[Marinir] Indonesia Digest 01.08

[Yap Hong Gie]

INDONESIA DIGEST
Indonesia's complex Issues in a Nutshell
Published by: TBSC-Strategic Communication
No.: 01.08 - Dated: 9 January 2008
In this issue:

Main Feature:
BENGAWAN SOLO FLOODS LARGE AREAS IN EAST AND CENTRAL JAVA

News and Background:

1.  TOURISM AND TRANSPORTATION:
·         Visit Indonesia Year 2008: Minister Optimistic 7 Million Visitors 
target attainable
·         National Airlines insufficient capacity to carry growing Chinese 
market to Indonesia

2.      THE ECONOMY, TRADE AND INDUSTRY
·         Budget 'on track' despite high oil prices: says Vice President 
Jusuf Kalla
·         2007 Unemployment Rate Down to 9.11%
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Main Feature:
By Tuti Sunario
For Indonesia Digest


BENGAWAN SOLO FLOODS LARGE AREAS IN EAST AND CENTRAL JAVA

The rainy season normally arrives in late October or early November on these 
tropical Indonesian islands. However, this year it came only just before 
Christmas. And when the rains decided to fall, they came with a vengeance, 
causing widespread destruction, floods, landslides and even death. On Java, 
landslides already killed more than 60 people, while flooding rivers sent 
hundreds to evacuation sites, having lost their prospective rice harvest, 
belongings and homes.  Incessant rains have also broken important arterial 
roads connecting main cities, broken through dams, and destroyed a number of 
bridges that collapsed when their supporting soil crumbled under.


Rising Seas, Storms and Landslides

Meantime, at large cities such as Makassar, Surabaya, Semarang, Bali and 
also the capital Jakarta, rising sea levels and high waves have pounded 
against beach fronts, flooding coastal settlements with one to two meters 
deep water, while sudden whirlwinds have brought down television towers, 
billboards and trees.

And if that is not enough catastrophe, a number of areas in West and South 
Sumatra in western Indonesia, and Manado, Maluku and Papua in eastern 
Indonesia, were rattled by earthquakes of more than 5 on the Richter Scale. 
While the Merapi, Krakatau and Kelud volcanoes on Java and the Lokon and 
Soputan in North Sulawesi continue to spew lava or cold lahar from craters, 
choking rivers, causing even more flooding.

This is the bleak picture of Indonesia at the turn of the year into 2008. 
Nonetheless, the Met warns that the peak of the rainy season is yet to come, 
since the peak is expected only towards the end of January or early 
February.

In North Jakarta, a number of low-lying areas are already suffering from 
high tides and overflowing rivers. Thankfully, in the last few days the sun 
has come out and waters have receded. But experts predict that because of 
the capital's dense settlement, the city's soil can absorb only 30% of 
rainfall. And as heavy rains of the past days have already exceeded this 
capacity, it is expected that at peak rains, absorption is no longer 
possible. Therefore Jakarta's 9 million population must brace themselves for 
some serious flooding by the end of the month.

Yet a Joyful and Peaceful Festive Season

Despite this bleak picture, during Christmas, churches were filled with 
congregations and the New Year was welcomed by millions with song, 
jubilation and grand fireworks in major cities and most prominently in the 
capital by the National Monument despite heavy rains. But all were happy and 
thankful that the festive season passed peacefully in Indonesia.

Meanwhile, most damage was wreaked by the Bengawan Solo, the Solo river that 
passes through Central and East Java. That mighty river that was made 
popular by Gesang, is today proving its prowess. "During the rainy season" 
so the song goes, " the Solo river overflows its banks, causing widespread 
floods".

Bengawan Solo, which is 530 km long, is the longest river on Java, and has 
its source in the Lawu mountain in Central Java. From here it meanders north 
east, cutting through the provinces of Central and East Java, passing major 
towns, to pour out into the Java Sea by the town of Tuban near Surabaya.

In the 13th century during the powerful Majapahit maritime kingdom, the 
river was the main transportation waterway. Large boats used to carry silks 
and spices inland to return to sea laden with agricultural produce from the 
Mataram (Yogyakarta and Solo) kingdom in Central Java. Tuban was then the 
major port of the kingdom, where ships from India and China used to anchor, 
however silting has reduced its economic significance to a quiet backwater 
port.


Bengawan Solo embankments deforested and converted to human settlements

Today, lands along both sides of the Bengawan Solo River have become densely 
populated areas because of their continued fertility. Therefore, when the 
river floods, millions are affected.

In Central Java, 16 districts and cities are today damaged by floods as are 
17 districts and towns in East Java. Here, serious destruction has been done 
on rice fields. The Department of Agriculture reports that since the onset 
of flooding at the end of last month, the Solo river has inundated more than 
35 thousand hectares of rice fields in Central Java and some 42 thousand 
hectares in East Java.  Of these, 23.5 thousand and 12 thousand hectares 
respectively in the two provinces were ripe for harvesting, but are now a 
complete loss. However, the Department assures that although most 
deplorable, the areas lost are a relatively smaller section of planted 
fields that cover a total of nearly 2 million hectares in both provinces. 
The nagging concern, however, is that more rainstorms may damage larger 
areas, especially when fields in the rice-growing centers of West Java will 
also be affected. The island of Java produces 65% of total national rice 
production.


Rice Stocks Sufficient despite flooded Rice Fields

Indonesia's Trade and Investment News issued by the Coordinating Ministry 
for the Economy, assures that "floods in parts of main rice-growing areas 
may delay the rice harvest but will not disturb the country's rice stocks", 
a senior agriculture official said on Friday (4/1/08), as reported by 
Reuters.

Sutarto Alimoeso, Director General of Food Crops at the Agriculture Ministry 
said floods also inundated rice fields in West Kalimantan and Aceh, which 
may postpone the February-March and March-April harvest season but will not 
affect the country's rice stocks, continued Reuters.

Indonesia has been struggling to increase rice output in its 10-12 million 
hectare fields, but lack of good quality seeds and fertilizers have hampered 
production.

Mustafa Abubakar, head of state logistics agency BULOG, said the country's 
rice stocks stood at 1.6 million tons is sufficient for the next eight 
months."We have 680,000 tons of rice ready to be distributed until February. 
Some rice imports are also arriving in the country," Abubakar said.
Meawhile, Bisnis Indonesia reports that according to data from the 
Environment Ministry since year 2000, natural forests of teak and pines 
along the Bengawan Solo embankments have been cut by 31.5% or some 11,023 
hectares, converted into agricultural gardens of bananas and maize, or open 
land. Human settlements have increased by 35.97% or taken up some 97,216 
hectares. Swamp areas along both banks which served as vital receptacles for 
rainwater that in 2000 covered 3,212 hectares, now remain a mere 3 hectares. 
While bushes and undergrowth have been reduced by 77.97%. Fishponds here 
have also shrunk from 23,179 hectares some seven years ago, to only 16,951 
hectares today.
All these spell disaster. Although Environment official, Masnellyarti Hilman 
explains that this year's floods have been caused by extreme rainfall caused 
by La Nina, which is expected to last until March, the disaster situation is 
exacerbated by extreme conversion of land.
In today's floods and stormy weather, fishermen have also ceased to take to 
sea because of menacing high waves and strong winds. But also factories on 
Java producing clove cigarettes, paper mills and printing presses have 
halted production as shop floors are flooded. While along the shores, 
seaweed plots have also been destroyed by waves.


More Extreme Weather expected until March

I wish I could end this article on a brighter note, especially since this is 
the first in the new year.  However, Kompas daily further warns that 
Indonesia's met (BMG) has drawn attention that more tropical cyclones are 
likely to develop south of Java and Bali, and eastwards to the Nusatenggara 
islands, that will last until March. The Meteorology and Geophysics Agency 
(BMG) says there is no early end in sight to bad weather that has been 
hitting the archipelago since before Christmas as the BMG issued new 
warnings of high waves at sea and severe weather patterns.

According to a report in Koran Tempo, the BMG said it expected severe 
conditions to continue at sea at least until the end of January. "The high 
waves are being caused by low air pressure in waters off Australia and an 
unusual 19-year lunar cycle," said the agency's spokesman, Suratno. He 
warned passenger ships, tankers, and fishermen to cancel operations for the 
time being.

Four-to-five-meter waves are expected to occur in the South China Sea, Banda 
Sea and Kai and Tanimbar waters in Maluku, the Aru Sea, and off the south 
coast of Papua.

High waves will also occur in the Java Sea, in the Indian Ocean affecting 
Bengkulu and Lampung provinces and eastward across Java to East Nusa 
Tenggara.

"Four-meter waves will also hit Riau waters, Bangka-Belitung, Pontianak in 
West Kalimantan and the Makassar Strait up to Sangihe Talaud in North 
Sulawesi," Suratno said.

High waves were reported to have damaged the fishing port at Kerayaan 
Island, Kotabaru and South Kalimantan. Damage to the port has delayed food 
supply distribution to the island from the mainland, writes Indonesia's 
Trade and Investment News.

The agency had warned vessels and fishermen in southern Papua coastline of 
four to six meters high waves that most likely will hit the area this week. 
So beware!

Are these, then. forebodings of worse things to come resulting from Climate 
Change and Global Warming, especially when politicians, businessmen and 
mankind remain unconcerned about their dire consequences to Planet Earth?

(Sources : Bisnis Indonesia, Kompas, Wikipedia)
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News and Background:

1.  TOURISM AND TRANSPORTATION:

·         Visit Indonesia Year 2008: Minister Optimistic 7 Million Visitors 
target attainable

On 26 December, Minister for Culture and Tourism, Jero Wacik officially 
launched Visit Indonesia Year 2008 that aims to achieve 7 million tourist 
arrivals in 2008, offering at least 100 events throughout the archipelago 
throughout the year.

During January through November 2007 the number of tourists visiting 
Indonesia jumped a promising 14% compared to the same period in 2006, 
Central Bureau of Statistics data showed.

The 4.11 million arrivals through Indonesia's 15 main entry points were 
boosted by a resurgence of tourism to Bali, which saw a 32.3% increase to 
1.59 million visitors to the island in the January to November period. 
Jakarta's Soekarno-Hatta airport recorded the second highest number of 
tourists at 1.05 million arrivals, little changed, however, from 1.04 
million in the same period in 2006, wrote AFP.

The Department of Culture and Tourism, therefore, estimates that counting 
arrivals through smaller entry points as well as cruise passengers, the 
total number of visitors to Indonesia for 2007 would reach 5.5 million, up 
12.9 % from the 4.87 million foreign tourists who visited Indonesia in 2006 
who spent a total of US$4.45 billion. "This is a record number of visitors 
to Indonesia in the past decade" said Minister Jero Wacik, although 
conceding that this number falls short of the earlier targeted 6 million 
arrivals for 2007.

Although the target for VIY 2008 has been set at 7 million, or an increase 
of  27.3% over 2007 figures, earning US$ 5 billion for the country, 
nonetheless, the Department has set a pessimistic estimate of 6 million (up 
9%), and a medium estimate at 6.5 million (up 18%) visitors for 2008.

More Chinese and Australians to Bali
Meanwhile Head of Bali Tourism, Gde Nurjaya mentioned that arrivals to Bali 
during 2007 totaled 1,667,655, an increase of 32.3% over 2006 when 1,260,317 
tourists spent their holidays on the island. Average hotel occupancy rate in 
2007 was 54.58%, up from 40.35% in 2006, reported the Bali Post.
For 2008, Bali targets a total of 1,744,000 visitors, or up a modest 4.6%. 
The estimate is based on daily arrivals during the past year of between 
3,500 - 5,375 persons per day.
Nurjaya further explains that for the first time in Bali's history, visitors 
from China have moved into its top ten markets after Japan, Australia, 
Taiwan, South Korea, and Malaysia, and further followed by UK, Germany, 
France and the United States residents. Whereas, the number of visitors from 
Holland have moved out of the 10 main markets into number 11. Australians 
are returning to the number two position, moving Taiwan to number three 
position.

Domestic Tourism now Bread and Butter for the Industry
 Meanwhile, Indonesians themselves are becoming increasingly mobile, with 
the number of domestic tourists rising from 114.3 million in 2006 to 116.1 
million in 2007 or up 1.6%, according to Director General for Tourism 
Marketing, Thamrin B. Bachri. However, as domestic tourists make an average 
1.95 trips a year, this means that domestically, 219.7 million trips were 
made in 2007

The Department further calculated that as domestic tourists spent an average 
Rp. 400,000 per trip, this means that their total spending was Rp. 79.95 
trillion in 2007.
In 2008 The Department of Culture and Tourism aims to achieve the target of 
118 million domestic tourists.


·         National Airlines offer insufficient capacity to carry growing 
Chinese market to Indonesia

Ever since Indonesia offered Visa on Arrival facility to Chinese nationals, 
the number of Chinese tourists to Indonesia has increased sharply, said 
Indonesian Ambassador to China, Sudradjat  to Antara journalist recently in 
Beijing.

So much so that at present Chinese tourists wishing to visit Indonesia must 
use charter flights as Indonesian carriers do not offer sufficient capacity 
when compared to increased demand.  Most Chinese tourists visit Indonesia by 
charters from Southern Airlines flying Shanghai to Bali twice weekly, 
besides the regular China Air flying twice weekly on the same route.

In this Visit Indonesia Year 2008, Ambassador Sudradjat expects such charter 
flights to increase to four times weekly with Bali as main destination.

According to data received, Chinese tourists to Bali using charters have 
increased to 30,000, which number is expected to double this year.

In 2007 Indonesia targeted some 300,000 Chinese visitors to the country, 
while January-October 2007 already registered 230,000 Chinese arrivals. 
Therefore, for 2008, the Ambassador expects to achieve more than 300,000, 
although in order to attract this number, Indonesia, in particular the 
Department of Culture and Tourism, airlines, tour operators in tandem with 
the Embassy in Beijing must work closer together.

At the moment, three airlines serve the Indonesia- China routes, these are 
Garuda Indonesia, Batavia Air and Lion Air, with only Garuda serving the 
Beijing-Jakarta route.
Whereas, Batavia Air and Lion Air connect Jakarta with a number of towns in 
Southern China.
Meanwhile, Antara reports that national flag carrier Garuda Indonesia 
airlines flew 21,650 passengers from Beijing to Jakarta in 2007 with a 81.8 
% load factor, said Garuda`s General Manager for Beijing, Pikri Ilham.

"Amid tight competition with foreign airlines which also serve the 
Beijing-Jakarta route, the number of Garuda`s passengers from Beijing 
continued to increase in 2007,"

He said that Garuda used B737 New Generation (NG) airplanes in flying 
passengers from Beijing to Jakarta with total capacity offered at 26,499 
seats.

Pikri said that the interest of Indonesian and Chinese citizens to use 
Garuda flights to Jakarta was high so that sometimes Garuda was overwhelmed 
in giving its services, particularly during holidays.

In all, Garuda conducted 169 flights from Beijing to Jakarta during the year 
2007, at three flights weekly.

Besides serving the Beijing-Jakarta route, Garuda also plied the 
Shanghai-Jakarta and Guangzhou-Jakarta routes with four flights a week 
respectively.

In 2007 Garuda served the Shanghai-Jakarta route with 204 flights, offering 
58,447 seats, carrying 38,823 passengers. It also served the 
Guangzhou-Jakarta route with 212 flights at 36,701 seats, carrying 28,823 
passengers.


2.       THE ECONOMY, TRADE AND INDUSTRY

·         Budget 'on track' despite high oil prices: says Vice President 
Jusuf Kalla

The government is sticking to its budget deficit target for this year even 
though oil prices have touched $100 a barrel, Vice President Jusuf Kalla 
said Thursday (3/1/08), reported Indonesia's Trade and Investment News 
issued by the Coordinating Ministry for the Economy, quoting Dow Jones 
Newswires.

"Our budget is not affected," Jusuf Kalla told reporters. "Fuel subsidy 
costs will increase, (but oil and gas) revenues will also increase." Kalla 
also dismissed concerns that rising oil prices will hurt the rupiah, saying 
a weaker local currency will boost exports and hence bring in more foreign 
exchange into the country.

The government managed to keep the budget deficit at 1.2% of gross domestic 
product last year, below its 1.5% target even though fuel subsidies totaled 
Rp85.5 trillion ($9.1 billion), compared with initial projections of Rp58 
trillion.

A day earlier, President Susilo Bambang Yudhoyono told the opening of 
trading for the year at the Indonesian Stock Exchange that the government 
was optimistic about growth this year, saying the economy could grow by 
nearly 7%, Reuters reported.

Growth would be boosted by higher spending and investment in infrastructure, 
he said, while the impact of the US sub-prime mortgage loan crisis would 
likely be limited and oil prices could be weathered.  The budget aims for 
6.3% growth in 2007 and 6.8% in 2008.

"I expect growth to exceed 6% in 2007 and can reach nearly 7% in 2008," 
Yudhoyono said. "Consumption is likely to improve, amid a positive momentum 
in our economy. Investment has shown an increasing trend."

The President said the government intended to pump money into infrastructure 
projects between now and 2010.

Markets were meanwhile waiting for the central bank's decision on interest 
rates. While most analysts believed Bank Indonesia would leave its benchmark 
rate at 8.0%, Governor Burhanuddin Abdullah told reporters on Friday that 
the bank believed there was still room to cut interest rates. He declined to 
give a timeframe for a possible rate cut.

He was commenting after the release of monthly figures that showed inflation 
easing slightly in December, coming in at 6.6% against a year ago partly on 
higher food prices, Agence France-Presse reported.

December's figure was above the government's revised forecast of 6.0% but 
within the central bank's target of 5.0% to 7.0%.

The consumer price index rose 1.1% in December compared with November, at 
the upper end of expectations. Inflation was 0.2% month-on-month in 
November.

Exports meanwhile dropped 4.3% to $9.81 billion in November from the 
preceding month, led by crude palm oil (CPO), the Central Bureau of 
Statistics reported.

Over the same period, imports rose 20.5% to $7.54 billion, with the trade 
surplus narrowing to $2.27 billion in November from $3.99 billion in 
October.

Exports were down on lower CPO exports due to seasonal factors, while the 
increase in raw materials and equipment imports suggested stronger 
performance ahead from the manufacturing sector.

Unemployment fell to 9.1% in August 2007 from 10.3% a year before, but was 
still a far cry from the government's target of bringing it down to 5.1% by 
October 2009, when its term ends, Dow Jones reported.

The official Statistics Agency said Wednesday the number of jobless dropped 
to 10.01 million people in August from 10.93 million a year before. The 
labor force expanded to 109.95 million people from 106.39 million.

Minister of Agriculture Anton Apriyantono said flooding in Central and East 
Java was not expected to have a major impact on rice production. "Flooding 
from October 2007 till now has drowned 68,277 hectares of paddy areas, of 
which 6,676 hectares will experience harvest failure," Dow Jones quoted him 
as saying.

Although rice production in January will be affected by the floods, 
Apriyantono said later months are expected to produce a surplus of rice.

Indicators:

 OctoberNovemberJan-Nov 07/
Jan-Nov 06Trade surplus
Jan-Nov 07
Total exports$10.25 billion$9.81 billion$103.07 billion$35.53 billion
Non-oil & gas exports$8.27 billion$7.73 billionn/a
 November
(y-o-y)November
(m-o-m)December
(y-o-y)December
(m-o-m)
Inflation6.71%0.18%6.59%1.10%
 Full year 2005Full year 20061H 20073Q 2007
GDP growth5.60%5.5%6.1%n/a
Tourist arrivalsOctoberNovemberGrowth/loss (m-o-m)Growth/loss
(y-o-y)
 351,400398,9838.6%14%


Source: Central Statistics Agency


·         2007 Unemployment Rate Down to 9.11%
Heni Rahayu for Media Indonesia reports that according to the National 
Statistics Board, BPS,  open unemployment in Indonesia in August 2007 
dropped to 9.11% compared to 10.3% one year before, and 9.75% in February 
2007.
This means that unemployment in August 2007 declined by 536,780 compared to 
February of last year, or down from a total 10.5 million unemployed in 
February to 10.01 million in August 2007, or down 920,860 when compared to 
the previous year when 10.93 million were jobless. 720,000 of those who 
found jobs were women and only 201,000 were men.
Unemployment declined in most provinces except Jakarta, South Sumatra and 
East Nusatenggara, said BPS Head, Arizal.

Media Indonesia further informs that, although unemployment figures 
declined, the new lift of job seekers meanwhile increased by 3.55 million 
from August 2006.
In August 2007 Indonesia's total workforce numbered 99.93 million, up 2.35 
million compared to February 2007 which registered 97.58 million employed.
It follows that those under-employed, meaning working less than 35 hours per 
week have increased by 1.27 million from 29.1 million in August 2006 to 
30,37 million in August 2007, constituting 40% of total workforce, since 
most work are in the informal sector, notably in services and trade.

The Small and Medium scale industries still absorb the most workforce next 
to the informal sector, caused by the slow growth in large industries that 
absorbed only some 480,000 employees.  Additionally, the Statistics Board 
also noted a decline in workforce in the agricultural sector.

Gender-wise, the number of women entering the workforce increased 
significantly. During the period August 2006-August 2007, the number of 
employed women has grown by 3.3 million, mostly in the agricultural and 
trade sectors, whereas the number of male employed increased by 1.17 million 
only, particularly in the services and construction sectors.

To create more jobs, the government continues to work at improving the 
investment climate, including introducing tax exemptions on certain 
investments, simplifying investment procedures, and clamping down on rampant 
corruption.

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