Indonesia has signed a $35 million debt-for-nature swap and coral reef conservation agreement with the US and four non-governmental organisations (NGOs) to protect and restore country’s coral reef ecosystems.

The agreements were signed under the Tropical Forest and Coral Reef Conservation Act (TFCCA) to reduce Indonesia’s debt payments to the US government over the next nine years.

Indonesia will use the $35 mln to establish a conservation fund for protecting the country’s marine ecosystems, and the fund will be managed by the Indonesian Biodiversity Foundation, or Yayasan Keanekaragaman Hayati Indonesia (KEHATI).

Meanwhile, the NGOs involved, including Conservation International, The Nature Conservancy, Yayasan Konservasi Alam Nusantara, and Yayasan Konservasi Cakrawala Indonesia, will use grants from the conservation fund to support projects that directly benefit the coral reef ecosystems, a press statement said.

They will also support the development of sustainable livelihoods for communities that rely on such ecosystems, it added.

“Indonesia is home to some of the most biologically diverse coral reef ecosystems in the world that support the livelihoods of millions of Indonesians,” US Assistant Secretary for International Trade and Development Alexia Latortue said.

“The US Department of Treasury is committed to advancing efforts that protect valuable ecosystems while promoting economic development.”

Indonesia, which falls in the Coral Triangle region, has roughly 5.1 mln hectares of coral reefs, making the Indonesian sea home to the largest coral reef in the world, according to Indonesia’s tourism ministry.

However, the region now faces threat due to overfishing, climate change, unsustainable tourism, habitat destruction, and poor governance that has affected marine diversity and the livelihoods of people depending upon it.

Several studies have suggested that debt-for-nature swaps could be scaled to protect biodiversity priority areas while also reducing debt burden of the developing countries.

A paper published last year concluded that out of 67 highly indebted countries studied, over half could protect all their biodiversity for only a fraction of their debt relief.

At the same time, a separate study published earlier this year found that such instruments play an important role in providing funds for the establishment of marine protected areas (MPAs), for example in Seychelles and Belize.

However, the study stressed that in order to achieve its full potential in safeguarding marine ecosystems, such swaps must be accompanied by best practices including strengthening of transparency, introduction of legislation by debtor countries, and the inclusion of NGOs and other financial institutions in such agreements.

A $1.6-billion debt-for-nature swap for Ecuador last year made global headlines as it was the biggest such deal concluded to date, but a recent report found that a year on there was no evidence that Ecuador had operating procedures in place to allocate funds or guide investment.

Indonesia has signed three previous debt-for-nature swaps with the US government, resulting in a debt relief of over $70 mln for the restoration, conservation, management, and sustainable use of tropical forests, the Monday statement said.

Other than Indonesia, the US has supported numerous countries under the TFCCA deal, including Bangladesh, Belize, Botswana, Brazil, Colombia, Costa Rica, El Salvador, Guatemala, Jamaica, Panama, Paraguay, Peru, and the Philippines.

By Nikita Pandey – nikita@carbon-pulse.com

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