[Marinir] Indonesia Digest; No: 12.05 ; 29 -03 -'05

[Yap Hong Gie]

INDONESIA DIGEST

Indonesia's complex Issues in a Nutshell
By: Ms Wurastuti Sunario
Published by: TBSC-Strategic Communication
No.: 12.05 - Dated: 29 March 2005

In this issue:
Stop Press: 8.7 RS Earthquake again hit Sumatra's west coast

A huge earthquake registering 8.7 on the Richter scale again hit the western
coast of North Sumatra Monday night, 28 March, at 11.09 pm local time,
reported Metro TV's Breaking News. Located due south of the last December
epicenter, yesterday's epicenter was 30 km. under the sea in the Indian
Ocean, situated between the islands of Nias and Simeuleu. Warnings of a
possible ensuing tsunami were sounded in Thailand and India but,
fortunately, no tsunami materialized.

 However, large damages are reported on the island of Nias, in particular
the towns of Gunung Sitoli in north Nias and Teluk Dalam in the south, where
200 and 100 people respectively  are so far reported killed in Gunung Sitoli
and  Teluk Dalam. But these are as yet only estimates, since many victims
are still buried under rubble, and no heavy equipment are available.
Vice-President Jusut Kalla estimates that the number may climb to more than
1,000 dead, as 80% of Gunung Sitoli is known to have been devastated.

 The quake was felt in many parts of Sumatra, from Aceh, south to Jambi and
Pekanbaru, and even to Singapore, Kuala Lumpur and Thailand's Hadyai..

Today, Tuesday, President Yudhoyono decided to postpone his planned visit to
Australia, New Zealand and Timor Leste, to inspect the stricken areas
instead. Emergency Relief operations were immediately started, but because
the airport of Gunung Sitoli is damaged and on account of bad weather, no
outside help has yet arrived. Singapore has sent 3 Chinook aircraft to help
out and a hospital ship is on its way from Australia.  The people of  Nias
are in dire need of food, drinking water and medical attention.

MAIN FEATURE:

ACEH RECONSTRUCTION BLUEPRINT READY: RP. 64 TRILLION NEEDED

News and Background:
1.      Tourism and Transportation:
Travel Agents Commissions cut to 4%
Tourism to receive part of VoA Revenue?
Indonesian Consulate General in Guangzhou, China, to open in April
Foreign Low-Cost airlines expansion into Indonesia curtailed

2.   Science, Culture and the Environment:
Bali to face Water Crisis

3.  The Economy, Trade and Industry:
 ABN-AMRO: Asia imports 60% of national Oil Needs
Bank BNI offers Loans to Maritime Development Projects
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MAIN FEATURE:

ACEH RECONSTRUCTION BLUEPRINT READY: RP. 67 TRILLION NEEDED

Right on schedule, on 24 March, Minister for National Planning, Sri Mulyani
Indrawati submitted the Blueprint for the Reconstruction of Aceh and Nias to
President Yudhoyono.  This is two days prior to the end of the Aceh tsunami
emergency period,  and exactly three months after the devastating earthquake
and tsunami on 26 December.

The Blueprint covers 12 books, comprising spatial planning, economics and
job opportunities, infrastructure, institutions and governance, environment
and natural resources, health and education. Additionally the books also
cover social, economic and religious aspects, community resilience and civic
order, financial, accountability and legal aspects.

Although not yet signed by the President, it is expected that the Aceh Blue
Print will be enacted through Presidential Regulations, continued Minister
Sri Mulyani, so that this will be a guidebook for the implementing board,
and for the regional government to work sector-wise.

One chapter is specially dedicated to the powers provided to the
implementing Board for the Reconstruction of Aceh and Nias, whose function
is to coordinate all areas of work in coordination with the regional
government. This Board is also empowered to further detail reconstruction
programs based on this masterplan.

All reconstruction will be overseen by a controlling council, or independent
institution, while audit will be done through the normal bureaucratic
channels of BPK, BPKP, Inspectorate General and regional inspecting boards,
as well as through appointed independent auditors.

Financing Mechanisms

Execution of the Plan needs an estimated Rp. 67 trillion, although according
to initial needs assessments it is Rp. 41.1 trillion. These funds will be
drawn from the National Budget and non-budget funds, including donor
assistance. At the moment, donor countries are still awaiting the masterplan
to determine funds to be remitted. A number of CGI (Consultative Group on
Indonesia) members have already identified which projects the countries will
fund.

As for financial procedures, when a country remits funds through a
multi-donor trust fund, then control and agreement will go through a
steering committee, that consists of donor countries and government
agencies. But when assistance is given through bilateral means, such as
provided by the USA, Australia and Japan, financial mechanisms will be done
through mutual agreement.

On Saturday, 26 March, when handing the Recovery Blueprint to the Local
Government, Vice President, Jusuf Kalla said that requirements set for the
position of Head of the Implementing Agency include: candidate must be a
civil servant, understands construction, finance, exports, is experienced in
handling large projects and understands international rules and regulations.


Women, majority who died in the tsunami

Meanwhile, Oxfam International announced that according to their study,
those who died in the tsunami were majority women, as found in Aceh, India's
Cuddalore District and Sri Lanka. In North Aceh, 284 women died compared to
82 men. In Aceh Besar, only 189 women survived of a total 676 inhabiting the
area, or 1 in 3 of population. Similarly, in India three times more women
died in the tsunami than men, whilst in one village, Pachaankuppam, all who
died were women. In Sri Lanka, many more men were seen in evacuee camps
compared to women.

Becky Buel, Director of Oxfam said that women are more prone to be victims
of the tsunami. In Aceh, since this occurred on a Sunday, women were in
their homes rather than at work, while the men were outside the homes or at
sea, where the tsunami was not destructive. In India, women were on the
beach awaiting the return of their husbands from the sea.

The reduction of women against men may become a problem in the future.
Already now, rape and forced marriages are happening in the camps.

Total number of dead around the Indian Ocean countries caused by the
December earthquake and tsunami is estimated at 174,300 - 183,083, with
majority of those killed in Aceh.
(Source: Bisnis Indonesia, Kompas, Media Indonesia)     (Tuti Sunario)
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News and Background:

1.      Tourism and Transportation:

Foreign Low-cost airlines expansion into Indonesia curtailed

The government will limit the number of foreign low cost carriers from
expanding their routes to Jakarta, Surabaya and Medan, until new agreements
are signed with related countries regarding such carriers, said
Communications Minister, Hatta Rajasa to Parliament. This policy is made
based on the consideration that Indonesian carriers are not yet on equal
level of competition with their overseas counterparts. Time slots will also
be managed that will differentiate between national and foreign LCC's.  With
particular regard to Yogyakarta and Semarang, the Minister continued, these
two airports are still closed to LCC's. This is since domestic airlines that
fly to these destinations are still creating the market and their load
factor is still low.

However, the government will allow LCC's to fly to potential tourism areas,
as long as these cities are mentioned in bilateral air communications
agreements. The strict stance comes in the wake of bilateral air talks with
Singapore,  which has ended in a deadlock.

Travel Agents Commissions cut to 4%

In its last meeting, the Indonesian National Association of Commercial
Airlines (INACA) has decided to cut travel agencies commission from 7% to 4%
said the Association's Secretary General, Tengku Burhanuddin. The cut is in
view of escalating aviation fuel costs and keener competition from low cost
airlines now flying the Indonesian skies. In 2004, Burhanuddin continued,
domestic air traffic surged 39.9% to 25.5 million passengers compared to
just 15.3 million the year before. In 2005, the increase is expected to
remain equally high. Therefore, now is the best timing to reduce
commissions.

The decision has, however, not been discussed with the Indonesian Tours and
Travel Agencies Association, ASITA. For this reason, the exact date of
validity has not yet been decided.

Tourism to receive part of VoA Revenue?

Tourism hopes to receive a share of receipts from fees on Visa on Arrival,
said Secretary General of the Department of Culture and Tourism, Sapta
Nirwandar. However, the subject must still be discussed by the Minister of
Culture and Tourism with the Minister of Law and Human Rights, under whose
auspices is the Directorate General of Immigration, and the Minister for
Foreign Affairs, urges Ferdiansyah, Coordinator for Budgets in Parliament.

By Law, all funds received through government departments must be submitted
to the National Treasury to become part of funds to be allocated in the
Budget, and may not be used directly by related agencies, unless
specifically allowed.

Tourism has requested a budget of Rp. 1 trillion, which is impossible to
meet within this Budget year, commented Parliament's Ferdiansyah. If
receipts from Visas on arrival are added to tourism's budget allocation,
then this will add to one third of tourism needs.  Therefore, when an
agreement can be reached this year, then Tourism may expect to receive
additional funds in 2006. Funds may then be disbursed for promotion and
upgrading of manpower. Additionally, one third of such funds should be used
to develop border islands and territories to safeguard our most outlying
borders, said Ferdiansyah.

According to Immigration statistics, in 2004 Immigration received US$ 35.6
million from VoA fees, comprising US$ 2.8 million for tourists staying 3
days (at US$ 10 per person), and US$ 32.8 million from 30-day VoA (at US$ 25
per person).

Indonesian Consulate General in Guangzhou, China, to open in April

To facilitate travel from China to Indonesia, the Indonesian government has
decided to open a second office to issue Indonesian visas, next to the
Embassy in Beijing. The Foreign Minister, Minister for Law and Human Rights
and the Minister for Culture and Tourism have jointly agreed to open the
Guangzhou Consulate General starting April, said Sapta Nirwandar, Secretary
General of the Department of Culture and Tourism. With its operation,
Indonesia expects to double yearly tourist arrivals from China to Indonesia,
up from the present 80,000 only.

2.      Science, Culture and the Environment:

Bali to Face Water Crisis

Balidiscovery.com. "the respected voice of Bali's tourism industry" reports
that Japanese Researchers have warned of the Need for Sustainable
Development and Wise Management of Bali's Water Resources.

At a recent seminar held in Bali on the development and management of water
resources it was concluded that unless water conservation becomes a top
priority in Bali, the island would face a serious water crisis within 20
years.

The seminar, sponsored by the Japan International Cooperation Agency (JICA),
presented the findings of a team of water experts from JICA, including:

. That by 2025, Bali's population will grow from its estimated 3.147 million
people in 2000 to 4.139 million - an increase of 132%.

. Similarly, foreign tourist visitor arrivals currently standing at 1.458
million can be expected to increase 253% to 3.690 million in 20 years time.

Pointing to the growing demand for water in all areas of Bali, a JICA
expert, Masatomo Watanabe, called for the identification of new water
resources and greater control on the over-exploitation of ground water in
order to avoid the intrusion of salt water into the Island's fresh water
supplies.

Mr. Watanabe estimates Bali entire water consumption now stands at 3,504
cubic meters per day - equivalent to 40.7 tons of water every second of
every day.

3.      The Economy, Trade and Industry:

 ABN-AMRO: Asia imports 60% of national Oil Needs

Irene Cheung, Head of the Asia Sovereign and FX Strategy of ABN-AMRO
recently said that 60% -65% of domestic energy needs of East Asian and Asian
countries must be imported, reports Bisnis Indonesia.  (It is not clarified,
how much of Indonesia's energy is imported, compared to what is refined and
distributed locally.
Oil price today in the world market is US$57/barrel which compares to US$35
mentioned in the latest Revised 2005 Budget.  Ed.).

The only oil exporting country in this region is now only Malaysia, Cheung
continued, although its value amounts to only 4.4% of total exports or 3.9%
of its GDP. As for Indonesia, although oil constitutes 23.6% of total
exports, or is 2.5% of total GDP, Indonesia has, in fact, become a net
importer of oil. "Indonesia has now become an importer of oil, although the
country is still a net exporter of gas", she said.

Nonetheless, with an expected annual economic growth of 5%, Indonesia is
among four countries that will become the engine of growth for the Asian
economy this year, states Cheung. Highest growth will be enjoyed by China
with 8.5% in 2005 and 7.5% in 2006, India's economy is expected to grow by
6.5% in 2005 and 6.7% in 2006; and Thailand with 5.0% and 5.5% respectively.

Whereas, countries heavily relying on exports like South Korea, Singapore
and Taiwan will be impacted by the global economy and the strengthening of
the exchange rate. However, the high price of oil will impact on the Asian
exchange rate, in particular on the Korean won, the Thai baht and the
Indonesian rupiah. While government policy to allow the appreciation of its
currency to counter-balance the high cost of fuel may trigger inflation.


On the other hand, with Indonesia's improved economic conditions caused by a
surge in domestic demand and the transformation of high cost economy, Cheung
remains optimistic of Indonesia's positive growth through lower inflation,
cutting of high cost economy, improved private sector performance and
continued fiscal discipline.

Indonesia has also successfully reduced its foreign debts, from 146.3% of
GDP in 1998, down to 59.3% of its GDP in 2004.  Last year economic growth
measured against GDP was 5.13%, which is higher than the original target of
4.8%. While in 2005 the National Statistics Board expects growth to be 5.5%,
higher than government's estimate of 5%. This is due to increased
investments and exports. Indonesia's credit rating outlook is also positive.

Meantime, the Association of Indonesian Economists, ISEI, recommended that
in order to accelerate industrialization, the country must focus on capital
goods industry to support exports, and not merely on consumption goods which
adds to imports.

Bank BNI offers Loans to Maritime Development Projects

Commercial Director of the BNI Bank, Suroto, told a press Conference in
Jakarta that the Bank has started to provide loans to small and medium scale
companies investing in projects related to the sea. Loans provided include
those for working capital, partnership loans, exports and imports, and
investment loans. Total funds allocated for 2005 amount to Rp. 15.8
trillion, up Rp. 3.6 trillion compared to 2004.

Types of business considered are restaurants, the fish-catch industry; fish
processing and canning, and provision and marketing of production
facilities. Furthermore, loans will be provided for tourism resorts,
manufacturing of tools and boats for the fishery industry, seaweed farming,
facilities for construction and exports of tuna fish, frozen prawns, seaweed
exports, imports of boats for fishery and similar.

Up to date, the marine sector has received little attention from banks,
where, according to the Institute of 10 November in Surabaya, between
2002-2003, banks only realized 20% of an intended Rp. 2 trillion loan to
this sector. For, thus far the banking sector has been more interested in
providing loans to the consumption sector. Additionally, banks consider the
marine sector as a high risk industry, is too seasonal, and its continuity
not guaranteed.


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