[Marinir] Indonesia Digest ; No: 34.06 ; 26 - 09 - '06

[Yap Hong Gie]

INDONESIA DIGEST
Indonesia's complex Issues in a Nutshell
By: Ms. Wuryastuti Sunario
Published by: TBSC-Strategic Communication
No.: 34.06 - Dated: 26 September 2006

We wish all our Muslim readers a blessed Ramadhan Fasting Month

In this issue:

MAIN FEATURE:

INDONESIA'S SHOPAHOLICS AND THE INDONESIAN TOURIST PROFILE

NEWS AND BACKGROUND:

1.      Tourism and Transportation:
Pasar Wisata (TIME 2006) offers new ecotourism attractions

2.      The Economy, Trade and Industry
Indonesia's Economy Back to Pre-Crisis Levels, assures Finance Minister
Government Gears Up for Infrastructure Push

3.      Politics and Security:
Plan Approved on Maritime Security of the Straits of Malacca
Thai Coup Raises Indonesia's Concern
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MAIN FEATURE:

INDONESIA'S SHOPAHOLICS AND THE INDONESIAN TOURIST PROFILE

Last Friday, 22 September, I attended a reception promoting "A Taste of
Thailand" by invitation of the Thai Ambassador in Indonesia, Mme. Atchara
Seriputra. What was most unusual about the occasion that it was held a mere
three days after the bloodless coup in Bangkok. And, as usual, the Thais
came out with their superb cuisine presented by Thai restaurants in Jakarta.
The event was packed, attended by almost all foreign ambassadors in
Indonesia and prominent Indonesians, no doubt to show support for the
Ambassador, but, I am convinced, not less attracted by the promised tasty
Thai cuisine. Above all, it proved that regardless of any political changes,
Thai promotion continues unabated without missing one single beat. Something
Indonesia's tourism authorities could well emulate.

The Indonesian Tourist Profile

Among the many stalls promoting Thai products and food, was one giving away
Thai brochures. I was attracted to see that a number of these were in Bahasa
Indonesia, and asked the Thai Tourism Marketing Representative, Indra
Nugraha, whether the brochure was an exact translation of the English
version.
To my surprise he said: "No, this was written especially tailor-made to the
specific needs and profile of the Indonesian tourists". He further explained
that unlike most westerners who are attracted to visit Thailand for their
beaches, not so Indonesians. For to Indonesians, it seems - so the study on
Indonesian tourists made by the Thais concluded - that taking an overseas
tour means to enjoy leisure and relaxation - or in Bahasa Indonesia:
Jalan-jalan - take a leisurely stroll and go sightsee.

And number one on the list is: Shopping, then come Food and Restaurants,
then Nightlife, and "a must" are leisure and recreation activities for the
kids and family. And only when those are "done", Indonesian tourists will
take time to go sightsee and visit the most well known landmarks of the
destination. And, when there is some "culture" thrown in, so much the
better. In Thailand, Indonesians do visit beach resorts, but not so much to
enjoy marine-related activities, as to enjoy the view and the opulent resort
facilities, away from the blazing sun. One exception is the shooting
location of the film "The Beach" starring Leonardo di Caprio, which is
popular with Indonesia's youth.

Interestingly, the next day, both the Kompas daily and Bisnis Indonesia
released studies on the trend of consumerism in Indonesia, which completely
tallies with the above profile.

Bisnis Indonesia reports that in the latest AC Nielsen survey made between
May-June 2006, the study found that, after restraining their spending habits
immediately after the 100% oil price hike in October 2005, the middle to
upper income groups in Indonesia are today tired of restraint and are out to
spend, spend, and spend more.

Indonesians now wish to enjoy life, relax, and pamper themselves, says the
Nielsen survey. And pampering for Indonesians means: shopping for
fashionable items, buying the latest electronic gadgets, and seek leisure
and recreation out of town or abroad.

Shopping for apparel grew fastest in the first semester of 2006, rising from
9% in the first semester of 2006 to 26% in the second semester this year.
Next comes buying for electronic goods, like audio and video equipment and
mobile phones, up from 24% to 32%. And, for recreation, watching shows and
films, eating out in restaurants or strolling in shopping malls, spending
for these grew from 24% to 37%. While those intending to travel during
holidays went up from 24% to a hefty 38%, opening up unlimited opportunities
for the tourist and leisure industry, both domestically and abroad.

The trend now seems to be for Indonesians to want to enjoy themselves, says
Karmelia Nurdjalin, Director Client Services of PT.AC Nielsen Indonesia.
This, however, also means that they are delaying repayments of debts or
spending in long-term investments.

Last semester, respondents who intended to set aside funds to pay credit
cards came to 32%, but this number was down to 29% in the second semester.
Similarly, the number of those wishing to invest or buy stocks declined from
20% in the first half of 2006 to 16% in the second half. People are also
delaying repairing homes, since this, they find, is a responsibility rather
than an enjoyment, so the study concludes.
Further, Kompas reports that 2 out of 10 middle class consumers surveyed
said that they would buy well known international branded goods, although
90% admitted that these are very expensive and at times their quality is not
really all that outstanding.

The Middle Class confirms Status through Symbols of Wealth and Quality

It is especially the middle income group in Indonesia, rather than the lower
or upper income groups that hunt for branded items and luxury goods, said
Airel Heryanto, expert on pop culture at the University of Melbourne. This
is because the lower income group cannot afford to buy original designer
goods, while those belonging to the upper class are not infected by this
"virus".

And, indeed, in Australia, Singapore, Malaysia, to Paris, London and
Hongkong, residents stare agog at the spending binge of Indonesians. At the
boutique of Louis Vuitton in Paris and at other top designers'
establishments, Indonesians queue up and are the spoilt customers, as they
pick the latest - and often the most expensive - in fashion, clothes,
handbags, shoes and perfumes. In Holland, Indonesians shop for diamonds,
while in Singapore, Indonesians are the top market for branded goods. But,
many admit, Indonesians do dress stylishly. Not only abroad, as these same
consumers can be seen at high end boutiques in posh shopping malls now
opening in many parts of Jakarta, Surabaya, Bandung and even Makassar, says
Kompas.

At many clubs in Makassar one can meet couples all dressed up from top to
toe in designers' apparel, both husbands and wives: the men in designer
shirts, pants, shoes, watches and spectacles, and women in branded dresses,
shoes, handbags, perfumes. For, they say, unless they wear these branded
products they do not feel "at ease".

Ariel Heryanto explains that shopping for and dressing in branded apparel
are, in fact, expressions of economic power. While, culturally, it is meant
to prove and confirm that they belong to an elite middle class that
possesses most discerning taste.

Culture of Ceremonies and Rites camouflage need for Recognition of Personal
Status

On the other hand, Anthropology expert at the University of Indonesia in
Jakarta, Achmad Fediyani Saifuddin, sees that consumerism in Indonesia has
deep cultural roots, as Indonesian communities are on the whole oriented
towards ceremonies and rituals, continues Kompas.

These ceremonies function to confirm society's social structure, Saifuddin
says. On these occasions people show off and confirm their status through
the display of material symbols of wealth in jewelry, property, cattle, or
even the size of the house. These displays are camouflaged behind the need
for ceremony.   Especially at wedding ceremonies and receptions, hosts and
guests are dressed to the nines to be recognized and confirmed as belonging
to the elite class.

Although today the world has changed, but as more luxury goods flood in from
abroad, these imports are welcomed with open arms by Indonesian societies
that traditionally love ceremonies. The upper class consumes luxurious
materials to keep their status and class, while the lower class will buy
copies of branded products by wearing "fakes", which is the main reason why
infringement of copyright remains so rife here.

Consumption sustains national economic growth, but imports rise

Ironically, for Indonesia's economy, these extravagant habits have sustained
the country's economic growth. When in 2004 Indonesia's manufacturing and
export industries were down, Indonesian consumers contributed 66.5% to Gross
Domestic Product, increasing to 74% in 2005. While, consumption by the 10%
of the upper income bracket contributed 30% to total consumption. Up to now,
says economist Fauzi Ikhsan, as reported by Kompas, Indonesian consumers do
not yet depend on loans, and this has, therefore, not reached the danger
stage, but the trend to that direction is clear.

On the other hand, legal and illegal imports are on the rise. Smuggled goods
increased from 22% in 2004 to a huge 66% in 2005, while legal imports rose
from 3% to 9%. At the same time, the share of local products contracted from
75% to a mere 25%. This shows that the quest for status symbols expressed in
the consumption of imported goods will weaken local industry, while on the
other hand, public consumption supports the economy, attracts foreign
investments and lowers prices for the domestic mark, writes Kompas daily .

Having all the above data available, it is little wonder, then, to see that
total spending of Indonesians abroad today is almost outstripping total
receipts from incoming tourists, and the trend is for outbound Indonesian
spending to grow faster, while incoming tourist spent is reducing. (see
Indonesia Digest 32.06).

It is also ironic that while other countries have read the statistics
correctly and acted on them, Indonesian destinations have yet to formulate a
concept on how to attract our own Indonesian domestic visitors to their
province with a well thought-out marketing plan based on market profile. Is
it a wonder, then, that Indonesians will travel in hordes to foreign holiday
destinations as they feel themselves more pampered abroad? Can the
Indonesian Tourist Industry and those in authority take advantage of this
spending spree to reverse the trend for the more wealthy Indonesians to
travel domestic?
 (Sources: Bisnis Indonesia, Kompas)           (Tuti Sunario)
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NEWS AND BACKGROUND:

1.    Tourism and Transportation:

Pasar Wisata (TIME 2006) offers new ecotourism attractions
The Tourism Indonesia Mart and Expo (TIME), held at the Clarion Hotel in
Makassar, South Sulawesi between 17 - 21 September, was attended by 110
buyers from 21 countries, and 124 sellers/companies from 20 of Indonesia's
33 provinces.
The event, which was held for the first time outside the island of Java,
attracted 62 foreign journalists and travel writers and scores of local and
national mass media, while 105 exhibitors displayed their attractions at the
Expo, reported Hilda Sabri Sulistyo, senior journalist from Bisnis
Indonesia.
In his opening address, Vice-President Jusuf Kalla expressed his thanks and
appreciation to Indonesia's private sector for the continued commitment in
organizing the Tourism Indonesia Mart & Expo to promote tourism to
Indonesia, which will impact positively on the economy, and which in turn
will bring better welfare to local communities.
And, since VP Jusuf Kalla, who hails from South Sulawesi, could not attend
the event, his speech was read by Minister for Culture and Tourism, Ir. Jero
Wacik.
Buyers came predominantly from the Netherlands, China, Korea, and Malaysia,
to meet and discuss business with Indonesian tourist establishments, who
came dominantly from Jakarta, Bali, South Sulawesi, North  Sulawesi and
Central Java.
Among first time attendee as buyer, Tess Avelino, travel consultant of PTA
Vacations in California, USA, said that TIME's location in Makassar this
year offers her the opportunity to study possible eco-tours in Sulawesi and
East Indonesia.
"Our company sends at least 2 groups of divers to Bali yearly", she said,
and since Indonesia's image in the United States as a safe destination has
restored, we will now push our groups to visit other Indonesian destinations
besides Bali" said Tess Avelino.
Meanwhile, Singapore Airlines' Indonesia General Managers, Eugene Lee, told
the press that the airline contributed US$25,000 in ticket value for buyers
and press to attend TIME in Makassar.
"Singapore Airlines gave complementary tickets to 7 foreign journalists and
travel writers, with 20 international buyers offered a 75% discount. Those
hosted by the Airline were from India, South Africa, the Philippines, Nepal,
the United States,. The Netherlands, Belgium and Canada.
Singapore Airlines which flies to Jakarta and Surabaya, and SilkAir to Bali,
Lombok, Makassar, Solo, and Manado, regularly promote these destinations to
the airlines major markets in Europe, the United States, Japan and
Singapore.

Eugene Lee says he is optimistic that tourist arrivals to Indonesia will
continue to increase in line with the global growth of international air
traffic.
In conjunction with TIME, the Time Forum, organized by the Department of
Culture and Tourism, opened the opportunity to discuss Indonesia's diversity
and competitiveness of eco-tourism destinations.
The Department also invited 22 journalists from ASEAN, 4 from other Asian
countries, 4 from the Middle East, 20 from Europe, who attended the opening
ceremony of TIME in Makassar, from where they continued to visit Bandung,
Yogya and Bali, reports Hilda Sabri from Makassar.
Since its inauguration in 1994, TIME was held annually at the Jakarta
Convention Center. Then the past two years the venue was moved to
Yogyakarta, and this year in Makassar. Meity Robot, Chairperson of the
Organizing Committee said that as in 2007 Indonesia will host the PATA
Travel Mart in Bali, TIME will be held parallel to the PATA Mart from 25-28
September 2007 in Bali. Thereafter, in 2008 the event will return to
Makassar.


The Economy, Trade and Industry :

Indonesia's Economy Back to Pre-Crisis Levels, assures Finance Minister

Market confidence in the Indonesian economy is back to pre-Asian crisis
levels, said Finance Minister Sri Mulyani Indrawati, as quoted by the
Indonesian Trade and Investment News issued by the Coordinating Ministry for
the Economy.

Indonesia is focusing on implementing practices of good governance as part
of its strategy to attract investments, Minister Mulyani said at a reception
hosted by the Jakarta Stock Exchange and the Indonesian delegation to the
IMF/World Bank meeting last September 17 in Singapore.

"Indonesia is the last country among those affected by the Asian financial
crisis to return to normalcy, and in this case is recovering and we are
picking up even stronger.  Last year, GDP growth was 5.6%.  This is despite
the fact we had very suddenly, to manage the most difficult times with a
number of natural disasters and increasing oil prices, which we had to deal
with on the budget side," she said, according to Channel News Asia.

"Macroeconomic stability has returned, creating very strong confidence at
this stage and we are ready to pick up to a more broad-based growth.  The
Indonesian rupiah is also stable at around 9,000 to the US dollar and
inflation and interest rates are now both at a declining path," Finance
Minister, Sri Mulyani said.

Government Gears Up for Infrastructure Push

As all major economic indicators are now heading towards a positive
direction, the government has begun to gear up for its November push for
investments in infrastructure projects, reports the authoritative Indonesian
Trade and Investment News.

Vice President Jusuf Kalla said on16 September that the government will
offer domestic and foreign investors infrastructure investment 'partnership'
projects at the twice-delayed conference.
Of the total amount, Rp70 trillion will be aimed at power grid development,
Rp50 trillion for road construction, and Rp 50 trillion for housing, Kalla
told reporters, as reported by Dow Jones Newswire.

A Ministry of National Development Planning document that was cited by Dow
Jones said that the government would offer a total of 110 infrastructure
projects for investment.
These include 50 toll road projects, 27 water projects, 14 power projects,
seven gas pipeline projects, four port projects, one railway project, one
ferry terminal project and one telecommunications project, the document
said.

German Vegarra, International Finance Corporation (IFC) country manager for
Indonesia and Malaysia, said that the World Bank's finance arm would take
part in some infrastructure work, describing it as "a great opportunity".

"Our executive vice president, Lars Thunnel, will be in Jakarta this week to
meet Pak Jusuf Kalla and discuss ways the IFC can quickly support the
development and financing of a few key projects," he told The Jakarta Post.
He added that the IFC is also prepared to offer AAA global standing to
partially guarantee infrastructure bonds in the local and international bond
markets. "We are fully committed to grow our support for Indonesia. I
personally want to see this country among the five largest exposures for the
IFC in less than two years," Vegarra said.

For its part, the government said it had earmarked Rp2 trillion ($218
million) for land clearance for infrastructure projects. It is planning to
spend a total of Rp66.1 trillion on infrastructure in 2007.

In Singapore, Trade Minister Mari Pangestu was lobbying for more investment
support for Indonesia at the International Monetary Fund (IMF) and World
Bank meeting, where the Minister took the opportunity to explain both the
economic reform process and the social reform program, which are aimed at
addressing social inadequacies and poverty.

She was also keen to attract interest to the new Special Economic Zone on
Batam, Bintan and Karimun islands. "The idea of special economic zones is to
have islands of best practices which in the end will be replicated
nationally. This is a manageable way to approach things in the short term".

Senior Economic Minister Boediono, meanwhile, said that the consumer
inflation rate may decline to below 7% by the end of the year, although he
added that it is uncertain whether the central bank's target interest rate
will fall below 10% by that time.

"Below 7% will be possible," he told Dow Jones Newswires in an interview.
Minister Boediono noted, however, that lower interest rates are less
attractive to foreign investors, and that the government is aware of the
risk of triggering capital outflow.

Consumer prices rose 14.90% in August from a year earlier but increased only
0.33% on-month.

Minister Boediono further mentioned that he was confident Indonesia could
achieve its growth targets even with a global trade cool-off, noting that
exports represent only 30% of gross domestic product.
Indonesia's recovery is at an "early stage," giving it greater upside growth
potential. "There is an extra force to move beyond what is dictated by
global...growth," Boediono said. Analysts were pointing to gains of up to
20% across the board at the Jakarta Stock Exchange in 2007, adding that the
market was cheap by regional standards, given expectations of strong
corporate earnings.

On her side, Finance Minister Sri Mulyani Indrawati said that the government
was expected to have $43 billion in foreign reserves in the Central Bank by
the end of the year, allowing it to use around $3.6 billion to pay off its
debts to the IMF.

The move to quit the IMF rescue program completely is politically important
for the government, and Minister Indrawati said it would save the government
$800 million in saved interest payments.

On the investment front, San Miguel announced that the corporation plans to
build a modern feed mill in Manado, North Sulawesi, to produce cheaper feed
products for Mindanao's animal and halal poultry industries. However, no
investment figure was announced, reported the Indonesian Trade and
Investment News.

Politics and Security :

Plan Approved on Maritime Security of  the Straits of Malacca

The shipping industry and maritime officials from 31 countries agreed
Wednesday (20/9/06) to cooperate on measures to ensure security in the
Malacca Strait, cites the Indonesian Trade and Investment News.

The implementation of projects in the Straits - ranging from the removal of
shipwrecks to the introduction of mechanisms to tackle oil spills - will be
discussed in the coming year, delegates said in a joint statement at the end
of a three-day meeting in Kuala Lumpur, the Associated Press reported.

"These projects are crucial in ensuring that the Straits remain safe and
open to international shipping at all times," the statement said.

Participating governments are expected to provide equipment, training or
direct funding for these projects, the statement said, without giving
specific details or financial estimates.

Malaysia, Indonesia and Singapore, which border the Malacca Straits, have
been calling on other countries whose vessels ply the Straits to help bear
the costs of keeping it safe.

Koji Sekimizu, maritime safety director of the UN's International Maritime
Organization, said China has expressed willingness to take part in the
maintenance and recovery of navigational aid equipment.

Malaysia, Indonesia and Singapore, which border the Malacca Straits, will
oversee how the projects are implemented, he added.

Three cases of piracy were reported in the Straits in the first half of
2006, down from 18 in the whole of last year and 38 in 2004.

Thai Coup Raises Indonesia's Concern

The Indonesia Trade and Investment News reports that on Wednesday, 20
September, Indonesia expressed concern following the military coup in
Thailand, saying that Indonesia hoped democratic principles would be
enforced.

"The Indonesian government is closely following the developments in Thailand
with concern," Foreign Minister Hasan Wirayuda said in a statement issued
from New York, where he was attending the UN General Assembly.

"As a fellow member state of ASEAN, the Indonesian government hopes that the
democratic principles, important elements in the ASEAN community that have
been agreed together, will remain enforced," the minister said.

He also expressed hope that the political crisis in Thailand could soon be
settled through democratic means.

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