Proposals from rich creditor countries to ease the debt burden of countries hit by the tsunami in South Asia must be carefully engineered in order to avoid being counterproductive economically, experts said.
The Paris Club, an informal grouping of 19 creditor countries, is to meet here next week to consider measures ranging from a freeze on debt repayments to a partial cancelation of debt and other initiatives from developed countries.
The matter of debt was also to be addressed at an aid summit in Jakarta yesterday.
There are precedents for debt relief for poor countries hit by a natural disaster. For example, in 1998, Honduras benefited from the biggest Paris Club debt rescheduling ever in the wake of Hurricane Mitch.
Although economists widely agree that the economies of countries hit by the Dec. 26 tsunami are unlikely to be devastated, there is a risk that easing their debt burden could hurt their financial reputation, which some countries such as Indonesia are struggling to improve after the 1997-1998 Asian financial crisis.
"We often get the impression that the cancelation of debt is very positive," said Francoise Nicolas, an Asia expert at the French Institute of International Relations.
But she added: "If we cancel some of the debt, there is inevitably a cost and this cost can translate into a lower credit rating. That means you are put into the category of risky debtors and it will be harder to get credit in the future."
Some non-governmental organizations have been pushing for the total cancelation of debt owed by countries affected by the tsunami.
Nicolas said that a little "breathing space" made by a freeze on debt repayments would be sufficient and would help avoid the "usual unwanted effect of canceling debt."
However, a source close to creditor countries voiced scepticism about a freeze on debt repayments.
"One can question whether it is really a solution to the problem. The subject is much more about humanitarian aid than the problem of debt," the source said.
International credit rating agency Standard and Poor's has said that it would not change its rating on Indonesia if a deal were limited only to debt to other governments and not private-sector lenders as well.
But it warned it would have to declare Indonesia in default if a debt-relief scheme were forced on commercial lenders.
"While official creditors may choose to initiate debt forgiveness or restructuring, there is no obvious reason why this would flow on to commercial debt," Standard and Poor's said in a statement in Singapore.
‘NO SECURITY RISK’: The Railway Bureau reassured the public that the technicians’ activities were limited to technical guidance and did not involve sensitive systems The Railway Bureau yesterday said it had invited eight Chinese technicians to assist with an airport MRT construction project. The bureau issued the confirmation after an Internet user said Chinese nationals had entered the construction zone of Taiwan Taoyuan International Airport’s Terminal 3 project. They asked why “individuals from an enemy state” were allowed access to such a major national infrastructure project, which raised serious concerns over Taiwan’s industrial safety, sensitive systems and information security. The bureau’s Northern Region Engineering Branch Office said subcontractor Taiwan Handle Industrial Co (台灣手把工業) of the Taoyuan airport MRT’s “Contract No. CU05 Project A14 Station Civil, MEP &
A US uncrewed surface vessel (USV) encountered multiple Chinese warships during an autonomous transit of the Taiwan Strait, US defense company Seasats said in a statement on Wednesday. Seasats announced that a Lightfish USV had completed the first autonomous transit of the Taiwan Strait. Over five days, the USV traversed the entire length of the Strait while constantly monitoring surface vessel traffic, the company said. The Lightfish encountered multiple Chinese warships, one of which was a Chinese People’s Liberation Army Navy (PLAN) Type 056 corvette, it said. The Chinese vessels were operating “well within Taiwan’s exclusive economic zone without transmitting their identity via the
GREATER REACH? Auto parts and wood products would face tariffs of up to 15%, matching those targeting the EU, Japan and South Korea, Vice Premier said The US has announced that preferential tariff treatment for Taiwan’s non-semiconductor Section 232 goods would take effect retroactively from May 1, the Executive Yuan said yesterday. The US government yesterday posted a notice on the Federal Register’s public inspection Web site previewing tariff concessions for Taiwan under a memorandum of understanding (MOU) on Taiwan-US investment after two months of negotiations. The MOU signed on Jan. 15 stipulated three major preferential tariff arrangements: a 15 percent “reciprocal” tariff rate for Taiwan without stacking most-favored nation (MFN) rates; preferential Section 232 treatment for semiconductors and related products; and preferential Section 232 treatment for non-semiconductor
The National Chungshan Institute of Science and Technology yesterday showcased its locally developed variants of the Vision 60 robotic patrol dog, which it plans to deploy on the nation’s outlying territories in the South China Sea. The variants were produced under the Joint Lab project — created by the institute and domestic companies — and assembled with domestically produced motors, lenses and artificial intelligence (AI) systems alongside licensed tech from the US, Missile and Rocket Systems Research Division deputy director Jen Kuo-kang (任國光) told the media event at a military base in Taipei’s Dazhi (大直) area. Taiwan has built up its strengths
RSS