Press Release

U.S.-Indonesia Debt-for-Nature Deal to Save Forests in Sumatra

Jakarta | Tuesday, June 30, 2009

Jakarta – The U. S. and Indonesian Governments today signed a debt-for-nature swap agreement under the Tropical Forest Conservation Act that will reduce Indonesia’s debt payments to the U.S. by nearly $30 million over eight years.  In return, the Government of Indonesia will commit these funds to support grants to protect and restore the country’s tropical forests.  This agreement, in partnership with Conservation International and the Indonesian Biodiversity Foundation (Yayasan Keanekaragaman Hayati Indonesia, or KEHATI), will be the first ever in Indonesia as well as the largest debt-for-nature swap of its kind thus far.

“Indonesia is one of the most biologically diverse countries on earth,” U.S. Ambassador Cameron R. Hume said. “Funds generated by the debt-for-nature program will help Indonesia protect critical forest habitats in Sumatra.” 

The agreement was made possible through contributions of $20 million by the U.S. Government under the Tropical Forest Conservation Act of 1998 and a combined donation of $2 million from Conservation International and KEHATI.  

Sumatra is home to hundreds of mammal, bird and plant species, many of which are rare or endangered, including the Sumatran tiger, elephant, rhino, and orangutan.  The grants are designed to improve natural resource management and conservation efforts, and develop sustainable livelihoods for local people and communities who rely on forests.

The Indonesia agreement marks the 15th Tropical Forest Conservation Act pact, following agreements with Bangladesh, Belize, Botswana, Colombia, Costa Rica, El Salvador, Guatemala, Jamaica, Panama (two agreements), Paraguay, Peru (two agreements) and the Philippines.  Over time, these debt-for-nature programs will together generate over $218 million to protect tropical forests.  Established in 1995 to support and facilitate biodiversity conservation in Indonesia, KEHATI is the first environmental NGO created with USG assistance to participate in a Tropical Forest Conservation Act debt-for-nature swap. 

Tropical Forest Conservation Act (TCFA)

Fact Sheet

The Tropical Forest Conservation Act (TFCA) was enacted in 1998 to offer eligible developing countries options to relieve certain official debt owed the U.S. Government while at the same time generating funds in local currency to support tropical forest conservation. The program also offers a unique opportunity for public-private partnerships and the majority of TFCA agreements to date have included funds raised by U.S.-based NGOs.

TFCA is implemented through bilateral agreements with eligible countries. The agreement with Indonesia marks the 15th Tropical Forest Conservation Act pact, following agreements with Bangladesh, Belize, Botswana, Colombia, Costa Rica, El Salvador, Guatemala, Jamaica, Panama (two agreements), Paraguay, Peru (two agreements) and the Philippines.  These debt-for-nature programs are projected to generate more than $218 million to protect tropical forests altogether. 

How Debt-for-Nature Swap Works

Principal payments and interest on treated debt are made into a new local tropical forest fund.   The swap involves non-government organizations that contribute monies to reduce or cancel a portion of eligible host country debt.  The subsidized debt-for-nature swap option is executed through three legal agreements: (1) a debt reduction agreement between the USG and host country, (2) a swap fee agreement between the USG and donor NGOs transferring the private funds to the USG, and (3) a forest conservation agreement between the host country and donor NGOs outlining how the funds will be used and establishing the oversight committee and its operating modalities.

The Agreements create a local board (or oversight committee) to oversee the fund and award small grants to eligible recipients, primarily local non-governmental organizations such as environmental, forestry, indigenous or community groups.  The board includes representatives from the USG and the host country, as well as representatives from NGOs approved by both governments. Under the TFCA, the NGOs must constitute a majority of board members. 

Benefits of Tropical Forest Conservation

Tropical forests are rich in biodiversity, providing habitat for an estimated 10-30 million plant and animal species, including species essential to medical research and continued agricultural productivity at home and around the globe. Forests provide important ecosystem services such as maintaining the quality and quantity of freshwater supplies and carbon sequestration.  Deforestation – burning trees and peat swamps - contributes about 80% of Indonesia’s carbon emissions; Indonesia has the world’s third highest rate of carbon emissions.

People living in and around these forests depend upon them for their livelihood and survival, and these agreements will help ensure the sustainability of the forests for future generations. TFCA grants build community and other non-government group capacity to complement government sponsored conservation activities.

Benefits of Tropical Forest Conservation for Sumatra

These funds will be used to support grants that will conserve and restore important tropical forests in Northern, Central, and Southern Sumatra, including priority areas such as Batang Gadis National Park, Bukit Tigapuluh National Park, Way Kambas National Park, and Siberut Island, which is known as “the Asian Galapagos” due to its uniqueness and extremely rich biodiversity. 

Eligible national parks, forests, wildlife reserves, and watersheds total 7,358,785 hectares, almost two-thirds of which are in the Northern Sumatran region. The ecosystems covered by the agreements include rainforest, mountain forest, moss forest, alpine meadows, peat swamps, and riparian forest. [riparian forest = adjacent to water]

Sumatra holds 210 mammal species and 582 bird species, many of which are rare or endangered, and at least 688 plant species, including the world's tallest flower.  These forests are home to numerous species found only in Sumatra, including the endangered Sumatran tiger (400 left), elephant (2500 left), rhino (less than 300 left), and orangutan (about 6500 left).

Eligible Activities

A wide range of activities can be funded under the TFCA, including:

Establishment, restoration, protection and maintenance of parks, protected areas, and reserves.

Ø  Development and implementation of scientifically sound systems of natural resource management, including land and ecosystem management practices.

Ø  Training programs to increase the scientific, technical, and managerial capacities of individuals and organizations involved in conservation efforts.

Ø  Restoration, protection, or sustainable use of diverse animal and plant species.

Ø  Research and identification of medicinal uses of tropical forest plant life to treat human diseases, illnesses, and health related concerns.

Ø  Development and support of the livelihoods of individuals living in or near a tropical forest in a manner consistent with protecting such tropical forest.

For more information about the U.S. Embassy’s activities, please visit http://jakarta.usembassy.gov/.