[Marinir] Indonesia Digest ; No: 05.06 ; 19 - 02 - '06

[Yap Hong Gie]

INDONESIA DIGEST
Indonesia's complex Issues in a Nutshell
By: Ms. Wuryastuti Sunario
Published by: TBSC-Strategic Communication
No.: 05.06 - Dated: 19 February 2006

Our sincere apologies to our readers for the absence of Indonesia Digest 
during the past two weeks due to computer and connection problems
In this issue:

MAIN FEATURE:

NEW ECONOMIC PACKAGE AS 2005 ECONOMIC GROWTH BELOW 6% TARGET

NEWS AND BACKGROUND:

1.      Transportation and Tourism:
Indonesia wins 2007 PATA Mart and Conference
Presidential Instruction to Support Culture and Tourism Growth

2.      Health, Culture and the Environment
Poultry stamped out and Stricter coordinated actions as 19th victim succumbs 
to Avian Flu
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MAIN FEATURE:

NEW ECONOMIC PACKAGE AS 2005 ECONOMIC GROWTH BELOW 6% TARGET

Taken aback by the latest data issued by the Central Board for Statistics, 
that Indonesia achieved 5.6% economic growth in 2005, short of the targeted 
6%, President Yudhoyono instantly called a meeting with members of the 
Indonesian Chamber of Commerce, KADIN, which was followed by a meeting with 
economic ministers in efforts to take corrective steps.

In its latest release the Statistics Board stated that Indonesia experienced 
decelerated growth starting in the second quarter of 2005, which meant that 
total economic growth during 2005 reached only 5.6%, although total GDP 
growth outside of oil and gas reached 6.48%. Whereas, the 2005 Amended 
Budget had targeted 6% growth, despite the fact that analysts predicted 
economic growth to be between 5.5% - 5.8% only.

External factors affecting below target growth included soaring 
international crude oil prices and increased Fed Fund Rate, said the 
Board, -  that had played a significant role in suppressing growth, whereas 
internal pressures came from the increase in domestic fuel prices announced 
in October 2005 followed by increases in interest rates, as well as the 
depreciation of the Rupiah, that at one point reached Rp. 11,000 to the US 
Dollar. Other factors were also the bombings in Bali in October and the 
threat of the avian flu, that reduced the number of foreign visitors.
Choiril Maksum, Head of the Statistics Board added that economic growth in 
Indonesia was also distributed unevenly, where in 2004 ,  87.71% of GDP was 
contributed by the Western part of Indonesia, and only 12.29% by the Eastern 
part of the archipelago. Additionally, growth came mostly from capital 
intensive investments rather than from labour intensive industries.

Highest growth was made by the transport and communications sector at12.97%, 
followed by trade, hotels and restaurants at 8.59%; and construction at 
7.34%. Growth of services was 5.16%.

Meanwhile, on the above subject, economist, Iman Sugema commented that the 
reasons for last year's slow economic growth are due to the fact that the 
government has not succeeded to create a conducive climate for investments, 
one example of which is the long process and high costs still required to 
obtain licenses. Moreover, the government has opted for fiscal stability 
through a 100% increase in fuel prices, which has considerably burdened the 
real sector. Sugema, therefore urged the government to further focus on 
opening up new employment opportunities and correct the economic structure 
of regions.

Improving the Investment Climate

In the meeting with the President, KADIN Chairman, MS Hidayat expressed the 
hope that the government would soon improve the investment climate in the 
country, that include improvements in legislation pertaining to investment, 
taxation and labour. Furthermore, improvements in infrastructure are also 
necessary.

Separately, Coordinating Minister for the Economy, Boediono, informed the 
press that the government is preparing an economic policy, called the 
investment climate package to boost investments aimed to support economic 
growth.

Meanwhile, Minister of Finance, Sri Mulyani, said that her Department will, 
within this year change regional policies on local taxes to cut and limit 
local and regional levies (retribusi daerah). These have proliferated in the 
past years and have seriously hampered the smooth flow of trade and 
services, resulting in high cost production for the private sector. In 
future, local taxes will be applied to listed companies in a closed list. So 
far, regions have applied an open list, where regions could levy taxes on 
almost anything and anyone. And, therefore, to compensate regions for 
reduced incomes, the Minister of Finance will negotiate and devise an 
improved strategy to shore up regional revenue.

Other policies in this context include the provision of matching grants. 
When, for example in a region wishes to rebuild broken down schools, then 
the national government will provide 20% of its costs, while the remainder 
is to be paid out by the Region concerned. Secondly, the government will 
improve the financial management system of regions, and thirdly the national 
government will strictly control loans made by Regional Governments as 
Regions are prohibited from applying for overseas loans direct, as regions 
must first receive approval from the national government, said Minister Sri 
Mulyani Indrawati.

Infrastructure Acceleration
In further follow up action, Coordinating Minister for the Economy issued an 
Infrastructure package to boost investments and the expansion of job 
opportunitie in this sector. Comprising 153 policies to be implemented in 
2006, one of its main policy is to establish an infrastructure financing 
institution outside of government structure, that has the potential to 
manage funds up to Rp. 200 trillion yearly, of which 20% will come from the 
State Budget.  This will be a Public Private Partnership Center, explained 
Minister Boediono.

The strategy to accelerate infrastructure development consists of 33 
policies, regulations and institutional frameworks, that include, among 
others, a road map infrastructure for Indonesia in the framework of 
government-private sector cooperation and the management of such joint 
projects. Other items in the package are 83 sectoral policies, 5 Regional 
government policies, and 32 transactions for infrastructure development.

One main drawback that is often met in developing infrastructure is the 
problem of land use and ownership, especially by land speculators.  In this 
regard Head of the Land Ownership Board, Joyo Winoto has been given three 
months to devise the necessary policies

(Sources: Bisnis Indonesia, Kompas)      (Tuti Sunario)
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NEWS AND BACKGROUND:

1.      Transportation and Tourism:

·         Indonesia wins 2007 PATA Mart and Conference

Indonesia has succeeded to win the prestigious 2007 PATA Mart and Conference 
to be held in April in Bali, beating India and China in the bid, said 
Director General for Culture and Tourism Marketing, Thamrin Bachrie in 
Jakarta, as reported in Bisnis Indonesia.   The 2007 PATA Mart and 
Conference are expected to be attended by 2,000 top tourism industry leaders 
from 25 countries. To attract the optimum number of participants to Bali 
2007, Indonesia will host an Indonesian Night at the 2006 PATA Conference in 
Pattaya, Thailand, said Bachrie.

Industry leaders see the successful bid as a real breakthrough to boost 
flagging visitor arrivals to Bali in particular and to Indonesia in general. 
At the event, Indonesia plans to promote special interest tours, including 
golf, community based tourism, eco-tourism, village tours and marine 
tourism, said the Director General.


·         Presidential Instruction to Support Growth of Tourism and Culture

At one point promised by the government to be announced with a big bang in 
efforts to jumpstart the recovery and turn-around of the Indonesian tourism 
sector, yet hardly a sound was heard when the Presidential Instruction was 
finally issued.
Presidential Instruction no. 16 of 2005 on Policies related to Development 
of Culture and Tourism was signed on 29 December 2005.

The Instruction called on Cabinet Ministers, Government Institutions, the 
Police, Governors, District Heads and Mayors to first, improve quality of 
public services to domestic and international tourists; secondly, accelerate 
the growth of culture and tourism with the aim to improve social welfare, 
create jobs, fight poverty and distribute development more equitably; 
thirdly proactively protect, develop and positively use natural and cultural 
resources in developing culture and tourism, and fourthly: use the theme 
"Indonesia Ultimate in Diversity" in all overseas promotions, and "Know your 
country, Love your country, let us explore Indonesia" in all domestic 
promotions.

The Instruction then continues to give specific instructions to 21 
Ministers, two Heads of National Institutions, the Chief of Police and all 
Governors, District Heads and Mayors related to each in their purview of 
authority. A number of these are, among others to the:

Coordinating Minister for Politics, Law and Security to coordinate efforts 
in analyzing and determining social-cultural conditions in tourist areas to 
become more conducive for international visitors, in order that more 
nationalities may be issued Visas on Arrival.

Minister for Home Affairs, to review local bylaws that hamper the growth of 
culture and tourism; urge local governments to develop tourism development 
programs, and protect and maintain historical and archaelogical sites.

Minister of Finance to review regulations on import duties on such items for 
development of the culture and tourism industry; to provide facilities for 
the import of goods for development of marine tourism and green tourism, 
including the development of small islands along Indonesia's borders, for 
tourism purposes. The Minister to review outbound tax (fiskal) to passengers 
or groups planning to promote tourism overseas; study possibilities to 
provide tax refund in efforts to promote shopping tourism to Indonesia; and 
provide facilities to accelerate import and export of materials for 
conferences, incentive groups, and exhibitions (MICE)

Minister for Law and Human Rights to study possibilities to increase the 
number of nationalities to be extended Visa on Arrival, and study to extend 
their length of stay and increase entry points for visitors.

Foreign Minister to support promotion of the theme : Indonesia Ultimate in 
Diversity, and support the establishment of Indonesian cultural centers 
overseas.

Minister for Public Works to support development of national access roads to 
tourism destinations; and determine potential tourism resorts.

Minister for Transportation to (a) urge national airlines to offer flights 
to and from Indonesian tourist destinations; simplify permits for cruise 
ships; (c) increase bilateral cooperation with tourist generating countries; 
increase quality and capacity of airports.

Minister for State Enterprises to urge Financial Institutions and Government 
Banks to develop special investment loans to support the growth of the 
cultural and tourism industry

The National Police to improve services to ensure the safety and security of 
tourists; enforce the law including those affecting foreign visitors, in 
particular regulations related to narcotics; and protect tourist areas from 
terrorist threats.

Governors, District Heads and Majors to compile a Tourism Development Master 
Plan; simplify and facilitate permits for culture and tourism development 
and simplify location permits for the shooting of films; furthermore, 
organize events staging local traditions, arts and culture.

The Minister for Culture and Tourism to (a) provide complete information 
related to
culture and tourism; (b) increase cooperation with Regions as well as 
improve international cooperation in efforts to support tourism promotion; 
(c) push development of priority destinations; and increase public awareness 
to protect and maintain cultural heritage sites and tourist attractions.

Can Indonesian tourism become more competitive?

Oddly missing in this whole array of public authorities to whom instructions 
are issued, are instructions addressed to the Coordinating Minister for 
Public Welfare, under whose coordination is the Minister for Culture and 
Tourism, to coordinate culture and tourism development efforts. The question 
then remains, who or which authority is tasked to coordinate the 
implementation of actions. Will this be the President himself?

Also missing are instructions to the Coordinating Minister for the Economy, 
to ensure that tourism development and national as well as regional policies 
are made in the framework of national and regional policies for economic 
growth, in order to make Indonesia a more competitive destination in the 
region and globally.  This now missing, how can Indonesia hope to compete in 
this competitive age of globalization?

An obvious linkage of policies and actions that involve or mention the 
business sector and industry is also sorely missing, especially one which 
can provide incentives for business growth and the empowerment of the 
tourism industry.

Similarly, instructions to the Minister for Culture and Tourism are felt to 
need expansion to include a more active national leadership by the 
Department in order to improve Indonesia's competitiveness vis-à-vis our 
neighbours in the region as well as globally. The Department should also 
provide a clear road map for regions, the business world and all 
stakeholders to follow, in order to concertedly develop the varied 
destinations of Indonesia.

In short, to this writer, a rather disappointing Presidential Instruction. 
However, officials promise that the Instruction will be followed up by more 
specific workable instructions.

Asked for his comments on the above Presidential Instruction, former Tourism 
and Telecommunication Minister, Joop Ave, said that although not yet ideal, 
the Presidential Instruction holds promises and has positively responded to 
some 50% of requests from the industry. Tuti Sunario

2.      Health, Culture and the Environment:
·         Poultry stamped out and Stricter coordinated actions as 19th 
victim succumbs to Avian Flu

Even as WHO confirmed Indonesia's 19th fatal victim of avian flu last 
Friday, Health Minister Siti Fadillah Supari denied that the virus has 
become more virulent in the country, it is still the same strain of 
infection, Minister Supari said.  What is true, nonetheless, is that those 
infected follow one another within a shorter time span, while Indonesia has 
registered the most number of "clusters" that are infected. However, this 
does not mean that avian flu has mutated to infect human to humans. Up to 
today, the infection is still from fowls to humans. However, these are 
warnings that infection from human to human of this dreaded virus is close 
at hand.

The main problem faced especially on Java is the intense density of 
population on the island especially in cities, and the fact that household 
poultry are still allowed to roam freely, even in the capital Jakarta. The 
main problem is with households that raise only one or two chickens or 
ducks. Therefore, the first thing to do is to guarantee safe distance 
between humans and poultry.

The day before, President Yudhoyono had called a limited cabinet meeting and 
with five governors on Java where most victims had originated, to take 
immediate concerted actions to avert a pandemic. Governors attending were 
from Jakarta, Banten, West Java, Central Java and Lampung on Sumatra.

Coordinating Minister for Public Welfare, Aburizal Bakrie, later informed 
the press that the government has decided (1) to stamp out all poultry found 
within a radius of one kilometer of infected humans or poultry, starting 
Friday, 24 February. Poultry raised immediately beyond this until two 
kilometers will be vaccinated. Compensation paid will be Rp. 10,000 for each 
chicken or fowl culled or Rp. 2,500 for smaller birds and quails.  In total, 
the government has allocated Rp. 30 billion for a  compensation program. (2) 
Surveillance to be kept routinely to ensure that biosecurity is enforced 
throughout the provinces, which includes hygiene, and cleanliness of poultry 
and handlers. (3) Stop the import and sale of poultry from infected areas 
especially to large cities such as Jakarta, and (4) continue socialization 
programs that the public ensure poultry to be kept in covered enclosures 
away from human habitat so as to limit the spread of the avian flu, and 
vaccinate poultry on a regular basis.

Minister for Agriculture, Apriyantono told the press that at present avian 
flu has already infected poultry in 161 districts and towns in 26 provinces 
of Indonesia.


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