AUSTRALIAN FOREIGN AID CUTS WOULD HIT INDONESIA DEEPEST

CANBERRA, Australia (AP) — Indonesia will suffer the deepest cut from Australia's plans to slash foreign aid by almost 20 percent in the next fiscal year.

Two weeks after recalling the ambassador from Jakarta in protest at the executions of two Australian drug traffickers, the government announced Tuesday it plans to cut Indonesian aid by 40 percent from 543 million Australian dollars ($428 million) to AU$323 million. Australia wants to cut its aid budget to AU$4.1 billion next year.

Aid to other East Asian countries Vietnam, Philippines and Myanmar would be cut in similar proportions. But their losses are less in dollar terms because Indonesia receives the largest share of Australian aid.

Cambodia, which has agreed to resettle refugees rejected by Australia, is alone among East Asian countries in maintaining its funding unchanged at AU$52.4 million next year. East Timor also took a lesser cut of AU$4 million from AU$72 million in the current fiscal year.

Some analysts had warned that the diplomatic rift between Australia and Indonesia over the executions could escalate if Australia withdrew aid in retaliation.

Prime Minister Tony Abbott drew an angry response from Jakarta when in pleading for the lives of heroin traffickers Andrew Chan, 31, and Myuran Sukumaran, 34, he pointed out how generous Australia's response to Indonesia had been in providing $1 billion following the devastating 2004 tsunami that killed 230,000 people in a dozen countries.

The reference was interpreted in Jakarta as a threat to cut aid if the Australians were executed.

Treasurer Joe Hockey, the architect of the budget, said Foreign Minister Julie Bishop had applied a formula to determine the extent of aid cuts that countries received.

Factors included whether the recipient countries were themselves giving foreign aid, their forecast economic growth and their proximity to Australia, he said.

"There wasn't any specific targeting of any single country at all. You can take that out of your mind, not at all," Hockey told reporters.

Several influential Australian commentators had called for a cut to Indonesian aid in retaliation for Jakarta's refusal to stay the executions, and Bishop had not ruled out that option.

Aaron Connelly, a research fellow at Sydney's Lowy Institute for International Policy, said there was still a risk of further damaging the bilateral relationship if Australia mishandled explaining the aid cut.

"But right now, so long as everything goes smoothly and there are no big mistakes in the messaging, I think the government will be able to get this cut through without significantly damaging the relationship," he added.

Connelly said he had feared early in the dispute a repeat of 1991 when the Netherlands attempted to attach conditions on its aid to Indonesia after the Indonesian military massacred civilians in East Timor. Jakarta responded by refusing all further aid from the Netherlands.

Helen Szoke, chief executive of the aid agency Oxfam Australia, described the cuts across the board as a lose-lose scenario that will cut vital programs helping some of the world's poorest while also harming Australia's interests.

ROD McGUIRK - AP