[Marinir] Indonesia Digest No: 43.05 ; 13-12-'05

[Yap Hong Gie]

INDONESIA DIGEST

Indonesia's complex Issues in a Nutshell
By: Ms. Wuryastuti Sunario
Published by: TBSC-Strategic Communication
No.: 43.05 - Dated: 13 December 2005
In this issue:

MAIN FEATURE:
BOEDIONO NAMED NEW ECONOMIC TEAM LEADER:
THE RUPIAH STRENGTHENS

NEWS AND BACKGROUND:

1.      Health, Culture and the Environment:
New Mammal Species found in Kalimantan: is it a civet or a lemur?

2.      The Economy, Trade and Industry
Mini Souvenir shops in Hotel rooms to serve as market outlets

3.      Politics and Security
US lifts Arms Embargo
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MAIN FEATURE:
BOEDIONO NAMED NEW ECONOMIC TEAM LEADER:
THE RUPIAH STRENGTHENS

One week after the "Limited Reshuffle" of the Cabinet, the Rupiah has
continued to strengthen day by day and now stands at Rp. 9.740 to the US
Dollar, from its former psychological level of over Rp. 10,000 to the US
Dollar.

At long last, the much awaited Cabinet reshuffle was announced Monday night,
5 December. The market responded most favourably: for immediately the stock
exchange index of Jakarta  shot up and the Rupiah strengthened. On Friday, 9
December, the Rupiah was up to
Rp. 9,770 to the US. Dollar, the position it has not held for more than five
months.

Before that, on Friday, 2 December, President Yudhoyono made a surprise
announcement from Medan, thereby halting all speculations that were rife for
months before. The President stated that one personality was now confirmed
to be included in the new Cabinet line up, this is Budiono, former Finance
Minister under President Megawati. Boediono is a widely respected economic
leader, is low-profile and prudent in his policies.

>From this moment on, the cards were dealt by the President, bringing all
media and political party speculations to a virtual dead stop. But even that
Friday it was not clarified what position Boediono would hold, whether as
Coordinating Minister for the Economy or as Minister of Finance. No other
name was mentioned. Nonetheless, the following day the market already
responded positively.

It was only on 5 December, that President Yudhoyono announced the new
Cabinet line-up from the Presidential Palace in Yogyakarta, - and not from
the Palace in Jakarta, - thus starting a new tradition.  It became clear
that those who were changed were Ministers with economic portfolios only.
Three personalities were replaced by three new faces, three were moved to a
different portfolio, while other Ministers not mentioned remained unchanged
at their appointed posts.

The President announced that the new Coordinating Minister for the Economy
was Boediono, replacing Aburizal Bakrie. While, Aburizal Bakrie was moved to
take over the position of Coordinating Minister for Public Welfare,
replacing Alwi Shihab.

Newly appointed Minister for Finance is now Sri Mulyani Indrawati, formerly
Minister for National Planning. Whilst the position of Minister for National
Planning has now been taken over by Paskah Suzeta, from the Golkar
leadership, and recently Deputy Chairman of Commission XI in Parliament in
charge of Planning and Budgeting,

Minister for Industry is now Fahmi Idris, formerly Minister for Manpower and
Transmigration, replacing Andung Nitimihardja. While the portfolio for
Manpower and Transmigration is entrusted to Erman Soeparno, Deputy Treasurer
of the PKB Party.

With the new line-up, Golkar has now three members in the Cabinet. These are
Aburizal Bakrie, Fahmi Idris and Paskah Suzetta, while PKB (former President
Abdulrahman Wahid's party) has a new face, replacing former Coordinating
Minister for Welfare, Alwi Shihab.

In an additional note, President Yudhoyono announced that Alwi Shihab has
been appointed as Special Representative for matters related to the Middle
East; while former Finance Minister, Yusuf Anwar, is expected to be
appointed as Ambassador in an economically important country, speculated to
be Japan.

When installing the new Ministers on 7 December, the President outlined the
ensuing economic plan, as follows:

First and foremost, the nation's economic policy must strive to improve and
bring back to  health, Indonesia's macro-economic conditions. This is to be
undertaken in tandem with local governments. Measures involved include
firstly, curtailing present inflation which has reached over 18%, to be done
through improved fiscal and monetary policies, working hand in hand with
Bank Indonesia. Secondly, the Cabinet must ensure the flow of goods, with
special regard to the flow of basic commodities. Thirdly, the creation of
new employment opportunities must be the next top priority, which is to be
undertaken through the shoring up of the production sector, especially
industry and agriculture. Fourth, the Government must improve the present
current account and capital account.

Outgoing National Planning Minister, and incoming Finance Minister, Sri
Mulyani Indrawati later told the press that 2005 Q4 economic growth is
expected to be depressed because of the high inflation in October and
November. In all, it is estimated that the year will end with around 5.5%
growth.

Whereas, for 2006, the Government is optimistic that growth may reach 6.2%.
This can be achieved only when domestic consumption can be retained at 3.5%
of GDP. At this rate, economic growth may attain 6.2%.  In addition, the
government must invite increased investments to between 11%-12% of GDP.
Nonetheless, inflation must still be monitored as this will determine
growth.

Separately, Asian Development Bank Indonesia Chief Representative, Edgard A.
Cua, has expressed optimism that the new economic team under Coordinating
Minister Boediono will continue such measures to further reform the economy.
The positive reactions from the market and the high optimism shown towards
the new economic team are assets that must be utilized by the government. To
attract new investments, however, the regulatory framework must also be put
in place.

Meanwhile ADB Senior Economic Advisor, Ramesh Subramaniam estimates that
Indonesia's 2006 growth may reach 5.8% - 6%, mainly pushed by infrastructure
projects and the program to create new employment opportunities. Mr.
Boediono's statement that government spending must be increased is also a
positive sign in the right direction. Meantime, Ramesh predicts that 2005
economic growth will be between 5.5% - 5.6%.

At a separate occasion, Coordinating Minister Boediono believes that in
coordination with Bank Indonesia, the 2006 inflation can be curtailed to
nearing 8%, and the Rupiah sustained at between Rp. 9,700 to Rop 9,800 to
the US Dollar.
(Sources: Bisnis Indonesia, Kompas, Media Indonesia, SCTV)
(Tuti Sunario)
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NEWS AND BACKGROUND:

1.      Health, Culture and the Environment:

New Mammal Species found in Kalimantan: is it a civet or a lemur?

On Tuesday, 6 December, Director of WWF Indonesia, Mubarik Ahmad,  and
Stephan Wurlffraat, biology expert and forestry expert of WWF formally
announced the discovery of a new mammal species in the Kayan Mentarang
National Park in Kalimantan, bordering Malaysian Borneo. In 2003, hidden
cameras had succeeded in taking photographs of a reddish brown animal that
at first appeared like a lemur, with a long tail. But, since lemurs are
found only on the island of Madagascar and the surrounding Comoro islands,
its appearance in Kalimantan/Borneo, seems unlikely. Different from the
lemur, however, this animal has strong front and hind legs resembling a cat,
and small ears, and is the size of a cat. It appears to live in the trees
during the day, and comes down only at night. The location is found at a
height of 700 meters above sea level. From its anatomy, experts are
convinced that the animal is carnivorous. When confirmed that this is indeed
a new species of mammal, it will be the first in a century since a new
mammal species was found in Kalimantan.

Further surveys done, inquiring whether local inhabitants had seen this
animal, turned out negative. Therefore, the only way to ensure that this is
indeed a new species of mammal this can be confirmed only when one can be
caught alive, and so traps have been placed to catch the beast.

In the past three years, 361 new species of flora and fauna have been found
in these Kalimantan/Borneo forests, ranging from 260 new species of insects,
50 new plant species, 30 white water fish, seven species of frogs, five
crabs, six newts, two snakes, and one toad.     The Borneo/Kalimantan
forests are estimated to be habitat to 15,000 plant species, making this the
largest bio-diverse rain forest in the world, reports Media Indonesia.

However, WWF data show that since 1996 Indonesia's rain forest areas have
been cut down by two million hectares per year, or half the size of the
Netherlands, slashed to make way for commercial uses, such as palm oil or
rubber plantations, while trees are cut for the production of paper pulp.
Total Indonesian forests have shrunk from 162 million hectares in 1950 to
only 98 million hectares in 2000.  And, to protect the border area between
Indonesian Kalimantan and Malaysian Borneo from illegal loggers, the
government had earmarked an entire tract along this border for the
development of palm oil plantations. Therefore, to preserve this natural
heritage from destruction, WWF has proposed a program called "Heart of
Borneo". When agreed, the Heart of Borneo will cover 220,000 square
kilometers, 60 percent of which will be part of Indonesian territory, 39%
Malaysian and the remainder, part of the state of Brunei Darussalam.

2.      The Economy, Trade and Industry:

Mini Souvenir shops in Hotel rooms to serve as market outlets

In a bid to help the growth of small scale industries, the Indonesian Hotels
and Restaurants Association recently signed an agreement with PT Usaha Kita
Mandiri (PT.UKM) to open mini souvenir shops in hotel rooms under franchise,
similar in concept to the minibars in hotel rooms.

In the agreement, PT UKM will invest around Rp. 3 million in each minishop
unit, offering various Indonesian souvenirs, from batiks to ceramics. In
all, the company has earmarked Rp. 75 billion for the venture. In the first
stage, hotels that have agreed to participate in the program are those in
the Sahid Group chain, the Jayakarta Hotels and the Ina Group hotels.
Through such efforts it is hoped that the minishops will act as marketing
outlets to Indonesia's plentiful and varied souvenirs.

Separately, PT UKM has also signed MOUs with Garuda Indonesia, Bank Permata,
PT. Orix Indonesia Finance, and the Jakarta Stock Exchange for the purchase
of corporate gifts, said Eva Ryanti Hutapea, President Director of PT UKM.
Eva Hutapea hopes that each of the above company will spend between 10% to
20% of their promotional budgets on the corporate gifts. Additionally, the
company plans to promote exports to South Africa and Japan starting next
year.

3.Politics and Security

US lifts Arms Embargo

Mid November, on 14 November to be exact, President Bush lifted US Arms
Embargo  through Appropriation Act no AS HR 3057, that  now allows arms
trade between the two countries, including the purchase of lethal weapons.
It now depends on the Indonesian side, whether budgets are available,
reported Indonesian Foreign Minister Hassan Wirayuda. The embargo was
imposed since 1999, based on alleged human rights violations in East Timor
(now Timor Leste). The media had earlier reported that the subject of
lifting the embargo had been broached by Indonesian President Yudhoyono at a
number of meetings with US President Bush.

Most affected by the US arms embargo was the Indonesian Air Force, that had
most of its equipment and aircrafts imported from the USA, including its
Hercules C130, F5 and F16. These aircrafts had been grounded because of lack
of spare parts. Spare parts for these planes, however, were made available
for humanitarian purposes during the tsunami disaster in Aceh last year.

US reasons for lifting the arms embargo are said to be based on the fact
that the Indonesian TNI has reached positive results in its military reform,
and positive results have also been attained in finalizing its human rights
violations.

Commenting on the new policy, Minister for National Defense, Yuwono
Sudarsono said that it is equally in the interest of the United States that
Indonesia has a strong military presence in South East Asia to combat
terrorism, and that Indonesia together with Singapore protect the Malacca
Straits, which is one of the most important trade sea lane between Japan and
the United States, reported Luhur Hertanto of detik.com .

Minister Yuwono Sudarsono had just attended a meeting with the President,
discussing provision of armaments for the Indonesian military, TNI, at which
meeting were also present TNI Commander Endriartono Sutarto, Army Chief of
Staff, Djoko Santoso, Chief of Staff of the Navy , Slamet Soebijanto, and
Air Force Chief of Sfaff Joko Suyanto.

Separately the Navy Chief of Staff hopes to buy Harpoon close-range missiles
from the USA, and the Air Force hopes soon to strengthen its transport
planes to carry troops as well as survivors and victims in natural
disasters. Meanwhile, its aircraft fleet is expected to be strengthened with
the purchase of additional Sukhoi planes from Russia.

For your comments or further inquiries please e-mail to:
tbsc-strategy at indo.net.id