[Marinir] Indonesia Digest: No.18. 07 ; 30-06-'07

[Yap Hong Gie]

INDONESIA DIGEST
Indonesia's complex Issues in a Nutshell
Published by: TBSC-Strategic Communication
 No.: 18. 07 - Dated: 30 June 2007

 In this issue:
MAIN FEATURE:

'UNFAIR': EU BARRING INDONESIAN AIRLINES FROM FLYING TO EUROPE

NEWS AND BACKGROUND:

1.      Tourism and Transportation:
Corrections to Indonesia Digest 17.07 Article on Visa on Arrival, p. 6
Garuda Indonesia expands operations to Australia and China

2.      The Environment, Health and Culture:
Narcotic Users increasing  and starting younger

3.      The Economy, Trade and Industry
Government plans to cap production of Cigarettes
Indonesia Looks to 36% cut in 2008 Fuel Subsidy
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MAIN FEATURE:

'UNFAIR': EU BARRING INDONESIAN AIRLINES FROM FLYING TO EUROPE

In a surprise announcement, the European Transport Commission stated on 28 
June that within one week EU would officially bar all Indonesian airlines 
from flying to Europe.
The information was met with surprise and protests from Indonesia carriers, 
calling the ban "unfair" and "outside of normal procedure".

Reuters news from Brussels, as quoted by CNN.com mentioned that "All 
Indonesian airlines including national carrier Garuda will be banned from 
flying to the European Union within a week, the European Commission said on 
Thursday, updating a "blacklist" of carriers deemed unsafe.

Indonesian carriers do not currently fly to Europe so the ban is also a 
warning to the 27-nation EU's consumers and travel agencies not to use the 
country's airlines, an EU official said.
The policy is "to make sure that airlines and civil aviation authorities 
take appropriate actions to improve safety," Transport Commissioner Jacques 
Barrot said in a statement.
The Indonesian carrier ban applies to all 51 airlines certified in that 
country.

The decision, following advice from an EU air safety committee, is expected 
to be formalized within a week. The Commission advised EU countries to start 
preparing for the ban immediately", reported Reuters.
Indonesia was apparently too late to include the latest assessments audit 
that noted significant improvements made by Indonesian operators during the 
past three months, to be included in the EU Commission report, despite 
efforts having been made to do so, explained Director General for Air 
Transportation, Budhi Suyitno to the press.
More importantly, says Suyitno, the government will continue to apply the 
Roadmap to Safety, Security and Services through Compliances (3S+1C).


Safety of Indonesian airlines Significantly Improved since March
A few days earlier, on 25 June Director General Suyitno had announced 
results of the latest quarterly audit on Indonesian airlines, in which 
Garuda Indonesia was shown to have greatly improved its safety performance, 
and therefore was moved up into Category I, - the only Indonesian airline 
that has so far made it into the top category.
Garuda had in fact exceeded the required minimum assessment points, having 
achieved 168 points in compliance, much improved from the 146 points noted 
in March.

The Department of Communications audited 21 airlines, of which only one, 
which is Jatayu Air had been found failing and therefore its operations 
license immediately frozen.

A category I airline fulfills minimum air transportation regulation 
requirements with a score of between 162 and 200, while a category II 
airline satisfies minimum requirements with a score of between 120 and 161.
However, a category III airline, with a score of less than 120, fails to 
consistently meet minimum requirements.

Suyitno explained that Garuda's strength lies in its manpower, aircraft 
maintenance facility and strong technical support, reports Bisnis Indonesia
Other more well known commercial airlines using larger than 30 passenger 
aircrafts that improved their safety standards and moved up to Category II 
are: Merpati Nusantara, with 152 compliance points in June compared to 132 
in March; Indonesia Air Asia (with 142 points, up from 128 in March); 
Sriwijaya Air (140 points, up from 132) ; Pelita Air Services (140 points); 
Kartika Airlines (132 points, up from 116); Lion Air (131 points, up from 
122); Wing Air (130 points, up from 127); Adam Air (129 points, up from 
117); Metro Batavia Air (128 points, up from 117); Mandala Airlines (124 
points, up from 120).


No Retaliatory Actions from Indonesia

Meanwhile, new Minister for Transportation, Jusman Syafii Jamal remains 
optimistic that there is still room for Indonesia to explain to the EU on 
the serious and systematic efforts being done in Indonesia to improve its 
flight safety records, since the notice was given by the EU Commission, and 
the Indonesian government had not yet received an official notice from EU on 
the subject.

 On 2 July, Indonesia will meet the President of ICAO to explain measures of 
improvements made in the standard of safety in Indonesia's airline industry. 
Minister Jamal, however, does not agree that Indonesia should take 
retaliatory actions to bar European airlines from Indonesia's airspace as 
suggested by the Association of Indonesian Commercial Airlines, INACA.

On a similar note, Vice President Jusuf Kalla, when interviewed tried to 
cool down the public and operators' heated sentiments, saying that Indonesia 
should view the EU opinion positively, by considering it as a reprimand to 
further improve our air safety standards.
Commercially, the ban will not affect Indonesian airlines as yet, because no 
Indonesian operator flies to Europe. (Garuda planned to resume its 
operations early 2008, having ceased flying to Europe since 2004). However, 
the VP concedes, that this is a setback to Indonesia's image abroad.

The airline associations on their part urge the authorities to explain in 
detail to the authorities and the international press, the serious efforts 
made by Indonesia to improve its air safety record. An opportune moment to 
do so will be at the Airline Safety Conference to be held in Bali from 2-3 
July, which is hosted by Indonesia and to be attended by Senior Officials 
from around the world.

Garuda Indonesia's Vice President for Operations, Ari Sapari, when 
interviewed on Television stated his opinion that EU's banning Indonesian 
airlines has followed an uncommon  procedure as EU has never audited 
Indonesian airlines.
This differs from the American authorities, who have made their own audit 
before making their assessments, and American authorities have not banned 
Indonesian airlines.

However, President Director of Garuda, Emirsyah Satar, said that facing a 
possible EU ban, Garuda Indonesia will continue to lobby through IATA and 
AAPA as well as discuss the matter further with counterpart airlines, 
including KLM.


Most Hit: Tourism, Poor Cultural villages and Eco-tours to sustain the 
Environment

 Most concerned with these latest developments, nonetheless, is the Tourist 
Industry, who sees the EU ban as another threat to international confidence 
in Indonesia's tourism, the market having finally sufficiently recovered 
from the fear of terrorism.

Europe and European tourists form a very important market for Indonesia. The 
2005 statistics from the Department of Culture and Tourism show that near to 
800,000 Europeans stayed between 15-18 days in Indonesia, visiting many 
regions and spending an average of US$ 1,450 per stay. This compared to the 
average Asian from Singapore, Malaysia, China or Japan, who stayed 5-8 days 
spending an average of US$ 500 (Singaporeans) to US$ 838 (Japanese) per 
stay.

It is envisaged that with stagnation in the number of European tourists, 
regions that will suffer most are the poor, outlying traditional villages 
that have so far benefited from tourism, such as those in Toraja, Nias, Lake 
Toba, the Moluccas, Papua, East and West Nusatenggara, and the Dayak 
villages in Kalimantan, but also remote and handicraft villages in Central 
and East Java.

Asian tourists, on the other hand, although more in number, stay a short 5-6 
days only, preferring the city life and shopping, While Chinese tourists are 
known to shun visiting graves and the Toraja highlands, which has as its 
main attraction its ancient culture of the dead, or trekking through forests 
and valleys - the very attractions for Europeans.

Indeed, the tourism industry already sees black clouds looming again on the 
horizon through no fault of tourism itself.
Ben Sukma, Chairman of the Indonesian Tour and Travel Association, ASITA, 
urged the government to explain clearly to the international press and 
authorities, on Indonesia's air transportation improved performance, since 
most affected will be secondary destinations and regions that do not have 
direct international flights from abroad and rely on Indonesian air 
carriers.
Europe remains an important market for Indonesia, despite the fact that 
numbers have been declining.

More importantly, Europeans tend to disperse and travel to more widespread 
destinations in Indonesia and are interested Culture, Village life and the 
Environment, the very areas that are developed in Indonesia's new tourism 
policy, which is aimed to improve the lives of rural communities and 
alleviate the burden of the poor.

The European ban, although perhaps well meant, will in the end thwart those 
very efforts that Europe - and Indonesia - both wish to foster, which are 
the preservation of Culture, Sustainable Environment and the Alleviation of 
Poverty through the development of Tourism.

(Sources, CNN.com, ANTV, Bisnis Indonesia, detik.com, Kompas)    (Tuti 
Sunario)


NEWS AND BACKGROUND:
1.            Tourism and Transportation:

Corrections to article on Visa on Arrival in Indonesia Digest 17.07

There are a number of disturbing errors in the article on Visa on Arrival 
(VoA) on page 6 in Indonesia Digest 17.07, that have been brought to the 
editor's notice by our readers.

VoA Fee should read:  US$ 10 for a stay of 1-7 days; and US$ 25 for a stay 
of 8 - 30 days. Among new countries whose nationals are extended VoA is: the 
Czech Republic, and not Czechoslovakia. Indonesia now extends VoA facility 
to 63 countries.

We sincerely thank our readers for the corrections.
For complete details on VoA please open: www. budpar.go.id website, and 
click "Regulations" on the right hand side of the front page.

Garuda Indonesia expands operations to Australia and China

Although  Australian arrivals to Bali are still lagging some 30% behind 
numbers recorded during the heydays just 3 years ago, yet today's improved 
year-on-year arrivals have prompted Garuda Indonesia to increase seat 
capacity with a new Wednesday flight from Sydney to Bali, effective June 20, 
2007, reports balidiscovery.com.

Australian arrivals to Bali January-May 2007 totaled 65,561 which represents 
a +56.34% increase from the same period in 2006.

The new flight, GA 717 brings the total number of Garuda Indonesia services 
between Sydney and Bali to five non-stop flights per week with departures 
daily, except Tuesday and Friday.

"The introduction of the new service results in a doubling of capacity from 
Sydney since the end of March which, along with capacity increases from 
Perth and Melbourne earlier in the year, put Garuda Indonesia in a good 
position to handle the increasing demand for Bali," said the airline's 
Regional General Manager, Southwest Pacific, Suranto Yitnopawiro.

Garuda Indonesia has the greatest number of non-stop flights to Bali, 
serving Sydney, Melbourne, Perth and Darwin.


Increased services to China

At the same time, according to Indonesia's Trade and Investment News 
published by the Coordinating Ministry for the Economy, Indonesia's National 
flag carrier PT Garuda Indonesia and China's fourth largest airline, Hainan 
Airlines, have signed a code-sharing agreement on Tuesday (19/6/07) to 
strengthen their marketing positions both in China and Indonesia, reported 
The Jakarta Post.

Agus Priyanto, Garuda executive Vice President for Sales and Marketing, said 
the agreement would allow Hainan Airlines to sell up to 20 seats on each 
Garuda flight from Jakarta to Beijing, and vice-versa.  The agreement will 
come into effect in July.

According to Den Jiang, General Manager of Hainan Airlines, his company 
would also serve Garuda passengers with connecting flights to domestic 
destinations in China, including to Harbin, Hangzou and Nanning. "Through 
this deal, Garuda and Hainan Airlines hope to secure bigger markets in the 
Chinese region and in Indonesia," Priyanto said.
Hainan Airlines flies to 53 cities across China, while Garuda flies 16 times 
a week to four cities in China.

In 2006, Garuda carried more than 275,000 passengers between the two 
countries and expects the figure to increase to more than 300,000 passengers 
this year. Garuda's China routes generate $130 million from passengers and 
$150 million from cargo, about 25% of the airline's total revenue.


4.      The Environment, Health and Culture:

Narcotic Users on the increase starting even in Primary school

TEMPO Interaktif, reported on 25 June that according to data from the 
National Narcotics Board, BNN, crimes involving narcotics in Indonesia has 
risen sharply. During the past five years, the number of crimes in narcotics 
has increased by 51.3%, up 3,100 cases per year.

Sharpest increase was seen in 2005 involving 16.252 cases or up a hefty 93% 
compared to the year before. In the same year, 22,000 suspects were arrested 
involved in narcotics, which has doubled, or up 101.2% compared to the 
11,323 cases in 2004.

When contacted by Tempo, criminologist Muhammad Mustofa, said that the 
number of cases cited by BNN are far below those in the field, since there 
are many more cases that have not been nabbed.
In his report commemorating International Anti-Narcotics Day on 26 June, 
Chief of Police, General Sutanto, as Head of the Narcotics Bureau, said that 
there are an estimated 3.2 million users of narcotics in Indonesia.
While the press has warned that some users start very young even while still 
in primary school.
The Law in Indonesia stipulates that narcotic dealers are liable to receive 
the death sentence.


5.      The Economy, Trade and Industry

Government  Plans to Cap Cigarette Production  by 2010


The government plans to limit cigarette production starting 2010 in a 
preliminary move to curb smoking in Indonesia, which today is the world's 
fifth-largest tobacco market.
Whilst the number of smokers in western countries has fallen, a third of 
Indonesians today are cigarette smokers, up from a quarter of its population 
some 10 years ago, Reuters reported on Tuesday (19/6/07) as quoted by 
Indonesia's Trade and Investment News.

Cigarettes cost as little as $1 a pack in Indonesia, which has a population 
of about 225 million, Imam Haryono, Director of Beverages and Tobacco at the 
Department of Industry , said on Tuesday. There are plans to cap production 
at 240 billion cigarettes in 2010.

"In 2010, we will impose a maximum production limit of 240 billion sticks 
and in 2015, the limit will be 260 billion and remain at that number until 
2020," Haryono said.

Indonesians smoked an estimated 220 billion cigarettes last year, the same 
as in 2005 but below the peak of 239 billion in 2000, according to 
government data.

According to the World Health Organization, nearly a quarter of deaths in 
Indonesia during 2005 were caused by tobacco, and 80% of lung and 
respiratory cancer cases were caused by smoking.


Indonesia Looks to 36% cut in 2008 Fuel Subsidy

Indonesia's Trade and Investment News further reports that the government 
looks to cut fuel subsidies by 36% in its Budget next year as the country 
replaces the use of heavily subsidized kerosene with liquefied petroleum 
gas, a senior official said late Tuesday (19/6/07).


Spending on fuel subsidy in 2008 could be Rp39.5-49.8 trillion, a figure 
much lower than this year's Rp61.8 trillion, Luluk Sumiarso, Oil and Gas 
Director General at the Mines and Energy Ministry told Platts Commodity 
News.


The government hopes to reduce fuel quotas by 3.5% to 36.57 million 
kiloliters next year from the current 37.9 million kl in the 2007 budget.
The reduction is expected to come from replacing kerosene used by households 
with LPG. It will reduce the volume of kerosene consumed from 9.9 million kl 
this year to 8.6 million kl next year.
Meanwhile, consumption of diesel oil is expected to stay unchanged at 11 
million kl next year, while gasoline quotas will be cut slightly to 16.95 
million kl from this year's 17 million kl, Sumiarso said.


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