[Marinir] Indonesia Digest: No: 11.06 ; 06 - 04 - '06

[Yap Hong Gie]

INDONESIA DIGEST
Indonesia's complex Issues in a Nutshell
By : Ms. Wuryasuti Sunario
Published by: TBSC-Strategic Communication
No.: 11.06 - Dated: 6 April 2006
In this issue:

MAIN FEATURE:

CONDOLEEZZA RICE AND TONY BLAIR ON OFFICIAL VISITS TO INDONESIA:
Improving Inter-faiths Understanding, Democracy and Investments

NEWS AND BACKGROUND:

1.      Tourism and Transportation
Bali's Regional Revenue from Tourism still down
Garuda Indonesia re-operates Bali - Seoul flights

2.      The Economy, Trade and Industry:
Government suspends Privatization of State Enterprises
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MAIN FEATURE:

CONDOLEEZZA RICE AND TONY BLAIR ON OFFICIAL VISITS TO INDONESIA:
Improving Inter-faiths Understanding, Democracy and Investments

March has been a busy month for Indonesia. Last month was highlighted with 
official visits made by a number of high profile VIPs. The first was US 
Secretary of State Condoleezza Rice, and towards the end of the month came 
Tony Blair, Prime Minister of the United Kingdom on official visit to 
Jakarta.

Itineraries for VIPs Rice and Blair were unusual in that each made a special 
effort to visit one Muslim Boarding School, both in Jakarta. Both Rice and 
Blair praised Indonesia for her moderate Muslim population, in a country 
that is democratic and is a prime example of harmonious living amongst 
communities of different faiths.
Reuters reported that Condoleezza Rice in her first visit to Indonesia as 
Secretary of State on Tuesday, 14 March, praised its government for setting 
an example of "moderation, tolerance and inclusiveness," and for urging 
officials in nearby military-ruled Burma to respect human rights.
"The Indonesians are making a real effort to rid the region and not just 
themselves, but in cooperation with the region, of the terrorist threat that 
has plagued southeast Asia," Rice told reporters traveling with her to 
Jakarta, said Reuters.

The United States sees Indonesia as a voice of moderation in the Islamic 
world and Rice hopes that it might have some influence in the Middle East, 
particularly over the militant group Hamas, which won Palestinian elections 
in January.
"Indonesia is an inspiration to those around the world who struggle with the 
many differences" people may have "in terms of race, ethnicity and 
religion," Rice said.
"Indonesia is home to the world's biggest Muslim population, and is expected 
to help the peace process (in the Middle East). The US stance is that we 
support the process there, one which is democratic and transparent."
"What we respect about Indonesia is that along with other religious groups 
people live in harmony and in tolerance," she said after a meeting with her 
Indonesian counterpart Hassan Wirajuda.
Speaking at a news conference, Rice praised Indonesia for its integrated 
efforts to convince people that "Islam must be associated as it is, with 
peace and not with extremism".
"I think Indonesia has a very big role to play as an example of what 
moderation and tolerance and inclusiveness of a society can be," she said.
Dr. Rice further defended the Bush administration's anti-terrorism policies, 
which have aroused criticism and violent protests among Muslims around the 
world including in Indonesia.
In Jakarta the Secretary of State first appointment was a visit to one of 
Jakarta's oldest Islamic schools located in a busy area of Central Jakarta.
A small crowd gathered outside the school and about 100 police, some 
carrying riot shields, fanned out in the neighbourhood.
Here she announced an $8.5 million grant to develop a version of "Sesame 
Street" for Indonesia. "I wish Americans could see this Islamic school," 
Rice told reporters, on the first day of a two-day visit. "Here you have 
young boys and young girls in their traditions, but learning their national 
curriculum, working together. . . . I'm sure they're going to be young 
people who are going to be very capable in the world."
The "Sesame Street" grant is part of a $157 million, five-year program to 
improve Indonesian education. The program, announced by President Bush on 
his visit to Bali in October 2003, followed terrorist bombings on the island 
a year earlier and at the JW Marriott Hotel in Jakarta in August 2003. A 
number of the bombers convicted in those attacks were graduates of Islamic 
boarding schools in Indonesia.
Some Muslim civic leaders initially were wary that the program might try to 
change their schools' religious curriculum, but that fear seems to have 
waned. The program focuses on improving teachers' skills and involving 
parents, U.S. officials said.

Indonesia has seen large anti-American protests over the past few weeks, but 
Rice said she was not concerned about that during her visit, adding such 
protests showed democracy was working. Several hundred protesters from a 
radical Islamic group rallied outside the heavily guarded U.S. Embassy in 
Jakarta, shouting slogans against Rice and the United States.

On US-Indonesia Restored Military ties

In separate meetings with Foreign Minister Wirajuda and President Susilo 
Bambang Yudhoyono, Rice discussed the strengthening relationship between 
Indonesia and the United States. The United States restored military ties 
with Indonesia last November after a six-year embargo imposed because of 
alleged military's human rights abuses in East Timor.
She said it was a better strategy for the United States to have contact with 
the Indonesian military than to isolate it. But the Bush administration has 
great interest in ensuring that Indonesia cooperates with the United States 
in its battle to suppress militant strains of Islam.
About 90 percent of Indonesia's 240 million people are Muslim.
Indonesia is keen to get US help in modernising its military forces and 
training its senior officers and the Americans are keen to have Indonesia as 
a strong Democratic ally as a counterbalance to China's increasing influence 
in the region.
In her address to an audience packed with political, business and media 
leaders at the end of a two-day visit to Jakarta, Dr Rice said that a 
"reformed and effective" Indonesian military is in the interests of everyone 
in the region. "We look for continued progress toward greater accountability 
and complete reform."
She also went out of her way to praise Indonesia for its shift to democracy 
since the authoritarian Suharto presidency ended under pressure in 1998.
Noting widespread skepticism on whether Indonesia's 220 million people could 
make the transition to democracy, she said: "Indonesians silenced these 
doubts once and for all in the (2004) elections ... a date now remembered as 
the largest single-day election turnout in human history".
Dr Rice praised Indonesia and other South-East Asian countries for knowing 
"that terrorists must be actively confronted" and says "the force of 
tolerance" was important in that effort.
"I think Indonesia is doing its part in demonstrating that it is possible to 
both adhere to Islamic belief and be democratic," she said.
Dr Rice's visit was the second leg of a nine-day trip that started in Chile 
and ends with three days in close ally Australia.


UK- Indonesia Islamic Advisory Group established
Later in the month, during his visit to Indonesia at the end of March, UK 
Prime Minister Tony Blair in a press conference with President Susilo 
Bambang Yudhoyono said that, after a most meaningful dialogue with five 
noted Indonesian Muslim leaders and scholars, the UK and Indonesia have 
agreed to build closer cooperation to narrow the divide between the Muslim 
and the Non-Muslim world. "Towards this end we have agreed to continue to 
promote and where necessary sponsor interfaith and inter-cultural 
 dialogues," added President Yudhoyono.
And thus together we have agreed to establish the UK-Indonesia Islamic 
Advisory Group, in the hope that through continued communications we may 
build a world that is more peaceful, just and prosperous", said Yudhoyono. 
The UK-Indonesia Islamic Advisory Group will be led by the respective 
Foreign Ministers of both countries.

UK Prime Minister, Tony Blair, commented that Indonesia is a prime example 
of a people where communities of different faiths live and try to understand 
one another, thus creating mutual understanding between Islam and the West.
"There is no better place to see this than here in Indonesia", said Blair.
The UK Prime Minister went on to say that the West must be aware that it can 
not solve all problems alone, especially in the fight against terrorism, 
without the basis and the existence of mutual understanding and respect 
between the Islamic world and the West.
The newly established Group will provide room for more structured dialogues 
between the UK and Indonesia on Islam. "I also hope that such dialogues will 
send a message and become a symbol to the world that a future that is based 
on tolerance, mutual respect and justice, will make this a much better 
 world" said PM Blair, as reported by Antara.
.
President Yudhoyono, meanwhile, informed the press that the two leaders had 
earlier discussed four main topics, namely, the economy, investments and 
trade, social, cultural and religious issues; cooperation in the field of 
security and counter-terrorism; and international political developments, 
including the results of elections in Palestine and Israel, as well as the 
political situation in Myanmar.

 On Investment prospects, PM Tony Blair ensured that British investors are 
prepared to increase investments in Indonesia, especially since Indonesia's 
investment climate continues to improve. Britain is the second largest 
investor in Indonesia after Singapore, with a total investment of US$ 1.5 
billion and US$ 1.4 billion in trade between the two countries, said 
President Yudhoyono.

 (Sources: Reuters, AFP, Antara, Kompas)    (Tuti Sunario)
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NEWS AND BACKGROUND:

1.      Tourism and Transportation

Bali's Regional Revenue from Tourism still down

Regional revenue from the tourism sector for the first two months of 2006 is 
still down, reports Bisnis Indonesia. To date, the regency of Badung 
receives most revenue from tourism, as here are located Bali's most 
luxurious hotels along the beaches of Nusa Dua, Kuta and Sanur. 80% of 
Badung's revenues are collected from the tourism sector. Second largest 
earners are the town of Denpasar, followed by the regency of Gianyar, where 
are located the villas at Ubud. Other of Bali's regencies are: Jembrana, 
Buleleng, Bangli, Kungkung, Karangasem and Tabanan, which are normally 
allocated a small portion of the taxes received in the three aforementioned 
regencies as a form of subsidy for their development..

Nonetheless during the first two months of 2006, taxes on hotels and 
restaurants in the Regency of Badung have reached 20.7% of target to Rp. 
40.1 billion, and 25.9% of target for restaurants at Rp. 4.67 billion 
respectively. This slide comes in the aftermath of the bombings at Bali's 
restaurants in October 2005 that has caused the number of tourists to the 
island reducing sharply.  For this reason Bali's regencies have had to 
downgrade their targets from tourism compared to their earlier 2005 
earnings, where last year saw Badung earning Rp. 267 billion from hotels and 
Rp. 27 billion from restaurant taxes. Whereas for 2006 the Regency expects 
to receive only Rp. 193.5 billion from hotels and Rp. 18 billion from 
restaurants, from a total expected regional tax revenue of Rp. 269.9 
billion, amounting to a loss of around Rp. 102 billions for regional 
development compared to last year.

Meanwhile, the regency of Gianyar, which in 2005 targeted earnings of Rp. 23 
billion from hotels and restaurants, actually realized earnings of Rp. 
23.022 billion, amounting to 40% of total regency earnings of Rp. 60 
billion. Nonetheless, with the sharp decline in tourist arrivals to Bali for 
the first two months of 2006, Gianyar has received a mere Rp. 1.9 billion 
from hotel and restaurant taxes. For the whole of 2006, however, the regency 
hopes to increase these earnings by Rp. 1 billion to Rp. 24 billion.

Gianyar has 10 star-rated hotels, 440 lodgings and inns and 253 restaurants, 
80% of these establishments are located in the village of Ubud.

Garuda re-operates Bali - Seoul flights

With improved traffic from Korea to the holiday island of Bali, Garuda 
Indonesia re-opened its Denpasar-Incheon, Seoul flights on Sunday, 2 April, 
after having suspended services on the sector since 2004 due to poor load 
factors.

Further balidiscovery.com reports that, flying Airbus A-300 equipment 
capable of carrying 294 passengers (42 in business class and 251 in 
economy), Garuda's Denpasar - Seoul services (GA-780) are scheduled every 
Tuesday, Thursday and Sunday, departing from Denpasar at 00:45 a.m. local 
time and arriving in Seoul at 08:30 a.m. local time. On the return leg, 
Seoul - Denpasar, Garuda (GA-871) flies every Tuesday, Thursday and 
Saturday, leaving Seoul at 11.00 a.m. local time and arriving in Denpasar at 
4:50 p.m. local time.

With these additional flights to Seoul, the Denpasar - Seoul route is served 
a total of 7 times a week in which Garuda flies 3 times a week while the 
other 4 flights are flown by Korean Airlines through a code-sharing 
arrangement that sees Garuda Indonesia using A-330 aircraft and Korean 
Airlines flying Boeing 747-400 aircraft.

The South Korean inbound market is the fourth largest source of Bali 
visitors after Japan, Australia and Taiwan. In 2005, a total 78.146 Koreans 
visited Bali.

Bali is a favourite holiday and honeymoon destination for Koreans. A number 
of Korean couples have even made their wedding vows on this dream island.

The Economy, Trade and Industry:

Government agrees to suspend Privatization of State Enterprises

The Government and Parliament have together agreed to temporarily suspend 
privatization of State Enterprises until the right conditions have been met 
by both the government and the State Enterprise concerned, said Didik J. 
Rachbini, Chairman of Commission VII of Parliament.

The conditions are firstly, that privatization is not undertaken with the 
sole interest of politics in mind, and done only after clear calculations 
that such privatization will benefit the state more than when privatization 
is not done, and only after careful efforts have been made at efficiency in 
Budget subsidies.

Secondly, privatization may be done only after the government has prepared 
appropriate bills or supporting legislation in such sectors where the 
Enterprise to be privatized operates. This measure is to avoid imbalances 
that may ensue between government policies and the market after 
privatization
.
Thirdly, the government has ensured the credibility of the prospective 
investor, and the government is placed in a positive bargaining position to 
ensure that positive results will ensue for the public good in the future.

"Parliament is not against privatization", avers Rachbini, but privatization 
must wait until such time when the government is ready to support the 
privatization of companies, especially in strategic sectors. Privatization 
should be the taken as last resort to rescue State Enterprises and made only 
after no other options remain. Before privatization other alternative steps 
need to be considered and taken, including efforts in efficiency, 
streamlining the bureaucracy, improve external factors of the company, 
efficiency in budgets, and improvements in external as well as internal 
management.

Until today, privatization of state enterprises has mostly been like placing 
the company on cheap sale, without utilizing the bargaining position of the 
government.

There are 3 alternative conditions where state enterprises may be 
privatized. These are in the case of enterprises to be liquidated, companies 
with low output, and where external conditions are negative.  Secondly, 
enterprises with low output, but with positive external factors, these may 
be privatized after due efforts in incorporation. And thirdly, in the case 
where a company has shown positive output, but the sector where it operates 
needs only little intervention or control from the government, such as in 
hotels and shopping malls.
On the other hand, those sectors that need the support and control from the 
government to maintain market balance, these must not be privatized, these 
include those involved in the production of arms, in telecommunications and 
in banking.
"It is most important to maintain  balance in banking, since, should all 
banks be privatized this may destroy the entire Indonesian financial system, 
as banking is a combination of the role of the private sector and 
regulations that are enacted by government. While, telecommunications uses 
public infrastructure and public space", concludes Didik Rachbini, as 
reported by Bisnis Indonesia.

Earlier, the Indonesian government  announced that it plans to reduce the 
number of state-owned companies from the current 165 to 25 by 2020 as part 
of a program at restructuring state enterprises, reports the Jakarta Post. 
The downsizing of the state firms would be carried out through mergers, 
privatization or liquidation. State enterprises would be reduced to 85 by 
2009, to 50 by 2015 and to 25 by 2020.
In the next two years, the government would restructure a number of state 
companies to make them more competitive in the global market, said Deputy to 
the State Minister for State Enterprises, Mahmuddin Yasin. State companies 
that will continue operations are those involved in maintaining national 
security, carry out tasks of public service obligation (PSO), are engaged in 
natural or cultural conservation, are in development of natural resources, 
are labour intensive or have an important role in maintaining the country's 
economic stability.

He said that the restructuring program was essential since many state firms 
had failed to compete with private companies either because of poor 
management or due to too much intervention from the government.

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