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US Enters Debt-for-Nature Swap With Indonesia

The United States has signed an agreement to forgive nearly $30 million in Indonesian debt in return for the large Southeast Asian country agreeing to protect forests on Sumatra Island. The deal is the largest debt-for-nature swap the U.S. government has organized so far under the U.S. Tropical Forest Conservation Act. It is the first such deal with Indonesia - who has one of the fastest deforestation rates in the world.

Another fallen tree in the forests of Indonesia - a country which loses an area the size of Switzerland each year to logging. Indonesia's massive deforestation rate makes it the world's third-largest emitter of carbon dioxide behind the United States and China.

Deforestation also affects the country's wildlife. The forests are home to some of the world's most endangered species including endangered tigers, elephants, rhinos and orangutan. In a new deal, the U.S. has agreed to trade $30 million in debt repayments for increased conservation of their habitat.

Jennifer Morris is the senior vice president for the ecosystem finance division of Conservation International, the group which brokered the deal between the United States and Indonesia.

"Basically, instead of repaying that debt, to put that money that they would have repaid, to the US government [money will be put] into conservation. [This arrangement] makes this deal, which is, incredibly historic [its the largest ever debt called a debt-swap, that's ever happened] and is specifically for the country of Indonesia," Morris said.

The deal signed by the US Treasury Department permits Indonesia to put the money into a trust to protect 13 areas of forest on the island of Sumatra.

Walter Lohman of the Heritage Foundation says he is concerned about the money getting to the right place, but he sees a lot of positives.

"It's just another way of giving assistance. You could ask the same question about why do we give the world $20 billion in assistance every year? It's about building a relationship," he said. "We're building a relationship with the Indonesians."

That is a point underscored in key meetings between American and Indonesian officials.

"I look forward to continuing to work with the foreign minister and the Indonesian government on all of these issues; and I am confident that our relationship will grow stronger and deeper in the future," Secretary of State Hilary Clinton said.

Conservation International says the deal is an innovative way of helping both the people and the species of Indonesia.

The United States has signed similar, smaller agreements with countries such as the Philippines, Guatemala and Peru.

"It's one of the best mechanisms we that we have for development assistance from developed countries where that money can be used in a different way," Morris added. "Instead of that money going directly back or instead of being forgiven, the government of Indonesia has made this really important commitment to invest in conservation for the local people and for these critical species."

President Susilo Bambang Yudhoyono, who just won his second term, in July's presidential elections, has made cracking down on illegal logging a priority.