|
|
|
|
Indonesia's unruly
economy
By Bill Guerin
JAKARTA - An incident
of bullying, threats and violence on a basketball court at Jakarta's
top school for expatriate children has brought
Southeast Asia's biggest economy firmly back into
the international spotlight, for all the wrong
reasons. Widespread media exposure of the violent
rampage was a major embarrassment to the
government, since the alleged perpetrator in the
April 17 incident at the Jakarta International
School was not some wayward, unruly foreign
teenager but Theo Toemion, chairman of the
powerful Investment Coordinating Board.
Toemion reportedly attacked
a 14-year-old student referee, and parents of
other children, over a dispute involving his
seven-year-old son. The assault left an American oil
company executive - a parent of one of the children in the
game - with a broken nose. The
executive, fearing violence, has since left Indonesia
with his family. Another oil company employee was
hit in the back of the head, requiring
several stitches. Toemion has claimed his outbreak was an act
of nationalism because he believes his son
was treated unfairly due to racism and discrimination.
Executives from major US multinationals -
ConocoPhillips, ExxonMobil, Unocal and Nike - were
among those trying to stem the violence, which
probably partly explains the response from the US
Embassy's deputy chief of mission, W Lewis
Amselem: "We are thinking of forbidding him from
visiting America." Toemion, who has held the post
since June 2001, has since told the local media
that he was resigning, but added that he was "very
irritated" by media reports on the incident. A
recent report in the International Herald Tribune
cited Indonesian officials as confirming that
Indonesian President Susilo Bambang Yudhoyono had
already planned to replace Toemion, an appointee
of previous president Megawati Sukarnoputri, with
his own appointee before the incident occurred.
Approved foreign direct
investment (FDI) from January to
April in Indonesia totaled US$4.28 billion, up 173%
compared with the same period a year earlier, but
the high-profile incident came during a week
that saw other mixed signals for the prospects of the
economy and further investment. Though Southeast Asia's
biggest economy is forecast to expand
5.5% this year - the fastest growth in nine
years - partly on expectations of increased foreign investment,
there are still fears that spiraling
inflation could stunt growth and hamper economic
recovery. Concerns about this, and the weakening
of the rupiah against the dollar, came amid
a sharp reminder of continued problems with the
labor force in the country.
Some good news from Toyota, which forecast that
car sales would rise this year by 12% and
announced a planned new investment of $50 million in
its local subsidiary, Daihatsu Motors, was
overshadowed by official confirmation from Japanese
trading house Marubeni that it will pull out of
its loss-making holdings in the giant Chandra
Asri petrochemicals complex. The plant is Indonesia's largest
ethylene producer, with a production capacity of
520,000 metric tons/year, as well as 240,000
tons/year of propylene and 300,000 tons/year of
polyethylene. Marubeni led a consortium that lent
the Indonesian-Japanese joint venture $700 million
in the early 1990s. It plans to sell its 24.6%
stake in the project by the end of this fiscal
year to set up a joint venture with Commerzbank
International Trust (Singapore) Ltd, a unit of
Germany's Commerzbank AG, incurring a net loss of
up to 22 billion yen ($210.2 million) from its
joint venture.
Currency and inflation
concerns
The rupiah
depreciated 1.4% against the
US dollar in the final quarter of 2004, against
0.24% in the corresponding period the previous
year, and by the beginning of last week had
slumped to its lowest level since April 2002, following
earlier comments by central bank (Bank Indonesia,
or BI) Governor Burhanuddin Abdullah that full-year
inflation could soar to 8.8% this year, well over
the 2005 budget projection of 7%.
BI then announced that it would raise its
key interest rates by up to 20 basis points as part
of a package of measures in a currency support
plan and aimed at fighting rising inflation.
The government has been reluctant to see an increase
in rates because it needs low interest rates
to sustain economic growth and curb borrowing
costs. The announcement came on the heels of
a personal appeal from President Yudhoyono for
government cooperation to stem the rupiah's slide
by, for example, coordinating the purchase of
dollars with the corporate sector.
Criticism of the slow official
response, which had led to the president's
intervention, came from Minister of National
Development Planning Sri Mulyani, who blamed pressures in
the foreign exchange market for contributing to
the slide of the rupiah against the dollar.
Mulyani said in an interview that policymakers had not
"responded adequately" to the "additional pressure
of a changing global economic environment", which
was pushing the rupiah lower.
Describing
the rupiah's slide as a "wake-up call" for the
government, Mulyani had warned against complacency
over what had been accomplished so far, citing the
need for strengthening and fine-tuning policies in
a much more timely manner. "If the market fails to
see progress, there must be something wrong in
terms of the way we communicate this" to the
market, the minister pointed out. One casualty of
the steadily weakening rupiah has been PT
Telekomunikasi Indonesia Tbk, the country's
biggest telecommunications company, which has
reported a 34% fall in fourth-quarter net profit,
partly due to foreign exchange losses.
Thorny labor issues
Thousands of people across
the country took to the streets to mark Labor
Day on May 1 with demands for better working
conditions and protection of workers' rights. The
demonstrators demanded, among other things, that
the government stop the dismissal of workers,
eliminate the contract system and revoke the
Manpower Law that came into effect in 2003.
Alboin Sidabutar, deputy chairman of the
All-Indonesia Workers Union Confederation, said
labor indicators have been worsening because of
the absence of significant changes in the social,
political and economic fields over the last seven
years. "This is evident in the frequent dismissals
of workers, rampant violations of freedom of
association by employers and the high unemployment
rate," he said.
Sidabutar said the
government's failure to take short-term measures
to enforce the law, to rid the bureaucracy of
corruption and eliminate the high-cost economy has
resulted in little change in the investment
climate and a lack of job opportunities.
"President Susilo and Vice President Jusuf Kalla
have been in power almost six months, but the
political and economic situation is not
recovering. There are many foreign investors who
wish to come but no actions have been taken to
eliminate the high-cost economy," said Sidabutar.
Corruption
Despite a very
public show of addressing corruption and trying to
repair the nation's reputation, Indonesia is ranked
the sixth-most corrupt country in the world. The
Corruption Eradication Commission has exposed
strong indications of widespread corruption at the
General Elections Commission after an audit report
by the State Audit Agency (BPK) indicated
widespread corruption in the procurement of
materials for last year's legislative election.
The county's largest bank, Bank Mandiri, majority
owned by the government, plans to acquire
several banks with assets of more than Rp10
trillion ($1.05 billion) this year to increase its
customer base to 2 million and fulfill its
ambition to be the dominant player in the banking
sector. It has a solid asset base of Rp248
trillion and a healthy CAR (capital adequacy
ratio) of more than 17.8%. However, the bank is
being investigated by the attorney general
following irregularities uncovered by a BPK probe
of the bank's financial reports.
The probe
has so far resulted in at least three arrests of
executives of local private companies on charges
of loan fraud. Several senior executives,
including the bank's president, Edwin Neloe, are
being questioned over "28 irregularities" in loans
amounting to Rp1 trillion. Minister of State
Enterprises Sugiharto put the best spin he could
on the news, saying that the investigation isn't
about the bank, but only certain individuals.
Nonetheless, there are concerns that the ongoing
investigation could spark a "rush" on the bank if
depositors believe their money is at risk.
A local daily, citing an unnamed source,
reported that Jusuf Kalla's nephew owns one of the
firms linked to the loan irregularities at Bank
Mandiri. The report cites the vice president as
saying his nephew's firm, PT Semen Bosowa, is a
Bank Mandiri debtor, but the company "wouldn't
have any problem" in repaying the loan.
And now, the good news
In the
wake of the Toemion incident came a fairly
encouraging set of figures released on Monday by
the Central Statistics Bureau. It announced that
inflation in April had eased slightly as increases
in food prices slowed. The Consumer Price Index
(CPI) rose only 8.1%, from a year earlier,
compared with the 8.8% gain in March, which had
been the fastest rate since at least January 2003.
The trade surplus rose to $2.27 billion in
March from $1.62 billion in the same month last
year on the back of higher oil and commodity
prices, though a substantial increase in imports
accounted for the surplus being below February's
$2.40 billion. Imports rose 22% month-on-month to
$4.98 billion while exports soared by 13.63% to
$7.25 billion. Non-oil and gas exports were up
8.75% to $5.48 billion in April, though non-oil
and gas imports were also up 12.10% to $3.35
billion.
The government also looks eager
to try put the Toemion embarrassment behind it as
quickly as possible. Presidential spokesman Andi
Malarangeng, announcing that the president had
issued a decree on the appointment of Mohammad
Luthfi as the new chairman of the Investment
Coordinating Board, said the change was based on
professional concerns and also to give a "new
spirit to the investment environment".
Bill Guerin, a Jakarta
correspondent for Asia Times Online since 2000,
has worked in Indonesia for 19 years as a
journalist. He has been published by the BBC on
East Timor and specializes in business/economic
and political analysis in Indonesia.
(Copyright 2005 Asia Times Online Ltd. All
rights reserved. Please contact us for information
on sales, syndication and republishing.) |
|
|
|
|
|
|
|
 |
|
|
|
|
|
All material on this
website is copyright and may not be republished in any form without written
permission.
© Copyright 1999 - 2005 Asia Times
Online Ltd.
|
|
Head
Office: Rm 202, Hau Fook Mansion, No. 8 Hau Fook St., Kowloon, Hong
Kong
Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
|
|
|
|
