[Marinir] Indonesia Digest, No: 20.05 ; 07 -06-'05

[Yap Hong Gie]

INDONESIA DIGEST
Indonesia's complex Issues in a Nutshell
By: Ms. Wuryasuti Sunario
Published by: TBSC-Strategic Communication
No.: 20.05 - Dated: 7 June 2005

In this issue:

MAIN FEATURE:

Indonesia-Japan sign MOU on Investment Strategic Action Plan

NEWS AND BACKGROUND:

1.      Tourism and Transportation :
        Avtur Price down 6.8%, Airfares Up 30%
        Q1 Tourist arrivals down 1.4%

2.      Health, Culture and the Environment:
      Health  Department Forbids officers to Circumcise girls
      Deputy Minister for Protection of Women appointed
·     Indonesia mentioned in CIA Factbook on Infectious Diseases

3.     The Economy, Trade and Industry:
       2005 Budget: World Oil Price assumption adjusted to US$45

4.      Politics and Security :
         Jakarta Tightens Security after Tentena bombings
----------------------------------------------------------------------------------------------------

MAIN FEATURE:

Indonesia-Japan sign MOU on Investment Strategic Action Plan

During his state visit to Japan, on 2 June, Indonesian President Yudhoyono 
signed a Memorandum of Understanding on an Investment Strategic Action Plan 
with Japanese Prime Minister Junichiro Koizumi. The Plan encompasses four 
areas: tax and duty, labour, infrastructure, and business competitiveness of 
medium and small scale businesses, reported Media Indonesia.

The Plan is expected to improve the business climate between the two 
countries, aimed to attract twice the investments of Japan in Indonesia 
compared to today. The Investment Board mentioned that approved investments 
from Japan in 2004 reached US$ 1.7 billion, however for the first Quarter of 
2005 this has trickled down to US$168 million only.

On Indonesia's side, measures to be taken will include improvements in the 
taxation system and the establishment of a national balance sheet on 
infrastructure.

In his speech at the Symposium entitled "Renewing Indonesia-Japan Strategic 
Partnership", President Yudhoyono said that until today, over the years, 
Japan has invested no less than a total US$ 11 billion in Indonesia, 
employing more than 200,000 workers. The present government is pro-business, 
the President assured his audience. And, to further improve the investment 
climate, the government will review laws and regulations that cause 
uncertainties and are not pro-market. These include laws and regulations on 
taxation, as well as on labour issues, that will be adjusted to improve 
relations between management and workers.  On its side, Japan is ready to 
facilitate investments through the Japan International Cooperation Agency, 
the Japan Bank for International Cooperation and Japan External Trade 
Organization.

Another point in the MoU is that Japan and Indonesia will further commence 
negotiations pertaining to an Economic Partnership Agreement (EPA) between 
the two countries, with discussions to begin no later than July 2005. The 
EPA  between Japan and Indonesia, which is  aimed to improve the economies 
of both countries covers twelve areas of cooperation, reports Bisnis 
Indonesia. These are: (1) trade in commodities - both tariff and non-tariff, 
statement of origin, and increased trade; (2) Customs Procedures; (3) Trade 
in Services; (4) Investments; (5) Relocation of local population; (6) 
Government procurement; (7) Intellectual Property Rights; (8) Policies on 
Competition; (9) Standards and Adjustments; (10)improved Business 
Environment; (11) Cooperation; and (12) on Conflict Resolutions

Trade Minister Mari Elka Pangestu further commented that the EPA will 
benefit Indonesia since included is the improvement of business 
competitiveness of the Indonesian industry, that will include technical 
cooperation and capacity building, so that our commodities will be able to 
compete and meet the high standards of Japan. Indonesia will further 
negotiate for a freedom of movement of labor, where, for example Indonesian 
nurses may work in Japan, where there is a shortage of nurses to care for 
the aged.

In Indonesia, the automotive sector looks forward to EPA with Japan, when 
Indonesia's industry will be able to supply automotive components to Japan. 
Bisnis Indonesia editorial on Monday, 6 June comments that Indonesian 
businessmen are looking forward to the actual implementation of the 
Agreement, which, according to some circles could start as early as next 
year. Coordinating Minister for the Economy had said that once the agreement 
is implemented, this could double Japanese investments in Indonesia from the 
present US$ 20 billion to US$40 billion in five years time.

While in its editorial Media Indonesia praised President Yudhoyono for a 
most successful overseas visit to the United States, Vietnam and Japan. The 
paper, however, reminds all that both the government and the private sector 
must not merely be happy with results achieved, but must take immediate 
follow-up measures to meet commitments made.

Sources: Media Indonesia and Bisnis Indonesia 
(Tuti Sunario)
----------------------------------------------------------------------------------


NEWS AND BACKGROUND:

1.      Tourism and Transportation :

Avtur Price down 6.8%, Airfares Up 30%

In a bid to assist in the plight of the aviation industry, Pertamina State 
Oil Company has reduced the price of aviation fuel, or avtur with 6.8%, 
starting 1 June, but prices vary from airport to airport. This is on 
condition that airlines pay cash at time of refueling, said Pertamina 
spokesperson, Muhammad Harun.

Though welcoming the news, Company Secretary of Merpati Nusantara Airlines, 
Jaka Pujiyono, regretted that the reduction is less than anticipated, since 
in the last two months, avtur prices have, in reality risen 21%.

In a related development, the Department of Communications, has accepted the 
proposal made by the Indonesian Commercial Airlines Association, INACA. The 
Department will enforce the base and ceiling reference rates for domestic 
airfares starting 6 June.  The rates are expected to increase domestic 
airfares by about 30% compared to last year's fares.

In response, Commission V of Parliament has urged the Department of 
Communications to explain transparently its calculations made to determine 
the base and ceiling rates of airfares.

At the same time Indonesia's tour operators said that tour packages to China 
and Europe have increased by between US$30- US$40.

Meanwhile, the National Statistics Board informed that the number of 
domestic passengers during April is down by 3.45% to 1.99 million passengers 
compared to March. Largest drop was seen at Jakarta's Soekarno-Hatta airport 
with -6.68%, and lowest was registered at Medan's Polonia Airport 
with -3.02%.

Outbound number of air travelers also dropped 0.93%, where the only increase 
seen was through Bali's airport with 1.98%, from 121,200 in March, to 
123,600 in April.

Q1 Tourist Arrivals down 1.4 %

The National Statistics Bureau further informed that visitors arrival 
through Indonesia's 13 main entry points for the First Quarter of 2005 is 
down 1.4% to
1.34 million compared to the same period last year when 1.36 million were 
registered. Whilst April arrival compared to March is down 3.55%. The 
Statistics Bureau blames the decline on the regular low tourist season.

Latest statistics received from the Immigration Office in Bali, however, 
showed no decline in Australian visitors after the verdict passed to alleged 
marijuana smuggler, Schapelle Corby, who was sentenced to 20 years 
imprisonment by the Bali Court.

1.    Health, Culture and the Environment:

Health Department forbids its officers to circumcise girls

The Department of Health has issued a Ministerial Decree forbidding its 
officers to circumcise girls and to further socialize this information to 
the public in order to stop the practice among communities.  Circumcision on 
females is still prevalent in parts of Indonesia following local tradition 
and religious belief.

Minister for the Empowerment of Women, Meutia Hatta Swasono, is emphatic 
that circumcision on girls is a violation on women and must be stopped.

A study by the Population Council of Jakarta on the practice found that 
medical officers have begun to be included in the practice, although they 
are motivated to reduce health risks if undertaken by midwives. According to 
data on Female Circumcision in Indonesia as reported by Kompas of 1 June, 
the practice of circumcising female babies below 1 year is prevalent in 
Sumenep (Madura), Padang (West Sumatra) and Kutai (East Kalimantan); 
circumcision of girls between 1-4 years is dominant in Gorontalo (northern 
part of Sulawesi); and on girls between 5-9 years in Bone and Makassar 
(South Sulawesi).

 Senior Official in the Department of Religious affairs, Muzakir, explained 
that there are several understandings among Moslem believers in Indonesia. A 
section believes that the practice is a religious duty, another believes 
that it is for good, others again believe that is neither good nor bad. For 
that reason the Department leaves the decision entirely to the individual 
communities.

Deputy Minister for Protection of Women appointed

The Ministry for the Empowerment of Women has recently appointed Irma 
Alamsyah Djajaputra to the new post of Deputy for the Protection of Women to 
handle a number of issues faced by women. The Deputy's first task is to 
socialize the Law on Violence against Women, Women workers in Households and 
other gender issues, said Minister Meutia Hatta.

In separate occasion, Meutia Hatta said that the protection of children has 
not yet been undertaken sufficiently seriously. According to Police reports, 
in 2003 more than 666 children were victims of child trafficking. 600,000 
children are working as maids in homes, and 35% of overseas migrant workers 
are below age.

·    Indonesia mentioned in CIA Factbook on world infectious diseases

      Asian and African countries trying to safeguard their image against an 
onslaught of negative publicity related to travel advisories and terrorism 
now have a new problem to contend with., reports Imtiaz Muqbil in his 
widely-read Travel Impact Newswire.

      The US Central Intelligence Agency's new World Factbook, which records 
6 million visits each month, has just been expanded to include a "new 
category" listing the risks posed in 35 countries by infectious diseases, 
Imtiaz continues.

Twelve Asian countries and 23 African countries are included in the website, 
rating them on the basis of the risk that travelers face of exposure to 
diseases contractable through or by food, water, vectors or animal contact. 
These include rabies, dengue
fever, malaria, bacterial and protozoal diarrhea, hepatitis A, typhoid fever 
and several others. Cambodia, Burma (now known as Myanmar) and Papua New 
Guinea are rated "very high" while Afghanistan, Bangladesh, India, 
Indonesia, Malaysia, Pakistan, Philippines, Thailand and Vietnam are rated 
"high".

The potential damage faced by these countries' travel industries is more 
than clear due to the huge distribution and coverage of the CIA website. The 
CIA refers to its World Factbook as its "most widely disseminated and most 
popular product, now averaging more than 6 million visits each month." It 
says, "tens of thousands of government, commercial, academic, and other Web 
sites link to or replicate the online version of the Factbook."

Now designed in a format that allows it to be updated twice a year, the 
Factbook provides wide-ranging information about the background, geography, 
people, government, economy, communications, transportation, military, and 
transnational issues for countries from Afghanistan to Zimbabwe.

This year's Factbook, which was last updated on May 17, 2005, includes six 
new entries. "In the people category, a major infectious diseases field has 
been added for countries deemed to pose a higher degree of risk for 
travellers," the CIA says in a
press release. In the economy category, entries have been included for 
current account balance, investment (gross fixed), public debt, and reserves 
of foreign exchange and gold. The transnational issues category has a new 
refugees and internally displaced persons entry.

Certain to make cash registers jingle at the insurance companies selling 
travel policies, the information contained in the website will create new 
headaches for global tour operators, travel consultants, airlines and 
national tourism organisations of the listed 35 countries

On Indonesia, the Factbook mentions that degree of risk is here is "High" 
for Food or waterborne diseases: namely bacterial and protozoal diarrhea, 
hepatitis A and E, and typhoid fever. Also for vectorborne diseases such as 
dengue fever, malaria, and chikungunya that are high risks in some locations 
(2004)

2.    The Economy, Trade and Industry:

World Oil Price assumption for 2005 Budget adjusted to US$45

With world oil prices soaring and with no prospect of going down in the near 
future, Parliament has finally relented to the Government's insistence that 
adjustments be made on economic assumptions for the 2005 Annual Budget. 
Earlier, members of Parliament insisted to retain this at the level of 
US$35/per barrel.

A recent Parliamentary Working Group meeting has finally agreed to changes 
in assumptions to become the base for the construction of the 2005 Budget. 
Most significant assumptions include Economic Growth, that was first 
expected at 5.5%, has now been raised to 6%. Inflation is up from 7% to 
7.5%. The Exchange rate of the Rupiah is down from Rp. 8,900 per US Dollar, 
to Rp. 9,300 per US Dollar. World Oil Price is now assumed up from the 
earlier US$35/barrel to US$45/barrel. And Indonesia's oil production down 
from 1.125 million barrels/day to 1.120 million barrels/day. Whilst, 
Interest rate of Bank Indonesia Certificates for three months remains at 8%.

The agreement must be brought up to be ratified by the Plenary as well as by 
the Government.

3.    Politics and Security :

·     Jakarta Tightens Security after Tentena bombings

After the bomb blasts on 28 May in the picturesque town of Tentena some 54 
km. south of the district capital Poso, - killing 22 people - , Police and 
Intelligence have been working overtime to nab the terrorists. Within a few 
days, the Police arrested more than 17 persons allegedly involved in the 
bombing. Most surprising arrest to the public was the Chief Warden of the 
Tentena Prison, named Hasman, who was caught in his car in the company of 
two prisoners - whom he had released without authorization, and an 
unidentified woman. Witnesses had seen them near the site, both before and 
after the deadly blasts. In his white car was also discovered a gun, a 
dagger and TNT powder. Later Police investigations verified that substances 
found in the hair of the Warden were identical to those used in the bombs, 
so that the Warden has now become a major suspect.

Hereupon, Police searched the prison grounds and found more evidence of 
materials that would most likely be used to make bombs, such as pipes to be 
used as casing for the bombs, 24 concrete nails, self-made guns, and TNT 
powder. Substances at the Tentena blasts were found to be identical in 
composition with those that were exploded at the Bali bombing in 2002, at 
Hotel Marriott in 2003 and in front of the Australian Embassy in Jakarta in 
2004.

Meanwhile, both Christian and Moslem religious leaders in the Poso district 
have urged their respective congregations to leave all investigations and 
reprisal to the Police and the authorities. For, should any member of the 
congregation take personal revenge, then this would trigger a horizontal 
conflict between followers of both religions, that will trigger more 
violence with no end in sight.  This time, the authorities as well as 
witnesses have confirmed that the bombers were not from the region, but came 
from outside. In fact, the Police confirmed that the bombers originated 
mostly from Central Java.

On Saturday, 4 June, the American Embassy in Jakarta issued fresh warnings 
to American citizens to avoid hotels, shopping centers and malls in the 
capital that are mostly frequented by foreigners, since intelligence has 
discovered that terrorists aim to explode bombs in Jakarta over the 
week-end. Hereupon, the Indonesian Police and the Military went into 
immediate action. Security at Embassies, especially at the American, British 
and Australian Embassies have bee fortified, as well as at hotels and 
shopping malls. Hotel Mandarin and the Menteng Plaza received bomb threats, 
but after thorough combing by bomb squads and no suspicious objects found, 
both buildings were cleared and declared safe.

In Jakarta, Central Java, South and Central Sulawesi, Police have staged 
road blocks, checking vans, private cars and motor cyclists, since 
information has been received that terrorists plan to blast bombs by suicide 
car bombings.

Although the Jakarta public went through its usual busy shopping on Saturday 
and Sunday, the Police and security officers have maintained high vigilance 
and are on top alert.

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