Peace deal helps to rebuild Aceh, but pains remain

The Jakarta Post 16 August 2007
Mohamad Rayan, Banda Aceh, Aceh

Two years have passed since the Helsinki Memorandum of Understanding was signed on Aug. 15, 2005. Several significant developments have taken place in Aceh since, including a successful and widely respected democratic election and the swearing in of a democratically elected government.

The Aceh government law, passed by the House of Representatives last year, has also helped the peace process in the province. It gave the government of Aceh significant powers. With the exception of banking, defense, security and foreign relations decisions, all other areas are the responsibility of the elected Aceh government, currently let by Governor Irwandi Yusuf. The central government will also allocate 5 percent of its total general allocation funds to the province.

This will increase the amount of funds Aceh receives from Rp 3 trillion to Rp 8 trillion and will enable the government to pour more money into the education, health and community empowerment sectors, benefiting especially the victims of conflict.
However, there is a chance governor Irwandi has forgotten he was elected to lead all Acehnese people, even if they supported other candidates in the election.

The KPA (Aceh transitional committee), a body formed by the Aceh government, is facing public criticism for its aggressive lobbing to win tenders for development projects. Now even for small projects, such as building a sewerage system in Banda Aceh for example, contractors have to have KPA or Free Aceh Movement (GAM) connections to win tenders. The committee is also allegedly involved in the illegal logging trade.

Irwandi has worked hard to combat illegal logging activities in the province. He employs 1,000 forestry rangers, most of whom are supporters of the KPA and GAM. Only time will tell whether or not the anti-illegal logging force will be able to combat the crime or will instead monopolize illegal logging activities itself.

But what is evident two years after the MOU was signed is that the economic cake is being contested by supporters of Governor Irwandi and Vice Governor Nazar.

Supporters assemble every day outside the governor's office, perhaps seeking rewards for their support. It is an amazingly different governor's office from that of a normal governor's office. It is becoming a governor's office for the people. However, the government needs to adjust its system of receiving guests because it could affect the performance of the office.

Another significant development two years since the MOU was signed is that there have been no more military clashes between the TNI and GAM ex-combatants.

However, a significant rise in the number of crimes committed has become evident. As Aceh becomes more lucrative, criminals from Medan in North Sumatra and Palembang in South Sumatra have started to operate in the province.

Concerns also remain regarding the poor performance of the Aceh Reconstruction and Rehabilitation Agency (BRA). Acehnese people are still also waiting for the establishment of a human rights court and a commission for truth and reconciliation to trace human rights abuses in the past.

According to the "Aceh Conflict Monitoring Update" published in March 2007 by the World Bank, the delivery of reintegration funds caused some tensions between the KPA and anti-separatist groups. The BRA needs to launch massive campaigns, especially targeting ex-combatants, so people know what benefits are they entitled to and how to obtain them.

The BRA has already allocated US$150 million to assist targeted groups. So far it has disbursed Rp 25 million to each of 3000 GAM combatants, Rp 10 million to each of 6200 GAM non-combatants, Rp 10 million to each of 2035 political prisoners, Rp 5 million to each of 3024 GAM members who surrendered before the MOU was signed and Rp 10 million to 6500 members of anti-separatist groups. It has also disbursed funds to 5726 conflict-affected villages, ranging from Rp 60 million - 170 million.

The parties to the conflict have shown their commitment to building mutual confidence and trust. This aim has been largely achieved during the last two years. However, a solution for lasting peace and prosperity is still far in the distance.

The writer is a specialist on issues concerning Aceh and is the community relations manager for Yayasan Hutan Tropis Borneo. The opinions expressed in this article are his own.

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EU Bans on 51 Indonesian Airlines

By Perry PADA

The recent decision by the EU to blacklist fifty-one Indonesian airlines is an inappropriate act of political theatre, serving neither Indonesia nor the EU.

With not one of these airlines flying to Europe the act is devoid of real meaning. From the Indonesian point of view this in no way contributes to the solution of the safety record which we Indonesians most of all strive to improve.

The reasons behind Indonesian´s displeasure are reasonable, and are based among others on ………….

(a) the EU’s verdict has failed to respect the normal process of inquiry being conducted by the International Civil Aviation Organization (ICAO);

(b) Indonesia has been engaged in major effort to improve the safety of its civil aviation, supported by the international community of safety experts;

(c) the unilateral action taken by the EU has the effect, possible unintended, of disrupting the excellent spirit of dialog and cooperation which Indonesia is committed to improve.

Therefore, EU should reflect seriously on its action and shift the focus away from punitive action and turn rather to finding ways of working with Indonesia in a joint hope of improving air safety.

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A Democratic Indonesian Tiger?

Wahingtonpost.com
By James Castle and Craig Charney
Wednesday, August 1, 2007; Page A17

JAKARTA, Indonesia -- Ten years ago this summer, Asia's financial crisis hit Indonesia. Within a year, Southeast Asia's largest "tiger" economy had collapsed: Gross domestic product fell 14 percent, the currency dropped from 2,250 to 17,500 to the dollar, and the Jakarta Stock Exchange plunged 91 percent in dollar terms. Millions lost jobs as most large banks and many domestic firms went bankrupt. Protests brought down President Suharto's 30-year-old authoritarian regime. The country seemed close to chaos.

Today, Indonesia is back: a working, if imperfect, democracy and a recovering economic tiger. The emergence of a solid democratic regime has quelled regional separatism and Islamic militancy. Moreover, Indonesians are bullish on foreign investment and U.S. brands, though they are skittish about economic liberalization. A stable, growing Indonesia is again attracting foreign investors, despite their disappointment with the pace of economic and legal reform

The successful shift to democracy has confounded skeptics who in 1997 feared this sprawling, diverse country of 235 million would disintegrate without a strongman holding it together. Its effective security response to bombings by Islamic extremists and its marginalization of pro-terror radicals has also surprised those who thought the world's largest Muslim nation might become a "failed state" and a hotbed of terrorist activity. Instead, Indonesia has achieved something unique in the region and the developing Muslim world: stability and growth on democratic foundations.

Since Suharto fell, Indonesia has held two free elections, in 1999 and 2004, both with turnout over 90 percent. Neither election was marred by serious fraud or violence; the political system has become open and vibrant. Almost all important segments of society -- even the military -- accept the legitimacy of the political system.

Polling we conducted beginning last September shows that Indonesians are optimistic about their country's future. Their reasons include restored order; economic recovery; and President Susilo Bambang Yudhoyono's successes in attacking corruption, raising school enrollment and ending separatist conflict in Aceh. Regional threats to Indonesia's integrity have been resolved through the 2005 Aceh peace accord, the financial autonomy given all provinces in 2001 and the independence East Timor gained in 2000.

The reform-minded Yudhoyono, Indonesia's first directly elected president, retains great popularity. In trial heats for the 2009 election, he trounces rivals, including his 2004 opponent, former president Megawati Sukarnoputri.

Some worries remain, including high unemployment, corruption and problems with disaster relief after the 2004 tsunami and other natural calamities. Yet these concerns contrast sharply with Indonesians' preoccupations after Suharto's fall: riots, violence and a leadership vacuum. Today, questions about the survival of the state have given way to ordinary government problems -- jobs and good governance.

Indonesia's democratic advance seems to have blocked Muslim extremists from making any headway. The Islamic fundamentalist party still polls at just 7 percent, its 2004 level, while the moderate Nahdlatul Ulama -- the world's largest Muslim organization -- is viewed favorably by 80 percent of the people. The state's security measures -- including the arrest in June of two leaders of Jemaah Islamiyah, al-Qaeda's local affiliate, for alleged involvement in terrorism -- have popular support. Backing for the U.S.-led war against terrorism has climbed sharply since 2002, after the terrorist bombings in Bali and Jakarta, and Indonesians now support the effort by 5 to 3. With banks and companies restored to health, the economy grew 5.5 percent in 2006. Growth should top 6 percent this year. More than $12 billion in public and private bonds have been sold since 2005, and foreign direct investment ($6 billion in 2006), though below pre-crisis inflows, is catching up.

Investors should be interested: Indonesians favor foreign investment 2 to 1. Iconic U.S. brands -- Coca-Cola and Microsoft -- are popular despite widespread antipathy toward America's Middle East policy. (There is a catch: Indonesians demand more corporate social responsibility -- and say multinationals do less for society than state or private local firms.)

Moreover, while Indonesians want to compete in the world economy, its risks frighten them. They split over tariff cuts, fear liberalizing labor markets and are reluctant to privatize state-owned firms. This restrains government from making those needed reforms, a problem which -- along with weak legal institutions -- inhibits foreign investment.

Yet Indonesia has come far since 1997, when students marched in the streets behind a coffin, protesting the "death of democracy." Indonesian democracy is managing potentially explosive disputes -- political, regional and religious -- that its autocratic neighbors ignore or suppress. If it can speed up economic progress, broad-based democracy, as in India, may become a better long-term bet for stability and growth than the rigid systems prospering in China, in Vietnam and in other Muslim countries.

James Castle foundedCastleAsia, a Jakarta consultancy. Craig Charney is president ofCharney Research, a New York polling firm. They co-authored "Indonesia Outlook Survey 2007."

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China's Strategic Southeast Asian Overture

By David Fullbrook

BANGKOK - If all goes to plan, China will for the first time ever in July host joint military exercises with troops from the 10-member Association of Southeast Asian Nations (ASEAN), the strongest indication yet that Beijing's recent economic charm offensive toward the region is starting to pay real strategic dividends.

Beijing extended the invitation during last month's ASEAN summit, innocuously for peacekeeping training and disaster-zone management and reconstruction. ASEAN is reportedly still mulling the offer, but many security analysts believe that the group is poised to accept the historic offer and that Beijing would not have extended the historic offer if the chances of acceptance weren't high.

Beijing's friendly overture would appear to mark a significant strategic departure, with China moving toward more limited multilateralism rather than its historical unilateralism to advance its regional-security interests. Developing cooperation with neighboring militaries would hypothetically help China secure its porous southern periphery and free up more resources for projecting its power and influence globally.
China is implementing what appears to be a two-phased strategy toward the region, characterized first by promoting growing economic and investment linkages and now by offering limited military assistance. It's a well-calculated gambit aimed at stealing a march from the United States, specifically through the development of competing linkages and personal relationships with individual ASEAN members' militaries.

China's strategic overtures obviously have the US on edge. This week, Washington announced that it would indeed stage its annual "Cobra Gold" joint military exercises with Thailand. Those exercises, the largest in Southeast Asia and which have in the past included troops from Singapore and Malaysia and observers from China, had been in doubt because US law prohibits certain types of military assistance to governments that seize power through anti-democratic means - as was the case with last September's Thai coup. Soon thereafter, Beijing attempted to fill the military gap by offering Thailand US$49 million in military aid and training.


Significantly, China has traditionally shied away from formal military ties with regional countries that could be construed as alliances. Likewise, ASEAN has steadfastly avoided entering formal security pacts and collective defense mechanisms. The group of pro-Western states was founded in 1967 partially to guard against the spread of communism, which China was then promoting - often through disruptive means. They had relied heavily on US strategic assurances to counterbalance China's, as well as the Soviet Union's, influence beginning as early as the 1950s.

Beijing arguably started to embrace military multilateralism in the late 1990s with the formation of the Shanghai Cooperation Organization, which loosely links four Central Asian states, Russia and China together through combined training and patrols in fighting against terrorism, extremism and separatism. China's trade and investment have since risen sharply in Central Asia, giving it greater influence to counter America's regional strategic designs, which included military bases in Uzbekistan for a few years and the ongoing use of a base in Kyrgyzstan, on China's border.

Strategic Passageway

If diplomatically possible, China would doubtless like to lead a similar security organization for Southeast Asia - a particularly strategic passageway for China's booming seaborne trade with India, the Middle East, Africa and Europe, which passes through the region's busy and congested shipping lanes.

Moreover, Southeast Asia is fast emerging as an important supplier of China's industrial commodities and energy, and the region as a whole now runs a trade surplus with China. China is set to displace the US as ASEAN's top trade partner as early as next year, a position the Sino-ASEAN free-trade agreement should cement when it comes into force in 2010. Meanwhile, there is still no sign of a counterbalancing free-trade proposal with the US.

To be sure, longtime disputes among ASEAN's member states, driven alternately by nationalism, territorial disagreements and historical rivalries, have given the lie to the group's pretense of harmony and have complicated China's attempts to push through universally accepted proposals - particularly on military matters. The United States' still-strong influence plus ASEAN's traditional distrust of multilateral security arrangements have meant China has had to tread carefully for the past decade.

To build confidence, China is now an active and engaging participant in the grouping's various talk shops, including significantly the ASEAN Regional Forum (ARF), which also includes the US, Japan and India among its participants. ARF has long discussed pertinent regional-security issues, but only toward the end of building confidence and specifically not by introducing any binding conflict prevention, conflict resolution or disarmament pacts.
ASEAN's goodwill toward China rose significantly in 2003, when Beijing agreed to a code of conduct toward easing territorial disputes among ASEAN members and China over the Spratly Islands, which some think are rich in oil. All sides recently reaffirmed their support for the code, which has helped to ease tensions in recent years. Moreover, China was quick to send US$60 million worth of aid and supplies to regional counties affected by the 2004 tsunami.

Though thoroughly outshone by the United States' - and to a lesser degree Japan's - rescue and financial response, Beijing's benevolent-big-brother posturing toward the region represents a diplomatic course shift that started in the wake of the 1997-98 Asian financial crisis, when it offered $1 billion in financial assistance to regional countries. The US, in comparison, was widely criticized across the region for its perceived opportunistic approach in dealing with the region's suddenly cash-strapped governments.

China also arguably displayed its support for ASEAN last month by making rare use of its veto at the United Nations Security Council, killing a US-sponsored resolution condemning Myanmar's rights record, which would have badly embarrassed the entire grouping on a global stage.

The US has so far wholly failed to match China's softly-softly approach toward ASEAN, which has significantly degraded the United States' bilateral relations with particular regional countries. The US administration's emphasis on securing counter-terrorism cooperation from countries in the region has taken precedence over most cordial diplomacy and reportedly rendered bilateral relations awkward with Muslim-majority countries such as Indonesia and Malaysia.

Both those countries have recently rejected as an infringement of sovereignty Washington's offer to send US Navy ships to help crack down on the pirates in the congested Strait of Malacca - which coincidentally is also where an estimated 75% of China's fuel imports travel through.

China has notably not made any hard demands on ASEAN, in effect practicing the group's own adherence to "non-interference" in other countries' domestic affairs. At the same time, Beijing is now adroitly and aggressively leveraging its recent successful diplomacy and growing economic linkages to overcome historical distrust and build new strategic assurances aimed at displacing the United States' strategic influence over the region. And judging by ASEAN's warm response to its recent overtures, China's grand designs are proceeding very much as planned.

This article appeared at Asia Times on February 21, 2007. Posted at Japan Focus on March 6, 2007.
© 2004-2007 JapanFocus.org
ISSN 1557-4660
Website by Data Momentum, Inc.

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Jakarta is flooded (with money)

Feb 7th 2007
From Economist.com


The case for more and better public spending

MUCH of Indonesia’s capital, Jakarta, was under water this week, after heavy rains overwhelmed drainage systems. At least 36 were left dead and around 340,000 homeless. The disaster underlined the need for more and better public works, from drains and water pipes to electricity and roads.

In the aftermath of the 1997 Asian economic crisis Indonesia had a good excuse for public neglect: lack of money. It was laden with debt, and no-one was keen to lend more. But things have changed. Successive governments have worked hard to improve national finances, through reforms including deep cuts in fuel subsidies last year.

A World Bank study due next week is expected to conclude that Indonesia now has plenty of cash available to invest―but seems to have lost the knack of doing so.

The bank thinks 2007 could be a year of great opportunity, if Indonesia can only take advantage of its improved finances and get moving on economy-boosting public works. It takes a similar view of the Philippines, South-East Asia’s other giant democracy.

Indonesia’s public debt has fallen below 40% of GDP, cutting interest obligations. The country recently declared “independence” from the International Monetary Fund, having paid off the last of its loans. The Jakarta stockmarket and the rupiah have been strong, reflecting foreign investors’ renewed interest. This week, as the government was preparing to issue up to $2 billion in bonds, it got a boost from Moody’s, a credit-rating agency, which said it was considering an upgrade.

But despite all the improved fundamentals, the World Bank reckons that Indonesia's investment in infrastructure, both public and private, amounts now to only 3% of GDP, against 5-6% before the Asian crisis.

President Susilo Bambang Yudhoyono is fond enough of drawing up grand plans for public works. But politics keeps them on the drawing board. Stephen Sherlock, a political scientist, says vital legislation gets stuck in frequent stalemates between president and Parliament, both of whom need to approve it.

Another obstacle to investment, strangely enough, is Mr Yudhoyono’s campaign against corruption. For fear of being hauled before a new anti-corruption court, civil servants have become reluctant to sign documents authorising public spending.

A third problem is the decentralisation that was a key part of Indonesia’s democratisation. Provincial and municipal governments now get 40% of all tax revenues, but have not yet worked out how to spend the money efficiently. The World Bank reckons they have cash to the tune of 3% of GDP idling in their bank accounts.

Things are much the same in the Philippines. Quarrels between presidency and parliament have meant that this year’s budget has only just been passed. All public works will be halted again soon, ahead of congressional elections in May, for fear they might be used for electioneering. This week attempts to auction the national electricity grid to private investors failed for a fourth time. As in Indonesia, firms are deterred by inadequate, outdated laws and weak property rights.

Unlike, say, Brazil, where there is a strong case for taxing less and leaving more money in people's pockets, South-East Asian countries tend to tax lightly. There would be plenty of space for private investment, as well as public, if only regulation and administration worked better. Indonesia and the Philippines have thrown off authoritarian regimes only recently: it is understandable if they go a bit heavy on the checks and balances. But the price of these is sluggish government, and lost opportunity.

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