Tuesday, 16 June 2009

Indonesia Is Not a "BRIC" Country

(Seekingalpha) Morgan Stanley seems to think that Indonesia should be included with Brazil, Russia, India and China as a BRIIC country in an expanded "BRIC." We disagree.

Indonesia, technically fails to meet our definition of a Continental-sized country (less than 1 million square miles spread out on numerous islands), although it has more than the requisite 100 million people. In this regard, it is similar to Japan, which is similarly contained. But its educational level and overall productivity are far below Japan's, as well as the BRIC countries.

India, Russia and Brazil together have a GDP as large as China's. Meanwhile, Indonesia's is about a third of the smallest (Brazil's). It is also on the edge, rather than center, of Asia, where three of the other countries, (China, India, Russia) meet. Geographically and economically, Indonesia is far less strategic than the others.

Another factor is that the Indonesian stock market is far less transparent than the others. It has far fewer American Depositary Receipts (ADRs), which means that both liquidity and transparency of its markets are decidedly inferior to the others.

It is possible to conceive of any of the four BRIC countries being a world power (under the right circumstances). It is much harder to see Indonesia in such a role.

BRIC Should Include Indonesia, Morgan Stanley Says

(Bloomberg) -- Indonesia’s economic growth may accelerate to 7 percent starting in 2011, providing a case for its inclusion in the so-called BRIC economies along with Brazil, Russia, India and China, Morgan Stanley said.

Political stability and buoyant domestic demand will help boost expansion in the $433 billion economy, Morgan Stanley said in a report dated June 12 that compares Indonesia with India. President Susilo Bambang Yudhoyono is expected to win the July 8 elections, polls show.

“What this means for the investor community is that they need to look at this asset class more seriously,” Chetan Ahya, a Singapore-based economist at Morgan Stanley, said in an interview today. Political stability, improved government finances and “a natural advantage from demography and commodity resources are likely to unleash Indonesia’s growth potential,” he said.

Southeast Asia’s largest economy may grow 60 percent in the next five years to $800 billion due to a stable administration, lower capital costs and a government plan to spend as much as $34 billion to build roads, ports and power plants by 2017, Morgan Stanley said. Leaders of the nations known as BRIC will meet this week in the Russian city of Yekaterinburg.

Indonesia may expand as much as 4 percent this year, making it the fastest-growing major economy in Southeast Asia, according to the International Monetary Fund. Morgan Stanley expects 3.7 percent growth this year.

Economic growth of 7 percent starting in 2011 is “possible and achievable,” Finance Minister Sri Mulyani Indrawati told reporters in Jakarta today.

Presidential Election

Yudhoyono may win an overall majority in next month’s election, avoiding the need for a second round of voting in September, polls show. Yudhoyono’s Democrat party won more than 25 percent of seats in parliamentary elections this year, becoming the only party to be able to nominate a presidential candidate without seeking outside support.

The 2009 parliamentary election results “suggest continued stability in this democratic political framework and is a critical factor in unleashing Indonesia’s growth potential,” Ahya said. “Coincidently, the India story has also recently been given a fillip from the strong political mandate of the Congress-led coalition in the 2009 general elections.”

Indian Prime Minister Manmohan Singh’s Congress party won the most seats in parliament since 1991 in results announced last month.

Higher Education

Indonesia still lags behind the BRIC economies in the quality of higher education, which is “crucial in moving the economy up the value-added ladder,” Ahya said in the Morgan Stanley report.

“We still have a problem with the supply side, especially infrastructure and human capital,” said Destry Damayanti, chief economist at PT Mandiri Sekuritas in Jakarta. The nation may not be able to exceed 7 percent economic growth starting 2011 until the investment and education infrastructure is upgraded, Damayanti said.

Leaders of the BRIC nations may use their first summit on June 16 to press the case that their 15 percent share of the world economy and 42 percent of global currency reserves should give them more influence over policies.

Developing countries say their votes in the IMF, founded at the end of World War II to promote global trade, don’t reflect the shift in economic power. Brazil, the world’s 10th-largest economy, has 1.38 percent of the IMF board’s votes, less than 2.09 percent for Belgium, an economy one-third the size.

The BRICs may overtake the combined $30.2 trillion gross domestic product of the Group of Seven nations by 2027, Jim O’Neill, the London-based Goldman Sachs Group Inc. chief economist who coined the term for the four countries in a 2001 report, has said. That is a decade sooner than he had forecast earlier.

To contact the reporter on this story: Arijit Ghosh in Jakarta at aghosh@bloomberg.net

Between science, diplomacy and Ambalat dispute

By Bantarto Bandoro

The Jakarta Post

A couple of weeks ago our presidential hopefuls gave their perspectives on the Ambalat case. President Susilo Bambang Yudhoyono said Indonesia would not compromise its sovereignty in the disputed Ambalat waters.

Jusuf Kalla said Indonesia must take action and be prepared to wage war over border breaches in the disputed waters.

Megawati was not so much worried about any possible war between the two countries, but more the possibility that Malaysian military allies would besiege Indonesia, should Malaysia enforce its will regarding Ambalat.

The prolonged tension is sure to drag elements from both countries to assure that their respective national interests are not in danger and are protected. The decision of our legislative members to meet officials in Kuala Lumpur reflects such sentiments, though many doubt if this move will result in a change in Kula Lumpur’s policy.

The 15,235-sq-km Ambalat region is believed to be rich in oil and gas reserves that could be exploited for approximately 30 years. Both countries have claimed the Ambalat block near their common border, off the eastern coast of Kalimantan, is their own. Indonesia and Malaysia have something in common, namely sovereignty, development and friendship.

Both countries understand the oil and gas reserve in question is strategically important for their future economic development. ASEAN’s reputation as a “club of friendly countries” will be compromised should the two countries enforce their will over Ambalat.

The dispute will not end anytime soon; the next administration will have to deal with the problem. Perhaps it would be worth for the next government to conduct scientific research in the area to see if it is strategically and economically beneficial enough for Indonesia to fight for. This would mean the government would have to increase its scientific research spending.

Whoever our next president is, they must remember that science and technology have tremendous applications for, and effects on, the country’s foreign policy. Given Indonesia’s vast geographical area, innovation in its approach to regional affairs and to some extent in technology – Indonesia is home to winner of Science Olympics – countries in Southeast Asia may want to cooperate and benefit from the country’s ideas and products.

Our government does not seem to have taken full advantage of the potential of science to improve foreign affairs and ensure healthier regional strategic milieu. Indeed, science is often seen as being far removed from diplomacy. The dispute over Ambalat has the potential to erupt into full blown conflict, but the need for scientific research, whatever the outcome, would require mutual cooperation. This point has been overlooked.

Scientific cooperation and engagement in the disputed area, of scientific diplomacy, should be conducted with the explicit intent of fostering a positive relationship with the Malaysian government. However, such engagement should not be undertaken at the expense of respective sovereignty. To ensure this, the government must do the following:

First, think strategically. Scientific cooperation could be a fruitful way to engage Malaysia at the time when diplomatic relations are the subject of waves of protest here. Scientists from Indonesia and Malaysia could work together on issues of mutual interests and discuss potential areas of cooperation, surrounding Ambalat of course, outside the realm of politics.

Second, think defensively as well as offensively. Indonesian’s current standpoint that Ambalat is legally within its jurisdiction is firm. This standpoint, however, should not prevent the two countries from having access to each other’s respective technologies in order to better develop the potentials of the Ambalat.

But such a defensive policy should be matched with better offensive policies, namely by attracting Malaysia’s best and brightest scientists to Indonesia, and in turn sending Indonesian scientists to Malaysia to ensure they better understand our interests, particularly with regard to the issue of Ambalat.

Third, think about people and not just the government. The initiative of our legislative members to visit Malaysian policy makers, as a form of protest, is positive in its essence. This public diplomacy opportunity reminded Malaysia of Indonesia’s position on the issue. This highlighted the constructive partnership between Jakarta and Kuala Lumpur, a friendship which so far has been the underlying spirit of ASEAN cooperation.

We are not sure when and how the Ambalat case will be resolved. The government in Jakarta may face even more complex challenges regarding the issue and it therefore can no longer overlook such a useful instrument of statecraft.

Now is the time for the government in Jakarta to take advantage of scientific diplomacy by mobilizing the Ministry of Energy and Mineral Resources, the Foreign Ministry, the Ministry of Defense and other technical departments and agencies such as LIPI (Indonesian Institute of Sciences).

The incoming administration should start considering the possibilities of scientific diplomacy, not just for Ambalat. It could become one of the strongest arrows in our foreign policy quiver. A key to success will definitely be the spirit of the engagement between Jakarta and Kuala Lumpur.

The writer is the chairman of the Indonesian Institute for Strategic Studies (IISS) and a lecturer of International Relations at the University of Indonesia.

Ambalat issue: ‘No official protest from Indonesia’

(The Star) PUTRAJAYA: The Indonesian Government had never officially protested against alleged encroachment by Malaysian enforcement agencies into the disputed Ambalat waters, despite allegations by the media there.

Foreign Minister Datuk Anifah Aman said the Indonesian media had been known to play up issues, especially during elections in the country, and he believed the hype now was related to the presidential polls next month.

Even the name Ambalat was coined by the Indonesian media, a reference to the Ambalat oil and gas concession block within the disputed area, which Malaysian maritime agencies know as the Sulawesi Sea.

Malaysia had chosen to address the issue through diplomatic channels, Anifah said, and had issued 13 protest notes over encroachment by Indonesian maritime enforcement agencies since 2007, the latest in April this year.

The two countries had in fact been working to find an amicable solution through a joint technical committee, he told a press conference after handing out Excellence Service Awards to 99 of the ministry’s staff members here Monday.

He said the technical committee had met 13 times so far, and Malaysia expected the 14th meeting, to be held here next month, to offer a step forward in finding a solution.

“We will continue to use diplomatic channels to find a solution, and we will not be drawn into waging a media war that can lead to unnecessary problems between the people of the two countries,” he said.

“We also feel that it is best to settle the matter on our own rather than involve a third country or the International Crisis Group (ICG).”

He also noted the commitment given by leaders of both countries to settle the dispute in a neighbourly manner.

He expected claims of encroachment to continue until the overlapping claims in the disputed area were resolved.

To avoid unnecessary tension, the Foreign Ministry had called on the ministries concerned to ask all Malaysian maritime enforcement agencies to stay out of the disputed waters for now, he added.

Anifah also announced that the Foreign Ministry would hold a Heads of Missions Conference on June 18-22 in Putrajaya to explain the country’s foreign policies under Prime Minister Datuk Seri Najib Tun Razak’s leadership.

Najib would also explain in detail the 1Malaysia concept he had introduced while the heads of missions and honorary consulates would provide first hand information on the conditions for trade, investment and tourism opportunities in the countries they based in.

OPINION POLLS - Indonesia's presidential election

(Reuters) - Indonesian President Susilo Bambang Yudhoyono is ahead of rivals Jusuf Kalla and Megawati Sukarnoputri in the run-up to presidential elections, and looks set to win in the first round, on July 8, two new polls showed.

Yudhoyono and his vice presidential candidate, former central bank governor Boediono, are up against two other teams. Current Vice President Kalla is running with former general Wiranto, while former President Megawati is running with ex-general Prabowo Subianto.

A new poll by the Soegeng Sarjadi Syndicate (SSS) put Yudhoyono-Boediono in the lead with 52.5 percent, ahead of Megawati-Prabowo with 24.4 percent and Kalla-Wiranto with 20.2 percent, while 2.9 percent of those surveyed were undecided.

The survey was conducted in 33 provinces between June 5-9, involved 2,496 respondents, and had a margin of error of +/-1.96 percent, SSS said.

A separate survey, by Reform Institute (RI), showed that the Yudhoyono-Boediono team had support of 62.92 percent, while Megawati-Prabowo had 16.99 percent and Kalla-Wiranto had 11.31 percent. It said 5.36 percent had not registered to vote while

3.41 percent do not intend to vote.

The survey polled 2,519 respondents in 33 provinces between May 25 and June 2, and had a margin of error of 1.96 percent.

Under Indonesia's election law, if a single candidate fails to win more than 50 percent of the vote, a run-off is held between the two leading candidates.

Some analysts have questioned the reliability of some of the polling agencies in Indonesia, saying they may be linked to particular candidates or parties.

To track the candidates' ratings, Reuters has compiled a table of polls showing support for Yudhoyono-Boediono (SBY-B), Megawati-Prabowo (MS-PS) and Kalla-Wiranto (JK-W).

For each survey, the polling agency and date that the survey was conducted are shown alongside. All numbers show percentage support and are rounded up to one decimal place.

Presidential elections: pct support in opinion polls

SBY-B MS-PS JK-W U D UR

SSS 6/09 52.5 24.4 20.2 2.9 - -

RI 5-6/09 62.9 17 11.3 n/a 3.4 5.4

PKSPSPI 6/09 37.1 31.5 26.6 4.9 - -

LSI^ 5-6/09 63.1 16.4 5.9 14.6 - -

LP3ES 6/09 54.9 9.7 6.8 27 - -

LRI 6/09 33 20.1 29.3 17.6 - -

LSI 5/09 71 16 8 5 - -

LSN 5/09 67.1 11.8 6.4 13 1.6 -

LSI 4-5/09 70 21 3* n/a n/a -

* The survey polled a pairing of Jusuf Kalla and former military chief Endriartono Sutarto

U: undecided

D: do not intend to vote

UR: unregistered voters

Polling agencies:

SSS Soegeng Sarjadi Syndicate

RI Reform Institute

PKSPSPI Centre for Analysis of Development of Indonesian Social

Politics

LSI^ Indonesia Circle Survey

LP3ES Institute for Economy and Social Research, Education and

Information

LRI Research Information Agency

LSI Indonesian Survey Institute

LSN National Survey Board

RI questions Israel’s ‘sincerity’ in endorsing Palestinian state

(The Jakarta Post) Indonesia said Monday the major “peace” speech made by the Israeli Prime Minister Benjamin Netanyahu, in which he conditionally endorsed the creation of a Palestinian state, “lacked clear direction”, and questioned if the about-face was “sincere”.

Reversing the stance he had held for decades before assuming office, Netanyahu said Sunday for the first-time Israel would endorse a Palestinian state, but on conditions the future Palestinian state did not have an army and recognized Israel as a Jewish state.

“The Palestinians have the right to fight against oppression by any means, including the use of weapons,” Foreign Ministry spokesperson Teuku Faizasyah said.

Indonesia, he said, also questioned the implications of Israel’s request the Palestinians recognized the Jewishness of Israel.

“Does it mean the Palestinian refugees will be denied their rights to return to their homeland and non-Jewish people will not be allowed to live in Israel?”

The Palestinian authorities slammed Netanyahu’s speech as “racist” and rejected his idea of an independent Palestinian state without an army. The US, the key player in the Middle East quartet, praised the speech, calling Israel’s backing for a Palestinian state a step “in right direction”. The EUgave it a “cautious welcome”.

Indonesia, a Dutch colony for decades before gaining independence in 1945, has consistently supported the Palestinians in their struggle against Israeli occupation. It demands a two-state solution for the conflict be based on the territorial map before the 1967 Middle East war, thus rejecting Netanyahu’s renewed insistence Jerusalem will be Israel’s undivided capital.

While hosting the UN meeting on Palestine last week, Indonesia called on the international community to push Israel to end its occupation of Palestine and punish the Jewish nation for its alleged war crimes against unarmed civilians.

Hamdan Basyar, a lecturer at the University of Indonesia’s Department of Islamic and Middle Eastern Studies, doubted Israel’s peace rhetoric, saying, “They agree to endorse a Palestinian state, but they also want to have it under their control”.

The speech, he argued, was nothing but a compromise Netanyahu had to make as he was now facing two-way pressure: one from the hardliners inside his right-leaning coalition government and the other from the United States, once Israel’s strongest backer before US President Barack Obama took office and bid to mend the US image after eight years of George Bush’s reckless foreign policy.

Obama has welcomed the speech, saying he is committed to a two-state solution and would work with all parties to see the Israeli and Palestinian authorities fulfill their obligations and head toward regional peace.

Hamdan said Obama should not be easily contented by Netanyahu’s speech, which overlooked the main issues, such as the freezing of settlement expansion in the West Bank, which have undermined peace process and creation of a Palestinian state.

“Obama must not let Israel go forward with their agenda. A Palestinian state without a military power to defend itself is useless.”

A senior politician from the Muslim-based National Mandate Party (PAN), Abdillah Toha, slammed Netanyahu’s speech, saying “it is not a speech of peace”.

The Israeli leader, he said, had instead “slammed the door to peace” by rejecting the conditions deemed essential to achieving a two-state solution.

“The speech’s substance is basically against Obama’s two-state solution.”

The US is seen as the only political power capable of forcing Israel to press the Middle East peace process forward.

“But then Obama has to face challenges in his own country on the issue. We know how strong the Jewish lobby in the US is,” Abdillah said.

Indonesia's failure to protect rain forests criticised

FRANK McDONALD, Environment Editor

(Irish Times) INDONESIAN PRESIDENT Susilo Bambang Yudhoyono has been strongly criticised by Greenpeace for his government’s failure to halt deforestation and deliberately lit fires in the tropical rainforests of Sumatra.

The environmental group said yesterday that the continuing destruction of forests in Indonesia was releasing millions of tonnes of carbon dioxide and destroying the habitats of endangered species such as the orang-utan and Sumatran tiger.

“While the Indonesian delegation maintained a stoic silence at the critical UN-led climate talks in Bonn, Indonesia’s rainforests were burning and fresh clashes erupted between pulp and paper companies and communities trying to protect their forest lands,” it said.

Bustar Maitar, of Greenpeace Southeast Asia, said Indonesia had the third-biggest carbon footprint in the world because of the huge quantities of carbon released to the atmosphere when its rainforests and peatlands are destroyed.

Although it is illegal to clear land using fire, the US National Aeronautics and Space Administration has recorded 2,643 fire “hotspots” so far this year in Sumatra – many started illegally to clear rainforest for palm oil or pulp and paper plantations.

“Many of the areas of rainforest currently on fire were recently slated for logging by Indonesia’s minister of forestry, MS Kaban,” Mr Maitar said, adding that Greenpeace asked the country’s corruption commission to investigate why this had happened.

Lawyers representing the minister have demanded the withdrawal of the complaint and threatened Greenpeace with legal action.

But the global environmental campaigning group has refused to withdraw the dossier it lodged with the commission.

Greenpeace called on EU heads of government meeting in Brussels this week to “repay their carbon debt” by providing $40 billion (€28.6 million) a year in aid for countries like Indonesia to protect rainforests as the world’s most important “carbon sinks”.