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Taking
Stock: 5 Years After “Reformasi”
Commentary by Wayne
Forrest
May 21 was the fifth year since President Suharto resigned
and a movement, “Reformasi”, was proclaimed.
Many Indonesians and those dedicated observers (including those who
spoke at our June 10 event) are wondering: has there really been reform or is
there now regression ? I’ll take a
stab at framing some of the contradictions:
·
The press is free but the war in Aceh and continuing
criticism of corruption in government could engender a backlash.
·
Indonesians feel free to speak out but an activist
was recently arrested for burning an image of the President (under an old law
that makes insulting the President a crime) in a scenario reminiscent of the
Suharto era.
·
The military is out of politics formally (active
officers will no longer hold legislative seats) but many retired officers are
seeking office and the Army retains a significant presence behind the
scenes.
·
The police and military have been separated but the
two groups have had figurative and literal turf battles.
·
The economy has made a rebound and the macro picture
has stabilized, but chronic employment, disinvestment, and lack of policy
coordination lengthens the term of crisis, dampening future growth
rates.
·
Indonesia’s Industry and Trade Ministry is at odds
for many months with the Ministry of Agriculture and Ministry of Religion
over the importation of US chicken products.
·
Some key amendments to the Constitution appear to
pave the way for more representative forms of government (including a direct
national Presidential election in 2004) but political parties are
perpetuating a political system built around patronage and elite
personalities.
·
The potential to bring in billions of dollars in
foreign investment clearly exists, but Indonesia is losing out to China and
other countries in the region.
·
IBRA has allowed forestry companies who owe it over
$2 billion to stay in business even after the GOI agreed in 2000 to close
indebted companies. Indonesia’s
Forestry Minister says that this has “contributed to the
overcapacity that demands more raw materials than Indonesia’s forestry sector
can supply.”
·
Batam Island’s could become a magnet for significant
new foreign direct investment in Indonesia now that Singaporean based
companies are looking for lower wage production bases, but its status as an
export processing zone needs to be clarified. The Indonesian government has listened to investor
recommendations but has yet to act
definitively.
·
Most industry sources say that Indonesia’s police and
military are involved with illegal smuggling of hardwoods to China. The Chinese are producing furniture with
the smuggled wood cheaper than what is made in Indonesia. Indonesia’s Trade and Industry Minister
has been unsuccessful in ending the practice.
·
The Ministry of Forestry has issued rulings
protecting lands where mining companies had previously been exploring. A compromise with the Ministry of Mines
and Energy has yet to be reached.
Meantime, almost all new exploration activity and investment in mining
have ceased. In 1995 Indonesia received 5% of global expenditure in mining
exploration. By 2001 Indonesia’s
share was less than 1%.
·
Provincial administrations continue to attempt to
impose additional taxes outside the scope of mining Contracts of Work. Although some inter-governmental solutions
have occurred, the ambiguity of the situation is a strong disincentive in the
mining industry.
·
The Ministry of Finance was apparently left out of
discussions to purchase Russian jet fighters utilizing countertrade. The MOF says it won’t reimburse Bulog, the
state agency designated by Industry and Trade Minister, Rini Soewandi, to
handle the transaction.
·
Although the mixed implementation of regional
autonomy has slowed investment (already down worldwide) it has already
engendered significant wealth transfers from Jakarta to the provinces, which
will lead to a wider range of economic players and commercial activities.
·
Despite micro economic policy difficulties, Indonesia
has made strong progress restructuring the banking sector and the balance
sheets of many companies. Thus, the
market for corporate and government debt has jumped significantly and even
the stock market has shown healthy returns. Lending is picking up but has yet
to reach a level that will engender strong growth.
Voices in Jakarta:
·
“Everything is so expensive, we miss the past.
If Suharto names himself a candidate
to become president, I will choose him”, wife of a rubbish collector in
Manado in TEMPO
·
“Indonesia is like a baby forced to run quickly. The condition turns everything into a
mess” Vicky, 25 year old former
student activist turned chicken breeder in the Jakarta Post
·
“After 5 years of reformasi, the conflicts in Aceh
and Papua appear to be no closer to resolution” Sidney Jones in TEMPO
·
"To be honest, under the New Order my income was
better," said Darwis, a public transport driver at Terminal Daya,
Makassar, South Sulawesi.
·
“I feel reform was the right path, we can’t go back,
and hopefully the current problems with bad leaders and corruption is just a
kind of growing pain and that in long term it will be better for all of us no
matter what color or religion,” A Chinese Indonesian quoted in the Jakarta
Post
In my conversations with
Indonesians, including Ministers as well as business leaders, I detect a sigh
of resignation. Perhaps it’s the
realization that real change requires tremendous sacrifices. Or maybe their
expressions reflect an inner sense that the talk of democratic reform is so
much easier than the action. I tend
to look at Indonesia in cultural terms and ask the question: if New Yorkers
were told time again that the way to get out of the current economic downturn
would be to stop being brash, impolite, and “in your face” would they really
shed their directness ? Probably not.
Indonesia is being asked to make fairly major reforms to corporate
governance and legal transactions for which there may not yet be a cultural
consensus. And certainly the economic
basis for change is in question. Are
Indonesians willing to give up side transactions, ritualized price
negotiations, obligations to employment facilitators, conflict avoidance
behavior in the workplace, observance of social hierarchies that are known
rather than “modern” democratic ones that are only theoretical ?
Can salaries to military and government employees be raised
sufficiently to replace the rents they are forced to seek to feed their
families ?
Lest
we get too carried away judging
Indonesia and its emerging reform culture--its timetable and trajectory may
be very different than we might hope-- it would be worth pondering the
following words from our fourth President:
"Complaints are
everywhere heard -- that our governments are too unstable, that the public
good is disregarded in the conflicts of rival parties and that measures are
too often decided, not according to the rules of justice -- but by the
superior force of an interested and overbearing party." James Madison,
in Federalist Papers No 10.
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As some
of the stories in this issue reflect, Indonesia’s economy has been
stabilizing and continues to be an important market with new opportunities
that cannot be ignored. But, caution is also in the wind as Indonesian
Presidential elections are just around the corner, the future arrangement
with the IMF has yet to be decided and the return to steadier growth in
important partner countries (US, Japan, Singapore) has yet to occur.
Indonesia is doing well with recent public offerings (Bank Mandiri, bond
issues) but new foreign direct investment has been harder to come by.
v Banking
and Finance
Indonesia
Signs Supplemental LOI
Jakarta, June 11
2003 —The Indonesian Government represented by the Minister Coordinator
for Economic Affairs Dorodjatun Kuntjoro-Jakti, the Finance Minister
Boediono, and the Governor of Bank Indonesia Burhanuddin Abdullah today
signed a supplementary Letter of Intent to the Managing Director of the
International Monetary Fund (IMF) Horst Kohler. The letter provides an update
on the progress in meeting the policy objectives under the economic program
for 2003 described in the Memorandum of Economic Policies (MEFP) of
March 18, 2003.
The LOI recognizes the following
achievements:
·
Fiscal policy
is on track to achieve the 2003 deficit target of 1.8 percent of
GDP. In the first quarter, the budget unexpectedly recorded a surplus, in
part reflecting temporary expenditure shortfalls. Monetary policy remains
firmly geared toward supporting the downward trend in inflation and
maintaining exchange rate stability. While reducing interest rates further, Bank
Indonesia has achieved its monetary and reserves targets with sizeable
margins.
·
A comprehensive plan for a sound financial safety net
has been developed by the Ministry of Finance and Bank Indonesia. As
expected, the plan provides for the creation of a deposit insurance scheme,
lender of last resort capability for BI, and a supervisory and regulatory
agency for the financial sector.
·
IBRA continues to make good progress toward achieving
its annual asset recoveries target. Results from the recently completed loan
sale program were encouraging, and IBRA has recently launched the sale of
virtually all of its remaining asset holdings.
·
Improving the
governance of state banks remains a priority of the government.
·
In the legal
area, the Government continues to work toward establishing the
Anti-Corruption Commission (ACC) by end-year.
·
The
amendments to the Foundations Law were recently submitted to Parliament.
During the debate of the amendments, the legal basis for the Supreme Audit
Agency (BPK) to undertake audits of military and other foundations receiving
state funds or financing of state activities will be clarified. In the area
of public sector governance, the Government is making progress in
implementing its program of state enterprise audits.
The letter will be presented to the IMF Executive Board
for its consideration later this month. A successful completion of the review
will enable the next IMF tranche to Indonesia of approximately US$450
million. Indonesia’s senior leaders
are mulling over what type of relationship the country will have with the IMF
when the current program expires in November. AICC has communicated to GOI that whatever decision they take
must be acceptable to the market as a whole.
One possible exit strategy that is known to be favored by some in the
government is similar to the one Thailand followed: retain the IMF in a monitoring role with access to funds if
needed.
New
BI governor aims for further rate cuts
On May 13 Indonesia’s Supreme Court swore in Burhanuddin
Abdullah as the new Governor of the Central Bank, in a ceremony during which
he further reiterated his pledge to maintain the current declining trend in
Bank Indonesia's benchmark interest rate to help boost bank lending to the
corporate sector. Burhanuddin, former
coordinating minister for the economy under President Abdurrahman Wahid,
defeated strong candidate Miranda S. Goeltom, currently deputy governor who
was backed by the largest faction at the House -- the Indonesian Democratic
Party of Struggle -- and low-key candidate Cyrillius Harinow Burhanuddin, who
has served in senior positions at the bank. The incoming Governor will
replace Sjahril Sabirin, whose tenure ends on May 17. Sjahril, who replaced
Sudradjat Djiwandono, has held the post since 1998. (Jakarta Post) In other interviews, Abdullah has said
Indonesia can survive without the IMF. He intends to ensure stability is a
feature of his term at the top.
v CONSUMER
Hypermarkets
to be banned from regencies
The government is currently revising the existing
regulations on the retail sector with the aim of preventing modern retailers
from entering regencies, to protect local traditional markets, a senior
official at the Ministry of Industry and Trade has said.
The move would also allow small retailers to develop their
businesses in regencies. "We
want to prevent modern retailers, such as hypermarkets, from expanding to
regencies because we still need to protect our traditional markets,"
Rifana Erni, director general for domestic trade affairs at the ministry told
The Jakarta Post. She said that the
current ruling on retailing -- jointly signed by the Ministers of Industry
and Trade and of Home Affairs in 1997 -- was no longer appropriate to protect
traditional markets and small retailers, particularly following the
introduction of regional autonomy law, and the entry of giant foreign
retailers. (Jakarta Post, June 10)
Electronics
sales could triple this year
Several major electronic makers predict sales of
electronics in the country to triple this year as a result of tax breaks and
the strengthening of therupiah, which
have led to a significant drop in the prices of electronic goods.
Such an ambitious target, set by PT Samsung Electronics
Indonesia by PT LG Electronics Indonesia, was prompted by optimism of strong
domestic consumption. Public consumption, which has been the backbone of the
country's economic growth over the past several years, has been expected to
become the main engine for this year's target of 4 percent economic growth.
Lee Khang Hyun, marketing director of Samsung, said the
drop in price was the main factor encouraging people to purchase more
electronic goods this year.
The country's electronic manufacturers cut the prices of
their products by between 15 to 20 percent in February following the
government's decision to cut luxury taxes on electronics.
Prices have further dropped by between 5 percent and 10
percent lately due to the strengthening of the rupiah against the U.S.
dollar.
v MINING AND ENERGY
Pertamina
to become limited company
The government has granted its approval for state oil and
gas company Pertamina to become a limited liability company, paving the way
for its privatization in 2006, a government official said on Wednesday.
State Secretary Bambang Kesowo told reporters that he was
informed that President Megawati Soekarnoputri had signed the decree on the
matter on Wednesday morning.
Under the limited liability decree, Pertamina must decide
within two years whether to keep non-core business units, such as hospital,
hotel and airline operations, or spin them off. Jakarta Post, June 19,
2003
Jakarta
sees $500 mln in oil exploration spending
JAKARTA, June 12 (Reuters) - Indonesia's oil watchdog said
on Thursday oil contractors are forecast to increase exploration spending to
$500 million in 2003 from $200 million last year. "We expect oil
contractors to drill 108 exploration wells in 2003, compared to 75 wells in
2002," Zanial Achmad, planning deputy chief of BP Migas told reporters.
The higher spending is expected because of Indonesia’s
efforts to find new oil reserves and to boost production amid declining
output and political stability. The bigger spending should also raise flows
of foreign funds into Asia's only OPEC member, as many of the contractors are
foreign firms.
Indonesia's May crude output fell to one million barrels
per day (bpd) from 1.03 million bpd in April. Its condensate output also fell
to 141,000 bpd in May from 145,000 bpd in April.
Head of BP Migas Rachmat Sudibyo said proven Indonesian
oil reserves had declined to 4.2 billion barrels from 5.2 billion in the past
three years. "We expect the proven reserves to remain productive for
around 10 years. Therefore, we will
encourage oil contractors to find new reserves by giving them incentives for
new explorations," Sudibyo said.
Mining
Exploration Woes
A PricewaterhouseCoopers study late last year showed that
new capital invested for green fields projects in Indonesia in 2001 amounted
to a paltry US$7 million, a far cry from the $200 million spent on
exploration in both 1997 and 1998. This is way below the minimum investment
levels needed to ensure the discovery of new mine sites.
There has been very little new exploration in the past
four years and the country's mineral reserves are depleting rapidly because
production by existing companies is high. Low market prices have also hit the
country's mining sector hard.
In 1999 the sector generated $8.5 billion, reflecting a
2.8 percent contribution to gross domestic product (GDP), but since then more
than 220 exploration-stage mining projects have been terminated, experienced
temporary closure, simply been left idle or inactive or suffered destruction
of their facilities.
In 2001, the mining sector still accounted for 11 percent
of the economy, though investment that year fell 42 percent to $1.43 billion.
The long-awaited draft bill on general mining, which is
expected to improve on the 1967 Mining Act, remains stuck in the corridors of
power. Industry players and the Indonesian Mining Association (IMA) worked
together last year to evaluate the draft bill and submit recommendations and
amendments but it is still being deliberated in the House of Representatives
(DPR).
The bill would regulate all mining concessions for
exploration and development and resolve some of the issues thrown up by the
autonomy laws. Regional Administration Law No 22/1999 and the
Intergovernmental Balance Law No 25/1999 were enacted in January 2001 amid
regions' outcries for greater authority in managing their own affairs.
FDI Is Up
May 23 (Reuters) - Indonesia's foreign direct investment
approvals jumped 70 percent to $3.1 billion in the first four months of the
year over the previous period, figures the government said pointed to
returning investor confidence. Many foreign investors fled Indonesia
after it plunged into political and economic turmoil in the late 1990s. Last
year's bombings on the resort island Bali were also another deterrent to any
revival. "Optimism in
Indonesia's economy has started to arise," chief economics minister
Dorodjatun Kuntjoro-Jakti said in a statement. "The recovery in monetary conditions has driven capital
inflows into Indonesia." State
investment agency BKPM said in a report that the biggest approvals from January
to April, worth $1.78 billion, were in transportation, storage and
communications. Foreign investment
pledges fell 35 percent to $9.7 billion last year.
Trade
Surplus Up
The Central Statistic Agency reported on July 1, 2003 that
Indonesia posted a 11.66 percent increase in exports in the January-May
period compared to the same period last year, from US$ 22,36 billion to US$
24.9 billion. This increase took place amidst the rupiah's (Indonesia's
currency) strong showing since the start of the year (the rupiah has
appreciated by 8 percent against then US dollar since the beginning of the
year) (source: The Jakarta Post, July 2, 2003).
Proctor
& Gamble Restructures Outside Indonesia
Is it bad news, sign of unfavorable business climate or
just a rational business move given dropping intra-ASEAN tariff rates ?
U.S. consumer goods giant Procter & Gamble plans to
close down in July its only remaining factory in Indonesia leaving hundreds
unemployed as part of a restructuring program of the group's operation in
Southeast Asia. However, industry leaders said this was further disturbing
evidence that the country was losing out against its neighbors in attracting
(or holding) foreign investment due to the continued unfavorable business
climate here.
The Jakarta Stock Exchange-listed P&GI currently
operates a plant in Bekasi, West Java, producing healthcare products under
the brand name of Vicks. P & G President Raul Falcon said that after the
facility was closed down, the company would outsource the production of the
Vicks health care products to local company Darya Varia Group to cater to
local demand.
The company shut down its hair care products manufacturing
plant in 2000, and relocated to Thailand, which has become the group's hub
for the Southeast Asian region. "We plan to consolidate our plants so
that we can provide centralized manufacturing facilities for the region. This
is part of our restructuring program until 2005 in a bid to make our
operation more efficient and competitive," Falcon told the Jakarta Post
in May.
Chairman of the National Economic Recovery Committee
(KPEN) Sofjan Wanandi said P&G's decision was another harsh blow for the
Indonesian economy. He said that the hard-earned stability in some
macroeconomic indicators failed to encourage new investment. Sofjan
criticized the government for being too slow in resolving the persistent
problems encountered by investors including illegal fee demands, poor
implementation of the autonomy law, security problems and the absence of a credible
legal system.
Unilever Indonesia
to Invest $500 million over next 10 years
PT Unilever Indonesia said it has allocated $500 million
for investment over next 10 years.
Unilever Indonesia corporate secretary Franky Jamin said the funds
will be used to improve production facilities, distribution networks and
technology. He said some of funds
will be also used to fund future acquisitions.
In a recent interview with
the Jakarta Post, Uniliever’s President, Nihal Kaviratne said “After the
Asian Free Trade Area (AFTA) came, we thought about where we should put our
various factories. After a lot of discussion and calculation, we decided to
make Indonesia the regional sourcing center for a number of our products.” He
also said the company’s tea operations in Australia and Singapore will
relocate to Indonesia. Unilever’s Indonesia factories already export
toothpaste and soap throughout the region.
Italy's
Pirelli Set to Build US$100 MLN Tire Plant in Indonesia
JAKARTA, July 11 Asia Pulse/Antara - Pirelli has announced
plans to establish a tire factory in Indonesia this year with an investment
of US$100 million and a production capacity of 5,000 pieces per day, a
company spokesman said.
Pirelli General Representative in Indonesia Luigi Carlo
Gastel told the press here Thursday his company intended to increase its
share in the country's huge tire market.
"In Indonesia with its population of more than 200
million, the tire market is still very large," he said.
Dumping
Practices Need Curbing
Indonesia Anti-Dumping Committee (KADI) said that a number
of foreign investment companies had threatened to leave the country as they
could no longer compete with the imported products sold here through dumping
practices. Speaking to reporters on
the sidelines of a seminar on international trade on Wednesday, KADI
chairwoman Halida Miljani criticized the finance ministry for failing to
impose an anti-dumping duty on a number of imported products immediately.
"I received many complaints from investors about the
dumping practices, which have hurt their businesses here," Halida
said. "If the government
continues to delay enforcing anti-dumping measures, the investors will shift
their operations to other countries."
Worse still, said Halida, some new investors had also delayed their
plans to invest in the country because of concerns regarding the same issue.
"Many imported products, such as wheat flour, carbon black and steel
pipe products, are now sold here via dumping practices," Halida said. Local producers of the above products have
long demanded government protection in the form of high import tariffs,
because cheap imports had seriously hurt the domestic market.
(Jakarta Post)
Indonesia Worries About US
Bioterrorism Act
The implementation of the U.S. Bioterrorism Act will
particularly hurt Indonesia's small and medium enterprises (SMEs) that export
food and agricultural products to the U.S. because of their inability to meet
IT requirements, the Indonesian Chamber of Commerce and Industry (Kadin)
said.
Kadin official Noes Soediono said on Wednesday that SMEs
would also have difficulty seeking trade agents in the U.S. as required by
the act. One of the most difficult requirements for SMEs is the mandatory use
of the Internet for export registration. "We have asked the U.S.
government to help local small and medium exporters in establishing their own
websites," she said.
The Bioterrorism Act was initiated in 2002, following the
Sept.11 terrorist attacks in the U.S. The act will be fully implemented on
Dec. 12 this year, with registration of exporters starting on Oct.12.
The act permits the U.S. Food and Drug Administration
(FDA) to respond quickly to any threat to the U.S. food supply. Under the
act, agriculture and food related companies who want to export their goods to
the U.S. must register with the FDA.
After registering, exporters are also obliged to give prior notice to
the FDA concerning the arrival of their goods, otherwise the products will
not be allowed to enter the U.S. market and the exporters will bear the cost
of storage or reexport.
U.S.
Will Monitor Foreign Seaports
WASHINGTON, June 11 — The Bush administration has decided
to place teams of American inspectors
at major seaports in Muslim nations and other smaller, strategically located
foreign ports to prevent terrorists from using cargo containers to smuggle
chemical, biological or nuclear weapons into the United States, senior
administration officials said.
The inspectors, they said, will be provided with radiation
monitors, chemical detectors and other equipment to inspect "high
risk" metal cargo containers before they are placed on ships bound for
the United States.
The move is the second phase in a government program begun
shortly after the terrorist attacks of Sept. 11, 2001, to station American
customs inspectors overseas to work side by side with their foreign
counterparts in searching for unconventional weapons. The first phase focused
on 20 large container ports in Europe and Asia, none of them in countries
with predominantly Muslim populations.
Officials said the Department of Homeland Security planned
to place teams of inspectors that would remain indefinitely in Dubai, the
Persian Gulf emirate that is a crucial transshipment point for containerized
cargo in the Arab world; Malaysia; Turkey and other Muslim nations. Al Qaeda
is believed to have a sizable presence in both Dubai and Malaysia.
Intelligence agencies report that Al Qaeda has repeatedly
used cargo ships to move conventional weapons and explosives, including the
explosives used in the 1998 bombings of two American Embassies in East
Africa. From an article in NY Times
Imperial
Tobacco unit wins right to Davidoff in Indonesia
JAKARTA, July 15 (Dow Jones) : Indonesia’s Supreme Court
has ruled in favor of U.K.-based Imperial Tobacco Group PLC in a battle with
a local company over the right to sell cigarettes under the Davidoff
trademark in the country, lawyers said on Tuesday.
The Supreme Court overruled an earlier decision by the
Commercial Court that PT Sumatra Tobacco Trading, an Indonesian company, had
the right to sell products under the Davidoff brand locally.
Indonesian
ministers sign decree enabling detention of errant taxpayers
JAKARTA, June 25 - Two Indonesian
ministers on Wednesday signed a joint decree authorizing financial
authorities to detain errant taxpayers, an official said. Finance Minister Budiono and Justice
Minister Yusril Ihza Mahendra signed the decree, said a finance ministry
spokesman, Sofyan.
Telkom
says could face penalties over SEC filing
JAKARTA, June 11 (Reuters) - Indonesia's
telecommunications leader PT
Telekomunikasi Indonesia could face serious penalties over problems with a financial report to the
U.S. Securities and Exchange Commission.
Telkom, the country's largest capitalised firm, gave no
figures on potential fines but one industry source said they could run into
tens of millions of dollars.
Telkom said in a statement SEC actions might affect the
status of its loans and possibly cause defaults. It said that until issues
with the SEC were resolved, it "expects that its ability to access international
capital markets will be materially hampered".
Telkom said SEC staff had advised the firm its 2002 20-F
report did not comply with U.S.
securities laws and SEC rules.
It said although it will try to give the SEC a new filing
"as expeditiously as
possible" that is fully compliant with SEC rules, it does not expect to
be able to meet either a June 30
deadline or a possible 15 day extension.
Telkom said while it intends to take other steps to comply
with stock exchange and regulatory
rules, it "cannot assure that it will succeed in meeting its ultimate goals of filing an amended 20-F
that fully complies with SEC
requirements and of otherwise achieving full compliance".
POLITICAL
AFFAIRS
TNI
can do without U.S. aid: military chief
Among several issues that are “barbs” in the
US-Indonesia relationship is the murders of two American teachers in Papua
province last year after an ambush on the road near Freeport McMoRan’s mine.
Agents of the FBI have just returned from Indonesia with forensic
evidence in the case. The US has
been reticent, until recently, to spend appropriated funds for military
training. What is not being reported in this ongoing debate over
whether or not to give Indonesian officers access to training is the nature of
the training, a mix of subjects that relate to civilian-military relations,
rather than combat.
JAKARTA (AP): The Indonesian Military (TNI) chief said
Friday the country's armed forces didn't need American aid after the U.S.
House of Representatives voted to block training funds until Jakarta fully
investigates an ambush last year that killed two Americans. "Until now,
we have not received any aid, and we could still go ahead," Gen.
Endriartono Sutarto told reporters after a ceremony to send off 175 Indonesian
soldiers to join U.N. peacekeeping troops in Congo. The House of
Representatives on July 17 approved the addition of an amendment to the
Foreign Relations Authorization Act which, if enacted, would withhold military
education and training funds until Jakarta fully investigates the killings. A
similar effort is taking place in the Senate. The training fund was to be the
first aid package from the United States since it stopped military assistance
to TNI in 1999 after East Timor's bloody break from Jakarta rule.
Indonesia’s
Presses for ASEAN “Security Community” at ASEAN Summit and Comments on
Myanmar
Indonesia’s Foreign Minister, Hassan Wirajuda, indicated
on June 17 that fashioning a mechanism for enhanced security cooperation
among ASEAN nations would be at the forefront of ASEAN diplomacy now that
Indonesia will assume the chairmanship. At
recent ASEAN ministerial meetings (also attended by Colin Powell and
Alexander Downer) Hassan underlined that the 36-year-old association should
have matured enough to discuss various security issues such as illicit drug
trafficking, small arms smuggling and other transnational crimes that serve
terrorism and separatism in several member countries of the regional
grouping. Indonesia’s conception is
not a defense pact, but something broader: "For example, with the
concept we should have a conflict resolution mechanism among ourselves, and
maybe in turn we could build a dispute settlement mechanism in the
region," the minister said.
Indonesia would like to see ASEAN become a full security as well as an
economic community by 2020.
Obviously a reaction to the events of 9/11/01 and
10/12/02, the initiative also appears at a time when ASEAN’s policy of
“non-interference” in the internal affairs of its members is being tested by
the recent arrest of Aung San Suu Kyi
in Myanmar. Minister Wirajuda
has already chartered a new path for ASEAN.
On international demands for Aung’s release, Wirajuda said on June 17:
"What is happening now in Myanmar is a setback for the country itself
and also a setback for the region. There should be an adequate response to
the demand," Hassan said. The
Philippines has lobbied for a harsh reaction but the joint communiqué issued
at the June 16-17 Ministerial Meetings was more mild, but got its point
across nevertheless. It stated: “In this connection, we urged Myanmar to
resume its efforts of national reconciliation and dialogue among all parties
concerned leading to a peaceful transition to democracy. We welcomed the
assurances given by Myanmar that the measures taken following the incident
were temporary and looked forward to the early lifting of restrictions placed
on Daw Aung San Suu Kyi and the NLD members”.
Controversial
Education Bill
Was it more about politics ? Some think so.
Indonesia’s Parliament (DPR) recently passed an Education Bill (in the
works for almost 2 years) that had articles that could be interpreted as
victory for religious parties that want more religion in private schools. Those seeking to modernize Indonesia’s
underfunded and ill equipped schools saw the new rules --that mandate that
all schools offer religious instruction by teachers from a student’s faith--
as wasteful and anti-global, although public schools are already required to
teach religion. Secular nationalists
tended to either be against the bill or pushed for modifications whereas
religious parties were for it.
Demonstrators for and against were out in force in many Indonesian
towns and cities.
Former Education Minister, Wardiman, didn’t see the bill
as being problematic, commenting that “through the education bill, all
Islamic schools, including Islamic boarding schools, must be willing to
accept non-Muslim students and must provide them with religious instruction
according to their faith.” In
reality, even Christian schools often arrange for Islamic religious
instruction for their Muslim students. But some Muslims have worried that
private Christian schools are converting their non-Christian students. There were both Christian and secular Moslem
groups as well as former President Wahid, himself a Muslim leader, that
opposed the law because it inserted religious matter in a matter of state.
Although the bill did make piety an educational goal, its
other no less important goals were: conduct, potency, intellectuality,
talent, development needs, demands of the industrial sector.
North Sulawesi, a predominantly Christian area,
immediately challenged the law, indicating that it might seek a special right
to implement it differently, ignore it, or mount a legal challenge in
Indonesia’s Supreme Court.
In the final
analysis, fundamentalist Muslim parties got a small revenge for losing the
debate on including sharia law in the Constitution, Megawati’s party
strengthened its nationalist credentials, and the bill’s sensitive “teach
Islam” character could be watered down in the implementing regulations
phase. It certainly showed the
President Megawati’s PDI-P, the party with the plurality, may have its hands
full in next year’s elections.
v
Social/Cultural Affairs
Battle
against people trafficking
Encouraged by having made some progress, Indonesia will
continue with its battle against people trafficking to repair its poor record
as well as to avoid sanctions from the international community, says a
government official.
In its third annual "Trafficking in Persons
Report" released at www.state.gov, the U.S. Department of State moved
Indonesia out of the so-called "Tier 3" group of countries,
inclusion in which can lead to sanctions, into the "Tier 2" group.
The report said that Indonesia had made, to some extent, improvements and
progress in its battle against people trafficking.
The report, however, also said that the Indonesian
government had not fully complied with the minimum standards for the
elimination of people trafficking.
"We are happy with the U.S. report as it reflects
what we have already done to correct our poor record on people trafficking.
But we still have a lot to do to eliminate rampant people trafficking,"
Ratna Tjaja, the deputy in charge of the quality of women's lives at the
Office of the State Minister for Women's Empowerment, told The Jakarta Post
here on Thursday
Public campaigns had been conducted, but overall public
awareness of trafficking remained inadequate.
Regarding the prosecution of offenders, the report said
that Indonesia had not yet passed a comprehensive anti-trafficking law, but a
bill was currently being deliberated by the House of Representatives.
The House, however, had already amended the Criminal Code
to provide for tougher penalties against traffickers, and had passed a law on
child protection.
Officials had made a number of arrests, but nationwide
data on convictions was not available and corruption remained a major
obstacle.
As for protection measures, the report said that the
Indonesian government had drawn up a national plan to ensure proper treatment
for the victims of trafficking, but implementation varied widely. Some local
officials continued to treat victims as criminals and further abuse them.
An estimated 230,000 Indonesian women and children have
been trafficked from their home villages in Java, Sumatra, West Nusa Tenggara
and Sulawesi to be employed as sex workers and cheap labor in urban areas at
home and the sex trade overseas. June
13 Jakarta Post
v TOURISM
Bali
Still Feeling Effects of October Bombing
In a Bali Update study issued jointly by the United
Nations Development Program, the World Bank and the United States Agency for
International Development (USAID), 1,500 Bali residents surveyed reported
significant falls in employment, sales and income since October. Perhaps most
troubling, school-dropout rates have risen, suggesting long-term consequences
for the island's 4 million people. After bottoming out at the end of 2002,
Bali tourism arrivals were running at about two-thirds previous normal-year
levels before severe acute respiratory syndrome (see SARS fever hits
economies, April 2) played havoc with travel throughout Asia. Events and conferences scheduled in Bali
later this year are slated to bring ever growing numbers of tourists back to
the fabled isle.
v Events and Activities
March 13 Personal Security in Indonesia, with Kelley McCann, Managing Director
of Kroll Inc.
April 15 Miranda Goeltom, Deputy Governor,
Bank Indonesia, at “Asian Bond Market Conference”, co-sponsored with Asia
Society
May 22 "Indonesia's Approach to
Separatism in Aceh and Papua: Implications for Business”, featuring Dr. Juwono Soedarsono, former Minister of Defense
June 10 Reform or Regression: Which Way Will
Indonesia Go ? Dr. Dorie Friend, author
of Indonesian Destinies and Kevin O’Rourke, author
of Reformasi
v Economic Indicators
|
Figures in
Billions of $, except where noted
|
2000
|
2001
|
2002*
|
|
Population
(millions)
|
212
|
215
|
224
|
|
GDP
|
156
|
161
|
|
|
Real GDP growth
rate(%)
|
4.0
|
3.2
|
3.8
|
|
GDP Per Capita
(nominal $)
|
760
|
742
|
|
|
Inflation (%)
|
7.0
|
12.55
|
10.0
|
|
Unemployment (%)
|
6.0
|
8.1
|
|
|
Foreign Exchange
Reserves
($ billions, including gold)
|
27.2
|
29
|
31.5
|
|
Average Exchange
Rate for $1.00 (Rp)
|
8,530
|
10,750
|
|
|
U.S. Economic Aid
(millions of $)
|
243
|
230
|
255
|
|
TRADE (billions of
US $)
|
2000
|
2001
|
2002*
|
|
Total Exports(FOB)
|
62
|
56.3
|
57
|
|
Total Imports(CIF)
|
33.5
|
31
|
31
|
|
U.S. Exports
|
2.4
|
2.6
|
2.5
|
|
U.S. Market Share
of Imports%
|
7.2%
|
8%
|
8%
|
|
U.S. Imports
|
10.3
|
10.1
|
9.6
|
|
|
|
|
|
Source: Government of Indonesia,
Bank Indonesia, Central Bureau of Statistics, US Commerce Department and
Embassy Projections Fiscal Year in
Indonesia is April-March 31, Shares calculated from Indonesian Government
Data ( *= preliminary)
|
TOP 5 US IMPORTS
FROM INDONESIA (millions of US$)
|
|
|
|
|
|
2000
|
2001
|
2002*
|
|
MACHINERY
(ELECTRONICS)
|
2523
|
2487
|
2650
|
|
APPAREL/TEXTILES
|
2102
|
2262
|
2091
|
|
FOOTWEAR
|
731
|
725
|
729
|
|
OIL
|
569
|
573
|
473
|
|
FURNITURE
|
506
|
505
|
548
|
|
|
|
|
|
|
TOP 5 US EXPORTS
TO INDONESIA (millions of US$)
|
|
|
|
|
|
2000
|
2001
|
2002*
|
|
ELECTRONICS/MACHINERY
|
629
|
642
|
637
|
|
GRAIN/FOOD
|
285
|
368
|
328
|
|
CHEMICALS
|
264
|
192
|
178
|
|
WOOD/PULP/PAPER
|
236
|
147
|
179
|
|
COTTON
|
167
|
196
|
197
|
|
|
|
|
|
|
