News & issues

Officials pay court to Soeharto

Jakarta Post - October 15, 2007

Jakarta – Despite corruption charges and allegations of human rights abuses during his three-decade rule, former president Soeharto received a string of courtesy calls Saturday, the first day of Idul Fitri, from prominent current and former state officials.

Among those visiting the former strongman were Vice President Jusuf Kalla, Army Chief of Staff Gen. Djoko Santoso, National Resilience Institute Governor Muladi, Regional Representatives Council Deputy Speaker Mooryati Sudibyo and Industry Minister Fahmi Idris.

Also calling on Soeharto at his residence on Jl. Cendana in Central Jakarta was the chairman of the Indonesian Democratic Party of Struggle (PDI-P) faction at the House of Representatives, Tjahyo Kumolo, Golkar Party legislator Yuddy Chrisnandi, Constitutional Court President Jimly Asshiddiqie and Religious Affairs Minister Maftuh Basuni.

Former Jakarta governor Sutiyoso and current governor Fauzi Bowo were also among well-wishers.

Former New Order officials such as former finance minister JB Sumarlin, former religious affairs minister Tarmizi Taher, former transportation minister Agum Gumelar, former foreign minister Ali Alatas and the former commander of the Army's Strategic Reserves Command, Lt. Gen. (Ret) Prabowo Subianto, who is also Soeharto's former son-in-law, also paid visits.

Top businessmen such as Mohammad "Bob" Hasan and Setiawan Djodi and Indonesia's top badminton player, Taufik Hidayat, also visited Soeharto. Most of Soeharto's children were present for the gathering.

Indonesia's fourth president, Abdurrahman "Gus Dur" Wahid, paid an Idul Fitri visit to Soeharto. Gus Dur dismissed the suggestion he had come to discuss political matters with Soeharto. "I only came to greet him and as far as I am concerned, he is just fine," he told detik.com newsportal.

Another prominent guest was State Minister for Women's Empowerment Meutia Hatta Swasono. Meutia said she was deeply touched because Soeharto called her by name during the gathering. "I didn't expect him to remember me by name, but it turned out that he did. It touched me deeply in the heart," she said.

Meutia has long been acquainted with Soeharto, who held several important posts in the military when Muhammad Hatta, Meutia's father, was the country's vice president. Meutia described Soeharto as in good condition, saying he did not use a wheelchair during the gathering.

Last year, then attorney general Abdulrahman Saleh issued a letter ordering a halt to all investigations into corruption charges involving Soeharto, after receiving a medical report that the former president had permanent brain damage as a result of a series of small strokes he reportedly suffered.

The damage, according to the medical report, would prevent Soeharto from remembering anything connected to the cases or actively participating in his defense.

The Attorney General's Office is pursuing a civil suit against Soeharto's Supersemar Foundation over the alleged misappropriation of state funds.

Indonesia needs improvement, not slogans: NU chairman

Jakarta Post - October 11, 2007

A number of high-profile issues have made headlines in the past month, including the planned construction of the Muria nuclear plant and the political maneuverings ahead of the 2009 presidential election. Chairman of the Nahdlatul Ulama (NU) Muslim organization, Hasyim Muzadi, discussed some of these issues with The Jakarta Post's Imanuddin Razak in a recent interview.

Question: Ulema and residents in Jepara, Central Java, recently rejected the planned construction of the Muria nuclear plant, with a declaration calling nuclear technology haram, or forbidden. What has really happened there?

Answer: The NU executive board supports the move by the Jepara ulema and residents as their rejection of the Muria nuclear power plant is based on their distrust that the plant would be safe for humans in the surrounding areas, and whether the government could guarantee there would not be any leaks or problems with the nuclear waste.

All the grounds they have provided in expressing their rejection of the Muria plant were objective. Therefore, we (NU executive board) support them.

What we have corrected of their action was the statement that nuclear technology is haram. Nuclear technology is an object which cannot independently be labeled haram or halal (permitted). It can be categorized as haram, if for example, it is used to kill people.

We also regretted them for their failure to communicate with the NU executive board prior to taking their action. Only after the case made headlines, with numerous figures, including chairman of the Board of Patrons of the National Awakening Party (PKB), Abdurrahman "Gus Dur" Wahid, his daughter Yenny and musician Iwan Fals visiting the area, did we get involved in the matter. But we have met with the Jepara ulema and residents and the case is now settled.

Q: A number of regions, including Nanggroe Aceh Darussalam province and Tangerang regency, have issued sharia-based bylaws. How does the NU see the issuance of such bylaws?

A: The sharia bylaw is formally and textually not necessary to be implemented in Indonesia, as it would only draw strong reaction from other faiths. Do you remember the Christian bylaw in Manokwari, which was none other than a response to Tangerang's sharia bylaw?

Issues like sex workers and gambling should not necessarily be regulated in a sharia bylaw, as they are already regulated in the Criminal Code, while social issues like poverty and unemployment are not the domain of Islam only, as other religions also regulate such matters. Such issues should, therefore, be regulated in bylaws within the context of state laws.

Q: How does the NU observe the jihad movement if compared with terrorism, as some jihad acts in Indonesia have been considered by many as close to terrorist acts?

A: All efforts to promote the development of religion – among others through the promotion of education, justice, human rights, prosperity and state unity – are considered jihad.

Waging war in Islam can also be considered as jihad, but only on the condition that it is taken as a defense against attack by other parties or countries. Jihad cannot be applied as an offensive.

As an example, the Lebanese people who have been attacked by the Israelis or Palestine's Fatah movement who have been severely attacked by the Israelis. There is nothing wrong with the Lebanese and the Palestinians fighting back if they were attacked. That's jihad.

Meanwhile, jihad cannot be applied in times of peace. So, bombing places in Indonesia in the name of jihad against the US, for example, while Indonesia is peaceful and not at war with the US, cannot be categorized as jihad.

Still in the context of jihad, Western countries should therefore not attack or invade other countries without clear or truthful reasons. The decision by the US government under President Bush to invade Iraq over the unproven existence of weapons of mass destruction and in the absence of the UN's approval only triggered radicalism, especially in Muslim countries.

Q: How does the NU view polygamy?

A: Polygamy should be viewed as an alternative in Islam and therefore should not be contradicted against (monogamy). Its (polygamy) implementation should be an individual concern. If a man is satisfied enough with one woman (wife), why should he look for more?

But every man is not the same. There are some who are hypersexual. Should those hypersexual men look for prostitutes because polygamy is forbidden? Or should we allow those men to have extramarital affairs with other women?

Another element for consideration in polygamy is the number of women in a region. In East Java, for example, there are two million more women than men. The same question is again whether we should let those men have extramarital affairs or practice polygamy.

By allowing polygamy, we will provide certainty of status for the children. Unlike children born to unmarried couples, children resulting from married couples, whether or not polygamous, will have a clear legal status of who their parents are.

Q: It's still two years away from the 2009 presidential election. How is the NU preparing for the 2009 election?

A: NU is not a political party. It will therefore not nominate nor support any presidential candidate.

But if an NU executive announces his or her candidacy, it is his or her personal right to do so and has nothing to do with the NU as an institution. And as part of the internal mechanisms in the NU, he or she must be non-active from the NU prior to running for president.

Q: What about the claim by Gus Dur that he has been mandated by senior NU ulema to run in the 2009 election?

A: I personally do not know about the issue. I do not know either whether they were really senior NU ulema or which ulema Gus Dur was referring to. Gus Dur has yet to talk to me about it and I think it should remain his business.

Q: In 2004, you were asked by Megawati Soekarnoputri (of the Indonesian Democratic Party of Struggle) to be her running mate in the presidential election. How about for the 2009 election?

A: Until now, I have not thought about participating in the 2009 election as I am still tasked with settling various problems in the NU.

Q: How about if NU members ask you to run?

A: There must be a mechanism to follow if they want to do so. But I have not seen any indications that they will do so. And I should not be geer (overconfident) that they would want me to run.

Q: Which would you prefer, an old face or a young one for president in 2009?

A: To me, age should not be the main consideration. If you look for young faces, why don't you vote for those on Indonesian Idol. Old and young are the same. The most important thing is that Indonesia needs improvement, not slogans.

West Papua

Clearing Papua's forests for palm oil is backwards - Greenpeace

Radio New Zealand International - October 9, 2007

Greenpeace has warned that Indonesia's plans to clear Papuan forests for palm oil plantations will hinder efforts to mitigate climate change.

Indonesia's President has asked Papua's Governor Barnabas Seubu to open up five million hectares of land for conversion into palm oil plantations in a bid to increase biofuel production.

Indonesia is on a fresh drive to become the world's biggest bio- fuel producer, and aims to reduce carbon emissions as well as spending on petrol.

Jakarta also claims it's working to reduce the rampant illegal logging which is destroying its largest remaining tracts of rainforest, in Papua

But Greenpeace Asia/Pacific's Tiy Chung says the government's plans to cut more Papuan forest will only increase carbon output.

"Indonesia is the third largest greenhouse gas emitter in the world, after the United States and China, and this is purely from forest conversion or forest destruction. The massive forest fires that Indoesia has every year are from land, especially peak land's being cleared for things like palm oil production. So Indonesia could basically cut most of its greenhouse gas emissions by stopping forest destruction."

Human rights/law

Harsh local law drives family from home village

Jakarta Post - October 10, 2007

Prodita Sabarini, Tabanan – I Ketut Riteg stared blankly. The 65-year-old was lost in deep thought over how his whole family may never be able to step foot again in their home village of Kedungu in Belalang, Kediri, Tabanan regency.

His banjar (local neighborhood community group) has issued an awig-awig (customary law) banishing his family from the community. The rule will take effect within two years, unless the family pays a Rp 200 million (US$22,200) fine.

The law was imposed last August after Riteg, who is better known as Pan Sini, hung a plastic chair above the banjar's padmasana temple shrine.

Padmasana, the seat of God, is a shrine that must be placed in every Balinese-Hindu temple. It is a roofless shrine with an empty throne on the top. The Balinese believe God sits on a lotus flower; the word padmasana is derived from the word padma (lotus) and sana ("seat").

The banjar considered placement of the plastic chair on the padmasana as blasphemy. "Placing a plastic chair, that humans use, on the throne of God is serious blasphemy," klian (head of banjar) Ketut Pakrek said.

Sitting on the front porch of his son's unfurnished house in Canggu, Kuta, Pan Sini said he did not know what had possessed him to place the chair on the padmasana. "I was possessed. I wasn't aware of what I was doing," he said.

The incident, however, has taken its toll on Pan Sini and his family, who have been expelled from the banjar. Pan Sini, his wife and all his descendants are forbidden to join the banjar.

The police arrested Pan Sini in September after representatives of the banjar reported him for blasphemy. After questioning, he was released but has not set foot back in his village, out of fear of retribution from the community.

The people in the village were also banned from talking to Pan Sini and anyone from his family. Those found talking to him or his family members risk being fined Rp 500,000.

For the Balinese, the kasepekang (banishment) is the ultimate punishment as Balinese culture is rooted in the community, in which every family is a member of a banjar. The eldest member of a family usually resides in the village where the banjar is located.

"Under the custom, if my father dies, I would go back home to Kedungu and become the representative of my family in the banjar," Wayan Sudika, 37, Pan Sini's son said. "Now, it is impossible for me to do that."

As religious rituals are an important part of Balinese-Hinduism, the banjar holds a strong position for families. The banjar upholds the value of gotong royong (working together), in which every member of the banjar helps organize religious ceremonies.

Complicated ceremonies, such as weddings and ngaben (funeral ritual) are carried out with the help of community members from the banjar.

The punishment troubles Sudika. With tears in his eyes and in a hushed voice he said; "I have met with the banjar leaders and asked for their forgiveness. However, they gave such a heavy fine for us to return as members of the banjar," he said. As his father is no longer allowed to enter the village, Sudika has become the spokesperson for the family.

"Our family is prepared to hold a ceremony to restore the sacredness of the shrine. We can build another shrine and carry out a ceremony, which we estimate would cost around Rp 10 million. However, the banjar's estimation is Rp 200 million. I don't have that kind of money," he said.

Sudika's wife, Ni Nyoman Wartini, 35, feels that the family is being blackmailed. "I know Hinduism teaches tolerance. This punishment, however, seems to violate human rights," she said.

Pakrek said Pan Sini's action was a major violation. "He outraged the community. That is a normal amount to pay for offending the community," he said.

"He can afford it if he sacrifices his belongings. If we just forgave him and accepted him back, it would be like he won a cock fight without ever releasing the rooster," he said.

Three families from a village in Klungkung regency are also facing a similar punishment, after the banjar in Tegalbesar in Negari, Banjarangkan, punished them for providing a statement to the police regarding a land dispute with the banjar's' klian.

While the Balinese embrace modernity with the fast development of tourism, customary laws are still heavily applied within the community. Although several parties have said the awig-awig on kasepekang is outdated and should only be used as a last resort, they seem to be weak in mediating between conflicting parties.

Tabanan Regency Customary Council head, IGN Purnayasa, said the Rp 200 million fine did not make sense and was inhumane.

"We hope they can resolve this issue peacefully," he said. "We haven't intervened as we are waiting for the Belalang village customary council to try to solve the problem first."

Head of the Bali Chapter of the Hindu Council (PHDI), Sudiana, said banishment should be the last resort. "If possible, a banjar should avoid kasepekang altogether," he said. "The purpose of a punishment is to provide a lesson, not to corner people."

He added kasepekang could tarnish Bali's image. "People would wonder what is going on here... why are we so hard on our fellow villagers?" he said. Sudiana said the Hindu Council would allow the villagers to settle the problem peacefully.

Meanwhile, Pan Sini and his family in Canggu said they had surrendered to fate. "Hopefully, we will find a solution," Sudika said.

Former Garuda director accused of Munir murder

Jakarta Post - October 10, 2007

Jakarta – State prosecutors charged Tuesday former Garuda Airlines director Indra Setiawan with the murder of human rights activist Munir Said Thalib, who died while traveling to the Netherlands in 2004.

Prosecutor Arief told the Central Jakarta District Court that Indra issued an assignment letter ordering pilot Polycarpus Budihari Priyanto to join Munir's flight on Aug. 11, 2004 as an aviation officer in order to poison the activist.

"Indra has admitted that he issued the letter of assignment upon the orders of the State Intelligence Agency because Garuda was considered a strategic industry that needed to be protected by the agency," Arief said in the indictment.

Polycarpus was the first defendant in the case to be brought to trial. The Central Jakarta District Court initially sentenced him to 14 years in prison for poisoning Munir but he was later acquitted of the murder charges by the Supreme Court. The panel of justices reduced his sentence to 24 months in prison for falsifying flight documents.

Polycarpus was freed in December 2006 but in June this year was once again brought to court following the prosecutors' request to the Supreme Court for a case review.

The prosecutors said they had found new evidence that allegedly linked the pilot with Munir's death. Among the evidence was a record of phone conversations between Polycarpus and Indra, mentioning that a high-ranking BIN official had told Indra to allow Polycarpus to board Munir's flight.

In response to the indictment, one of Indra's lawyers, Heru Wicaksono, asked the district court to reject the prosecution because the Supreme Court had acquitted Polycarpus of the murder charges.

"Thus it is now irrelevant to bring the topic of Indra helping Polycarpus to murder Munir to this court," he said in his objection to the indictment.

Another lawyer, Antawirya Dipodiputro, said that security considerations were behind Indra's decision to put Polycarpus on the same flight as Munir.

"The intelligence agency wanted to protect the flight by placing Polycarpus (on it)," he said, although he not say why the flight needed protection or what it was being protected from.

Presiding judge Heru Pramono adjourned the session to Oct. 24 to hear the prosecutor's responses.

Also on trial Tuesday was former Garuda secretary Rohainil Aini, who is also charged with taking part in the murder. She is accused of helping Indra give Polycarpus access to the flight. Rohainil's court session was adjourned to Oct. 25.

Munir was found dead on a Garuda flight to Amsterdam, where he was to continue his studies in law. The Dutch police were the first to examine the scene and said the activist's death was caused by arsenic poisoning. They said they suspected that the poison had come through food or beverages consumed by Munir.

Environment/natural disasters

Nuclear reactor plan on shaky ground

Melbourne Age - October 14, 2007

Tom Hyland – It was, in a way, a case of taking the mountain to Muhammad – the mountain being a dormant volcano that looms over the planned site of Indonesia's first nuclear power station.

Last month, 100 clerics and scholars from one of the world's largest Muslim organisations, in the heart of the country with the world's largest Muslim community, met near Mount Muria in Java for two days of deliberations.

The unprecedented gathering considered Indonesian Government plans to build four nuclear power plants at the foot of Mount Muria, on the world's most populous island. It also sits on the Pacific "Ring of Fire" that is prone to devastating earthquakes and volcanic eruptions.

The scholars, members of the 30-million strong Nahdlatul Ulama, met in the town of Jepara, where they heard from the Research and Technology Minister, the ANU-educated engineer Kusmayanto Kadiman, who urged support for nuclear power. So did the head of the national atomic energy agency and other government experts.

They heard a different story from non-government groups, environmentalists, and representatives from the village of Balong, the proposed site of the nuclear plant.

At the end of their deliberations, drawing on Islamic traditions of jurisprudence, the scholars issued a fatwa, a religious legal edict, declaring the Muria plans haram – forbidden.

They declared Islam neither forbids nor recommends nuclear power. Their edict, instead, was specific to Muria, where they ruled the likely benefits were outweighed by the potential damage. Their main concern was safety.

"As far as we can tell, it's the first time there's been any mainstream Islamic expression of opposition to nuclear power, anywhere," says Richard Tanter, an Australian academic who observed the gathering.

Despite the fatwa, and a chorus of other critics, the Government is pressing ahead. It wants to let the first tender next year, with construction to start in 2010, and the first station operating by 2016.

Unease over the plan is not confined to Indonesia. Its neighbours are watching closely.

Australia's position is ambivalent. Indonesia is a potential market for Australian uranium and under the 2006 Lombok Agreement the two countries are committed to peaceful nuclear co-operation.

At the same time, Australia is concerned about potential risks, with studies showing a disaster in an Indonesian reactor would send massive fallout across northern Australia.

Earlier plans by Jakarta to go down the nuclear road were finally killed off by the financial crisis that brought down the Soeharto regime in 1998. Now it's back on the agenda, backed by powerful and inter-connected business and political interests, including Vice-President Jusuf Kalla.

Proponents argue Indonesia needs to diversify sources of energy for its 224 million people, more than half of whom are crammed onto Java, an island roughly half the size of Victoria. Electricity demand is growing by about 10 per cent a year, while supplies of oil, its main energy source, are dwindling.

Indonesia has the backing of the UN's International Atomic Energy Agency, whose director, Dr Mohamed El Baradei, endorsed the plans on a visit to Jakarta last December. He pointed out that Indonesia was a party to the Nuclear Non-Proliferation Treaty and was committed to safeguards.

Global warming and the need to cut carbon emissions are also being used in support of the nuclear option – although most of Indonesia's emissions, the world's third highest, come from clearing and burning forests.

Government experts insist the Muria site is stable and that modern reactors are earthquake proof. Such arguments have not silenced opponents, who point out that only last year an earthquake in southern Java killed more than 5000 people.

Critics also point to Indonesia's poor safety record in industry and transport, a lack of transparency in Government decision- making and the potential for corruption in a project worth about $US10 billion ($A11.1 billion).

Japanese and South Korean companies are keen for the contract. The Indonesian firm Medco Energi Internasional, which has links to Vice-President Kalla, has already signed a preliminary deal with Korea Hydro and Nuclear Power Co Ltd to build the plant. Details of the deal are secret, adding to unease in a country where corruption remains endemic.

While the Government has decentralised power to provinces, the nuclear plant remains the last of the Soeharto-era big projects, imposed from above.

If it goes ahead, the local administration will have little say and no capacity to manage it, says Dr Tanter, senior research associate with the Nautilus Institute, a think tank that focuses on security and sustainability.

"At the local level the impact would be like a kid playing in the middle of a freeway with an 18-wheeler barrelling down on top of them," he says.

Safety is it at the heart of public anxiety, according to Rizal Sukma of the Centre for Strategic and International Studies, a Jakarta think tank.

"To be precise, there is strong doubt – even distrust – that whoever administers the nuclear plant will have the ability and absolute commitment to ensure the safety of a nuclear plant," he wrote in The Jakarta Post.

This doubt is shared by Indonesia's near neighbours, who already resent the choking haze they endure each year from the burning of Indonesia's forests.

At a seminar in Jakarta last month on energy and nuclear safety, Dr Sukma was joined by Simon Tay, chairman of the Singapore Institute of International Affairs, in declaring that the nuclear option was a regional issue.

"In addition to harm at the local and national level, nuclear energy plants can potentially cause trans-boundary harm to neighbouring states," they said.

The potential harm was highlighted by research by ANU experts, who warned in a 1998 report that a failure in a reactor on Java "could be a disaster" for northern Australia, Papua New Guinea and South-East Asia.

A failure during the summer monsoon would send radioactive gas across northern Australia within days, the report said. The north of Western Australia, the Northern Territory and Queensland would be at "substantial risk" of receiving potentially devastating fallout.

Critics of the Indonesian plans stress there is no evidence Jakarta wants to develop nuclear weapons. But some observers do see a long-term risk of nuclear weapons proliferation in the Indonesian project.

What they fear is an "A.Q. Khan scenario" – a reference to the founder of Pakistan's nuclear program who set up a secret network to supply nuclear technology to Libya, Iran and North Korea.

The fear held by some US analysts and officials is that a group of Indonesian technical experts could form a similar network, outside the control of the Jakarta Government and working with experts from Iran, which has launched a diplomatic offensive aimed at building ties with Indonesian nuclear researchers.

This is a nightmare scenario for Australia, given the mutual suspicion that complicates relations between the two countries.

This suspicion has been compounded by Prime Minister John Howard's call for a "full-blooded debate" on Australia developing its own nuclear industry, and his refusal to rule out uranium enrichment.

"The consequences of Indonesia and Australia pursuing their somewhat non-rational approaches to the nuclear fuel cycle could have very negative consequences for people who are already suspicious of each other," says Dr Tanter.

Even so, he says climate change and the nuclear issue present an opportunity for greater co-operation between environmentalists, scientists and non-government groups in the two countries.

"These are issues where Australia and Indonesia have common cause, where it's in our shared interests to encourage both governments toward less risky, less threatening energy alternatives. We are in the same boat on this one," he says.

Indonesian court throws out case against New York Times

Agence France Presse - October 11, 2007

Jakarta – An Indonesian court has thrown out a lawsuit brought by a mining executive against the New York Times over reports the firm dumped toxic waste into an Indonesian bay, lawyers said Thursday.

Richard Ness, an executive with US mining giant Newmont, sued the newspaper and one of its reporters for more than 64 million dollars for defamation over articles published in 2004.

The stories alleged Newmont polluted the bay with tonnes of waste from its now-defunct gold mine on the island of Sulawesi.

A three-judge panel said the Central Jakarta state court "does not have the authority to hear and judge this case," according to Gani Djemat and Partners, the law firm representing the defendants.

The law firm said in a statement that Wednesday's court ruling was based on defence arguments that the case was outside its jurisdiction.

The defence argued that the journalist was not an Indonesian national or a resident here, that The New York Times did not have a representative office in Indonesia and that it did not commit the alleged defamation in the country.

"Not a single connecting factor practically links or at least points toward the fact that Indonesia can be the site where the case is to be heard," the lawyers' statement said.

Ness and the local unit of Newmont were acquitted by Indonesian judges in April of criminal charges of polluting Buyat Bay with mining waste including arsenic and mercury.

Prosecutors had sought a three-year jail sentence for Ness in a drawn-out case closely watched by foreign investors and environmentalists.

Ness claimed the New York Times stories on the pollution allegations were inaccurate and unfair, and had contributed to the charges brought against him and Newmont.

The stories were published about the time that police started investigating complaints from villagers living near the bay, who said pollution was killing marine life and complained of headaches, skin rashes and tumours.

Newmont had always denied the charges, saying it disposed of toxins safely and that levels of mercury and arsenic were within acceptable levels.

Studies of waters around the bay have shown conflicting results. A World Health Organisation-backed report and others found no evidence of pollution, but government tests showed high levels of toxins.

War on corruption

Complete overhaul needed: Government

Jakarta Post - October 10, 2007

Desy Nurhayati, Jakarta – A systematic war against corruption, collusion, nepotism and poor bureaucratic practices in all government agencies using a new draft law would improve the country's public administration sector, a government official said Tuesday.

"The law on public administration... will be the legal basis to conduct a complete improvement of our governance system," State Minister of Administrative Reforms Taufik Effendi said. The draft law on public administration had been forwarded by the ministry to the House of Representatives and was now waiting deliberation.

The House is expected to start discussing the draft by the end of this year. "We expect... (the law will) change the mindset of state officials toward a good governance system," Taufik said.

He said corruption, collusion and nepotism in government agencies had continued to occur because of a lack of transparency and accountability in the system. "And efforts to fight corruption should not only be focused in the investigation, but also the prevention of corruption," he said.

The draft law says officials abusing their political authority would face administrative sanctions. The minister said the draft law, if enacted, would benefit the public because it would cut red tape and increase public service efficiency.

Eko Prasodjo, a researcher with the Center for Legal Study and Good Governance at the University of Indonesia, said the current bureaucratic system was often detrimental to the public.

"The public has always received an unfavorable impact from the administration system," Eko said. "We need comprehensive reform in the governance system to ensure the public stops losing out. The public has to be allowed to actively participate in the drafting of a public policy by providing feedback to the government. This would help ensure policies stop being detrimental to their interests."

Eko said the law would allow the public access to the government administration documents used to draft public policy.

Bivitri Susanti from the Center of Policy and Legal Studies said the draft law would provide "concrete guidance toward a good governance system".

"The law, if enacted, will regulate how government officials should act in their provision of services to the public," Bivitri said. "The law would not just stipulate the principles of good governance."

ICW on the money, almost: House member

Jakarta Post - October 10, 2007

Ridwan Max Sijabat, Jakarta – Law enforcers have not performed well in their attempts to fight corruption which has swept from public officials and state institutions to rural administration, the Indonesian Corruption Watchdog (ICW) said in a report.

Yasonna H. Laoly, a member of the House of Representatives' commission III on legal affairs has praised ICW's mid-year report, which included a focus on cases exposed by local media, but he said it had failed to provide recommendations for improvements.

"As corruption is rampant among government officials and in state institutions, the number of graft cases in the first semester should be far more than ICW's reported 132," Yasonna said.

"Law enforcers' poor performance has a lot to do with the absence of a clear-cut policy and job description between the National Police, Attorney General's Office (AGO) and Anticorruption Commission (KPK) in handling corruption cases."

He said he was sure corruption had swept through the executive and legislative bodies at all levels and the judiciary system.

Yasonna has a PhD in law from North Carolina State University and said the fight against corruption should start by "writing-off all stolen state assets and requiring the perpetrators to return a part of the stolen assets to the state".

"At the same time, the wages of public officials and civil servants should be raised by 200 to 300 percent," he said. "Since then, any officials found guilty of corruption must be given harsh sanctions, up to a life sentence."

Yasonna said making a bad debt of stolen assets could be inserted in the planned revision of the law on the KPK.

"The anticorruption commission should be revamped to have it establish its branch offices in provinces," he said. "The law should make job descriptions clear to avoid overlapped authority between the police and the AGO."

He said the KPK, the police and the AGO should put all state institutions under their supervision and that their performance should be evaluated annually.

KPK, which spent Rp 300 billion (US$33 million) annually in handling corruption cases, has been found ineffective because it could not act independently.

The House law commission was still seeking a revision of the KPK law to include representative offices in provinces so that graft cases committed by public officials in regions could be probed effectively and efficiently.

Yasonna said the National Police headquarters should handle graft cases in several state departments and the AGO should be in charge of graft cases in other departments.

"A similar job description could be applied in provinces and regencies and municipalities," he said.

Graft probes are 'too slow'

Jakarta Post - October 9, 2007

Desy Nurhayati, Jakarta – Indonesian Corruption Watch (ICW) said Monday that law enforcement had been slow to tackle corruption in government agencies in the first half of this year.

In its report analyzing corruption trends, launched Monday, the anticorruption group revealed that out of 132 corruption cases identified in the first half of this year, there were 51 new cases with total potential state losses of around Rp 665.8 billion (US$73.4 million).

The figure is much smaller than the 2006 second semester data provided by the Supreme Audit Agency (BPK), which identified 5,776 cases of alleged fund misuse in government agencies with state losses of up to Rp 13.3 trillion.

"Huge differences in the figures indicate that law enforcers are very slow in responding to and following up on the BPK's report on corruption cases in government agencies. It shows their poor performance," ICW researcher Febri Hendri told a media conference.

"The BPK report reveals that there are many corruption cases in the agencies. But why are only few of them being uncovered? The investigators should have worked faster to handle the cases by promptly taking action in response to the report."

Febri said the time the investigators had needed to investigate one case – two and a half years on average – was too long.

"Ideally, they should be able to reveal a case within one to one and a half years, based on the BPK report, which is usually published a year after the government agencies have started working on their programs."

The ICW collected data based on the daily reports of 26 national and 54 local media between Jan. 1 to June 30. According to the group, the 51 new cases were dominated by the central and local administrations as well as the social service sector. Most of the cases involved corruption in goods procurement, a total of 20 cases.

The group said that of the 132 cases recorded during the first semester, 81 were old cases being processed legally. The latter figure accounted for more than 60 percent of the total number of cases.

"It indicates that the law enforcers tend to focus on investigating old cases, which were first uncovered several years ago but have yet been settled due to their slowness, and pay less attention to new ones," Febri said.

The total 132 cases have inflicted Rp 7.9 trillion in losses on the state, with the banking sector contributing the lion's share of Rp 2.1 trillion in four cases.

ICW's Adnan Topan Husodo said law enforcement should cooperate better with the BPK so as to speed up their investigations.

He also said that they had to prioritize big and complicated cases, which had usually inflicted huge state losses, instead of only investigating smaller cases.

"However, it's hard for them to investigate big cases since such cases usually involve high-ranking officials that are difficult to probe," Adnan said.

War on terror

Bali bombers ready to die

Agence France Presse - October 8, 2007

Jakarta – The three Bali bombers on death row in Indonesia are ready to face their imminent execution, a report said here Monday.

"This is the happiest period for us, because we are soon to die as martyrs," Ali Ghufron, the eldest of three bombers, told the Koran Tempo daily from his jail off the southern coast of Java island.

Ghufron, 47, his younger brother Amrozi and another man, Iman Samudra, were convicted of the nightclub bombings on the resort isle in 2002 that killed 202 people. The attacks were blamed on the Jemaah Islamiyah (JI) militant network linked to Al-Qaeda.

Indonesia's Supreme Court in August rejected their appeal and the men have been quoted as saying they would not seek clemency from the president, their last avenue of appeal.

Achmad Michdan, one of their lawyers, could not be immediately reached for confirmation the three had waived their rights to demand a presidential pardon.

No date has been released for the executions, which could take place at any time and are expected to be carried out by firing squad.

Last month, the three men signed a final statement reported to read: "If we are executed, then the jets and drops of our blood will, God willing, become a ray of light for Muslims and become hell for infidels and hypocrites."

The statement also said that they would continue to engage in jihad – holy war – if they were pardoned and released from prison.

Indonesian courts have issued three death sentences, two life sentences and more than 30 other long jail terms for people involved in the Bali attacks or for helping hide the key players when they were on the run.

Islam/religion

Polygamy won't become easier: MPR speaker

Jakarta Post - October 9, 2007

Irawaty Wardany, Jakarta – The Constitutional Court's rejection of Muhammad Insa's petition to have re-evaluated the pre- requisites for polygamy, as stipulated in the 1974 Law on Marriage, have been lauded by politicians and activists.

People's Consultative Assembly speaker Hidayat Nur Wahid said Monday there should not be any further argument on the issue following the court's verdict last Wednesday.

"We must appreciate the ruling of the Constitutional Court, which has the right to review all laws that might run counter against the 1945 Constitution," Hidayat said.

The 1974 law stipulates a man can marry more than one wife, if his first wife agrees, or if that wife is disabled or cannot have children.

But Insa said this made many men avoid registering their second marriages. He said children from unregistered marriages "often lose their rights for inheritance and other benefits".

But Hidayat said, "The court has done its job... according to its authority". He said the court's decision must be accepted as a legal product. "And the important thing is how to maintain this legal product in the future."

Hidayat also said the public should realize the objective of establishing a family was to pursue happiness, fairness and harmony. "It is up to the person whether he can get all of those aspects from one wife or more." Hidayat said he was not a polygamist.

Executive Director of Kalyanamitra, an NGO promoting women's rights, Rena Herdiyani, said she was "quite happy" with the court's ruling because it would help make the concept of polygamy clearer.

"Most people think that polygamy is an easy thing to do in Islam, but it is not," Rena said Monday. Islam allowed polygamy on the condition multiple wives were treated fairly, she said.

"Men cannot just practice polygamy whenever they like, in the name of ibadah (religious worship), because most likely it is just to meet their passion," Rena said.

University of Indonesia sociologist Imam B. Prasodjo said life for women today was different to the life women led during the age of Prophet Muhammad. "Today's women live in a situation where many institutions can help them protect their rights," Imam said.

He said during "the old age" the only institution that offered any protection to women was marriage. "Besides, current polygamy practices are no longer for protecting the women's lives, but merely for sexual passion," he said

Rena and fellow activists said they expected the government would amend the 1974 marriage law. "The law is actually monogamous in principle, so why can't we just eliminate all articles about polygamy," Rena said.

Several organizations for women have proposed the House revise the law, she said. "We have submitted a draft proposal, but unfortunately it has yet to get any response from the House."

She said there were several key points included in the new draft law, including the elimination of articles on polygamy, role sharing and the minimum age for marriage.

Islamic sect crackdown criticized

Jakarta Post - October 8, 2007

Syofiardi Bachyul Jb., The Jakarta Post, Padang – Activists in West Sumatra have protested against a raid on the Al-Qiyadah Al- Islamiyah Islamic sect by police acting on the orders of the Indonesian Ulema Council (MUI).

The sect has found itself under attack in several parts of the country, including West Sumatra and West Java, since the council declared it blasphemous on Thursday and demanded the government ban it.

The Pusaka Inter-Community Study Center, a non-governmental organization promoting pluralism in West Sumatra, has called for the public to respect individual's rights to perform their religions and beliefs according to human rights.

"Labeling a group's teachings as blasphemous and then attacking them is against the Constitution. The police and the Indonesian Ulema Council should refrain (from doing so) and solve the matter wisely," Pusaka director Sudarto told The Jakarta Post.

Members of several large organizations, including the Indonesian Mujahidin Council, visited last week the shop-house in Padang where the sect, led by 44-year-old Dedi Priadi, operates. They ordered the worshipers to stop their activities before raiding and sealing the building.

Police detained 11 Al-Qiyadah members, including Dedi, in order to prevent "clashes". The sect members were eventually releases, although Dedi has been ordered to report to the police every day and the building has been secured with a police line.

In Bogor regency, West Java, police sealed off two villas belonging to Al-Qiyadah's founder Ahmad Moshaddeq or Haji Salam on Friday to prevent any attacks on the property.

Chairman of the Indonesian Ulema Council Ma'ruf Amin said people needed to be wary of Ahmad Moshaddeq's teachings because he said he was the next prophet after Muhammad.

Ma'ruf said that the sect did not regard daily prayers, fasting or the pilgrimage to Mecca as compulsory. The MUI has said that any followers of the sect would be considered apostates.

Sudarto, who is also a member of the West Sumatra chapter of the National Commission on Human Rights, said the government should stay neutral. He said sealing off the sect's building and requiring its leader in West Sumatra to report to the police over a personal issue was against human rights.

"The state has again used the Criminal Code against the sect for tarnishing a mainstream religion. The Criminal Code should not be placed above the Constitution, which guarantees people the freedom to perform their own religions and beliefs...," he said. He said the accusations against the sect should be solved through dialog.

In West Sumatra, Dedi Priadi claimed to have 4,000 followers, mostly students. In his teachings, he says praying once a day at night, instead of five times, is enough, but denies the sect is blasphemous.

Gusrizal Gazahar of the West Sumatra chapter of the Indonesian Ulema Council said they have monitored the sect for some time and had even sent two people inside the organization.

"The sect is misleading and not Islam. But it claims to be Islam so we ask the government to ban it and call the people involved to get back on the right track," Gusrizal said.

The West Sumatra Provincial Prosecutor's Office released a decision banning Al-Qiyadah Al-Islamiyah on Friday.

Elections/political parties

Voters want regeneration of political leadership - Survey

Kompas - October 15, 2007

Sultani – The Indonesian public's attention of late has been focused on the actions and maneuvering of political figures who want to nominate themselves as presidential candidates for the 2009 presidential elections. Goodwill meetings between individuals and open declarations are the medium being used by these figures to increase their popularity.

Aside from the activities of individual political figures, the political parties have also been holding actions to mobilise their forces, both internally as well as coalitions with other parties. The event "A National Goodwill Meeting of Golkar and the Indonesian Democratic Party of Struggle (PDI-P)" in June was as if to demonstrate the strategy being taken by the two largest parties to solidify and consolidate their membership in the lead up to the 2009 general elections.

Political "sounding out" by individual figures as well as political parties are already visible. Goodwill forums, which bring together presidential candidates and other social figures are an effective means by which to sell an image and at the same time jack up their popularity. Open forums such as declarations have also been held to sell ideas directly to the public. The political parties meanwhile have been quietly"waging guerrilla warfare" by approaching potential figures who could be nominated as a presidential or vice presidential candidates.

Competition heating up

This phenomena illustrates that political competition has already started to heat up with the several figures who have openly declared that they are ready to contest the highest position in the country. This also gives more opportunities to the public to appraise and evaluate their capacity before deciding on their final choice. The currently liveliness of the contest also indicates a new enthusiasm where the public is involved beforehand in the process of national succession.

Out of the names that have currently entered the contest as presidential candidates the majority are dominated by old figures, who were once or are still state officials. President Susilo Bambang Yudhoyono, Vice President Jusuf Kalla and former Presidents Abdurrahman Wahid and Megawati Sukarnoputri are some of the names that have entered into the nomination count as presidential candidates. Other name that have surfaced include Yogyakarta Governor Sultan Hamengku Buwono X, former Jakarta Governor Sutiyoso and former 2004 presidential candidate Wiranto. Finally there are new and young figures such as National Mandate Party (PAN) chairperson Soetrisno Bachir and Din Syamsuddin, the general chairperson of the Islamic mass organisation Muhammadiyah.

Several of them have already declared that they will step forward to struggle for the presidency. Although in fact these declarations are still seen by the public as being too soon, it is also appreciated by the public.

This survey revealed that being the chairperson of a political party does not apparently guarantee the support of voters. Only PDI-P voters explicitly said that they want their general chairperson, Megawati, to step forward as a 2009 presidential candidate. Megawati is considered a suitable candidate by 76.4 percent of her supports to reappear on this, the most prestigious political arena. Few National Awakening Party (PKB) voters however gave their support to Abdurrahman Wahid, the founder and at the same time chairperson of the party's advisory board. Only around 47 percent of voters consider it appropriate for the former president to again appear as a presidential candidate.

The Golkar Party is different from the two above parties with regard to the current contest. Although garnering the most votes in the 2004 general elections (21.57 percent), party supporters have not immediately given their full support to their general chairperson to step forward on to the presidential nomination stage. Currently, only 54.3 percent of Golkar voters see Jusuf Kalla as being suitable to become the candidate for the number one position in the country. The low level of support by party members for their general chairpersons is also the case for PAN's general chairperson, Soetrisno Bachir, who only received the blessing of 39.5 percent of the party's voters.

Sultan Hamengku Buwono X

Aside from figures with a basis in political parties, individual nominations have also received the appreciation of the political parties. Hamengku Buwono, who has already been approached by PAN and several other Islamic parties, also turns out to have be favoured by these party's voters. Fifty-eight percent of PAN voters believe that Hamengku Buwono's nomination is appropriate while 52.9 percent of PKB voters believe that he should become a presidential candidate.

Figures that do not yet have a political vehicle find it rather hard to jack up their popularity among already established figures. Sutiyoso appears to have his own method of informing the public of his intention to nominate himself as a candidate. Through a declaration held on October 2, Sutiyoso challenged the political parties to evaluate him and the achievements that he made while in office, both in the military as well as in civil life.

This method appears to have helped him jack up his popularity. In a survey conducted in September, Sutiyoso was only considered appropriate as a candidate by 28.2 percent of respondents. Since declaring his nomination, the public has become better aquatinted with him and in this survey 43.7 percent of respondents said that Sutiyoso is a suitable candidate for the 2009 elections.

Not shaken yet

Although several challengers had declared that they will contest the 2009 elections, President Yudhoyono's popularity has still not been shaken. Yudhoyono is still seen as suitable to lead the nation by 75.7 percent of respondents. Moreover, two out of three respondents from the Democrat Party want Yudhoyono to come forward as a presidential candidate in 2009. Meanwhile the presidential elections were held today, although only 48.8 percent of respondents said they would vote for him, this is still three time more than the number of votes for Megawati.

The domination of old figures was still strong in this survey. Whereas respondents said that ideally they would like a regeneration of the leadership from old figures to new and younger ones, as was revealed by 46 percent of the respondents that were involved in the September Kompas survey. Indeed, it is time for the mechanisms for the election of the president to be reviewed in order to give a greater opportunity to individual presidential candidates to appear on the battle field. (Kompas Research and Development)

[Slightly abridged translated by James Balowski.]

Big potential for youth leaders to come forward

Kompas - October 15, 2007

Jakarta – In the midst of the current decline in the popularity of national leaders, a potential for the emergence of new leaders is opening up. According to a survey conducted by the Indonesian Survey Institute (LSI), out of 1,300 respondents as many as 35 percent do not yet know who they would vote for if a presidential election was held today.

Old names such as President Susilo Bambang Yudhoyono and former President Megawati Sukarnoputri, who obtained the highest percentage in the survey, still only got 28 and 19 percent respectively. In addition to this, the survey also showed that although Yudhoyono surpassed his rivals, electoral sentiment towards him over the last year has tended to decline from 68 percent in October 2006 to 66 percent in October 2007.

This indicates that although Yudhoyono's position is not that strong, the public does not yet see any better alternatives. The results of the survey also show that other names such as former military chief retired General Wiranto, Vice President Jusuf Kalla, Yogyakarta Governor Sri Sultan Hamengku Buwono X and former Jakarta Governor Sutiyoso are for the moment, not seen as a viable alternative.

When contacted on Sunday October 14, the executive director of The Indonesian Institute, Anies Baswedan said that these result could show that a potential for the emergence of new leaders, particularly among the young, is opening up. "Thirty-five percent of respondents have yet to decide on a choice", he said.

Contacted separately, a researcher from the Indonesian Institute of Sciences (LIPI), Indria Samego, said that in order to optimise the emergence of new leaders it would be best of the old leaders withdraw. "They don't need to come forward again", he said.

If other long-term leaders such as former President Abdurrahman Wahid, Megawati and Amien Rais are nominated again, youth from the National Awakening Party, the Indonesian Democratic Party of Struggle and the National Mandate Party will of course be reluctant to put themselves forward. Whereas said Samego, there are lots of young leaders with potential. "The old ones should be sensible", said Samego. (JOS)

[Translated by James Balowski.]

Parties set to form coalition

Jakarta Post - October 15, 2007

Jakarta – Four political parties are set to form a so-called National League ahead of the presidential election in 2009, according to Taufik Kiemas, chief patron of the Indonesian Democratic Party of Struggle (PDI-P).

The four parties are the nationalist-based PDI-P, the Golkar Party, the Islam-based United Development Party (PPP) and the National Mandate Party (PAN).

"We will declare the league of the four parties in April 2008," he was quoted as saying by Antara on Saturday.

He said the four parties had decided to form a coalition because they shared a common interest adhered to the Pancasila state ideology.

Taufik, husband of PDI-P chairwoman Megawati Soekarnoputri, said the party controlling the greatest number of votes would have the right to name presidential candidates.

Meanwhile, Zannuba "Yenny" Ariffah Chafsoh Rahman Wahid, secretary general of the National Awakening Party (PKB), said a coalition between PDI-P and PPP would run into snags due to differences in ideology between both parties.

"We don't rule out coalescing with like-minded parties. We will possibly even take the initiative to form a coalition," she said.

Survey shows Yudhoyono still ahead of the 2009 competition

Jakarta Post - October 8, 2007

Jakarta – The latest survey on voter preference for possible presidential candidates has shown that incumbent President Susilo Bambang Yudhoyono would be likely to win an election held today.

Indonesian Survey Institute (LSI) executive director Saiful Mujani said Yudhoyono was likely to win his nomination for reelection, although his popularity has sharply declined since the 2004 presidential election.

"If the presidential election was held this year, his chance to become the next Indonesian president would be bigger, particularly if he faced a head-to-head battle with Megawati (Soekarnoputri) or current Vice President Jusuf Kalla," Saiful told a media conference on National Leadership Prospects on Sunday.

He said a fight with Megawati would likely leave Yudhoyono the winner with around 55 percent of the vote and Megawati with just 35 percent, while a battle with Kalla would also return Yudhoyono to power with 66 percent and give Kalla only 15 percent of the vote.

"However, the public's electoral preference (for Yudhoyono) in the past year has been declining because of his failure to meet people's expectations to improve their welfare," Saiful said.

"This shows that he's not strong enough and the public have not seen any better candidates. From the public's point of view, Megawati, Sutiyoso, Jusuf Kalla and the other candidates are not able to compete with Yudhoyono," he added.

The Indonesian Democratic Party of Struggle (PDI-P) announced recently its chairwoman, former president Megawati, will run again in the 2009 election.

Former Jakarta governor Sutiyoso has also announced his readiness to run for the presidency. He has recently visited some of prominent figures including Megawati and former president Abdurrahman "Gus Dur" Wahid, and Central Java's Mount Merapi guardian Mbah Maridjan.

The LSI survey, conducted from September until early October this year, evaluated the first three years of the Yudhoyono-Kalla government. The survey involved 1,300 eligible voters across the country with the levels of trust reaching 95 percent.

The survey checked the knowledge of the public about the 2009 presidential election, including the importance of a president in their daily life, people's electoral characteristics and the performance of the ruling government.

Golkar Party deputy secretary general Rully Chairul Azwar said the performance of the current state leadership was better when compared with the governments from 1998 to 2004.

"It's a tough task to become a leader in such a transitional period. But if we compare to the previous period, (the current government) is much better although some of the facts show that it's still far from what the public have been expecting," he said.

Rully criticized the survey results that still put Yudhoyono at the top of the list, saying that there was something wrong with the survey due to the absence of new faces for presidency.

"This is a big regeneration problem in Indonesia's state leadership. This is also a warning for us, especially political parties, because it means that there are not any good candidates yet," Rully said.

Jhony Allen, deputy chairman of the Democratic Party faction at the House of Representatives, said the survey indeed showed that many people would still vote for Yudhoyono on moral issues.

"The survey shows that most people choose their leaders over trust in them rather than their education background," he said. "Honest leaders with good morals are definitely what this country needs."

Government/civil service

BPK reveals new budget malfeasance

Jakarta Post - October 11, 2007

Urip Hudiono, Jakarta – Despite a number of improvements over the years, the Supreme Audit Agency (BPK) says that significant irregularities are still commonplace in the management of public funds, and that the government is slow to take follow-up action on its findings.

In its latest audit report presented Wednesday to a House of Representatives plenary session, the BPK revealed six cases where there was clear evidence of malfeasance during this year's first half, involving a total of Rp 779.7 billion (US$86 million) in taxpayer funds.

During the same period last year, the BPK found only four cases of malfeasance involving Rp 123 billion in potential losses to the taxpayer. Meanwhile, in the second semester, the BPK found only one case of malfeasance, which involved the reporting of non-tax state receipts worth Rp 24 trillion. This paucity of cases over the last two years compares to thousands of cases of malfeasance involving at least Rp 48 trillion in 2005.

The findings for this year's first semester, however, still give a total of 36,009 cases of financial irregularities uncovered since 2004, with less than a quarter of them having been followed up on, BPK chairman Anwar Nasution said. Of the 5,717 cases that resulted in actual losses to the state, full recovery had been achieved in only 860 of these.

"We would, therefore, urge the government to issue a regulation as soon as possible to allow for the transparent recovery of taxpayer losses as provided for by the State Treasury Law," Anwar said. "The government must also continuously improve its accounting systems and capabilities."

The BPK's latest semiannual report was compiled based on the audits it conducted between January and June 2007 on the accounts of 82 ministries, state institutions (including the central bank), 362 local governments, nine state-owned enterprises, and three local government-owned firms.

Also included were the BPK's audit findings on the government's 2006 annual accounts, which were once again given a disclaimer due to a disagreement over auditing of the tax service.

Among the significant cases reported was a financing scheme cooked up by Bank Indonesia's investment house, PT Bahana Pembina Usaha Indonesia (BPUI), for Credit Asia Finance worth Rp 212.8 billion and $34.8 million.

The BPK also highlighted an aircraft leasing deal worth Rp 27.2 billion between PT Merpati Nusantara Airlines and AF Aerospace, and the government's ineffective Rp 75 million injection of capital into the state-owned carrier.

Problems in local government accounts, meanwhile, included a suspicious Rp 106.6 billion shortfall in East Aceh regency's budget, Rp 11.8 billion in fictitious procurements in Purwakarta regency, and a Rp 33 billion loss due to an overdue land-leasing deal in Cilacap regency.

More irregularities could yet surface this year as the BPK has so far only managed to audit the budgets of 362 out of 467 local governments.

The BPK has also been involved in a row with the Supreme Court over the way it accounts for court fees. The dispute was recently resolved when the nation's highest court finally opened its doors to BPK auditors.

Regarding BPK audits of the tax service, Anwar said he expected the Finance Ministry and the BPK to arrive at a similar resolution soon so that audits could be conducted without compromising confidentiality.

"We will carry out the audits as we do at the central bank and state banks. Has anyone heard of the personal data of any customers being leaked by the BPK?" Anwar asked.

2008 budget endorsed, deficit could hit Rp 73.3 trillion

Jakarta Post - October 10, 2007

Urip Hudiono and Adianto P. Simamora, Jakarta – The House of Representatives on Tuesday approved the 2008 budget, which envisages a wider deficit due to higher government expenditure as part of the effort to spur growth next year.

All of the House's ten factions approved the budget by acclamation during a plenary session, although their seals of approval were not without provisos: 115 cross-faction legislators – and a group of student protesters – issued a stern reprimand to the government for its failure to allocate 20 percent of total budget expenditure to education, as required by the Constitution.

The Indonesian Democratic Party of Struggle (PDI-P) faction, meanwhile, criticized yet again the government's "ambitious" budget expansion and growth targets, and perceived lack of concern for public welfare.

The government and the House budget commission have been deliberating the 2008 draft budget since President Susilo Bambang Yudhoyono submitted it to the House during his Aug. 16 state address. It is the administration's third budget of its five-year term, which runs until 2009, and promises higher growth, and lower unemployment and poverty levels.

Overall, the 2008 budget envisages total expenditure of Rp 854.7 trillion (US$95 billion), a rise of more than Rp 100 trillion over this year's revised budget.

Most of the additional spending will go on the procurement of capital goods, rather than routine spending, in line with the government's stated intention of "optimizing expenditure".

Local governments will receive Rp 4.2 trillion more in central government development transfers, giving them a total of Rp 271.8 trillion. Allocations to central government ministries have been increased by Rp 2 trillion, while another Rp 1 trillion has been earmarked for a contingency fund to cover any shortfalls arising from failures to achieve budget assumptions.

The budget also increases the cooking oil subsidy for poor households to Rp 600 billion from Rp 325 billion this year. Fuel and power subsidies are respectively penciled in at Rp 45.8 trillion and Rp 28.5 trillion, lower than last year's figures on savings accruing from the gas and coal conversion programs.

Meanwhile, the government has allocated 12 percent of total expenditure to education, arguing that this is as much as the treasury can afford for the time being.

With anticipated revenues of Rp 781.4 trillion next year, the 2008 budget deficit will be higher at Rp 73.3 trillion, or 1.7 percent of gross domestic product (GDP). The additional revenues will mainly come from intensified tax collection, and an increase in dividends from state firms to Rp 23.4 trillion.

Next year's deficit is expected to be financed mostly through government bond sales, which it is hoped will raise some Rp 91.6 trillion.

The government said the 2008 budget was expected to help support Indonesia's economy expand by 6.8 percent next year, so as to give the country a GDP of Rp 4,306 trillion.

Meanwhile, inflation is expected to continue at 6 percent, the rupiah to weaken slightly to Rp 9,100 against the US dollar, and the central bank benchmark interest rate to fall to 7.5 percent. Indonesia's daily oil production is estimated at 1.034 million barrels, on an oil price of $60 per barrel.

Speaking for the government after the budget's approval, Finance Minister Sri Mulyani Indrawati said that while next year's budget was more expansive in its assumptions, the various constraints on achieving them had already been factored in.

"Experience has shown us that shortfalls in oil production are particularly effective in upping the deficit. That is why we have included additional funds as a contingency measure to address any discrepancies between budget assumptions and outcomes," she said.

"We will also address concerns regarding the optimizing of tax collection, while still providing incentives for the real sector."

Jakarta/urban life

Thousands queue for their share of Fauzi's money

Jakarta Post - October 15, 2007

Mustaqim Adamrah, Jakarta – Thousands of Jakartans queued Sunday to receive an Idul Fitri "gift" from new Governor Fauzi Bowo. However, the day almost ended in chaos, with many people claiming they did not receive money from the governor.

The head of the city's public relations bureau, Ari Budiman, said more than 3,500 people queued in front of the governor's home from 7 a.m. on Sunday.

People of all ages waited in line for the gates to be opened for two hours. Those waiting in line received one coupon each to be exchanged for an envelope containing Rp 50,000 (approximately US$5.50) when they greeted Fauzi.

Wearing a Muslim tunic and an embroidered black cap, Fauzi greeted his many guests with his wife Sri Hartati on schedule at 10 a.m.

"We gave the money as infaq, or charity, from myself and my family. And I didn't take the money from the city budget," said Fauzi.

"It is part of our responsibility as Muslims to give away part of what we earn to poor people who have the right to it, regardless how much we earn," he said.

At 12 p.m. when officers closed the gate to Fauzi's home, many of those still waiting in line became angry.

Suhemi, 55, and Eman, 42, from Kramat subdistrict, Central Jakarta, said they were frustrated by how long they had waited.

"I've been here since 10 a.m. but I didn't get any money," said Suhemi. My neighbors who arrived a few hours earlier than me received money."

Sumarni, 41, also from Kramat subdistrict, failed to receive money despite joining the queue early. I arrived here at 7 a.m. but I got nothing," she said.

After the gate was closed, officers instructed those still holding coupons to go to nearby Suropati Park where they handed out what was left. Many waiting for their share of the money were pushed and shoved.

In response to the situation unfolding outside his house, Fauzi said he asked the officers to make sure everyone received their share.

"Those who said they were left out probably just wanted more," he said, adding that those who received money had their fingers marked with ink.

On Saturday, Fauzi welcomed guests to his official residence on Jl. Taman Suropati in Central Jakarta, including state officials, ambassadors and a number of public figures.

Muslim exodus transforms Jakarta

Sydney Morning Herald - October 11, 2007

Mark Forbes, Jakarta – In a remarkable exodus, tens of millions of Indonesians are filling roads, trains, planes and ferries as they return to their birthplaces to celebrate the Islamic festival of Idul Fitri.

A strange calm is beginning to descend across Jakarta as about half the capital's 12 million population departs, clearing city streets of their regular gridlock. Flights and trains out have been booked solidly for weeks.

Highways leaving major cities are clogged with cars and many convoys containing hundreds, even thousands, of motorbikes – Indonesia's most common form of private transport. An estimated 2.5 million motorbike riders will leave Jakarta alone.

Tomorrow's Idul Fitri celebration marks the end of the fasting month of Ramadan, when Muslims should abstain from food and drink during daylight, along with abandoning pleasures of the flesh and negative thoughts. Ramadan celebrates the handing down of the Koran's edicts.

During the past month bars, clubs, pool halls and karaoke lounges have been closed. Some that dared to remain open were raided by police, and several were attacked by hardline Islamic mobs.

Throughout Ramadan suburbs and villages have come alive at night. Many have chosen to sleep during the day, waking to pray and break the fast with their neighbours and remaining awake until a pre-dawn meal. Ironically, food consumption rises during the fasting month.

One television comedy show has switched from evening broadcasts to a live 2am to 4am show, gaining more than 20 million viewers in the process.

Idul Fitri also sees a second exodus – of wealthy Jakartans from their homes. Many of Indonesia's elite cannot cope with a house devoid of servants.

As a result, the Hindu island of Bali is booked out by local tourists and luxurious hotels in Jakarta are filling up by offering Idul Fitri packages to families unused to life without staff.

New governor installed amid protests

Jakarta Post - October 8, 2007

Jakarta – Jakarta had its new governor and deputy governor installed Sunday amid a wave of rallies organized by various groups to remind Fauzi Bowo and Prijanto to keep the promises they made during the election campaign.

Home Minister Mardiyanto, who presided over the inauguration ceremony at the City Council building, Central Jakarta, also said the new governor and his deputy would have to keep the promises they made to the public ahead of the Aug. 8 election.

"Fauzi must remember his promises, such as to eradicate poverty, promote industry and trade, and prevent floods," he said as quoted by the detik.com news portal at the City Council. The minister said Fauzi must try to put into effect the free 12-year-education program for every child in Jakarta.

Fauzi, with his deputy Prijanto, said they would try to fulfill their duty as the city's leaders to the best of their abilities.

Backed up by a 13-strong coalition, Fauzi and Prijanto defeated former deputy national police chief Adang Daradjatun and politician Dani Anwar in Jakarta's first-ever direct gubernatorial election.

Sunday's inauguration ceremony was attended by former governor Sutiyoso and City Council chairman Ade Surapriatna.

Outside the building, protesters from the Poor People's Alliance held a rally, demanding that Fauzi keep his promise to make the city "friendly" to all residents.

Fauzi's campaign slogan, Jakarta untuk Semua (Jakarta for all) included free education, improved social services and employment opportunities for the urban poor. "The city administration should focus on people's welfare," said Sabarudin of the alliance.

Khalisah Khalid of the Indonesian Environmental Forum (Walhi) said the city needed to be revitalized and restored. However, she warned Fauzi not to discriminate against the city's poor.

"I hope Foke (Fauzi's nickname) will accommodate the interests of the poor because this city, as he said in his campaign, is for all kinds of people, not the rich alone," she said.

Fauzi said last month that he would concentrate on revitalizing the city's slums during the first three months of his tenure.

The Betawi native said he planned to involve the private sector in rejuvenation projects so as to reduce the burden on the city budget.

Fauzi's experience as a bureaucrat and his expertise in urban planning issues were the main reasons why people voted for him in the gubernatorial election, according to a number of exit polls.

Khalisah said that many people migrated to Jakarta as they could not make a living in their hometowns. "They're trying to earn some money here by doing anything they can," she said.

Many slum areas had emerged because of this massive influx. People who lived in such areas mostly worked as unskilled laborers and street vendors.

Besides dealing with the slum issue, Fauzi will also have to solve the city's persistent traffic problems, which, according to Tulus Abadi of the Indonesian Consumers Foundation (YLKI), are one of the biggest problems facing Jakarta.

Tulus compared Jakarta to Bogota, Colombia, the city from which Sutiyoso got the idea of the busway, which has been turned into a "humane" city. "The busway and monorail must be completed soon because they're important," he stressed.

Armed forces/defense

Reporter's Notebook: The TNI's business networks

Global Intergrity - October, 2007

Andreas Harsono – Clad in a sarong and cotton shirt, Chief Sergeant Ukas seemes like an ordinary shopkeeper. He runs a family store next to his house on the outskirts of Merauke, a town in Indonesia's troubled Papua province.

"I'm a retiree now," he says with a smile. In fact, Ukas retired from not one profession but two: the Army and the prostitution racket.

In 1996, when Ukas was the treasurer of the Merauke Military Command, he established the Nikita bar in downtown Merauke. Most town residents knew the Nikita made its money from the sex trade. "We usually bring in girls from Java or Makassar," Ukas said. "We contract them for three or four months. We also regularly check their health," he added.

Ukas is one of thousands of Indonesian military officers who profit from shadowy side jobs. Although they know it is illegal, the practice is so pervasive it's almost taken for granted. Even former President Suharto, the Army general who ruled Indonesia with an iron fist, was once demoted for smuggling. "Our salaries are not enough; we have to find extra income," Ukas argued.

Soldiers find ample opportunity in Indonesia, composed of thousands of islands stretching some 3,200 miles from east to west. Its 210 million people speak more than 500 different languages. Nearly 90 percent of its population is Muslim, concentrated on the islands of Java and Sumatra, though eastern provinces like Papua have a Christian majority. Ethnic violence and separatist movements riddle Indonesia's modern history. Now many question whether Indonesia can survive as a nation-state given that its people's only common history is their Dutch colonial past. Suharto managed to keep the country together by brutal means after he rose to power in 1965, but after he left power in May 1998, the institutions he built began to crumble.

A common thread running through the chaos of Indonesian history is corruption within the Indonesian military (TNI-Tentara Nasional Indonesia). The New York-based group Human Rights Watch published a 126-page report in June 2006 titled "Too High a Price: The Human Rights Cost of the Indonesian Military's Economic Activities." The report described how the TNI raises money outside the government budget through a sprawling network of legal and illegal businesses.

An example is the large cache of military equipment found in the Jakarta houses of a dead Army general in June 2006 that included 145 weapons, 28,985 bullets, eight grenades, and 28 pairs of binoculars. Though the materiel was clearly moving through the black market, the TNI claimed the general collected weapons as a "hobby."

The principal driver of military corruption is the fact that the military's budget is only partially covered by the government. Cornell University's Indonesia Journal estimated the government's contribution to be as low as 30 percent of the total. The TNI must raise the rest of the funds from three principal sources: yayasan, a complex system of non-governmental foundations; provision of services such as security and transportation for civilian clients including US mining giant Freeport McMoran; and illegal businesses, such as protection rackets for prostitution and gambling businesses.

The lowest level of Army personnel, such as Sergeant Ukas, conduct the latter type of businesses, while private security services are largely managed by the Kodam (provincial-level Army command) and Korem (a subcommand). Only the yayasan are under direct control of the Army Central Command in Jakarta. The Asian economic crisis damaged the yayasan, exposing their endemic corruption and poor management. Army headquarters, however, found them difficult to investigate as dozens of generals were involved. In 2001, Army headquarters finally understood that the yayasan bankruptcies posed a fundamental threat to the military institution and employed Ernst & Young to audit its biggest foundation, Yayasan Kartika Eka Paksi. The result was shocking: Only two of the 38 yayasan generated profits.

The Indonesian Parliament passed a law in 2004 requiring the TNI hand over all of its businesses to the government. The law mandates four ministries, including the defense and finance ministries, to audit some

1,500 military enterprises before turning them over by 2009. The TNI played hide-and-seek, however: A government team assigned to audit the firms estimated their total worth at only 1 trillion Rupiah (US$100 million), far less than the value widely believed.

Their revelations took most legislators by surprise. "During the regime of former president Suharto, a number of generals held concessions for mining, forestry and other lucrative sectors inherited by TNI businesses, so the assets cannot be worth only 1 trillion rupiah," said lawmaker Permadi Satrio Wiwoho of the Indonesian Democratic Party of Struggle.

House member Soeripto of the Prosperous Justice Party expressed similar shock. "As someone who knows a little bit about forestry, I learned that one way or another, military members managed to get shares in all 550 logging concessions. How can there be only two concession-holders with connections to the military?" he said.

Ukas and his generals in Jakarta only echoed what founding president Sukarno repeatedly said about the Indonesian military: "It's a state within a state." Defense Minister Juwono Sudarsono is not surprised to hear stories like that of Ukas. "Bad cops and soldiers who are involved in protection rackets happen in Jakarta. You could also easily find them in Chicago or New York," he said.

But this kind of corruption does not only hurt the state. One of Ukas' girls was 25-year-old Anita Ayu Sulandari, who worked at the Nikita for three years until she decided to "freelance" in the hinterlands of Kaname Island. "I was considered old," she said. "In Kaname, I did business, looking for the gaharu in the villages." The gaharu tree produces a hard, black resin that the Asmat peoples burn to connect with their ancestors and cast spells. Outsiders value gaharu as the source of expensive incense for the Asian and Middle Eastern market. Ayu traded gaharu for sex, selling the gaharu to middlemen in Kaname. "If (the gaharu) is of low quality, one kilogram buys a short time," she said. "If the quality is excellent, it could be one full night."

In October 2002, Ayu fell seriously ill and returned to Merauke. Doctors told her that she had contracted HIV. Devastated, she decided to stay in a Catholic-run HIV treatment house. Last year, Ayu decided to leave the HIV medical treatment facility and worked again on the street. "I can't stand to live there. The (pocket) money was not enough. It's also hard to see my roommates died one by one," she said. I asked her if her consumers used condoms. "They said it is not natural," she answered.

An estimated 90,000 to 130,000 Indonesians are HIV positive, 30 percent of them in Papua, though the island contains only one percent of Indonesia's population. Papuan nationalists liken the spread of the disease to Indonesia's harsh military occupation. Corruption's role in both closes a deadly circle.

Indonesia to boost military role in disaster relief

Agence France Presse - October 10, 2007

Bhimanto Suwastoyo, Jakarta – In a land hit by one natural disaster after another, Indonesia's armed forces must shift their focus from the battlefield to emergency and relief efforts, its defence minister said Wednesday.

In an interview with AFP, Juwono Sudarsono said most of Indonesia's defence spending in the next decade would go on improving its transport capability to better respond to emergencies. There are certainly plenty of those.

Earthquakes, volcanoes, landslides, floods and fires are a virtually daily feature of life in this vast archipelago nation, which sits on the so-called Pacific "ring of fire" where continental plates meet.

The deadliest recent event was the December 2004 tsunami spawned by a quake which swept the Indian Ocean, killing 168,000 people in the northern point of Indonesia's Sumatra island.

Sudarsono said he foresaw that in the next 10 to 15 years, the role of the defence forces would be particularly important in terms of delivering relief and aid to stricken areas.

"Looking ahead, for 10 years ahead in this ring of fire, and with tectonic plates underneath us, the bulk of our defence spending would be on transport capability for emergency responses," he said.

That would include air and land transport as well as a sealift capability, he added in the interview, conducted entirely in English in his office.

By man-made disasters, he said, he meant conflicts that were "endemic" in outer islands such as the Moluccas and other troublespots. "The bulk of our budget for the period for 2005- 2010 is, in fact, more for transport and airlift capacity, and sealift," Sudarsono said.

He said the military were quickest to respond to disaster, with airplanes and helicopters commandeered by the government for initial search and rescue efforts as well as providing aid supplies.

"As exemplified by the post-tsunami relief efforts, the army, the navy and the air force were first on the scene with transport ships, helicopters," he said.

Sudarsono was educated in Britain and the United States and has served in different administrations back to the regime of former dictator Suharto. Now 65, he says the armed forces – 316,000 personnel across the army, navy and air force – are run on a modest annual budget of 3.2 billion dollars.

Its delivery capacity suffered greatly under a military embargo imposed by Washington after a bloody 1991 massacre in Indonesia- occupied East Timor. The embargo has been lifted, but 15 of its fleet of 21 Hercules transport airplanes remain out of operation.

"We are focusing on the Hercules because we have about 21 planes and about three quarters of them are grounded because of the lack of spares," Sudarsono said, adding that the air force was prioritizing their refitting.

Traditionally reliant on the West – notably the United States – for its military equipment, Indonesia has since a decade ago sought to diversify its sources, Sudarsono said.

The Indonesian and Russian presidents inked a billion-dollar arms deal in September under which Jakarta is buying helicopters, tanks and submarines. It came a month after Indonesia had signed another deal worth 354 million dollars to buy six Sukhoi-30 fighter jets from Moscow.

Sudarsono said he would also be visiting China in early November to sign a defence cooperation agreement that could include a joint production programme, again focusing on transport. He said the military shopping spree was not aimed at boosting Indonesia's strike capability.

"We would just like to maintain what we call technological parity with the fighters that are existing in the region, be it Australia, Singapore, Malaysia and Thailand," adding that in terms of quantity, the Indonesian air force had "just the bare minimum."

"That is all that we can afford," he said. "I am running one of the best underpaid defence forces in Southeast Asia."

Economy & investment

Investment seen driving economic growth

Jakarta Post - October 15, 2007

Urip Hudiono, Jakarta – Rising investment and an in-check inflation rate are seen pushing Indonesia's economy toward the 6.3 percent growth targeted by the government for the year.

The Investment Coordinating Board (BKPM) reported last week that actual foreign direct investment (FDI) had by the end of September nearly doubled to US$8.54 billion – mostly in the transportation and communications sectors – from $4.29 billion in the same period last year.

The BKPM noted a more than threefold rise in FDI approvals to $33.03 billion during this period, mostly in the chemical industries, while domestic investment approvals increased 58 percent to Rp 171.46 trillion.

The Finance Ministry highlighted stronger investment and higher consumption in its latest assessment of the economy last week, seeing both as providing the stimulus for faster growth of between 6.2 and 6.4 percent year-on-year for the three months to September – slightly higher than the 6.3 percent growth registered in the second quarter.

The government expects Indonesia's economy to grow by an overall 6.3 percent for 2007, and faster still at 6.8 percent next year. The economy grew by 5.5 percent last year, slightly lower than 2005's 5.6 percent.

For 2007's third quarter, investment is expected to grow by between 7.17 and 7.27 percent, the Finance Ministry's Fiscal Policy Agency said, up from 6.86 percent the previous quarter.

Private consumption is also expected to grow by between 4.79 and 4.86 percent from 4.66 percent the previous quarter, and government consumption between 3.58 and 3.87 percent from 3.83 percent.

Rising inflation during Ramadhan and Idul Fitri had led to concerns of consumption being affected, as the central bank had to hold its benchmark interest rate – which affects borrowing costs in the country – to help address the situation.

However, Finance Ministry Sri Mulyani Indrawati said over the weekend that inflation might ease after the holiday between 5 and 7 percent on-year, balancing out the adverse effects on consumption.

"Inflationary pressures were indeed high in August and September, due to the holidays and seasonal factors, and it will be a 50-50 situation for October," she said. "We also have to still watch out for rising inflation at the end of the year."

Tapping a gas gusher in Indonesia

Asia Times - October 11, 2007

Bill Guerin, Jakarta – After a series of environmental, funding and supply contract problems, surging regional demand has given new impetus to Indonesia's US$6.5 billion Tangguh liquefied natural gas (LNG) project, which with 14 trillion cubic feet of proven reserves represents one of the largest gas fields in all Asia.

Energy Minister Purnomo Yusgiantoro said last week that the first LNG deliveries from the plant are now expected to start by the end of next year. The gas will help China, the second biggest investor in the ambitious project, to meet its surging energy demand while at the same time tap a valuable new fuel source to power Indonesia's domestic economy.

The announcement comes amid surging global LNG prices, which have more than doubled over the past three years. The initial output of the two planned LNG production lines, or trains, as they are known in industry parlance, will be a combined 7.6 million metric tons per year, an output that has been fully contracted for the next 25 years.

The gas will flow from two unmanned offshore production platforms through sub-sea pipelines to an LNG processing facility on the Papua mainland. From there, super-cooled gas will be exported from a tanker terminal directly to buyers, including a contracted 2.6 million tons to an LNG terminal on the coast of the southeastern Chinese province of Fujian. Another 3.7 million tons is scheduled to be sent to Sempra Energy's Baja California terminal on the western coast of Mexico as well as 1.1 million metric tons to South Korea to supply steelmaker Posco and SK Power.

Industry analysts note that previous upbeat announcements about bringing Tangguh on line have been followed by delays rather than actual production. A supposed final decision to go ahead with the project came in March 2005, when LNG exports were predicted to start flowing in 2007. That timetable wasn't met due to funding and supply contract problems. The project's operator and biggest investor with a 37% stake is Anglo-American energy giant BP and is run through its local Indonesian unit, BP Indonesia, and in partnership with state-owned energy company Pertamina. State- owned China National Offshore Oil Corp (CNOOC) has nearly 17% and several Japanese oil companies and trading houses hold the remaining equity. Earlier this month Kanematsu Corp announced the sale of 10% of its total stake in Tangguh to affiliates of Nippon Oil and Mitsui. Nippon Oil's stake in Tangguh will rise slightly from 12.2%, to 13.5%, while Mitsui and Mitsubishi will now hold just under 10% each.

Amid the shifting ownership, the cost of the project has rocketed from an estimated US$2 billion in 2002 to more than $5 billion at present. The $3.5 billion funding target was finally met in August this year, when BP announced it had secured an extra $884 million in funds from banks in China, Japan and Europe. The $2.6 billion of funding secured earlier included $1.2 billion from the Japan Bank for International Cooperation, $1.1 billion secured from several other funding sources and $350 million from the Asian Development Bank (ADB).

The China factor

China is boosting its use of gas for power generation and industry with an eye on reducing it's current reliance on coal. The country's first ever deal to import foreign-produced LNG, a 3.3 million ton per year tender for southern Guangdong province, went in August 2002 to a consortium led by Australian energy giant Woodside Petroleum Ltd.

The loss of this supply tender was at the time a major blow to BP and Pertamina because they had jointly planned to start shipping gas from Tangguh to Guangdong in early 2006 and could not start the plant until the majority of its output had been contracted. The powerful Golkar political party slammed then president Megawati Sukarnoputri's administration for what it deemed poor judgment in sending a delegation led by her husband, Taufik Kiemas, to Beijing to lobby for the Guangdong contract.

CNOOC first purchased a 12.5% share in Tangguh from BP for US$275 million in February 2003. Shortly thereafter, it was announced that Tangguh had been awarded China's second major LNG import deal, the 25-year supply contract to an LNG terminal in Fujian province. The deal was negotiated by Indonesia's oil and gas regulator BP Migas and Pertamina.

Some industry analysts speculate that efficiently tapping Tangguh could return Indonesia to its position as the world's leading LNG exporter, a claim it lost to Qatar in only recently. Pertamina pioneered and dominated the regional LNG market for over 25 years, until its monopoly on marketing LNG overseas was lost in 2001. The state entity then changed tack, when in 2002 then president director Baihaki Hakim urged a refocus on LNG production for the domestic market to avoid future scarcities.

Indonesia is the Asia Pacific's only Organization of the Petroleum Exporting Countries (OPEC) member, yet has much larger reserves of natural gas than oil. The government is developing the domestic gas market to move away from its current reliance on its depleting oil reserves as the country's main energy source. In that direction, legislation enacted in 2004 mandated that 25% of domestic oil-and-gas must be sold to local markets.

At the end of last year, Indonesia had total reserves of some 93 trillion cubic feet of recoverable natural gas, according to BP statistics. But much of its natural gas is exported by major foreign producers under production sharing contracts (PSC). Total, Indonesia's biggest gas producer, for example, pumps around 2.6 billion cubic feet of gas a day from two separate fields, most of which supplies the Bontang LNG plant in East Kalimantan.

Exports from the country's other LNG liquefaction plants, in Arun and Bontang, have steadily declined as the dwindling production from aging fields was diverted to meet local demand. Phillipe Armand, president of Total's Indonesian unit Total E&P Indonesie, has said the company expects to start producing 400 million cubic feet natural gas a day, at peak levels, from two new fields in East Kalimantan by the end of this year, to offset lower outputs.

Questionable commitments

Shortfalls in export supplies have been met on occasion by spot market purchases as contractual commitments to traditional

markets in Japan, South Korea and Taiwan have been threatened by local shortages. Most of these contracts, supplied from the Bontang and Badak fields, are due to expire in 2010. With no new additional gas sources due to come on stream, these contracts will likely not be extended. And senior energy officials' attitude to these still valid contracts raises questions about the government's future commitment to LNG export markets.

Purnomo has been reported saying in the past that if current contracts to these traditional buyers can not be renegotiated in terms of supply volumes that Indonesia should seek out LNG supplies from other countries for resale to these buyers to meet projected shortfalls in 2007, 2008 and 2009. The idea that Indonesia, until recently the world's biggest LNG exporter and with several standing long-term contractual commitments, should aim to play a broker's role, some analysts say, sends a mixed signal to large volume LNG buyers in the region.

Pertamina, at least, continues to move forward with its ambiguous support for boosting supply to both domestic and overseas markets. Last month the state-owned concern secured a 25% interest in a Qatar onshore oil block, which will be operated by Germany's Wintershall, and which Pertamina will invest $11 million as part of a total $47 million exploration budget.

The Tangguh project could still face problems back in Jakarta, however. The House of Representatives has set up a special team made up of members of the Supreme Audit Agency, legislators and government officials to look into its contracted LNG prices amid claims that the average $3.5 per MMBTU (metric million British thermal units) prices are far lower than the domestic gas price. Purnomo has been quoted in local media as saying that this is just a free on board (FOB) price, while delivered prices can be as much as $7 to $9 per MMBTU.

Indonesia's LNG contract prices have always been pegged to a maximum oil price ceiling. The current administration of president Susilo Bambang Yudhoyono has already renegotiated Tangguh contract prices with two big Korean buyers to a reported $3 to $3.5 per MMBTU, on the basis that crude oil prices have more than trebled since the original contracts were signed. Similar reviews of contract prices with US-based Sempra Energy resulted in a new price of just under $6 per MMBTU, according to industry sources.

Even the contract with CNOOC, which when brokered seemed etched in stone, was last year renegotiated to a price level of $3.35 per MMBTU, according to local media. Purnomo indicated in September 2002 that the Fujian price was worth $21 billion over 25 years, although the contract prices at the time were lower than US$3 per MMBTU.

CNOOC, meanwhile, is locked in a contract dispute of a different kind after being sued in June by Canada's major oil-and-gas producers Talisman Energy Inc, which has claimed right to a 44% participating share of CNOOC's interest in Tangguh through Talisman's Fortuna Resources. Talisman claims CNOOC failed to offer it this share, conferred under its rights to assets in the Indonesian American Petroleum Company drawn up almost four decades ago, and Warrior International Corp, which eventually through acquisitions became to be known as Talisman.

CNOOC has filed a counterclaim against another Talisman unit, Paladin Resources, and the suit is expected to be heard in March next year. It's still unclear if those legal troubles will impact on CNOOC's future commitment to funding Tengguh. CNOOC has recently said it will buy 25 million tons of LNG annually by 2010 to help meet China's huge and growing energy demand. At the same time, Indonesia's other traditional buyers are busy chasing new LNG contracts in Indonesia.

For instance, Japan plans a major LNG-related investment on Sulawesi island, where Mitsubishi, along with Pertamina and publicly listed Medco Energi, plan to build a new $1 billion LNG plant. The plant's total output of 2 million tons per year will be exported to Japan, according to the terms of an agreement signed in August by then Japanese prime minister Shinzo Abe during a three-day visit to Indonesia. Construction will begin in mid-2008 and is expected to be completed by 2010.

South Korea is currently the world's biggest LNG importer and now takes annually around 5 million tons of the fuel from Indonesia. It's state-owned Korea Gas Corp (KOGAS) announced in April this year that it would buy LNG from Tangguh if expansion were to go ahead. This was agreed to during a visit by a high-powered South Korean business delegation, of which senior KOGAS officials said they were looking to invest in upstream activities in the Natuna field in the South China Sea and other areas of the country.

[Bill Guerin, a Jakarta correspondent for Asia Times Online since 2000, has been in Indonesia for more than 20 years, mostly in journalism and editorial positions.]

Chinese poised to dominate Indonesian power sector

Jakarta Post - October 8, 2007

Ika Krismantari, Jakarta – That "Chinese products are everywhere" is a statement few would deny, as you can find Chinese-made goods in just about every corner of the world at the present time.

The fact that Chinese products have proven themselves so successful in winning the hearts of consumers all over the world is largely due to their relatively low prices.

A similar situation also prevails in Indonesia. A wide variety of Chinese goods, including such things as electronics products, shoes, fabrics, children's toys, kitchen utensils and clothing can be found almost everywhere. Now, even our power plants are using Chinese technology.

Under the so-called fast-track program, state-owned power utility PT Perusahaan Listrik Negara (PLN) is building 35 coal-fired power plants to provide an additional 10,000 megawatts (MW) of power supply over three years up until the end of 2009.

Ten coal-fired power plants with a total capacity of 6,900 MW will be built in Java, while 25 others, with a total capacity of 3,100 MW, will be built outside Java as part of the US$8 billion fast-track program. Of the 10 projects in Java, eight have been won by Chinese companies.

A consortium led by Shanghai Electric, for example, recently kicked off the construction of the 1,050-MW Pelabuhan Ratu power plant, which is the biggest project under the fast-track program.

Aside from Shanghai Electric, a number of other Chinese companies, including one of China's largest power companies, Harbin Power Engineering, have won projects under the fast-track program.

PLN expects to sign one more contract with another Chinese company, China National Machinery Industry Corporation (Sinomach), for the construction of the 600-MW Tanjung Awar Awar plant in East Java.

With the Chinese known for their low prices, it is easy to guess why PLN has turned to Chinese firms rather than European or Japanese ones, which have built most of the state firm's power plants over the last few decades.

It is estimated that for a power plant with a total capacity of 1,000 MW, Chinese companies are willing to submit bids in the region of between US$700 million and $800 million, while a European company, such as France-based Alstom or Germany's Siemens, would charge between $1 billion and $1.1 billion for such a plant.

"As part of this fast-track program, we don't really need high- end technology. What we need is technology that can be applied right now. I believe we can upgrade the technology later on," PLN president director Eddie Widiono told The Jakarta Post recently.

Aside from the price issue, he said there was no reason why PLN should not pick Chinese companies as long as their technology satisfied all the requirements.

"We must remember that in the past, power plants were built under G-to-G (government-to-government) collaborative arrangements with some European countries. We see now that China can also produce good-quality power technology, which is able to compete with other foreign products," Eddie said.

Time magazine has reported that the development of China's power technology was driven by rapid domestic industrialization, which pushed demand for electricity up by almost 61 percent from 2002 to 2005, when the government of China ordered a massive push to modernize and expand power production. The upshot of this was that many new power companies emerged.

However, with the local market becoming saturated, these companies are looking overseas for new customers. According to a Citibank report, the rate of growth in China's power-equipment industry is expected to slow to just 3.5 percent between 2006 and 2010, forcing power companies to look for new customers in other parts of Asia and Africa.

Given that Chinese power companies import most of the required equipment, analyst Fabby Tumiwa questioned the quality of the products themselves given the fact that they were mass-produced using template-design engineering.

"The technology for electricity is not the same as other manufacturing industries; it needs to be produced specifically for each order so as to ensure that the technology is suitable for the location where the power plant will be sited," he said.

PLN project coordinator M. Dalyono told the Post on Thursday that before the commencement of construction, PLN would review the designs proposed by the Chinese contractors as they were often not suitable for the location.

He also admitted that price was the main consideration in choosing the winning bidders. "We invited all companies to bid, not just the ones from China. But it turned out that it was they who offered really competitive prices," Dalyono said.

Commenting on this, Fabby said that PLN should not be considering price alone. It also needed to have regard to efficiency and maintenance costs.

"They should have learned from the Cilacap power plant, which was constructed by China's Chengda, that Chinese technology is less efficient compared with the technology from Japan and Europe. As it has a lower heat rate, the plant needs more coal than its Japanese or European competitors to be able to produce the same amount of electricity," Fabby said.

However, for PLN, it seems likely that the price tag will continues to be the most important factor, with many of the power projects located outside Java also having being awarded to Chinese companies.

The head of the government's power-sector development program, Yogo Pratomo, said that of the 25 projects to be built outside Java, Chinese contractors had already won seven projects. Other firms were still negotiating for the remaining 15 projects.

The economic relations attache of the Chinese Embassy in Jakarta, Fang Qiuchen, told the Post that besides taking part in the crash program, Chinese investors had also been vying for power projects under Independent Power Producer (IPP) schemes with PLN.

Under such a scheme, an investor builds and operates the power plant, and then sells the electricity to PLN. One of the biggest IPP projects awarded to a Chinese firm to date is the 2,400-MW, coal-fired power plant in Bangko, South Sumatra, where China Hua Dian has been appointed as operator.

A Shanghai Electric representative, Mi Qi Ting, said recently that he believed that Indonesia's power sector still had a lot of room for growth, which meant that it would continue to be attractive to Chinese firms.

Regarding product quality, he said that his company has 10 years of experience in the power industry, and its technology has been acknowledged in other countries, such as Iran, Pakistan, India and Vietnam.

He said that his company intended to help develop the Indonesian electricity market, either through national or IPP projects. Shanghai Electric is the contractor for the Pelabuhan Ratu project, which is the biggest one under the fast-track program.

Indonesia, a country of more than 220 million people with 9 percent growth in electricity demand per year, represents an attractive market for power firms as currently more than 40 percent of its population in rural and remote areas lacks access to electricity.