INDONESIA DIGEST Indonesia's complex Issues in a Nutshell Published by: TBSC-Strategic Communication By: Ms. Wuryastuti Sunario No.: 24. 07 - Dated: 12 September 2007
In this issue: MAIN FEATURE: RUSSIA-INDONESIA SIGN 8 COOPERATION AGREEMENTS IN NEW RELATIONS NEWS AND BACKGROUND: 1. Tourism and Transportation: ASEAN Tourism Investment Forum to be held in Bali in September Bandung International Folklore Festival organized by ITB University School of Business Management 2. Climate Change, the Environment, Health and Culture: Indonesia initiates Forestry Eight Grouping and Coral Reef Triangle in Climate Change mitigation 3. The Economy, Trade and Industry Indonesia-Japan EPA signed Japan to Buy More LNG from Indonesia ---------------------------------------------------------------------------------------------------- MAIN FEATURE: RUSSIA-INDONESIA SIGN 8 COOPERATION AGREEMENTS IN NEW RELATIONS On Thursday, 6 September, Russia's President, Validimir Putin paid a 20-hour official visit to Indonesia , the first Russian President to do so in the last 5 decades although Indonesian presidents from Sukarno to Bambang Susilo Yudhoyono had visited Russia. President Putin made the stop-over en route to Australia to attend the Asia-Pacific Economic Cooperation (APEC) forum in Sydney, Australia. During the visit, Indonesia and Russia signed eight agreements in bilateral cooperation covering various fields ranging from sports to counter-terrorism, which were signed by representatives of both countries, witnessed by Russia's President Vladimir Putin and Indonesia's President Susilo Bambang Yudhoyono at the Merdeka Palace, reported Antara News. The first agreement which dealt with State Financial Audits was signed by Indonesian State Audit Board (BPK) Chairman Anwar Nasution and Chief of the Account Chamber of the Russian Federation S.V. Stephasin. The two countries also agreed to reduce negative impacts on the environment in documents signed by Environment Minister Rachmat Witoelar and his Russian counterpart, K.B. Pulikopsky. Indonesian State Minister for Youth Affairs and Sports Adhyaksa Dault and his Russian counterpart, V.A. Fetisov, further signed a Memorandum of Understanding (MoU) for Russian assistance to Indonesia's efforts to improve its performance in sports. The fourth agreement concerned the promotion and protection of Russian investment in Indonesia, signed by Chief of the Investment Coordinating Board (BKPM) Mohammad Lutfi and his Russian counterpart V.G Savalyev. The two countries also agreed to cooperate in the fight against terrorism, with the agreement inked by Director General of American and European Affairs of the Indonesian Foreign Ministry Eddi Hariyadi and his Russian counterpart A. Losyukov. The sixth agreement dealt with cooperation in the extension of Russian loans to the Indonesian government, signed by Director General of Debt Management at the Indonesian Finance Ministry Rahmar Waluyanto and his Russian counterpart A.A. Storchack. The seventh agreement concerned Culture and Cinematography for the 2008-2010 period, which was inked by Secretary General of the Indonesian Department of Culture and Tourism Sapta Nirwandar and Russian Ambassador to Indonesia, Alexander Ivanov. The eighth cooperation agreement was related to technical procedures for placing and managing Indonesia's Credit Budget, which was signed by Director General of Debt Management of the Indonesian Finance Ministry Rahmar Waluyanto and his Russian counterpart, A.A. Storchak. Strengthening Bilateral Relations President Putin's landmark visit to Jakarta signals a strengthening of bilateral relations between Russia and Indonesia, analysts said here, wrote Abdul Khalik for the Jakarta Post. . The visit is also seen as underscoring the growing importance of Indonesia in Russia's quest to return to global prominence after the collapse of the Soviet Union in 1989. Present-day Russia is the heir to two-thirds of the Soviet Union's vast territory and resources. "The visit opens a new era for Russian and Indonesian relations. With Russia almost out of its transition phase after the collapse of the Soviet Union, it is essential that it seeks to foster an alliance with Indonesia if it wants to balance the U.S.," said Hariyadi Wirawan, an international relations expert at the University of Indonesia. The last visit by any Russian leader to Indonesia was by Soviet Premier Nikita Khrushchev when he met with Indonesia's first president Sukarno in Jakarta in the 1950s. Investment and Business Cooperation During President Putin's visit, Russia and Indonesia further signed deals on weapons, mining and oil worth billions of dollars. President Putin, accompanied by business leaders, among whom were Chairman of Lukoil, Vagit Alekperov, the head of the Trade and Industry Chamber, and billionaire investor Vladimir Yevtushenkov, met with Indonesian President Susilo Bambang Yudhoyono. Presidential spokesman Dino Patti Djalal said that both leaders discussed ways to improve investment and trade relations, which reached only US$680 million in 2006. "This is very a small (amount) compared to our huge potential," he said. Russia agreed to extend a US$1 billion line of credit to Indonesia to buy Russian military hardware, said spokesman Dino Pati Djalal, who declined to provide further details. Indonesian mining company Aneka Tambang signed a US$3 billion deal with Russian aluminum giant United Company Rusal, while state-owned oil company Pertamina signed a US$1 billion agreement with Russia's LukOil. Hariyadi said closer relations with Russia could help Indonesia prove to the world, and in particular Muslim nations, that it was independent of U.S. foreign policy. Hariyadi said Indonesia had long been seen as a loyal U.S. ally, a position harder to maintain with growing worldwide discontent with the U.S. over the invasion of Iraq and its handling of the Israeli-Palestinian conflict. He added that many observed that Indonesia's military ties with U.S. had not helped the country gain military technology and independence. "Russia can fill this gap and offer Indonesia similarly advanced products at a cheaper price (as well as) the transfer of technology," Hariyadi said. Indonesia in the past heavily relied on the U.S. for military equipment. However, the U.S. slapped a military embargo on the country in 1992 after reports of human rights abuses in Indonesia's then province of East Timor. The ban forced Indonesia to scrap much of its military equipment because of a lack of spare parts, many of which had to be searched for on the black market. U.S. military restrictions were withdrawn earlier last year, but the Indonesian government is still seeking other suppliers to avoid the consequences of a possible future U.S. ban. Cultural Exchanges and attracting Russian Tourists to Indonesia Meanwhile, Culture and Tourism Department Website, budpar.go.id reported that Cultural Cooperation between Russia and Indonesia for the period between 2008-2010 include the staging of a Russian Cultural Day in Indonesia, and an Indonesian Cultural Day in Russia, cooperation in photo exhibitions, cultural exchange programs in arts and theatre, the exchange of researchers and experts in cinematography and other fields related to Cultural studies. Secretary General of the Department of Culture and Tourism DR. Sapta Nirwandar said that as a result of the MoU, Indonesia could attract more visitors from Russia, besides the fact that Indonesia may benefit from the transfer of knowledge and skills including in Russian management of its cultural assets. Earlier, Indonesia and Russia had signed a Memorandum of Understanding (MoU) in Tourism in Moscow on 1 December 2006, which was followed by a rapid increase of Russian tourists to Indonesia . In 2004 some18,770 Russian tourists visited Indonesia, while in 2005 this number declined by 8.7% to 17,138. However in 2006 the number of Russian tourists surged by 99.06% reaching a total of 34,116 visitors. Indonesia provides Visa on Arrival (VoA) facility to tourists from Russia. (Sources: ANTARA News and budpar.go.id) Edited by: Tuti Sunario -------------------------------------------------------------------------------------- NEWS AND BACKGROUND: 1. Tourism and Transportation: ASEAN Tourism Investment Forum to be held in Bali in September Organized back to back with the PATA Travel Mart, ASEAN will hold the Second ASEAN Tourism Investment Forum in Bali from 20-22 September. This is followed by the ASEAN Task Force Meeting, and continued with Indonesia hosting the PATA Travel Mart from 25-28 September 2007. "The strategic importance of the tourism industry to support sustainable socio-economic growth of ASEAN Member States and the diversity in cultures, economy, and the complementary advantages across the region, will benefit tourism development in ASEAN in the pursuit of improved regional quality of life, peace and prosperity", says ATIF brochure. Despite having faced a number of drawbacks, ASEAN tourism has continued to grow at an impressive rate. ASEAN as a region is determined to look ahead and to build on its competitive advantages which entails new investments both in 'soft' as well as 'hard' tourism infrastructure, as well as improving existing tourism attractions, products and destinations. Market trends are also changing rapidly and ASEAN destinations have to be well prepared to meet new consumer demands. Larger aircraft, the growth of LCC carriers in the region, rapid changes in Information Technology, and above all the expansion of the internet in all aspects of tourism product information, purchasing, and distribution have transformed how people make their choices as to when, how, and where to travel on business or leisure. All this will require serious levels of investment from both domestic and international sources. Therefore, ASEAN countries who wish to see their tourism sector grow must be highly competitive as 'investment destinations' in order to attract funding sources in today's fast global economy. The goals of the ASEAN Investment Forum are to: 1. Raise awareness of investment opportunities in the tourism sector in ASEAN countries among the national and international investment community - banks, investment companies, and international financial institutions. 2. Promote potentials intra-regional tourism investment among ASEAN countries (such as the Greater Mekong Sub-regional (GMS) alliance or EAIG growth zone, or intra-provincial within ASEAN countries (for example, a "cultural corridor" linking heritage sites in different provinces). 3. Give practical advice and assistance to tourism regions and destinations in ASEAN countries seeking investment from the international investment community on how to best prepare and present their investment proposals. 4. Hold a "Tourism Investment Opportunities" Expo to publicize to investors, media and delegates the many opportunities to invest in the tourism sector in Indonesia and ASEAN countries. ATIF will be attended by NTO members, investors, governors & regional government representative, destination manager, related sectors, ministry of culture and Tourism, media, associations, academician, consultants, bankers and NGOs Bandung International Folklore Festival organized by ITB School of Business Management The Bandung International Folklore Festival, held at this university hill town in West Java from 27 August to 1 September, was the first such festival to be held in Indonesia. The Folklore Festival was not organized by the national or local government, but was privately arranged by students of the School of Business Management at the ITB University, and supported by the private sector. Last year these students represented Indonesia at the International Folklore Festival in Central Mongolia, China and were determined to organize a similar festival in Indonesia. Seven countries sent troupes to Bandung totaling 135 dancers and musicians, coming from Italy, Spain, Poland, Malaysia, Thailand, Sri Lanka and a number of provinces from Indonesia. The troupes from Italy and Poland were professionals and above forty years of age, whilst those from other countries were younger and amateurs. Working together with the Council of Organization of Folklore Festival and Folk Art (CIOFF) affiliated to the United Nations, the ITB University School of Business Management ventured to organize the Bandung International Folklore Festival (BIFF), with ample success. During the four day festival, performances were staged at various University campuses in Bandung, at the Parahyangan University, Padjadjaran and ITB campuses, as well as at a number of malls, such as at the Bandung Indah Plaza and Bandung Supermall, receiving enthusiastic acclaim from students and the West Java public alike. Besides at Bandung, performances were also staged at Cirebon, on Java's north coast. The energetic Spanish artists performed the Fragua, Danza de San Juan, Peona, and the Joga de Sotillo, with most dances originating from the town of Burgos; the delegation from Poland performed the Kariczka dance, the Lemko Czardas Dance and the Lem Polka. Itally staged the Su Ballu Tundu Bolotanesu, the Su Passu Torradu, and the Su Dillu. While Thailand offered the Fon-Kan dance, the Chui Cahi dance and the Mortar dance; Malaysia the Silat, Zapin, Ngajat Induk, Inang Renek and Joged Lambak; Sri Lanka showed the peacock dance, the Pooja Dance, and the Kalagedi Natuma. And Indonesia came up with the Angklung, the Rampak Bedug, Kuda Renggong and the Sisingaan from the Province of West Java itself, as well as dances from the Riau province. The Organizers plan to stage the second International Folklore Festival in Indonesia next year during Visit Indonesia Year 2008 (Tuti Sunario) 2. Climate Change, the Environment, Health and Culture: Indonesia initiates Forestry Eight Grouping and Coral Reef Triangle in Climate Change mitigation At a Cabinet Meeting held in Bali in preparation of the UN Climate Change Bali Conference to be held here early December, President Yudhoyono decided that Indonesia take the initiative to urge the formation of the Forestry Eight Grouping at the forthcoming UN General Assembly scheduled on 24 September in New York, said Presidential spokesman Dino Pati Djalal to the press in Bali, as reported by Kompas daily. Data have shown that Indonesia is the third largest polluter of carbon dioxide through forest fires and deforestation, after Brazil and China. Together an estimated 20%-25% of global emission is caused by countries owning tropical forests. The eight countries expected to be included in the Forestry Eight Grouping are those located between 10 degrees north of the Equator and 10 degrees south of the Equator, comprising Indonesia, Malaysia, Papua New Guinea, Gabon, Cameroon, the Congo, Brazil and Costa Rica. The Forestry Eight group is expected to urge for better utilization of carbon credits in the preservation of precious tropical forests, and to provide better balance between conserving the environment on the one hand, and the growth of industry in developing countries, on the other. So far, India and China are the only countries that have made best use of carbon credits. And, thus far, also it has been mainly the economically advanced countries that have urged for the preservation of tropical rainforests. Dino Pati further explains that the Kyoto Protocol has not included forest fires as a major contributor to global pollution. Although no specific amounts of carbon credits involved have as yet been mentioned, however, diplomatically it has in principle been agreed that the amounts must be raised and mechanisms for their use be better stipulated. It is for this purpose that countries owning large tracts of rainforests have an important role to play in the negotiations concerning global warming, concluded Dino Pati Djalal. At the recent APEC Meeting in Sydney, President Yudhoyono also proposed the formation of the Coral Reef Triangle Initiative (CTI) to protect Coral Reefs, Fisheries and Food Security. The countries involved are Indonesia, Malaysia, the Philippines, Timor Leste, Papua New Guinea and the Solomon Islands. Scientists point out that coral reefs possess similar functions as tropical forests to absorb carbon dioxide and are the habitat of ocean life. 60% of the world's coral reefs are in the Asia-Pacific said President Yudhoyono. In Indonesia itself, only some 5.23% of coral reefs are in pristine condition, and 24.26% of a total of 4,200 square kilometer reefs are in good shape. 37.34% of Indonesian reefs are in ok condition, however, some 33.17% are deteriorating, said Irwandi Idris, Secretary to the Directorate General for Oceans, Coasts and Small Islands, as reported by Bisnis Indonesia. Destruction of coral reefs is predominantly (53%) caused by the use of explosives and cyanide and over-fishing. 3. The Economy, Trade and Industry Indonesia-Japan EPA signed The Trade and Investment News published by the Office of the Coordinating for the Economy, reported that on Monday, 20 August Indonesia and Japan signed a broad-ranging economic pact and agreed to jointly tackle Climate Change and Bird Flu issues. President Susilo Bambang Yudhoyono and visiting Japanese Prime Minister Shinzo Abe signed the Economic Partnership Agreement (EPA) after a closed-door bilateral discussion, reported Business Times. The pact will do away with more than 90% of trade tariffs, simplify customs procedures, provide for cooperation in investments, and seek to eliminate anti-competitive activity. It will also ease Japan's strict labor market, with a new scheme allowing Indonesian nurses and care workers to work as expatriates in Japan. About 80% of Japanese tariffs on Indonesian goods, including footwear, textiles and wood products, will be lifted as soon as the pact is implemented. The remaining 10%, which include foodstuffs like bananas and pineapples, will be removed gradually within three to 10 years. Japan is Indonesia's largest trading partner. Indonesian exports to Japan last year totaled $21.7 billion, about half of which were fuel such as LNG and coal. Some 58% of Indonesian tariffs on Japanese imports will go when the pact comes into force. Another 35% of tariffs that are already low or which are levied on items where there is little trade will gradually be abolished within three to 10 years. It is hoped that, as well as boost trade, the EPA will boost investment from Japan. Japanese economic official Masakazu Toyoda told an Indonesia-Japan business forum on Monday that the lower cost of imported materials will make Indonesia a more attractive production and export site. Japanese interests have already announced some $500 million in new investments in the automotive industry, which will benefit from the scrapping of the 15% tariff on Japanese steel used in the industry. In energy cooperation, Jakarta has agreed to supply Japan with LNG. Indonesia is the top exporter of LNG to Japan, supplying more than 12 million tons or 22% of the latter's total LNG imports last year. It is also Japan's No. 2 coal supplier. However President Yudhoyono has indicated that domestic needs would be fulfilled first. Mines and Energy Minister Purnomo Yusgiantoro said on the sidelines on Monday that Indonesia could only confirm extending contracts of 3 million tons per year, a sharp drop from the current 12 million tons. Japan to Buy More LNG from Indonesia Indonesia plans annual shipments of up to five million tons of liquefied natural gas (LNG) to Japan after their current contracts end in 2010, despite the country's plan to sell more of its gas domestically. State-owned oil and gas company Pertamina, which handles sales of the country's LNG, will ship about two million tons of the total five million tons from the Senoro LNG plant in Central Sulawesi, which is expected to come on stream by 2010, the company's deputy president director, Iin Arifin Takhyan, told The Jakarta Post on Thursday (24/8/07). Takhyan said the other three million tons would be provided by other LNG plants. Under current contracts, Indonesia ships 12 million tons a year to Japan. Takhyan, who heads the negotiation team for the extension of LNG export contracts with Japan, said with Indonesian gas production limited due to a lack of new finds and aging fields, it was important for the government to prioritize the domestic gas market. However, he said, Pertamina was still open to more negotiations on the amount of gas that would be exported and at what price. For your comments and further inquiries, please e-mail to: [EMAIL PROTECTED]