[Marinir] Indonesia Digest; No: 28.06 - 14 - 08 - '06

[Yap Hong Gie]

INDONESIA DIGEST
Indonesia's complex Issues in a Nutshell
By:  Ms. Wuryasuti Sunario
Published by: TBSC-Strategic Communication
No.: 28.06 - Dated: 14 August 2006
In this issue:

MAIN FEATURE:

12 CRITERIA TO QUALIFY AS SPECIAL ECONOMIC ZONE

NEWS AND BACKGROUND:

1.      Tourism and Transportation:
First Half 2006 Tourist Arrivals down 7.54%, Flights to Bali Increasing
Seven Arab Nationals arrested, deported for committing "instant marriages"

2.      The Economy, Trade and Industry:
Indonesia's Per Capita today is US$ 1,500, up from US$ 600 post Asian Crisis
Nine Priority areas for Cabinet's 2007 Work Plan

4.   Politics and Security
Indonesia calls for Permanent Cease Fire in Middle East
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MAIN FEATURE:

12 CRITERIA TO QUALIFY AS SPECIAL ECONOMIC ZONE

With the islands of Batam, Bintan and Karimun now designated Special 
Economic Zones, many more governors are urging that the national government 
appoint similar areas in their respective provinces.

In response, the national government, in a preliminary move, has stipulated 
nine requirements that must be met by Regions as qualification before SEZ 
can be designated in their province, these are:

Proposal for SEZ must originate from the Regional Government itself, who 
must remain committed to the project, and agree to transfer authority of the 
Zone to a dedicated management.
The Regional Government must assure consistency in fiscal and non-fiscal 
policies
 The proposed Zone is already a center of economic activity and designated 
an industrial area,
The area is relatively well developed and is linked to other development 
areas
Supporting infrastructure is in place, including roads, airport, sea port, 
power supply and power network, and water supply of a minimum of one 
liter/second per hectare.
The industrial site must be a minimum of 10 hectares, and still expandable,
Skilled manpower is available around the designated zone;
The area offers significant economic impact, meaning that it has supporting 
industries surrounding it, such as in manufacturing, electronics, etc. The 
zone may also be potential center for logistics or transshipment;
Its location is near to international seaport and airport
Its location is close to markets for its products, and near to, or has easy 
access to raw materials required.
Its development will not disturb nature conservation areas
The area is bounded by clear borders, and its security can be monitored.

Chairman of the team for development of Special Economic Zones, Bambang 
Susantoro, informed the press that these criteria are yet in its preliminary 
stage, as more may be added, or others reduced. Furthermore, it has not yet 
been decided whether development of these zones should be based on special 
legislation, incorporated into other Bills, or could be supported through 
Presidential Regulations.

In the latest development, Riau Governor, Ismeth Abdullah, informed that 6 
MoU's are ready to be signed with foreign investors to a total value of 
US$528 million. Four are investments on Batam, these are Schmidmann, PT 
Batamfast Indonesia, PT Neptune Marine, PT Cemara Intan Shipyard; one is an 
investment on Bintan, i.e. Tiong Woon Co. Ltd, and one in Karimun, namely 
Daeju Construction Engineering Co. Ltd. Another company from India, namely 
ABG Ltd. is expected to operate a shipyard at an investment value of US$ 15 
million that will create 1,500 jobs.
(Source: Bisnis Indonesia)
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NEWS AND BACKGROUND:

3.      Tourism and Transportation:

First Half 2006 Tourist Arrivals down 7.54%, Flights to Bali Increasing

The National Bureau for Statistics informed that total international tourist 
arrivals through Indonesia's 13 main gateways from January to June 2006 was 
down (-)7.54% compared to the same period last year.  Arrivals to Bali 
dropped by (-) 19.1%, direct arrivals to Lombok declined by (-) 13.58%; To 
Tanjung Pinang down by (-) 12.31%, and to Batam down by (-) 9.07%.

On the other hand, arrivals to Jakarta improved by 6.31%, to Padang's 
Minangkabau Airport by 60.65%; arrivals to Manado improved by 18.65%; and 
through Solo's Adisumarmo Airport increased threefold, although from a low 
base.

Nevertheless, largest share of arrivals is still held by Bali with 30.83%; 
followed by Jakarta at 29.82%; and Batam at 26.55%. Share of other gateways 
are below 3% respectively.

The Statistics Bureau said that foreign tourist arrivals fell to 1.89 
million in the January-June period this year from 1,049,487 in the first 
half of last year.
Tourism accounts for about 5% of Indonesia's gross domestic product.  It is 
one of the country's largest sources of foreign exchange revenues, 
contributing $4.5 billion in 2005 from an estimated 4 million foreign 
tourists in the year, Reuters reported.

Indonesia's tourism industry has been battered by a series of natural 
disasters this year such including the earthquake in the major tourist 
destination of Yogyakarta followed by an earthquake and tsunami in the West 
Java beach resort of Pangandaran.
Meanwhile, Cathay Pacific announced that since July the airline has 
increased its flights from Hong Kong to Bali, from seven times to 11 times 
weekly, anticipating increasing demand, especially from Europe, in 
particular from the Netherlands, from Japan and South Korea to holiday in 
Bali. Flying A-330 and B-777 aircrafts, the airline's load factor on this 
route is reported to reach 80%.  While, lately Cathay Pacific carried some 
350 passengers weekly on the Amsterdam-Denpasar, Bali route.

In the latest development Emirates Airlines informed that the airline will 
increase its flights to and from the Middle East to Jakarta, from 10 times 
weekly to 14 times weekly starting early next year, due to positive increase 
in demand.

Arab Nationals arrested and deported for committing "instant marriages"

Several weeks ago, in an off-the-cuff remark widely publicized in the 
international media, Vice President Jusuf Kalla joked that Indonesia should 
not be disturbed if many Middle East tourists go into "instant marriages" in 
Indonesia, if that shoud improve genes.  Women activist groups, especially, 
were appalled, and the next day, VP Jusuf Kalla publicly apologized if his 
joke had offended some people.

In a more serious follow-up, however, on 31 July, the West Java Police 
reported that during one week raids along Jakarta's popular hill resort of 
Cisarua in the Puncak area, Police had arrested seven Saudi Arabian 
nationals for having committed "instant marriages". In one case the Police 
had even stopped a couple in "mid-ceremony". Four were later deported and 
returned to their home country for having misused their tourist visas, thus 
having violated Indonesia's Immigration Law no. 9 of 1992 as well as 
Indonesia's Marriage Law, while the three others were released as they were 
caught on the verge of going into the "marriage rites", but had not yet 
committed the offense.

Women's groups consider these "instant marriages" disguised prostitution.

4.      The Economy, Trade and Industry:

Indonesia's Per Capita today is US$ 1,500, up from US$ 600 post Asian Crisis

Indonesia's per capita income has topped $1,500, said the Central Statistics 
Agency (BPS) on 2 August, thus technically lifting the country to 
lower-middle income status, reports Indonesia's Trade and Investment News.

Agency Head Rusman Heriawan told reporters that the figure marked a 
considerable improvement ( or two and a half times increase) over the depth 
of the financial crisis, when per capita income fell as low as $600 at one 
stage. The stronger Rupiah, which now hovers around Rp. 9,100 against the US 
Dollar, has helped lift Indonesia's Per Capita income.

His comment followed another reduction in inflation to 0.45% for the month, 
or 15.15% year-on-year.
On the other hand, Indonesia's trade surplus dropped to $2.81 billion in 
June from $3.28 billion in May as imports grew faster than exports during 
the month, Heriawan said, while exports hit a new record of $8.48 billion in 
June, 1.70% up on May's $8.34 billion.

Imports, often seen as an indication of capital goods imports for 
manufacturers, picked up by 12% pct to $5.67 billion in June from $5.06 
billion in May.

"Inflation in Indonesia is on a downward trend," Deputy Governor of Bank 
Indonesia, Miranda Gultom told reporters. "Inflation has been declining 
faster than expected and therefore there is a very big possibility of easing 
monetary policy."

At the end of July, Vice President Jusuf Kalla said the government hoped 
that in the last semester inflation will return to single digit, or more or 
less, so that consumer spending and purchasing power as well as production 
can return to normal levels, reported Indonesia's Trade and Industry News 
issued by the Coordinating Ministry for the Economy.

The lower inflation rate also helped boost confidence among business 
operators. The Business Sentiment Index (BSI) edged higher by 0.4% in the 
April-May period to 114.5, reported The Jakarta Post.  Of the eight business 
sectors covered by the survey, business sentiment improved the most in the 
construction sector (up 2.6% to 114.9) and the financial sector (up 1.6% to 
129.4).

Vice President Kalla further said that lower rates were also producing an 
upswing in the industrial sector. While growth rates would not be as high as 
the government had hoped, but there are clear signs that output will 
increase in the second half. The government  predicted growth of 7.7% in the 
sector.

Indeed, in the latest developments, on Tuesday, 1 August, as expected, Bank 
Indonesia reduced its BI interest rate by 50 base points to 11.75% from the 
earlier 12.25%.

Nine Priority Development areas in Cabinet's 2007 Work Plan

The National Planning Board (Bappenas) has released information that the 
Government has specified nine priority areas in its 2007 work plan, which 
are expected to absorb near to Rp. 173 trillion of total budget for the 
year, or 75.12% of expected total 2007 Budget Allocation, reports Bisnis 
Indonesia.

The nine priority areas for development and their expected outlays (in Rp. 
Trillions) are:

1.   Poverty Eradication 
25.408
2.   Increase employment opportunities, investments and exports 
2.045
3.    Revitalize Agriculture, Fishery, Forestry and Rural Development 
17.408
4.   Increase Access to and the Quality of Education and Health 
33.889
5.   Law Enforcement, Corruption Eradication and Bureaucratic Reform 
7.410
6.   Defense, involvement in, and resolution of Conflicts 
45.590
7.   Disaster Mitigation and Management 
10.697
8.   Acceleration of Infrastructure Development 
25.919
9.   Development of Border areas and Isolated areas 
4.626
                                                                             
                                                  -------
                                                                             
              Total                           172.992

However, seen from Budget amounts allocated, priority scale of the nine 
priority areas, reads as follows: (1) Defense 26.35%; (2) Education and 
Health 19.59%; (3) Infrastructure 14.98%; (4) Poverty Eradication 14.68%; 
(5) Agriculture, Fishery, Forestry and Rural Development 10.06%;  (6) 
Disaster Mitigation and Management 6.18%; (7) Law Enforcement, 
Anti-Corruption, and Bureaucratic Reform 4.28%; (8) Development of Border 
and Isolated areas 2.67%; and (9) Opening of Employment Opportunities, 
Investments and Exports 1.18% of  total 9 priority areas mentioned above.

The President is expected to submit the 2007 Budget Plan before the Plenary 
Session of Parliament on 16 August, on the eve of Indonesia's Independence 
day, for debate and endorsement.

4.      Politics and Security

Indonesia calls for Permanent Ceasefire in Middle East
On Friday, 11 August, the UN Security Council finally succeeded to 
unanimously agree on, and issue Resolution No. 1701 on a permanent Cease 
fire between Israel and Lebanon. Accepted by all 15 members of the Security 
Council, the Resolution was proposed by France and the United States.
In the original text of Resolution 1701 as published in the Jerusalem Post, 
the UN considers that the situation in Lebanon constitutes a threat to 
international peace and security, and therefore, calls for a full cessation 
of hostilities based upon, in particular, the immediate cessation by 
Hezbollah of all attacks and the immediate cessation by Israel of all 
offensive military operations;
Furthermore the UN Resolution "reiterates its strong support for the 
territorial integrity, sovereignty and political independence of Lebanon 
within its internationally recognized borders, as contemplated by the 
Israeli-Lebanese General Armistice Agreement of 23 March 1949";
The UN, therefore, calls on the international community to take immediate 
steps to extend its financial and humanitarian assistance to the Lebanese 
people, including through facilitating the safe return of displaced persons 
and, under the authority of the Government of Lebanon, reopening airports 
and harbours, and calls on it also to consider further assistance in the 
future to contribute to the reconstruction and development of Lebanon;
Acting in support of a request from the government of Lebanon the UN will 
deploy an international force to assist it to exercise its authority 
throughout the territory, and therefore, authorizes UNIFIL to take all 
necessary action in areas of deployment of its forces and as it deems within 
its capabilities, to ensure that its area of operations is not utilized for 
hostile activities of any kind, to resist attempts by forceful means to 
prevent it from discharging its duties under the mandate of the Security 
Council, and to protect United Nations personnel, facilities, installations 
and equipment, ensure the security and freedom of movement of United Nations 
personnel, humanitarian workers, and, without prejudice to the 
responsibility of the government of Lebanon, to protect civilians under 
imminent threat of physical violence;
Consequent to the above decision, the UN decided to supplement and enhance 
UNIFIL force in numbers, equipment, mandate and scope of operations, and 
authorized an increase in the force strength of UNIFIL to a maximum of 
15,000 troops, and that the force shall, in addition to carrying out its 
mandate under resolutions 425 and 426 (1978):
a. Monitor the cessation of hostilities;
b. Accompany and support the Lebanese armed forces as they deploy throughout 
the South, including along the Blue Line, as Israel withdraws its armed 
forces from Lebanon as provided in paragraph 2;
c. Coordinate its activities related to paragraph 11 (b) with the Government 
of Lebanon and the Government of Israel;

d. Extend its assistance to help ensure humanitarian access to civilian 
populations and the voluntary and safe return of displaced persons;

e. Assist the Lebanese armed forces in taking steps towards the 
establishment of the area as referred to in paragraph 8;

f. Assist the government of Lebanon, at its request, to implement paragraph 
14;
The UN Security Council further requests the Secretary General to urgently 
put in place measures to ensure UNIFIL is able to carry out the functions 
envisaged in this resolution, and urges Member States to consider making 
appropriate contributions to UNIFIL and to respond positively to requests 
for assistance from the Force, and expresses its strong appreciation to 
those who have contributed to UNIFIL in the past;
The Resolution further decided that all states shall take the necessary 
measures to prevent, by their nationals or from their territories or using 
their flag vessels or aircraft (in Lebanon).
Hereupon, extend the mandate of UNIFIL until 31 August 2007, and expresses 
its intention to consider in a later resolution further enhancements to the 
mandate and other steps to contribute to the implementation of a permanent 
ceasefire and a long-term solution;
Finally, the UN Security Council stressed the importance of, and the need to 
achieve, a comprehensive, just and lasting peace in the Middle East.
Although both Israel and Lebanon have agreed to the Resolution, yet all 
through the weekend bombs and military operations continued unabated. 
According to latest Television reports, Secretary General Kofi Annan 
confirmed that actual cease fire will commence Monday, 14 August, at 05.00 
GMT or 12.00 noon Jakarta time.

Indonesia plays active role in Middle East Peace Talks

Some ten days earlier, on 3 August, in an emergency meeting of the 
Organization of the Islamic Conference (OIC) in Kuala Lumpur, Malaysia, 
President Susilo Bambang Yudhoyono urged member nations of OIC to play a 
prominent role in the United Nations-led international peacekeeping force 
that may eventually be deployed in southern Lebanon.

Noting that a comprehensive ceasefire could be achieved within the week, the 
President said the OIC's participation would help ensure proper care for 
tens of thousands of traumatized Lebanese civilians.

"I do think that a substantial part of the peacekeeping force must come from 
OIC countries. Thus, the OIC can also have a role in formulating the rules 
of engagement, and terms of reference," he told delegates from 18 countries 
during an emergency meeting of the OIC in Kuala Lumpur, reported Indonesia's 
Trade and Investment News.

Speaking to reporters after a meeting with Lebanese Foreign Minister Fawzi 
Salloukh, Dr. Yudhoyono said that the rules of engagement and terms of 
reference for deployment of the peacekeeping force could not be designated 
to one or two countries. "We fear that troops from the countries will not be 
fair and evade making constructive engagement," he said.

Delegates from the 18-member OIC urged a comprehensive and unconditional 
ceasefire between the warring parties in Lebanon. They also backed the 
Lebanese government's plea for the enforcement of an agreement reached in 
Rome.

As part of the commitment agreed in the joint declaration, member countries 
pledged to do their utmost to end the violence within the coming week.

"We hope that at least within the next one week, there will be a global 
effort spearheaded by the UN to save our brothers and sisters from the war," 
Dr. Yudhoyono said.

Apart from supplying $1 million in humanitarian aid to the Lebanese people, 
the Indonesian government has also committed a 600-man force to join a 
future peacekeeping force.

Meanwhile, on the sideline of the OIC Conference in Malayia, Indonesia's 
Foreign Minister, Hassan Wirayuda, was reported to have remarked to US 
Secretary of State Condoleezza Rice in Kuala Lumpur that America's support 
for Israel's military attacks on Lebanon was making it difficult for Muslim 
countries to counter Islamic radicalization. "If the US allows Israel to 
continue "attacking, burning and killing Lebanese (people), it will create 
difficulties for moderate countries that have Muslim populations," spokesman 
Desra Percaya quoted the minister as having remarked to Rice.

"Seeing such situations, even for moderate Muslims, they could become 
radical, and will do anything to stop Israeli attacks," he said.  Rice 
responded that she was aware of the problem and "promised to create a 
sustainable ceasefire" in the Middle East.

In Indonesia, meantime, Police vowed to prevent hard line groups from 
leaving for Lebanon to join a declared jihad against Israel, reported the 
Jakarta Post.

 "We will stop them if they want to go to war," National Police spokesman 
Brig. Gen. Anton Bachrul Alam said. He said that the action would only 
worsen the situation in Lebanon. "Their departure for the Middle East would 
be a violation of our state Constitution, which says that Indonesia should 
pro-actively contribute to world peace," he was quoted as saying by AFP.


Today, Indonesia is ready to send 850 military personnel to join UNIFIL 
peace keeping force. The troops were personally inspected by President 
Yudhoyono on Friday,11 August.

(Sources: UN Security Council Resolution 1701, Kompas, Jakarta Post, Metro 
TV, Indonesia's Trade and Investment News). 
(Tuti Sunario)

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