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Tuesday, 15 March 2005
Page: 10

Senator ABETZ (Special Minister of State) (1:12 PM) —In direct response to the Greens amendment, I indicate that the loan component of the program is envisaged to be used for longer term projects such as economic infrastructure—for example, in the transport sector. Concessional loan programs are a recognised funding tool for development. It is a mechanism used by leading international development organisations, including the World Bank, the Asian Development Bank and many bilateral donors. The AIPRD loan program will be at least as concessional as those provided by other donor agencies.

Loan program terms and conditions are based on zero interest for up to 40 years with no repayment of principal for 10 years. I think that is important in relation to Senator Nettle’s amendment and some of the matters that she has raised. These terms will mean that Indonesia’s repayment liability will only be $83 million in today’s money, which will have a negligible impact on Indonesian debt-servicing commitments while assisting Indonesian rates of growth and overall ability to repay debt and improve living standards.

There is an ongoing international debate about the relative balance between grants and loans. Australia is an active participant in this debate, including in discussions on increasing the grant element in portfolios of international financing institutions. Australia has also been an active supporter of the Heavily Indebted Poor Countries Initiative, providing substantial additional debt relief. However, discussions about the balance between grants and loans under the AIPRD program should not be driven by this debate. The Indonesian economy is soundly based, and Indonesia has demonstrated the capacity to use concessional loans effectively for its own economic and social development.