[Marinir] Indonesia Digest No: 12.06 ; 19 - 04 -'06

[Yap Hong Gie]

INDONESIA DIGEST

Indonesia's complex Issues in a Nutshell
By: Ms. Wuryastuto Sunario
Published by: TBSC-Strategic Communication
No.: 12.06 - Dated: 19 April 2006
In this issue:

MAIN FEATURE:

"MT. MERAPI LIKELY TO ERUPT IN ONE TO TWO WEEKS", SAYS YOGYA'S SULTAN
NEWS AND BACKGROUND:
1.      Tourism and Transportation:
Bali Recovery Funds Disbursed Slowly

2.      The Economy, Trade and Industry:
Developing and Marketing Local Handicrafts
Government to develop Ten Economic Zones
Regions now authorized to issue Licenses for Domestic Investments

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MAIN FEATURE:

"MT. MERAPI LIKELY TO ERUPT IN ONE TO TWO WEEKS", SAYS YOGYA'S SULTAN

All preparations are on standby for an eventual evacuation of an expected 
30,000 rural population living around the crater of Mt. Merapi, as the 
volcano increases increased its seismic activity day by day since 12 April. 
President Yudhoyono has instructed Coordinated Emergency relief measures to 
be prepared for any eventuality should the volcano erupt.

Situated on the border between the densely populated provinces of Central 
Java and Yogyakarta, the perfect cone-shaped Merapi lies 18 miles north of 
the city of Yogyakarta, which counts a population of 1 million. Mt. Merapi 
is also the most active among Indonesia's 129 volcanoes. The volcano is both 
the life blood as well as the bane of the people living along its slopes, as 
it brings fertility to the soil, and through lava spews, provide sand that 
is continuously mined by the people for construction purposes. But, the 
volcano is also continuously active.

400 Army, Police and Red Cross personnel are now on alert and ready to help 
with evacuation any day now, as are 100 military trucks, evacuation 
shelters, general kitchens, food supply for three months, medicines, 40 
paramedics, ambulances as well as body bags, added Minister for Health, Siti 
Fadilah Supari. And, lessons learnt from the tsunami disaster in Aceh at the 
end of 2004, has taught us that it is most important to obtain accurate data 
on population actually living in the danger zone before a disaster.
The Geological Office has raised the status of the volcano to "standby", one 
level below the crisis level, when evacuation must be done. The office has 
warned, however, that the volcano could emit lava flows or fatal toxic 
clouds, so people must stay away from the crater, stop mining for sand along 
rivers that have their source on the slopes of Merapi, as well as be at 
other known danger zones. If lava succeeds to ooze out through the crater 
sides then an eruption may be averted, but if this does not happen, then 
Merapi may well blow its top.

But even as officials are busy with preparations, the population, by now 
inured to Merapi's idiosyncracies are waiting for two signals only, before 
they are actually willing to evacuate. The first sign of danger for them is 
when they see tigers, monkeys and other wild life fleeing down from the 
forested mountain top, which sign they believe will be followed by hot lava 
flows; and the second signal is the one given by the "guardian" of the 
Merapi, a sage who is believed able to communicate with the mountain spirit 
to tell people when they must evacuate.

Mt. Merapi is 2,968 meters above sea level. Its characteristic nature, 
experts say, is that magma keeps pushing up the crater but is blocked by a 
dome. This movement causes frequent tremors. Lately, electro-optic distance 
monitoring equipment have observed the dome expanding, causing further 
blockage.

Meanwhile, other Indonesian mountains have been raised their alert warning 
status by the Geological Office, these include Mt. Anak Krakatau in the 
Sunda Straits located between islands of Java and Sumatra, the Semeru in 
East Java, Mt. Lokon, Mt. Soputan, and Mt. Karangetang in the Sangihe 
islands (North Sulawesi), south of the Philippines, and Mt. Marapi and Mt. 
Talang in West Sumatra.

In the latest development, Sultan Hamengku Buwono X, Governor of the 
Province of Yogyakarta has issued warning that Mt. Merapi "may erupt any day 
within one to two weeks", reports Bisnis Indonesia. The Sultan has, 
therefore, instructed the 12 hamlets within a radius of 5 km from the crater 
to the volcano's south side in the province of Yogyakarta, to be evacuated 
immediately.  "This warning is not made on the basis of supernatural vision, 
but through scientific deduction. Should the mountain erupt, then those 
living within a radius of 5 to 12 kilometers will only have a short 10 
minutes to save themselves from hot lava flows", said the Sultan. "If 
necessary, people may return to till the soil during the day but return to 
shelters at night".

Interviewed on SCTV, the Sultan explained his reason for issuing warnings to 
his subjects.  "Latest seismographs of the Merapi" the Sultan said, "have 
shown continued upward activity. The problem that exists is that scientists 
do not as yet have the ability to determine the exact moment when a critical 
position will grow into an eruption. Scientists can also not yet determine 
when and at what date an explosion may occur. However, when the mountain 
erupts, then it is known that Merapi's crater sides will collapse, causing 
cold lava, - known as lahar,-  to flood the valleys, bringing down with it 
huge boulders and other volcanic material. When evacuation is done at this 
point, then villagers can only save themselves, if at all. Therefore, if 
villagers are evacuated now, when there is still time, then they can be 
moved with their families, wife and children and whatever sparse belongings 
they have, including cattle or poultry, to safer ground. If the situation 
still allows, then the men could return to the field during the day, and 
return to safe shelters at night.

As Governor and Sultan of Yogyakarta, Hamengku Buwono X feels responsible to 
avert another tragedy like the one that occurred in 1994, when toxic clouds 
suddenly rolled down the mountain, killing more than 60 people, despite the 
fact that the Merapi did not actually erupt.

Meantime, the hill resort at Kaliurang has been closed for tourists since 18 
April. Nearby, a bunker for 30 to 50 persons had been built in 2002 to 
protect villagers who do not have the time to escape lower down the slope. 
This bunker is equipped with oxygen and food for five days.
Merapi has been rumbling over the past four years. The volcano's most deadly 
eruption took place in 1930, when 1,370 people were killed. In 1994 hot 
clouds claimed the lives of at least 66 villagers.
(Sources: Kompas, Bisnis Indonesia, SCTV, Metro TV)  (Tuti Sunario)

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NEWS AND BACKGROUND:
1.      Tourism and Transportation:

Bali Recovery Funds Disbursed slowly

Rp. 2.5 billion towards the recovery program of Bali's tourism has finally 
been disbursed. Director General for Tourism Marketing, Thamrin B. Bachri 
told the press that this is the first installment of total funds to be 
channeled through the Department of Culture and Tourism towards tourism 
recovery of Bali. Of the allocated Rp, 92.9 billion (approx. US$ 10 million) 
for the total program, Rp. 67.3 billion (72.4%) is allocated for tourism 
marketing, whereas the remainder 27.6% is channeled through the Police 
Headquarters to safeguard security of the island, and the Directorate 
General of Immigration and the Office of the Coordinating Minister for the 
Economy for monitoring and evaluation and for the administration of the 
secretariat of the Bali Recovery Coordinating Team.

Funds disbursed to the Bali Tourism Promotion Board will focus on the 
activities of the Bali media centre, organizing agents and media 
familiarization trips and for road shows.

In March 2006, Bali received 79,726 tourists, said Bachri, or an average of 
2,660 per day, which is still a drop of 31% compared to statistics during 
the same month last year.


Indonesian Carriers urge Government's Protection before "Open Sky"

Chairman of the Indonesian Air Carriers Association (INACA), Rusdi Kirana, 
said that the Association's Annual General Meeting in one of its decision 
has urged the government that Indonesian carriers be given protection in 
anticipation of the prospective ASEAN Air Liberalization to start in 2008. 
At the opening of the General Meeting, Communication Minister, Hatta Rajasa, 
had challenged the Indonesian carriers to be ready to compete with foreign 
airlines that will be allowed to fly freely into Indonesian skies, as ASEAN 
had decided to start its open sky policy in 2008.

In response, INACA now asks that the government stop issuing new operating 
licenses to new airlines, since even now operators are in a cut-throat 
competition, that has left no room for consolidation of its corporation and 
organization. Since the start of Indonesia's Reform movement, the government 
has liberated its air policy from the former monopoly given to Garuda 
Indonesia and Merpati on domestic and international routes. With more than 
27 carriers licensed to operate the Indonesian skies, cut-throat competition 
has ensued among carriers, despite the fact that the number of domestic 
passengers has grown dramatically. As a result, four airlines have 
collapsed, while Garuda Indonesia and Merpati are burdened with still 
unresolved debts. Therefore, it is most essential that the government ensure 
some breathing space to airlines to consolidate their operations in order to 
be able to compete in open sky competition.

Lately, Kirana said,- referring to the revival of almost defunct AWAIR and 
its transformation to Air Asia,- the government has allowed foreign airlines 
to make use of Indonesia's lax foreign investment law by buying into a 
domestic company, and thus allowing to infringe into the rights of cabotage, 
which by right can be given to domestic carriers only.

Should the government issue new licenses to new operators, of which highest 
shares are owned by foreign companies, then through further price discounts, 
this will cause Indonesian companies to collapse, being unable to compete. 
And, compounded with the "open sky" policy, there will no longer be any 
Indonesian carrier left in existence.

Further, Secretary General of INACA, Tengku Burhanuddin urges the government 
to reduce fees that burden the airlines. These include concession fees of 
10% at airports, as well as the 10% VAT on avtur fuel for domestic flights. 
Whereas, on international flights this tax is waived. Additionally, the 
government is urged to issue safety guarantee letter for airlines operating 
in Indonesia to improve international confidence in the safe condition of 
aircrafts.

INACA predicts that domestic passengers this year will increase by 5% only 
due to the drop in buying power of consumers in general as a result of the 
100% increase in fuel costs.


3.      The Economy, Trade and Industry:

Developing and Marketing Local Handicrafts

Opening the Inacraft 2006 exhibition on Wednesday, 19 April, President 
Yudhoyono mentioned that export value of Indonesian handicraft last year 
grew by 4.06% to
US$ 465.1 million compared to US$447 million in 2004. Although a positive 
improvement, yet, compared to the rich potentials of arts and crafts in 
Indonesia, the industry still has to grow to its optimum capability.

According to data at the Department of Trade, 3,500 handicraft small and 
medium scaled businesses are today involved in the export of handicrafts, 
hiring an average 35 persons per business. Whereas, the remaining 6,000 
businesses are still unable to export their products. Meanwhile, the 
Association of Handicraft exporters and Producers said that of these, only 
1,200 units export their products directly, while others export indirectly 
through exporters.

In an earlier exhibition of handicrafts, the President noted that four areas 
need to be pushed when Indonesia wishes to be more competitive in 
handicrafts. These are: creativity, capital, technology and market and 
marketing.  At the Inacraft 2006 exhibition, the President added a fifth 
point, namely: branding. President Yudhoyono noted that many handicraft 
items overseas are given a foreign brand, though produced and created in 
Indonesia. Handicraft producers should, moreover, be able to read accurately 
the different market trends and preferences.

Markets considered potential for Indonesian handicrafts are Singapore, 
Malaysia, Turkey, Great Britain, France, Germany, Holland, Denmark, United 
Arab Emirates, Tunisia, South Africa, Egypt, Canada, Peru, Brazil, next to 
the USA, Japan and Australia.

Government to develop Ten Economic Zones

A government team coordinated by Coordinating Minister for the Economy, 
Boediono and M. Lutfi, Head of the National Investment Board, BKPM, as 
executive team leader, is at present formulating criteria, conditions and 
preconditions to determine which areas will in fact be determined as 
economic zones, and what fiscal and non-fiscal facilities to be offered, so 
that these will become zones able to compete in the international world.

Trade Minister, Mari Elka Pangestu further outlined that prospective 
economic zones must already possess the necessary infrastructure, are 
already industrial areas and have potential to be further developed for 
partnerships between the private sector and the regional government. Even 
those zones that have already been designated special integrated economic 
zones (known as Kapet) will not automatically be designated economic zones, 
since a number of these have not shown significant growth despite facilities 
given. Economic zones can not be those areas that must start development 
from square one, said Minister Pangestu.

At the forefront of possible areas earmarked for economic zone development 
are the islands of Batam and Bintan, and Bojonegara in Banten, said M. 
Lutfi. This measure is aimed to increase added value to Indonesia's 
commodities, with the aim that Indonesia will not only export raw materials, 
but also able to produce and export semi-manufactured goods.  Other 
potential zones under consideration are in the provinces of Nangroe Aceh 
Darussalam, North Sumatra, East Java, Central Java, East Kalimantan and 
South Sulawesi.

Earlier, President Yudhoyono emphasized that economic zones will not be 
developed through government budgets, but will be entrusted to the private 
sector for development. Singapore has expressed interest in developing 
economic zones with Indonesia, especially on its neighbouring islands of 
Batam and Bintan.

With the above criteria in mind, especially concerning infrastructure, it 
seems unlikely that areas in the eastern part of Indonesia (the poorest 
areas) may be developed into economic zones, also since none of these have 
as yet adequate market outlets. Meanwhile, Industry Minister, Fahmi Idris 
has urged that already developed industrial zones near Jakarta and Surabaya 
should not be abandoned. These are the areas known as Jababeka, Tangerang, 
and the industrial area in East Java.

Outermost islands developed for Fishery, Tourism and Processing Industry

Separately, Minister for Maritime Affairs, Freddy Numberi, has outlined 
plans to earmark 12 of Indonesia's 92 outermost islands to become centers 
for fishery, tourism and food processing industries, for which purpose, 
these will be designated free trade zones. Considered are the islands of 
Batam and Karimun in the Riau Islands, and Miangas, south of the 
Philippines. Others are the islands of Rondo, Berhala, Sekatung, Marore, 
Bras, Fanildo, Fani, Batek, Dana I and Dana II and the island of Nipah.


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