U.S. to Forgive Indonesian Debt in Exchange for Conservation Plan

The deal is the largest so-called debt-for-nature swap the U.S. government has organized so far under the U.S. Tropical Forest Conservation Act and its first such pact with Indonesia, which has one of the fastest deforestation rates in the world, losing an area of forest the size of Switzerland annually.

Conservation International, the U.S.-based conservancy group, helped organize the deal, and has contributed $1 million to help reduce the debt. "This is a huge boost for people and wildlife of Sumatra, and demonstrates a forward-looking policy on the part of the U.S. government," said Jatna Supriatna, vice president of Conservation International Indonesia.

Under the deal, Indonesia will pay the nearly $30 million into a trust over eight years instead of repaying it to the U.S. government. The trust will issue grants for critical forest conservation work in 13 forest areas in Sumatra.

The U.S. in the past has organized smaller debt-for-nature swaps with countries like Guatemala, Botswana, the Philippines and Peru. Under the Tropical Forest Conservation Act of 1998, developing nations with a significant tropical forest, a democratically-elected government, and an economic reform agenda, are eligible for debt forgiveness in return for conservation efforts.

Indonesia's massive deforestation rates makes it the world's third-largest emitter of carbon dioxide behind the United States and China due to the forest fires set each year on peat lands to clear forests. Deforestation has picked up in the past decade due to a break down in law and order, but President Susilo Bambang Yudhoyono, who is standing for re-election next month, has made clamping down on illegal logging a priority.