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SBY Makes Ultimate Decision

“It is my wish that in the first 100 days of this administration, eradication of judicial mafias as part of an overall reform of the legal system will run well and effectively,” the president said.

JAKARTA (PP) – President Susilo Bambang Yudhoyono, contrary to what many politicians and analysts have said over the past week, was firm and decisive on the Chandra/Bibit case, according to prominent academics.

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he chairman of the Constitutional Court (MK), Moh Mahfud MD, last week said that the president’s nationwide televised speech saying that he prefers to see the case dropped, as recommended by Team 8, showed firmness and fell within the “corridors of law.”

“The President was decisive because he said it should not be brought to the court,” said Mahfud, a graduate of the Yogyakarta-based University of Gajah Mada.

Mahfud added that the president had also been careful in choosing his words as “No matter what, the president cannot intervene in the case as that would be unconstitutional.”

“That falls under the jurisdiction of law enforcement bodies such as the Attorney General’s Office (AGO) and the police.”

President Yudhoyono, in remarks on the case, had earlier said that “it would be better if, in the interest of the general public and their sense of justice, that the police and the AGO do not bring the case to the court.”

He also called on ‘corrective’ measure against the police, the AGO and the anti-graft body KPK.

Echoing Mahfud’s statement is a legal expert from the University of Jambi (Unja), Winarno SH, who said the president’s stance on the Team 8 recommendation on the Chandra/Biti case was “very wise and firm.”

“As a head of state SBY showed wisdom by putting the national interest above all,” Winarno told Antara last week.

He also criticized legal experts who made comments on the case in ways that only confused the public, adding that “they should not be giving incomplete analyses and remarks.”

“SBY’s stance was correct as it helped to maintain unity in a nation that had been divided over the issue,” he said.

President Yudhoyono had earlier said he had been listening to the views and opinions of all sides regarding the legal case of suspended anti-graft body (KPK) commissioners Bibit Samad Rianto and Chandra Hamzah.

The President, in a get-together with news editors here on Sunday on the week before last, pledged that that the government would make the right decision to put an end to the polemics regarding the two KPK deputy chairmen.

“I have been listening to the

“The President was decisive because he said it should not be brought to the court,” said Mahfud.

thoughts, opinions and positions of the general public in Jakarta and in other regions. I also heard what was reported by the police and the attorney general although I did not make any technical interference. I also listened to the Team 8 and various sides, and had consultations with MK and MA,” the president said.

The head of state expressed his stance of staying away from the legal area and refrain from taking action beyond his mandate.

He said that the party which had the right to determine whether or not a person was guilty was a court of law.

Meanwhile, his spokesman said the president believes the police and the AGO will in the days ahead take action on the case.

Julian Aldrin Pasha said that the substance of the president`s speech last Monday was very clear for the police and the AGO to take action.

Julian said the president`s speech was clear and “I think the attorney general understands what the speech means and at who it is aimed at.”

The national police announced transfers of posts of several highranking as well as middle-ranking officers on Tuesday, including the transfer of the controversial chief of detectives, Commissioner General Susno Duadji.

The police have also handed over the case to the AGO, and that it is now up to them to decide on whether to prosecute Candra and Bibit or not.

In a related development, President Yudhoyono is said to preparing a presidential decree (Keppres) to re-activate Bibit Samad Rianto and Chandra M Hamzah as the anti graft body KPK’s commissioners.

“If the police or the AGO decides to halt the Chandra/Bibit case, both are entitled to be ac-

tive again,” said a member of the presidential staff that handles legal, human rights issues, and corruption, Denny Indrayana.

Denny, who teaches law at the University of Gajah Mada, said the president would soon issue the Keppres once the police or the AGO issues a decree nullifying the case.

In another controversial case the president has instructed Police Chief General Bambang Hendarso Danuri and Attorney General Hendarman Supandji to speed up the legal process on the Bank Century case.

“I will also take internal government measures and speed up the legal process against Bank Century executives. I have assigned the police chief and the attorney general to do so,” President Yudhoyono here last week.

He pointed out that the global economic conditions at the time also prompted a number of oth-

Photo: www.presidenri.go.id

er countries to adopt certain economic policies.

“We should understand that the measures on Bank Century were taken at a time of crisis.

Many countries took measures to rescue their banking industries.

What BI (the central bank) did in this regards was in an abnormal condition,” he said.

Bank Century was taken over by the Deposit Insurance Agency (LPS) late last year after it faced a liquidity problem.

The government later provided a bailout of Rp6.7 trillion in a move that was much criticized by the public.

The President acknowledged that many questions emerged in the public about the process of disbursing the bailout funds to the bank.

“What the House of Representatives and the public are paying attention to now is the extent to which the process of making a

decision to bail out to Bank Century was accurate and proper,” he said.

The president’s resolve to put the nation’s judiciary in order took center stage when he said judicial mafias in the country had reached an alarming level, forcing him to take concrete action to root it out completely.

Speaking at a plenary cabinet session here recently, the president said, “We are going to formulate concrete steps, including what I will do as president to fight judicial mafias.”

The president said if the legal mafia eradication effort ran well and effectively, it would greatly benefit the Indonesian people at large.

“It is my wish that in the first 100 days of this administration, eradication of judicial mafias as part of an overall reform of the legal system will run well and effectively,” the president said.

Central Bank Mulls Limiting Foreign Ownership in SBI Analysts have voiced concerns over the excessive amount of hot money that poured into the country through SBI.

Danamon economists said that too much foreign capital inflow into portfolio investments, especially in SBI, could create an unstable capital and financial transaction balance and thus increase the volatility risk of the rupiah,as they are not stable funding sources and as such can be pulled out at any time.

Sharing the view is Bank Mandiri Economist Mirza Adityaswara, who sees no positive impact from foreign capital inflow in SBI on economic growth. He said hot money could even create a negative impact as its possible sudden outflow may cause the rupiah to plunge.

He added a bold move from the central bank is needed to stop foreign investors from investing in SBI by revising Bank Indonesia regulations.

He said Indonesia is not getting any benefit from foreign investment in SBI because they could not be allocated to other sectors.

In fact, he added, it is only burdening the central bank as interests have to be paid.

“It is much better to allocate the money in the stock market, bonds or state bonds,” he said.

He went on to say that the recent rupiah appreciation was mostly driven by the increasing level of capital inflow in SBI and that the rupiah will quickly depreciate once the capital rushes out.

BNI Chief Economist Tony Prasentyantono acknowledged that curbing foreign ownership in SBI could slightly change foreign investors’ positive perception on Indonesia but said the measure is much better and more acceptable than imposing capital control.

“We do not want to see BI’s monetary costs swell next year because of excessive capital flow in SBI,” he said.

BI is predicted to suffer a budget deficit of up to Rp22 trillion

THE ECONOMY

MANAGEMENT

TOURISM

From Recession to Growth

A Leader’s Role in Managing Organization Culture

Pura Luhur Uluwatu: Beautiful and Sacred

By Eka Putri

B

ank Indonesia, the central bank, is considering limiting foreign ownership in shortterm Bank Indonesia promissory notes (SBI) after projecting a budget deficit of up to Rp1.905 trillion at the end of the year.

“We are studying the possibility to limit foreign ownership in one-month SBI papers. We still need to review its pros and cons before implementing the policy,” BI Deputy Governor Darmin Nasution said recently.

Analysts have voiced concerns over the excessive amount of hot money that poured into the country through SBI. Sustainable Development Indonesia economist Dradjad Wibowo urged the government and the central bank to tighten capital market and financial regulations to curb the hot money flow.

He said various measures needed to be considered and imple-

mented to prevent speculations that could threaten the national macroeconomic stability. He also suggested the government to regulate all policies related to fund managers, even increasing tax on stocks and bonds by 2% as implemented by the Brazilian government.

Wibowo said he has not seen any concrete action yet from both the government and BI to solve the problem.

Nasution acknowledged that regulators still have no plan to limit foreign ownership in SBI despite the soaring amount of interest the central bank has to pay.

Foreign ownership in SBI reached Rp48 trillion as per November 2009 out of a total of Rp280 trillion. According to BI data, the central bank will have to pay up to Rp18.335 trillion in monetary costs at the end of the year, with a large part of the

THE REGION

Singapore: Back on Track

Singapore was the first country, after the US, which officially announced it had been dragged down the abyss of recession as a result of the global economic crisis.

PAGE 4

For many countries, including Indonesia, the transition from recession to sustainable growth would not be an easy one. The world has changed and the economic landscape is now different.

PAGE 6

chunk going to SBI interest payment.

Meanwhile, BI estimated it will only gain a revenue of Rp16.429 trillion, which translates into a deficit for the central bank.

Calls for the central bank to curb foreign ownership in SBI has mounted, as such a measure is considered crucial to minimize the negative impacts brought about by the hot money flow. It is also aimed at getting foreign investors to shift to longer maturities like three-month to one-year SBI notes.

Leaders who are able to develop their organization culture effectively possess certain qualities and beliefs which are beneficial for overall organization performance.

PAGE 10

next year.

Meanwhile, Capital Market and Financial Institution Supervisory Agency (Bapepam) head Fuad Rahmany fears that hot money could become a bubble risk. Rahmany said he hasn’t seen it happening yet but added that actions are needed to prevent it from happening as it can impede economic growth.

He said the current inflow of capital into the country is still positive for the economy, attributing it to Indonesia’s relatively stable macroeconomic fundamentals.

Meanwhile, BI is predicted to allow foreign investors to continue buying SBI. CitiGroup Economist Johanna Chua said there are three reasons why BI will not curb foreign investment in the

short-term instrument.

“Curbing hot money will bring a negative impact on the rupiah exchange rate,” she says.

She added many can argue that foreign investment in SBI is speculative and non-productive and therefore it is best that the government find other alternatives to diversify foreign funds to other local instruments such as government rupiah-denominated bonds, corporate bonds or shares.

On the other hand, Indonesia’s shallow financial condition and non liquid bond and stock markets have caused foreign capital diversification to concentrate on SBI. “So, limiting foreign ownersahip of SBI will only trigger capital outflow and weaken the rupiah,” Chua was quoted as saying

by detikcom.

Secondly, the central bank will be seen as inconsistent. Calls to curb foreign ownership in SBI emerged after the central bank disclosed that it was suffering a budget deficit due to swelling monetary costs.

Thirdly, inflation rate is moving upward. The widening production gap and rising commodity prices will trigger inflation to rise next year.

“Giving room to rupiah volatility by curbing hot money in BI will disrupt BI’s main goal of managing inflation. BI calculated that for every 1% depreciation of the rupiah, it will add 0.07% to the inflation,” she explained.

Chua suggested BI to minimize intervention costs and ease inlationary pressure by allowing the rupiah to appreciate.

One of Bali’s holiest temples is not only majestic but also offers a spectacular and sweeping view of the Indian Ocean and, of course, stunning sunsets.

PAGE 13

Bank Indonesia, the central bank, is considering limiting foreign ownership in SBI

Photo courtesy of: www.swaberita.com

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The President Post

November 27, 2009

www.thepresidentpost.com

Viewpoint B

y now citizens should already have come to realize that, like most true leaders, President Susilo Bambang Yudhoyono has his own style of leadership.

Furthermore, he has shown no signs of altering his own brand of nation management, much less under pressure from the public or media, and least of all from politicians.

A career Army officer with fours stars on his epaulet when he left military service and became a cabinet minister in 1999 under former President BJ Habibie, Yudhoyono has over the years developed a style of leadership all his own.

Granted that his style in managing the nation has exasperated some, if not many, depending on who you listen to, it has nevertheless brought him to where he is today not once but twice.

“So who are all these people to tell me how I should manage the nation,” the president may often wonder in moments of reflection.

His detractors rightly contend, albeit from a narrow and superficial viewpoint, that the president’s management style is fraught with unnecessary hesitance, acute indecisiveness and excessive caution. Such traits, they quickly point out, do not conform to what is required in a crisis-ridden nation such as Indonesia.

His supporters have countered by saying that final results are what matter, so forget about the benign specifics by which they are attained.

Presidential spokesman Dino Patti Djalal noted in his book on Yudhoyono’s leadership that “The president is never at a loss for ideas and is able to distance himself from conventional thinking. This enables him to take decisions with very strategic impli-

The Leadership Style of SBY Like most true leaders, President Susilo Bambang Yudhoyono has his own style of leadership.

By Taufik Darusman Photo: www.presidenri.go.id

cations.”

“I will not be pushed,” the president said a few days before he appeared on nationwide television to comment on the findings of the Team of Eight last week.

However, no sooner had he finished commenting on the team’s report did politicians and analysts berate him for being wishy-washy,

that the president has been vague in where he actually stands on the case, a statement by Constitutional Court Chief Mahfud MD may be helpful in putting things in a better perspective.

dragging manner in which law enforcers prepare to dismiss the case, one may also expect Yudhoyono to deal later with the people who refuse to read between the lines of his statement.

“As I see it, the president was firm because he said the case should not be brought to the court,” Mahfud said. “It

To the extent that the president’s leadership style is a contentious national issue, it may perhaps not solely be rooted in him but in our post-reform political setting.

Ten years since reform set in and allowed democratic life to run its course after three decades of authoritarian rule, we seem to have produced too few people able to manage change.

As a matter of fact, the president did accept, in no uncertain terms, the team’s recommendation by suggesting that the case be dropped “in order to serve the larger interest and the sense of justice of the public, but by taking into account the laws vested in the Attorney General’s Office and the police.” indecisive and out-of-touch with the public over the controversial high-profile case concerning antigraft officials Bibit Samad Rianto and Chandra M Hamzah.

As a matter of fact, the president did accept, in no uncertain terms, the team’s recommendation by suggesting that the case be dropped “in order to serve the larger interest and the sense of justice of the public, but by taking into account the laws vested in the Attorney General’s Office and the police.”

While many continue to insist

also at the same time reflects his understanding of the law, which is that a president cannot intervene in legal process.”

The president also, again as a matter of fact, endorsed another major recommendation from the team calling for law enforcement officers to be reassigned.

In fact, two days after his call the National Police not only dismissed the controversial Susno Duadji as its chief of detectives, it also left him with no strategic post.

As one takes note of the foot-

The situation becomes even more problematic as there are too many who believe they are just as capable as the next person to govern this nation. Little do they realize that if you can’t even run for sheriff, as the saying goes, how can you ever run for governor, let alone for president?

Yudhoyono must now be missing Andi Mallarangeng, the combative former spokesman and now the minister of sports and youth affairs, who would go out of his way to defend the president on just about any issue.

If the president is indecisive at all, it is actually with his failure to rebuke, if not to “reposition” some of his cabinet ministers and presidential staff for not coming out forcefully in his defense.

The President Post

www.thepresidentpost.com

November 27, 2009

3

Law Peace, Prosperity and the Rule of Law Editor’s notes: While currently embroiled in a high-profile rule-of-law battle, with the Corruption Eradication Committee (KPK) under attack, Indonesia recently entered into a Partnership and Cooperation Agreement with the European Union which, inter alia, inaugurates a dialogue between the two on the rule of law.

Swedish Foreign Minister Carl Bildt, representing the Swedish Presidency of the European Union, asserts, “Experience has shown again and again that respect for human rights and the rule of law is a prerequisite for lasting peace, prosperity and progress.”

The benefits of the rule of law can be wide ranging and far reaching, and in this article Frank Richardson explains the power of the rule of law in facilitating enterprise and transforming societies.

A

ntonio Maria Costa, head of the United Nations Office on Drugs and Crime (UNODC), credits the rule of law with being a means to achieving all eight Millennium Development Goals: “There was a clear correlation between weak rule of law and weak socio-economic performance,” he says.

“As a result, the ‘bottom billion’ of the world’s poorest people were suffering the most from the effects of crime and corruption.”

Huge differences exist in gross domestic product per capita from country to country, and these cannot be explained simply by the abundance or lack of natural resources. Japan, for example, has few natural resources, yet it is one of the richest countries in the world. The efficiency with which a country turns its capital and natural resources into goods and services, leading to high levels of per capita income, appears to be a key factor and one which is aided by good governance and

strong rule of law on which the market economy is based.

Law and economic progress

Amartya Sen, the distinguished economist-philosopher and winner of the 1998 Nobel Memorial Prize in Economic Sciences for his work on welfare economics, states, “It is hard to understand the history of economic change, for example the rise of capitalism as an economic system, without acknowledging the role of non-economic influences, among which legal changes figure prominently.”

He asserts that, “capitalism did not emerge until the evolution of law and order and the legal and practical acceptance of property rights had made an ownershipbased economy feasible and operational. The efficiency of exchange could not work until contracts could be freely made and effectively enforced, through legal as well as behavioural reforms. Investment in productive businesses could not flourish until the higher rewards from cor-

ruption had been moderated, and in this too, legal and behavioural changes played their part.”

Similarly, another Third Worlder, the Peruvian economist, Hernando de Soto, known for his work on the informal economy, also credits the development of property rights as being key to economic development.

“The origin of the rule of law,” he says, “which will allow a mod-

es together and divide labour effectively in order to raise productivity. Without the rule of law this is not possible. He points out that property is very important to the poor trying to make money from trading, and it is only when the right to such property is recognised in law that it can be preserved and exchanged nationally or even internationally. The need in societies, where the rule of law is weak, to “satisfy tribal chiefs, crooked cops, corrupt politicians, bad judges, difficult neighbours and even the terrorists” seriously dilutes property rights hampering the creation of wealth through enterprise. Corruption, by seriously undermining the rule of law and, thereby, weakening property rights, creates a much higher level of risk for investors, thus deterring investment and dampening economic growth. It is for this reason that countries with less corruption tend to have higher levels of GDP per capita.

In order, for instance, for labour to be productive it needs to be educated and, here again, the rule of law has an important part to play. ern nation to grow and so bring peace, stability, and prosperity to the world, is property rights. And the rule of law will actually generate prosperity.”

To de Soto, a nation’s wealth is the result of the efforts of entrepreneurs to bring resourc-

Unlocking the assets of the poor

De Soto points out the vast extent of the assets of the poor, and in so doing indicates the huge scale of their potential if they were to be converted into capital by virtue of the rule of law.

“In Egypt,” he says, “the poor

own outside the law 92 percent of all the buildings and 88 percent of all the enterprises, which are worth $248 billion. That’s equivalent to 55 times the value of all foreign direct investment in Egypt since Napoleon left, including the Suez Canal and the Aswan Dam and 70 times all the bilateral aid that they have received.”

bour to be productive it needs to be educated and, here again, the rule of law has an important part to play. In many countries legal reforms gave people the right to free state-provided education and obliged parents to send their children to school, thereby equipping future workers with skills that could be used, or that could be built upon, for use in industry.

Furthermore, properly functioning legal systems provide the legal instruments and entities that are required for economic development, such as legal tender, shares and debentures, and legally recognised corporate entities with limited liability. In turn, it is the strong legal protection for investors that has brought about the development of sophisticated financial markets enhancing an economy’s ability to bear risk.

This ability to spread risk over a multitude of investors is critical for entrepreneurship and economic growth.

The development of education played a critical part in Asian economic expansion. This has been particularly evident in Japan where educational priorities and the right to school education had a leading role in initiating speedy economic expansion. In Japan as a whole, between 1906 and 1911, education accounted for up to 43 per cent of municipal and local authority spending, and books had assumed a far more prominent role in society than in either Britain or the US.

Constitutive parts of a whole

The extent to which laws are effectively enforced depends very much on the effectiveness of the judiciary, the absence of corruption, and the low risk of both contract repudiation and government expropriation. The way the law was initially transplanted to and received by a country is an important determinant of these factors. It is thought, for instance, that had Ecuador, which adopted French law in the nineteenth century, been in a position to develop its own legal system internally or to adapt the transplanted law better, in 1994 its GNP per capita would have been ten times high-

Amartya Sen, echoes de Soto’s view that the great value of the rule of law in creating wealth can be far-reaching.

“Legal and judicial reform,” he says, “is important not only for legal development, but also for development in other spheres, such as economic development, political development, and so on, and these in turn are also constitutive parts of development as a whole.

This is like a thickly interwoven textile.”

In order, for instance, for la-

Transplants and dysfunction

er than it was.

Where a legal system is seriously dysfunctional, perhaps, because transplanted law does not sit well with features of the feudal-like society in which it has been required to take root, corruption, violence and poor legal competency are likely to be pervasive. So too will be the deleterious consequences of this, such as injustice, human rights abuse, conflict and distorted scarce resource allocation, manifested by poverty, unemployment, disaffection, environmental destruction and, perhaps, extremism.

Allied interests

It is often felt that there is a serious conflict of interest between entrepreneurial capitalistic activity and human rights; but, for the most part, the law and economic development are complementary and synergistic. While being aware, therefore, that abuse, exploitation and other excesses can and do occur in enterprises, we should not lose sight of the fact that robust economies depend on clear laws that govern societies and commerce, as well as a strong, independent legal system that impartially enforces laws and contracts. These ingredients that help ensure investors are not subject to arbitrary forces and can risk investing capital, make for greater legal predictability and equality before the law, which is very much the basis of, rather than being at odds with, rights that support human dignity.

Frank Richardson can be contacted at f.richardson@ti-web.org

4

The President Post

November 27, 2009

www.thepresidentpost.com

The Region

Singapore: Back on Track

criminals flee to escape the arms of the law.

In consistence for being a country where the law reigns supreme, Singapore agreed to the idea but, in typical Singaporean fashion, linked it to a Defence Co-operation Agreement (DCA) that would allow her to conduct military training in Indonesian territories.

While many Indonesians would question the wisdom of such a linkage, the fact remains that Jakarta had agreed to the idea.

At the conclusion of the lengthy bilateral official talks, which apparently had not involved the House of Representa-

Singapore was the first country, after the US, which officially announced it had been dragged down the abyss of recession as a result of the global economic crisis.

Text and Photos by Taufik Darusman

T

hings are back on track again as the island state’s economy, which had been growing negatively, posted a positive figure in the third quarter of the year.

Data released by the Singaporean government last week showed that its GDP in the third quarter of the year reached 14.2% on a quarter-to-quarter basis.

On a year-on-year basis, the figure was 0.6% in the third quarter, a major breakthrough as during the second quarter of the same period it contracted by 3.3%.

“In effect recession in Singapore has come to an end,” says Ravi Menon, a senior official at Singapore’s trade and industry trade is quoted as saying by AFP last week.

For 2009 as a whole the government has retained its earlier projection of a contraction of 2-2.5%, but for 2010 the figure is expected to be 3-5%.

Singapore was the first country, after the US, which officially announced it had been dragged down the abyss of recession as a result of the global economic crisis.

In the first quarter of the year the economy contracted by -10.1% as exports plummeted.

Signs of recovery were already apparent in the property market, especially in the luxury segment, as foreign buyers descended upon the island-state to grab prime apartments.

In a recent report The New York Times wrote that the number of apartments priced at S$4 million (about US$2.9 million) that were sold in the third quarter reached 210 units, up from 87 and 15 in, respectively, the first and second quarters.

“The sales rebound primarily has been driven by mass-market and mid-tier properties, but a few recent transactions indicate the high-end luxury sector has also started to pick up,” the report further said.

The 21 heads of governments who converged in Singapore early this month for the two-day AsiaPacific Economic Cooperation (APEC) conference accounted for 50% of the world’s GDP. By any measure it was a re-

markable high-level gathering indeed, but no less impressive is the profile of the host county, whose population of 4.5 million people is hardworking, intelligent, and disciplined.

Last August Singapore celebrated its 44th birthday as an independent country, and is now one of the most prosperous countries with one of the best educated population in the world.

As President Susilo Bambang Yudhoyono recently vowed to overhaul Indonesia’s education system that he finds out of sync with the needs of a modern society, he might want to look to Singapore as a role model.

US President Barack Obama, who was also in Singapore for the APEC meeting, once said, “The future belongs to the nation that best educates its people.”

Singapore definitely fits the bill, for here is a country that is ‘obsessed’ with education to the extent that it grants subsidies to their intelligent and talented citizens.

It has gone out of its way to make sure its citizens get the best kind of education; many educators from the west are said to come to the country to find out what makes the country tick.

For obvious reasons, it is neither financially feasible nor socially practical for Indonesia to emulate what Singapore has done and is still doing in the field of education.

But Singapore lies only 90 minutes of flight time away

from Jakarta; as a rich neighbor it is likely willing to share its experience (and perhaps some of its wealth) with Indonesian educators on how best to go about in revamping our outmoded education system.

Like Indonesia, Singapore is a multi-ethnic society with a culture that has been enriched by the diversity.

Seldom, if at all, do you hear the members of the society engaged in conflicts in ways that would make news in major international media.

First-time visitors from Indonesia are always impressed by the fact that the majority of its citizens live in clean and well-maintained public housing, and the buses and subways are clean and punctual.

Sure, Singapore is no nirvana and may be said to only come close to a Utopian society.

But that is sufficiently laudable, which explains why more and more Indonesians – they are the largest among international visitors to Singapore – come to the country less for their hedonis-

“Singapore is a place that keeps re-inventing itself. Shopping malls are either newly built or revamped such as the Orchard Central,” Sharon Liew, Marketing Communications and PR Manager of the Intercontinental Singapore, told this writer.

tic and consumptive urges.

Nowadays, Indonesians go there simply to experience the orderliness and the vigor of a civil society, something that many here often pine for but are hapless and downright lazy to establish for the good of their societies.

As in most cases regarding close neighbors, ties between Indonesia and Singapore has its downsides.

In recent times this involves Indonesia’s desire to have an extradition treaty with the country, to where most of Indonesia’s alleged

tives (DPR) that would ultimately ratify it, the extradition treaty and the DCA were signed in Bali three years ago.

In no time at all came the political storm, as the DPR, feeling slighted for being left out, declined to ratify the agreements.

It was arguably one of the most embarrassing if not bizarre episodes in the annals of IndonesiaSingapore relations.

For here was Indonesia, the socalled ‘big brother’ among ASEAN states, reneging on a pledge made to its ‘younger brother’.

There was much blame to go round on the Indonesian side but, in typical Indonesian fashion, officials decided to sweep it under the rug and let it die a naturally political death.

It is so convenient to dismiss Singapore for its size – it is no larger than Greater Jakarta – which was what BJ Habibie once

did.

In what was a politically incorrect statement, the former president called it “a little red dot in the region.’

If so, and it is definitely not, it is a shiny and inspiring dot that never fails to impress Indonesians.

There are no bad days in Singapore, only good days with slight variations.

And the best days to be there is now, when the city lights up and exudes a festive atmosphere in preparation to welcome Christmas and New Year.

And nowhere is the holiday fever more apparent than in Orchard Road, one of the world’s most famous shopping strips.

70% of tourists visit Orchard Road, which has 30 malls, 800 food and beverage outlets and 3500 retail shops, according to the Singapore Tourism Board (STB).

Now, perhaps even more visitors roam the treelined street, as it features glitzy decorations and hanging ropes of golden, blue, orange and red lights with pedestrian walkways abound with mock Santa Clauses—all in place until January 3.

A new fixture at the crossroads of the city’s premier shopping enclave is the $700 million Ion Orchard. It took three years to build, and now boasts eight floors with snaking escalators and 335 shops selling high-end products and food.

Ion Orchard is not about catering to hard-core shoppers only, but also to art lovers. Last month the Ion Art Gallery featured the works of Swiss-Chinese artist Franklin Chow, comprising paintings and mixed media installations that may be best described as simple elegance or ‘elegant simplicity at its highest form.

Not to be missed is while you’re in the neighborhood is 313@Somerset, the city’s leading retail destination. Apart from world brands it offers, it has the distinction of being located just right above a MRT station and, even better, houses Food Republic, whose variety of Oriental consumables match its reasonable prices.

“Singapore is a place that keeps re-inventing itself. Shopping malls are either newly built or revamped such as the Orchard Central,” Sharon Liew, Marketing Communications and PR Manager of the Intercontinental Singapore, told this writer.

“And you’ll notice that Indonesians from all walks of life are everywhere here.”

If you’re beginning to feel too familiarized with Orchard Road,

hop over to Marina Bay, which is set to become more than just an Orchard Road wannabe.

Dubbed Singapore’s crown jewel, the area is rapidly developing as a prime plot which in the future will be the site for the annual Formula One race, New Year’s Eve countdown, National Day Parade and luxury residential blocks.

As Singapore is ever re-inventing itself, new tourist attractions are in the offing, one of which is the 49-hectare US$4.3 billion Resorts World Sentosa on the island of its namesake.

Set to open in the first quarter of next year is the much-awaited Universal Studios theme park, the only one in Southeast Asia.

Featuring 24-themed rides, including the world’s tallest pair of dueling roller-coasters in the world, it is expected to accommodate five million visitors a year.

Ever the city that keeps the faith in superlatives, the resort will also feature the world’s largest oceanarium, Marine Life Park. Housed in eight hectares of land containing 20 million gallons of water, the park includes such heavyweights as tiger sharks and rays.

“Indonesian travelers have traditionally been Singapore’s number one visitor source, making up close to 18% of total visitor arrivals last year. Indonesians are no strangers to Singapore, given our proximity and accessibility,” Sin Yee Lee, Communications Manager of Resort World Sentosa, the company that manages the mustsee site, told this writer in Singapore last week.

“But we are confident we can still offer a brand-new experience for Indonesian travelers, and further boost interest in Singapore as a destination.”

About 1.7 million Indonesians visited Singapore last year, a figure that is likely to grow by 4-5% this year, according to official sources.

“We hope to see the figure rising even higher as we are aware that Indonesia’s economy is sound and growing at a remarkable pace,” says Ms Liew.

Ms Lee concurs, saying that “Indonesians are always at the forefront when it comes to checking new attractions in Singapore.”

Sentosa also targets ‘serious’ travelers such as art lovers, who will be visually and intellectually feasted at next year’s “Live! Singapore”, a nothing- short-of-spectacular arts and entertainment trade show that offers an industry conference and live performances.

Slated to be a four-day event (June 8-11), the annual event is expected to attract some 1500 artists, arts managers, producers and agents from around the world.

A member of the committee that oversees the event says that “Live! Singapore” will have “an international focus”, and as such is different from other performing arts markets in the world.

Indeed, leave it to Singaporeans to come up with things differently.

The President Post

www.thepresidentpost.com

November 27, 2009

5

The Region

ASIA ON THE MOVE

The Big Challenge for ASEAN Asia is on the move, regionally as well as globally, by showing its remarkable performance in the wake of the global recession.

By Atmono Suryo

A

REGIONAL COOPERATION

sia is on the move, regionally as well as globally, by showing its remarkable performance in the wake of the global recession. Asia is also experiencing a rapid development of its business (production and distribution) networks. An important point to note is the expanding growing regional interdependence and integration, all driven mainly by market forces.

International observers rightly remarked that Asia today is becoming an economic powerhouse. Part of this success story is the growing interactions of their economies. The trend toward integration is gaining momentum, economic observers concluded.

Therefore, an important trend to observe is the development of Asian regionalism, which is marked by the present of a number of major economic groups, namely ASEAN, ASEAN+3, East Asia Summit, APEC and ASEM. In a study undertaken by the Asian Development Bank on “emerging Asian regionalism”, Indonesian Minister of Finance Sri Mulyani Indrawati remarked in her foreword that “Asia learned the hard way in 1998 that the absence of regional cooperation can cost an economic fortune….enhancing regional integration and cooperation is important to build stronger and more resilient economies”.

This is an important policy objective which is often not well understood by many skeptical observers in Indonesia. With the

APEC Asia-Pacific Economic Cooperation ASEAN+3 ASEAN plus three countries, as shown

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Economies

covers the whole South East Asia region and plays a central role in Asia.

In terms of GDP in 2007, Indonesia ranked fifth ($433 b) among 16 countries in Asia, below Japan ($4,380 b), China ($3,241 b), India ($1,166 b), Korea ($970 b) but above Thailand

2005 Cambodia China, People’s Rep. of Hong Kong, China

GDP at market prices

(million)

($246 b), Malaysia ($187 b) and Singapore ($161 b). For the year 2020 Indonesia is expected to retain its present economic position.

In this era of globalization and rapid growth in technology, external cooperation has become an important vehicle to stimulate domestic economy. It will take

2020

2005

GDP at PPP

GDP per capita

($ billion)

(at market prices)

Average growth rate

($ billion) 2020

2005 - 2020

2005

2020

2005

2020

13.8

18.6

6

15

6.3

20

48

454

806

1,303.7

1,422.8

2,244

5,877

6.6

5,333

13,970

1,721

4,131

6.8

7.1

178

353

4.7

243

483

26,094

49,718

1,101.3

1,295.7

779

1,748

5.6

2,341

5,255

707

1,349

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218.9

259.5

287

611

5.2

708

1,506

1,311

2,355

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127.8

123.3

4,549

5,806

1.7

3,870

4,939

35,604

47,088

48.1

50.5

791

1,580

4.7

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2,052

16,441

31,287

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3

5

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10

18

508

694

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137

313

5.7

300

682

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10,064

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85.3

103.3

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166

3.6

250

421

1,158

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4.3

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117

240

4.6

180

371

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48,980

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22.7

24.4

355

641

4.0

590

1,067

15,674

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64.8

69.5

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347

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445

877

2,721

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394

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Korea, Republic of Lao People’s Dem. Rep.

Integrating Asia European Union United States World

Lao PDR Lao People’s Democratic Republic

SAARC South Asian Association for Regional Cooperation Notes: ASEM includes also the European Commission as a member. For CAREC, the PRC’s membership is focused on the Xinjiang Uygur Autonomous Region.

Source: Asian Development Bank

too much time to depend only on limited domestic sources. Countries have to be willing and to be prepared to undertake closer regional and international cooperation.

ASIAN REGIONALISM

The center of gravity of global economy is shifting to Asia, which sees China and India in the lead. As observed by the ADB

Population and gdp projections for 2020 Population

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Economic architecture: regional and transregional forums

rapid development of regional and international cooperation there is the continuous fear that Indonesia will be worst off. This shows the lack of national confidence that still prevails in the country. In terms of size, resources and economic growth, Indonesia’s position in Asia is in good order, especially in ASEAN, which

CAREC Central Asia Regional Economic Cooperation

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296.4

331.2

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19,904

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75,001

3.6

54,976

93,057

7,230

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Sources: Asian Development Bank staff projections based on International Comparison Program data from ADB 2007c

ASEAN is right at the center of Asia. As expected by the world community the time has come for Asia to be in the lead to help to accelerate global economic recovery towards sustainable growth and prosperity.

To that end, with Asia on the move, that will also be the big challenge for ASEAN. (Asian Development Bank), Asia’s economy is already similar to that of Europe and North America. Asia’s influence in the world continues to rise. It is therefore of strategic importance for Asia to work out and develop an emerging Asian regionalism to

underpin and support its sustainable growth.

Important points in the study undertaken by ADB show that regionalism can benefit Asia as follows: • Cooperation on macroeconomic policies • Enabling Asia to cope with such issues as global imbalances and financial shocks • Linking the strength of the diverse economies in the region to enforce Asia’s economy in this competitive world • Boost productivity • Sustain the region’s growth and undertake pro-growth strategies • Connect capital markets to enhance financial stability, reducing costs and sharing of risks • Pool the region’s large foreign exchange reserves • Strengthen the region’s and countries; financial stability • Build required infrastructure to reduce inequalities and smoothen the flow of goods and services • Create regional mechanism to cope with such matters as environmental issues, safety and health questions Further extensive work will be required to prepare the road towards greater regional cooperation.

WORLD AFFAIRS

Asia’s position in world affairs has grown: Asia is rated to be on par with North America and

Europe. It is strongly represented in the G-20 and the BRIICS grouping; it is presently the fastest growing region in the world as Asia is very strong in trade.

Asia has become an attractive region for the world community to conclude economic partnerships. The recent APEC summit held in Singapore has clearly demonstrated Asia’s increasing importance in world economic affairs.

This is demonstrated by the presence of many world leaders at the summit. President Barack Obama made a special effort to attend the leaders meeting and to participate in the special ASEAN-US summit—the beginning of stronger US-ASEAN relations.

It is expected that through the APEC mechanism Asia’s reach will expand to countries around the Pacific Ocean. It involves large potential countries such as China, Russia, Japan, Australia, New Zealand and ASEAN, all the way to countries on the other side of the Pacific, namely Canada, the United States, Mexico, Peru and Chili.

From the outset Indonesia has a stake in the development of the Asia-Pacific region. It will be recalled that the Bogor Declaration, which is considered to be an important landmark in the development of APEC, took place right in the center of Indonesia.

Presently, the United States’ interest is again focused on the development of APEC and ASEAN, which benefits Asia.

Asia is on the rise and to that end Asian regionalism must grow and become an effective mechanism to strengthen the economies in the region and to build a dynamic economic community which would benefit the world.

ASEAN

ASEAN, with its vast experience, is well-placed to start building the emerging architecture of regional cooperation covering East Asia in particular. As stated clearly by the ADB’s study, “Given its history, scope, and institutional development, ASEAN remains the core of broader regional arrangements”. Furthermore, ASEAN is highly respected for its outward orientation toward the rest of Asia and the global economy.

ASEAN is right at the center of Asia. As expected by the world community the time has come for Asia to be in the lead to help to accelerate global economic recovery towards sustainable growth and prosperity. To that end, with Asia on the move, that will also be the big challenge for ASEAN.

6

The President Post

November 27, 2009

www.thepresidentpost.com

The Economy For many countries, including Indonesia, the transition from recession to sustainable growth would not be an easy one. The world has changed and the economic landscape is now different.

From Recession to Growth We can safely assume that East Asia will have a significant role to play in the proposed reform of the global economy. Five East Asian countries are members of the G-20, namely China, Japan, India, South Korea and Indonesia.

ASEAN as a regional grouping will as now be closely associated with the workings of the G20.

By Atmono Suryo

T

POSSIBLE SCENARIOS

he world is presently in the midst of a critical transition, from the worst recession since W.W. II to global recovery. The traumatic years of 20082009 seem to be over. It’s now the years of contracting global output, plummeting trade, disappearing jobs, and financial disarray. Consumers and business confidence have plunged to its lowest level.

For many countries, including Indonesia, the transition from recession to sustainable growth would not be an easy one. The world has changed and the economic landscape is now different.

The global economy will not be as strong as before the recession.

World demand and consumption will be less and competition will be fierce. Protectionism and short-sighted nationalistic measures could be on the rise.

On the brighter side, the dark clouds over the global economy are clearing up, signaling that the world is about to enter a new but critical transition stage. The goal is to move up from recession to sustainable growth.

This is a boon for Indonesian exports and investment prospects for the coming year look more promising. World-wide recovery is on the rise; faster than many institutions and think have predicted. All the forecasts, however, remain cautionary. The global playground is still slippery and the risk is still there. A number of developments or possible scenarios need to be watched.

The Pittsburgh G-20 Summit 2009

V-TYPE RECOVERY

It is becoming increasingly evident, however, that the global economy as a whole is undergoing the V-Type recovery. It is also unlikely the world would return to a deep crisis situation. Economists in the OECD see GlobPhoto: www.worldbank.org

RECOVERY POSSIBILTIES

A number of possible scenarios apply to individual countries, one of which is the so-called V-Type recovery, the immediate or quick recovery mode.

At one time there was the fear that the world economy would not allow the quick-type scenario to be played out, meaning it will take years for the global economy or for individual countries to recover, and this is often called the U-Type recovery mode.

But the worst scenario is the “double dip” or W-Type recovery, which is often mentioned as risky, in particular for many developing countries, involving internal financial or budgetary collapse; the danger of food shortages; the risk of energy crisis and climate change and natural disasters. Presently, the world is still being plagued not only by falling demand and global imbalances but also by internal discrepancies. In short, the world and individual countries are going through a critical transition stage: from recession to sustainable and balanced growth.

PM Singapore, Lee Hsien Loong

Singapore Prime Minister Lee Hsien Loong has said that there is a growing awareness on market flaws and the importance of governments to monitor and prevent the same crisis from happening in the future.

Photo: www.wikimedia.org

al Economic Recovery to start sooner than expected, but caution remains. However, three countries of the G-7, namely the United Kingdom, Italy and Canada are presently still facing contractions.

Michael Mussa of Peterson Institute for International Economics observed that most forecasters expect that the pace of the recovery will be sluggish. In the US and other industrial countries, unemployment continues to rise.

The IMF is somewhat more pessimistic; saying that while global recession is ending, a subdued recovery lies ahead.

The recent APEC summit in Singapore noted that sustainable recovery is vital, and that the crisis has marked a change in market-based economic moods. Singapore Prime Minister Lee Hsien Loong has said that there is a growing awareness on market flaws and the importance of governments to monitor and prevent the same crisis from happening in the future. In the Asia Pacific region, this sustainability requires the adjustments in global economy to rectify imbalances by encouraging US economy to reduce its deficit and China’s economy to increase its consumption.

FORCEFUL POLICY RESPONSE

To confront the immense challenges that erupted in 2008, there is the need for the world financial community to come up with a forceful response. As it is

the G-20 is pleased to see that the steps they recommended, namely ensure recovery, repair the financial systems and maintain the global flow of capital, have worked. The largest and most coordinated fiscal and monetary stimulus ever undertaken has brought results: this is an important achievement.

The inescapable impression is that most people in Indonesia are not fully aware what has been going on in the global economy. The reason is that Indonesia is only marginally affected by the global recession. Internal domestic socio-political developments overshadowed world events. Fortunately, so far domestic consumption and spending rates are on stream and, in fact, have even increased.

Indonesia should be fully aware, however, that we need to follow the emerging global guidelines, G-20 recommendations and now APEC aspirations.

It is no more possible to act alone and to disregard forceful global policy responses needed to move the world from recession to sustainable growth. Indonesia is now at the forefront in this world, as she is a prominent member of the G-20, APEC, ASEAN, the upcoming East Asia and the BRICS grouping. There is a need for an internal domestic political setup to be fully aware of Indonesia’s position and commitments in the world community.

A warning was raised by the G-20 at their Pittsburgh summit. It rightly admitted that the process of recovery and repair remains incomplete. The greatest problem is in the area of unemployment, which is affecting practically all countries in the world. This is caused by the fall in world-wide demand. Consumers in advanced countries are cautious in their spending with the result that world trade has so far not expanded. Consequently, there is still the need for fiscal and monetary stimulus measures to beef up domestic economies.

THE GLOBAL ARCHITECTURE

There is increasing pressure to reshape the global economy. Even the G-20 at their Pittsburgh Summit has made references to the need “to reform the global architecture to meet the needs of the 21st century …. To lay the foundation for strong, sustainable and balanced growth ….’. This is an important statement which deserves world attention and world agreement. It goes without saying that being in the G-20, Indonesia should provide meaningful and effective contributions.

We can safely assume that East Asia will have a significant role to play in the proposed reform of the global economy. Five East Asian countries are members of the G-20, namely China, Japan, India, South Korea and Indonesia. ASEAN as a regional grouping will as now be closely asso-

ciated with the workings of the G20.

In addition to policies, East Asia economies are presently also powerful world economic players. The strong performance of East Asia has been an important push factor in the rebound of the global economy. The economy of China and India will be important and reliable engines of growth, as both countries will for the next years continue to liberalize their economies.

As confirmed by the World Bank in its latest report on “Asia’s Recovery in the Global Context”, “Asia has rebounded fast from the depth of the global crisis. Initially the region was hit extremely hard, but starting in February 2009, Asia’s economy began to revive. Exports and industrial production began to increase

again, first slowly then rapidly: Asia is now leading as the world pulls out of recession”.

All this implies that in the world stage Indonesia is firmly committed to play a proactive role in the area of diplomacy and in rules-making forums. But she also needs to be proactive on the ground: as a world economic player, in the area of trade, investment, services industry and technology.

But the task ahead for Indonesia is not only to help to reshape the world and to build the New World Architecture, but also, internally, to make progress and reform and to build a new and rising prosperous Indonesia. To that end, the strategy of capacity building is of crucial importance for the country. This will, in particular, involve the private sector.

FIGURE 1: global gdp growth (Per cent; quarter-over-quarter, annualized) ��

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The President Post

www.thepresidentpost.com

November 27, 2009

7

The Economy

APEC: 20 Years On Asia Pacific Economic Cooperation (APEC) was formed twenty years ago based on a commitment to support and to capitalize on the growing interdependence of its member economies.

By Carolyn Sinulingga

A

The starting point

sia Pacific Economic Cooperation (APEC) was formed twenty years ago based on a commitment to support and to capitalize on the growing interdependence of its member economies. With trading blocs among European and North American countries as the backdrop, the creation of APEC serves as a bridge for greater integration between the industrialized and emerging economies on the two sides of the Pacific Ocean.

Slightly different than other existing trading blocs, APEC is a consensus-building forum with the underlying principle of open regionalism. It is characterized as a soft-institution imposing no legally binding rules and a governing body which would, to some extent, intrude on member economies’ sovereignty. It is also an open regionalism forum as APEC rejects the idea of an exclusive trading bloc posing any form of discrimination against non-member trading partners.

To date, APEC fora have been successful in facilitating trade and investment through liberalization, encouraging economic and technical cooperation, and most importantly, maintaining voluntary commitment of leaders to regional objectives, policy cooperation, and convergence. Now, comprising of 21 economies, the cooperation uses the word “economies” instead of “nations” to accommodate the membership of Chinese Taipei and Hong Kong.

APEC represents 54% of the world GDP and 40% of the to-

tal world population. Its member economies are Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, South Korea, Chinese Taipei, Thailand, the United States of America, and Vietnam.

The Bogor Goals

Of greatest importance in APEC’s history is the 1994 Second APEC Summit Meeting held in Bogor, Indonesia. This summit set out an ambitious, longterm commitment of a free and

Actions have been done individually or collectively to curb trade barriers, promote business and investment facilitation, implement structural reform, and cooperate in capacity building programs. These efforts have resulted in the developments on intra-regional relations such as: the lowering of average tariff from 16.9% in 1989 to 5.5% in 2004 (most traditional barriers are low or gone); the implementation of APEC Business Travel Card, allowing the cut of cost and faster entry services for business travelers; and the formation of Economic and Technological Coop-

And, most importantly, APEC is an important non-binding policy harmonization forum which has been successful in leading 21 of Asia-Pacific economies towards a more integrated regional collectivity, something which is too important for Indonesia to ignore. open trade and investment in the region by 2010 for industrialized economies and 2020 for developing economies. If this could ever be formed, the Asia-Pacific region would be the world’s biggest trading bloc characterized by the free flow of goods, services, and capitals. According to the International Monetary Fund (IMF) the combined GDP of all APEC economies is 2.5 times that of the European Union.

Preparing for the attainment of this grand scheme, throughout the years APEC member economies have gradually, but continuously integrate with each other.

eration (ECOTECH) aiming at building capacity and skills at individual and institutional levels.

Benefits of APEC membership

What can we infer from APEC’s attainment for the last two decades?

On October 2009, the Policy Support Unit, an independent team formed to provide APEC with research, analyses and policy suggestions, published a report entitled “Trade Creation in the APEC Region: Measurement of the Magnitude of and Changes in Intra-Regional Trade since APEC’s Inception.” This report was prepared to address ques-

tions on the benefits of an APEC membership.

The findings indicated that APEC has been successful in attaining its goal to facilitate trade creation between 1989 and 2007.

It was observed that: • APEC economies trade more with other APEC economies than with non-APEC economies. On average, an APEC economy exports 2.8 times more to other APEC economy than to non-APEC economies and imports 1.9 times more from APEC economies than from non-APEC economies.

These numbers are similar to that of a Free Trade Agreement.

Therefore, an APEC membership has comparable benefits than that of a FTA. • The share of intra-regional trade with the rest of the world is larger among APEC member economies than that of among EU members, NAFTA members, and ASEAN-7 members (Fig 1&2). It was further elaborated that the following countries contribute considerably to APEC intra-regional trade: China, as the biggest exporter of manufactured goods; Canada, as the biggest exporter of non-manufactured goods; and the US as the biggest intra-regional importer of both manufactured and non-manufactured goods.

Political Achievements

Meanwhile, on the political side APEC has generated several developments in the region. According to Peter Drysdale, one of the intellectual architects of APEC, this forum has served as

a primary political forum in the region. It is said to have done well in facilitating political dialogues and ameliorating tensions among major countries.

Over the past twenty years, Asia-Pacific has been the stage of political disputes: between China and the USA over Tiananmen and Taiwan; China and Japan over trade disputes in 1994; and Australia and Indonesia over East Timor. Dialogues among parties in APEC for a have helped to promote solutions while maintaining positive relations among members. Now, with the rise of China and India, the role of APEC in shaping the new political transformation of the region is becoming even more indispensable.

In the near future, APEC will be obliged to do more to maintain peace and harmony amidst the growing concern that wrong policies from major powers could easily lead to disintegration.

De facto economic integration

What has contributed to these achievements?

In the case of APEC, the absence of binding rules and supra-national authority to govern cooperation among member economies, instead of being characterized as a weakness, serves as a vital strength in facilitating growth and consistent integration. The 21 member economies share great differences in regulations, economic and political system, national aspirations, and social values; some even share historical enmities with each other.

Yet, this unique method has been successful in maintaining leaders’ faith on the process and forming greater sense of common interests and goals, some of the very essential requirements for development of APEC. In this forum, countries are, mostly, focusing on pragmatic economic issues.

In political areas of concern,

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APEC can be considered successful as an advocacy group. This has also made APEC an important actor in dealing with globally-affecting issues. One of its undoubtedly important achievements is bringing China to the table in 1995 on the way to the WTO accession.

Indonesia in APEC

After twenty years of membership, Indonesia has been an active participant in the field of trade liberalization. The adoption of the Bogor Goals, on 1994, reflected the country’s economic focus on liberalization under former President Soeharto. In the summit’s Declaration of Common Resolve, it was also stated as its third objective, “the intensifying of Asia-Pacific development cooperation.” This was Indonesia’s initiative. The government, at that time, was aiming at narrowing the gap in stages of development among economies through cooperation opportunities. Therefore, the growth in the region could be equal, sustainable, and promote stability.

Indonesia also has benefited from the reduction of trade barriers and facilitation of trade and investment through structural reform. This has eased a lot of difficulties faced by the business sector in Indonesia, as most of its trading partners come from APEC member economies. On human capacity building cooperation, Indonesia took advantage of trainings, especially, on entrepreneurship.

Lastly, APEC has been a very useful forum for Indonesia to be engaged in discussions on international economic problems. It is the forum in which Indonesia can project and protect its national interest by giving its thoughts on the issues. Policy dialogues also allow Indonesia to communicate its policies to other member economies. And, most importantly, APEC is an important non-binding policy harmonization forum which has been successful in leading 21 of Asia-Pacific economies towards a more integrated regional collectivity, something which is too important for Indonesia to ignore.

8

The President Post

November 27, 2009

8

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Education T

he Jakarta chapter of Indonesian Legal Aid Institute has called on the government to obey a Supreme Court ruling that bans national exams, but the minister of education has indicated that the exam will be held as planned.

Director of the Legal Aid Institute, Nurkholis Hidayat, says that since the Supreme Court ruling is legally binding, and that the government must not administer the national exam until all conditions required by the court are fulfilled.

Even though the government intends to file for a review of the legal case, the verdict by the Supreme Court must be implemented unless stated otherwise by the court, Hidayat says, adding that the government has misinterpreted the verdict.

He explains that one of the minimum requirements for holding national exam is improvement of teachers’ quality across the Indonesian archipelago. A similarly important requirement is upgrading of teaching-learning facilities. Until these basic requirements are fulfilled, the government must not conduct national exam, he emphasizes.

But Minister of Education Prof. Dr. Muhammad Nuh has confirmed that the government will administer national examinations despite the Sept.14, 2009 Supreme Court ruling that ordered its termination.

Supreme Court Ruling Forces Education Minister to Defend Stance The Supreme Court ruling is legally binding, and that the government must not administer the national exam until all conditions required by the court are fulfilled.

By Allyssya Chairani

The minister was quoted as saying on national television on Nov 29—after Hidayat had made the remark—that the government would seek a thorough legal re-

view of the case, and that students should not have any more doubt on the government’s plan to conduct national exam—which will be held in March 2010.

Photo: www.rakyataceh.com

Until these basic requirements are fulfilled, the government must not conduct national exam.

Uneven Distribution of Teachers a Big Challenge in Indonesia In some provinces there is an oversupply but in others there is a dire shortage of teachers.

By Allyssya Chairani

D

istribution of teachers is a big problem in Indonesia.

In some provinces there is an oversupply but in others there is a dire shortage of teachers. This affects directly the quality of education in the country.

For instance, on primary school level, Indonesia has a total of 1,445,132 teachers spread across 33 provinces. With 209,198 teachers, East Java has the biggest number, while Central Java ranks second with 198,188 and West Java is in the third place with 186,781 teachers.

In contrast, West Papua has only 5,547, North Maluku has 7,665, and Riau Islands have 9,028 teachers. Strangely, while schools in West Papua and North Maluku are poorly facilitated, those in Riau Islands are not, because it is one of the richest provinces in Indonesia.

One could argue that the number of teachers usually corresponds to that of schools and the size of the local population, meaning that the bigger the size of a local population, the bigger the number of schools and teachers. But in Indonesia’s case, that is not always the case.

The nature of Indonesia’s school system is quantity-oriented rather than quality-oriented, meaning that the higher the level of study, the smaller the number of schools. Likewise, the lower the level of education, the bigger number of teachers there are.

On the junior secondary level, Indonesia has 621,878 teachers with East Java having the biggest number of 88,975, West Java with 82,299, and Central Java with 75,355 teachers. In contrast, West Papua only has 2,884, while North Maluku has 4,231, and Bangka Belitung has 2,874 teachers at state-run and private schools.

On senior high school level, Indonesia has a total of 536,639 teachers comprising 305,852 teachers in general high schools and 230,787 in vocational schools.

In general high schools, East Java has the biggest number of teachers totaling 39,046 followed

by West Java with 37,014 while Central Java has 30.186 teachers. In contrast, West Papua has only 1,334 while West Sulawesi has 1,382 and Gorontalo 1,380 teachers.

In vocational high schools,

East Java retains its reputation with 34,482 teachers while Central Java has 33,204 and West Java has 30,551 teachers. In contrast, Gorontalo only has 824 teachers, West Papua has 843 and West Sulawesi only has 1,111 teachers.

At the university level, the number of teachers/lecturers is much smaller. According to government statistics, Indonesia then had a total of 250,357 university lecturers at 2,680 institutions.

During 2007-2008 academic period, for instance, there were a total of 1.090.417 new students accepted, and the number of enrollments stood at 3,805,287, apart from 292,485 graduates.

And as of 2009, the total number of students on Indonesian campuses has stood at 4.5 million people.

As education is such a huge sector that involves so many aspects of national life, Minister Nuh cannot work alone.

He needs support from all interested parties in the drive to produce better results, educators and analysts say.

Jakarta has the biggest number of university lecturers totalling 38,702 while West Java ranks second with 37,633 lecturers, East Java has 35,901 and Central Java has 30,083 lecturers. In contrast, West Sulawesi only has 149 lecturers while Bangka Belitung has 505, and Gorontalo has 754.

In terms of university enrollments, Jakarta still stops the last academic year’s list with 989,029 students, followed by East Java with 442,867 students, West Java with 435,412 students, and Central Java with 294,853 students.

But in terms of the number of higher learning institutions, West Java is on top of the list with 363 universities and academies, followed by Jakarta with 301, East Java with 296, and Central Java with 238 higher learning institutions.

The above figures show that Indonesian education system has

the shape of a pyramid: the higher the level of study, the smaller the number of students and teachers.

The reverse is also true—the lower the level, the bigger the number of students and teachers.

This explains why unemployment continues to soar in the country despite rigorous efforts to solve it. One reason being that employers in the government and private sectors prefer to absorb graduates of higher learning institutions that are much smaller in number than those of senior and junior high schools.

In order to solve this problem, the government is working hard to increase the number of vocational schools while improving their quality in order to meet requirements of the job market.

Another effort that has been undertaken is improvement of teacher’s quality. At the junior and senior high school level, this is being done through what is popularly known as “teachers’ certification program” under which only certified teachers are allowed to conduct teaching assignments.

Meanwhile, at the university level, undergraduates are no longer allowed to teach because the government has made it compulsory for faculty members to have at least a Master’s degree from a recognized university as a prerequisite for being a lecturer. Unregistered graduate and post-graduate titles are not recognized in Indonesia.

Minister of Education Muhammad Nuh is also working to equip schools with broadband Internet connections to enable teachers to gather as much data and information as possible from all the centers of excellence around the world.

He had, in fact, started to do this even when he was still minister of communication and information in the previous cabinet of President Susilo Bambang Yudhoyono.

Now that he is the minister of education, he may multiply the effort, because he is technologyminded minister—having been the rector of ITS, the technology institute in Surabaya.

As education is such a huge sector that involves so many aspects of national life, Minister Nuh cannot work alone. He needs support from all interested parties in the drive to produce better results, educators and analysts say.

“With this I wish to confirm that national exams will be held as planned. So there should be no more questions on whether or not it will be held,” the minister said in an attempt to clear the confusion that followed the Supreme Court ruling.

This ministerial stance is the reason why Prof. Dr. Mungin Eddy Wibowo from the National Agency for Standardization of Education—the institution responsible for national exams— reiterated that the government “shall continue to hold the national exam as planned because it is mandated by Government Ordinance number 19/2005 regarding standardizing of education.”

He elaborated that it is also in conformity with ministerial decrees number 74 and 75 of 2009 regarding final exams for elementary and high schools.”

Before that, the Supreme Court had issued a verdict, strengthening earlier verdicts by the High Court and Central Jakarta District Court, which ruled against implementation of national exam.

A Supreme Court’s verdict is legally binding, according to Indonesia’s law. In the legal lexicon, the government’s move to have the case reviewed will not prevent the ruling from taking effect until the Supreme Court decides otherwise.

The courts maintained that at a time when there are great discrepancies among schools across the archipelago in terms of facility, distribution of teachers, and quality, it is unfair to conduct national exams.

Such centralized exams are too difficult for students in remote areas whose schools are poorly equipped to take advantage of modern sources of data and information. But for those in big cities, the exams are fairly easy.

This is unfair, the district, high, and supreme courts said.

In the verdict, the Supreme Court also asked the government to improve teachers’ quality, school facilities and students’ access to information before it could administer a national exam.

Nevertheless, the government seems to believe that if Indonesia must wait until teachers’ quality and school facilities are standardized and brought to an equal level before it administers national exam, it will need several more decades to make it happen; whereas the teaching-learning activities cannot wait for that. Students must graduate and schools must have some kind of uniformed quality yardstick to rely on.

So, despite its shortcomings, national exam can complement and endorse the performance or every graduating student and its results

add ballast to every school’s prospect of accreditation.

This is part of the reason for Minister Nuh to have said that the government will request a review of the case—apparently because it is much better still to have a handy yardstick whereby to standardize to some extent the quality of education than to have nothing at all in place.

Implementation of university entrance test has been the primary reason why millions of students—who have passed national exam on high school level— are denied entry to any university every year.

His argument is quite logical, because if national exam is not reinstated as a mandatory process, Indonesia will not be able to apply any accreditation system—for the simple reason that there is no quality standard to start from.

In such a case, the output from Indonesian schools and universities will not be recognized abroad because no foreign university will accept students with unclear or questionable quality standards.

The government seems to maintain that if the national exam system is still far from perfect, it is the duty of the entire nation to improve it, but not to abolish the system and have nothing to replace it.

In other words, if one wishes to kill the rats, the right thing to do is not to burn down the house, but find ways to abolish the nuisance.

Rejecting national exam consequently means annulling the national accreditation system.

But maintaining it would also be a problem given rising opposition in society these days.

In the event the national exam is maintained, the homework of the government is to streamline the process in order to ensure objectivity, equal access opportunity, fairness, and accountability.

It is repeated failures in these areas that have motivated many circles to oppose the national exam scheme.

But the government also needs to revamp the system to make sure that schools taking part in the mandatory exam shall be divided in several evaluation categories based on their capacity and adaptability to the national standards.

Given the fact that schools in Indonesia differ a great deal in terms of teaching-learning facilities, the national exam must be categorized accordingly and not be generalized blindly.

Another reason why the minister of education wants the national exam to be upheld is because he wants that to replace university entrance test which is usually a source of corruption involving “seat brokers” around the country.

Implementation of university entrance test has been the primary reason why millions of students—who have passed national exam on high school level—are denied entry to any university every year.

Business RI is World`s Biggest CPO Producer Indonesia is now the world`s biggest crude palm oil (CPO) producer, replacing Malaysia, Amin Tamin Subandrio, deputy to the research and technology minister said here last week.

He told Antara that Indonesia`s CPO production had reached 19.2 million tons per annum, exceeding Malaysia`s 17.8 million tons.

Subandrio said Indonesia was able to become the number one producer two years sooner than previously projected.

Indonesia`s plantation productivity reaches 3.7 million tons per hectare, the deputy minister said.

The oil palm industry now accounts for 4.5% of the national gross domestic product with its foreign exchange contribution to national income amounting to US$3.5 billion.

Although demand has begun to decline ahead of the winter season, price of crude palm oil (CPO) in Europe has almost reached US$750 per ton, an industry executive said.

Laksamana Adiyaksa, executive director of PT Asian Agri, told Antara last week that “the upward trend in CPO price would continue until the end of the year because many consumers would order large volumes to build up their stocks for 2010.”

Investment Must Reach Rp2,000 trillion: BKPM Investment in the country must reach Rp2,000 trillion so that the average economic growth target of 7% in the coming five years is achievable, the investment chief said.

“It is not easy to attract an investment of Rp2,000 trillion, but neither is it impossible. We will work hard to attract foreign and domestic investors,” Head of the Capital Investment Coordinating Board (BKPM) Gita Wirjawan said.

He said that Indonesia has assets that attract private investment which has been targeted at 55 percent of the total investments.

The BKPM chief said that one of the assets is the well-preserved macroeconomic stability.

Meanwhile, domestic investment up to October 2009 climbed 104.5% to Rp32.47 trillion over the same period a year earlier, he said.

“The number of domestic investment projects rose to 212 from 194 previously,” Wirjawan told members of the House of Representatives Commission VI. However, foreign investment in the January-October 2009 period fell 28.8% to US$89.28 billion from US$125.37 billion in the same period last year, he said, adding that foreign investment projects jumped to 1,008 from 950, he said.

He said Singapore topped the list of foreign investors in the January-October 2009 period with a value of US$4.1 billion in 160 projects, followed by the Netherlands US$1.2 billion in 26 projects, Japan US$580.9 million in 103 projects, South Korea US$553 million in 153 projects, and Britain US$521 million in 49 projects.

Pertamina Prepares for IPO The state-run oil and gas company PT Pertamina said it may list some of its units on the Indonesian Stock Exchange next year ahead of plans to launch its own initial public offering (IPO), Antara reported last week.

Pertamina may sell shares in insurance unit PT Tugu Pratama Indonesia, drilling unit PT Pertamina Drilling Services, geothermal unit PT Pertamina Geothermal Energy and energy exploration unit PT Pertamina Hulu Energi, chief financial officer Frederick Siahaan said.

Siahaan said the company would try to list subsidiaries first to increase transparency, adding that Pertamina would retain majority stakes.

Sabang to Operate as International Port in 2012 Aceh province`s Sabang international seaport, which is now under construction, is scheduled to commence operations in 2012, the port`s administrator said.

“The project is to support the economic growth of the Sabang Free Port and Trade Area,” Sabang Port Administrator Teuku Saiful Ahmad told Antara recently.

He said the port would have a pier with a length of 423 meters, and that the total length of the port`s piers was 2,600 meters. The project costs Rp8 trillion.

“Of the total amount of funds needed for the 2,600 meter project, about Rp5.5 trillion will go to a foreign contractor, namely Dublin Port of Ireland,” he said.

For the construction of the 423-meter pier, the government would in stages allocate Rp1 trillion from the state budget.

The President Post

www.thepresidentpost.com

Display until December 10, 2009 /// N0. 04

9

THE INDONESIAN ECONOMY:

Looking up with a Cautionary Note

Photo: www.mobil.sk

While they enjoy significant growth improvement, governments of advanced nations remained cautious in order to keep the global economic recovery on the right track.

By Anton Hendranata, Anton Gunawan and Helmi Arman

T

he global economy is ready for expansion as contraction has slowed down. Meanwhile, Indonesia’s economy has almost recovered in every sector. Labor intensive, non-agricultural sectors such as manufacturing and trade once again posted positive growth. However, their contribution to economic growth remained relatively small as the economy is still supported by sectors that provide low job opportunities.

The balance of payment in the third quarter of 2009 experienced a surplus over the previous quarter. However, the surplus was mainly driven by surplus in capital and financial transactions which were dominated by portfolio investments that could potentially contribute to the rupiah’s fluctuation. The movement of the rupiah has been relatively unstable compared to other currencies in the region. Pressure on the rupiah is expected to continue until the end of the year and the currency unit is predicted to remain at the 9,600 level against the USD.

to rise since March 09 .

While they enjoy significant growth improvement, governments of advanced nations remained cautious in order to keep the global economic recovery on the right track. Economic stimulus that adopts loose monetary policy regime is still needed. Almost all advanced nations maintained low key interest rates except for Australia, which has increased its benchmark rate.

Optimism on global economic recovery continues to grow. In general, the global economy has passed the contraction period and is thus ready to see positive growth. Several economic indicators are showing more positive developments, however.

Advanced nations posted positive economic growth (except for Britain). The US recorded a remarkable growth of 3.5% in Q3-2009 after enduring contraction for four consecutive quarters since Q3-2008 (Graph 1).

Production activities in advanced nations are continuously and gradually improving. Although the yearon-year production growth is still in the negative zone, sluggishness has gradually diminished in the past seven months until September 09.

Have all Indonesian economic sectors recovered?

Has global economic contraction ended?

The confidence in economic recovery continues to grow as reflected in the leading economic indicator index trend, which continued

The high unemployment rate remains a lingering problem, especially in the US, which rose to 10.2% in October from 9.8% over the previous month. The high unemployment rate continues to keep the US public purchasing power weak, a condition that is reflected in the consumer credit growth that fell by 0.6% in September from a 0.4% drop in August 09. If the unemployment problem can be tackled, global economic recovery acceleration will be swifter than expected.

nomic sectors with high growth levels could provide wider job opportunities.

With the global economic condition expected to improve and create a more conducive environment for the domestic economy, Indonesia could see a 5.2% economic growth in 2010, up from only 4.3% in 2009. In Q4-2009, the transportation, communication, financial and construction sectors are expected to propel economic growth.

Inflationary pressure under control until year end

Month-on-month general inflation rate in October was 0.19%, lower than the 0.40% projection by economists. Year-on-year general inflation in October dropped to 2.57% from 2.83% in September. The core inflation, whose movement is influenced by economic fundamentals, showed a declining trend throughout 2009.

In October, year-on-year core inflation stood at 4.52% compared

Under this situation, it is not impossible that pressure on the rupiah may occur due to its unstable movement. The main element that needs to be watched is the growing portfolio investment trend, as they are only short-term financial sources.

Almost every sector in Indonesia’s economy showed recovery, which had started in Q2-2009 and continued in Q3-2009. The quarterly growth level in the mining, construction and transportation sectors have even surpassed the pre-crisis level (Q3-2008).

For its year-on-year economic growth, Indonesia heavily depended on the transportation and communication sectors in Q3-2009, which contributed 34% to economic growth, followed by the construction, services and mining sectors with contributions to the economy reaching 12.9%, 12.6%, dan 12.5% respectively.

However, it is unfortunate that these sectors were unable to provide more job opportunities, which in the transportation and telecommunication sectors reached only 5.7%, while the construction, services, and mining sectors contributed 4.4%, 13.0%, and 1.1%, respectively. It would have been better if the eco-

to 4.86% in September 09.

The low October inflation rate was due to the drop in spending in the transportation and communication and financial services. Meanwhile, other spending groups experienced inflation.

Not many spending components are expected to experience deflation next month. Therefore, the general and core inflation rates are predicted to rise until the end of the year due especially to Christmas and New Year holidays. Despite the growing inflation rate until year end, inflation at the end of 2009 is expected to be relatively low and under control. Inflation is predicted to reach 4.0% at the highest level and that BI will maintain its key rate at the 6.5% level in December.

Balance of payment in Q32009

Surplus in Indonesia’s balance of payment grew US$3.5 billion in Q3-2009, up from US$1.1 billion in Q2-2009. The growing balance of payment surplus is attributed to the surplus in cur-

Communication together with transportation, contributed 34% to ecoomic growth

rent transaction balance and capital and financial transaction balance. The current transaction balance enjoyed a US$1.7 billion surplus, down from US$2.9 billion in Q2-2009.

Meanwhile, capital and financial transaction balance posted a relatively high surplus after experiencing a deficit in the previous quarter. Unfortunately, the balance of payment surplus was dominated by portfolio investment (stocks, bonds, and BI promissory notes/SBI), which are not stable funding sources as they can be pulled out at any time, especially the SBI. Too much foreign capital inflow into portfolio investments could create unstable capital and financial transaction balance, increasing the volatility risk of the rupiah.

An idea that emerged lately is the need to cap foreign ownership in SBI, as it is a monetary policy instrument and the amount of foreign ownership in the instrument is closely correlated to the rupiah’s fluctuation. This idea tends to give a negative sentiment on the rupiah in the short term, especially amid efforts by several emerging markets such as Turkey and Brazil and probably Taiwan too to consider “capital control”.

Rupiah strong but volatile

In early November 09, the rupiah traded at 9,585 per US dollar but strengthened to 9,490 per 19 November, an appreciation of 0.99%.

Meanwhile, the US dollar weakened against other major world currencies (Britain, European, Swiss, Japanese, Canadian and Swedish) by 1.42% (US

dollar index) and 0.82% against Asian currencies (Chinese, Hong Kong, Indian, Indonesian, Korean, the Philippines, Singaporean, Taiwanese and Thai).

What’s interesting about the recent rupiah appreciation is that the rupiah movement was relatively stable over the previous month. Coefficient of variation statistics showed a decline to 0.78% compared to 0.97% in October, which was more volatile. Is this a sign that the pressure on the rupiah until the end of 2009 is over?

Let’s have a look at currencies movement in Asian countries such as Malaysia, Philippines, Singapore, and Thailand during November. It turned out that the currencies of those countries were relatively stable compared to the rupiah except in the Philippines.

The coefficient of variation statistics of the Malaysian, Philippine, Singaporean and Thai currencies were as follows: 0.70%, 0.89%, 0.405%, and 0.30%, while Indonesia’s is 0.78%.

Under this situation, it is not impossible that pressure on the rupiah may occur due to its unstable movement. The main element that needs to be watched is the growing portfolio investment trend, as they are only short-term financial sources. As such, we predict that the rupiah will continue to stay at the 9,600 level per USD up to the end of the year (the same as our prediction last month). For 2010, the rupiah is likely to weaken to the 9,750 level due to pressure from imports and a possible hike in The Fed’s rate next year.

The President Post

10 November 27, 2009

www.thepresidentpost.com

Management A Leader’s Role in Managing Organization Culture Leaders use every available means to influence organization culture. Reward system, Board of Directors composition, reporting relationship, physical design, organization structure, system and procedures and budgeting policy are elements that could help leaders in developing organization culture.

By A.B. Susanto

L

eadership and organization culture is inseparable. Leaders define standards and characters of the organization culture, playing a key role in instilling beliefs, values, and assumptions through their attitudes, behavior, words, and decisions.

Leaders use every available means to influence organization culture. Reward system, Board of Directors composition, reporting relationship, physical design, organization structure, system and procedures and budgeting policy are elements that could help leaders in developing organization culture.

The process and criteria for recruiting, selecting, promoting, and terminating people will also contribute to the organization culture. Leaders prefer candidates who have character similarities with current members regarding style, assumptions, values, and beliefs. These candidates are considered the best people to be recruited.

The leader’s role is also important at the time the organization culture should be changed.

Change should be made when the existing culture is no longer able to support the organization in achieving its goals and objectives. In the book THE JAKARTA CONSULTING GROUP on Corporate Culture and Organization Culture, the authors suggest two factors that trigger changes in the organization culture, namely internal factors and external factors. Internal factors come from within the organization. These include changes in the organization life cycle; desire to create a better business process; application of a new technology and a new leadership pattern. External factors come from outside the organization, which could include changes in business environment; economic, social, and political crisis; and pressure from the stakeholders. Strategic alliances, mergers and acquisitions will also require change in the organization culture.

In order to develop organization culture, leaders often create rituals. For leaders, rituals can be used as a means to instill beliefs, values, and assumptions to strengthen organization culture.

Rituals could help an organization in accomplishing its vision and mission, which are translated into strategies and policies.

According to Deal and Kennedy, there are several kinds of ritual, namely social, work, management, and recognition. Social ritual deals with the relationship among organization members such as the relationship between a superior and his/her subordinates and vice versa, peers, and people from inside and outside the organization. Work rituals include the way organization members do their tasks. Management rituals include how a leader or manager performs managerial function such as planning, organizing, directing, and controlling. Recognition rituals are performed to celebrate certain events.

Schein describes some mechanism in which leaders can consider when they need to change the organization culture. First, promoting people from certain subcultures which reflect the preferred change direction. A well-established company usually consists of several subcultures alongside its core culture. Subcultures emerge because of the division in company’s operations, which are usually based on product, market, technology, geographical location and function.

Second, changing the culture through the application of technology. This involves the introduction of specific technology in order to encourage new behavior.

This in turn will require employees to reexamine their existing assumptions and to consider the possibility to adopt new beliefs, values, and assumptions. Third, recruiting leaders or managers from outside the organization.

New managers usually will bring their own trusted persons and re-

Image: www.demandstudios.com

place those who are considered to be representing the old and inefficient way of doing things.

often find difficulties in managing organization culture due to the pressure to accomplish short

Leaders who are able to develop their organization culture effectively possess certain qualities and beliefs which are beneficial for overall organization performance.

However, many leaders still disregard the importance of organization culture, whereas this issue is one of crucial element for effective leadership. Leaders also

term financial objectives, increasing organization complexity, demand for managing recuring crisis, and lack of understanding about leadership in the organi-

zation.

Leaders who are able to develop their organization culture effectively possess certain qualities and beliefs which are beneficial for overall organization performance. Want (2006) suggests several attitudes and beliefs that a leader should possess which could benefit the development and/or change of organization culture.

Those attitudes and beliefs include becoming a student of the culture, renewal, communication, inclusiveness, trust, and accountability. Organization culture originates from behavior,

commitment, values, business practices, policy, vision, mision, and history. All of these should be evaluated on a regular basis.

Leaders should ensure open communication for all organization members. Reclusiveness and secrecy will only disturb the development of organization culture.

If employees feel that they are not involved, there could be disatisfaction and resistance. Open communication will enable organization members to exchange ideas and resources. Leaders also have to ensure that the development of organization culture will involve all organization members, in order to encourage more

participation. Leaders should be able to build trust among organization members. Members should also feel safe to express their opinion and expression.

The differences emerge in the development of organization culture should be well-managed. All efforts made by a leader regarding organization culture development should aim only for the organization success.

The writer is Dean of the Faculty of Economics, President University, and Managing Partner of THE JAKARTA CONSULTING GROUP.

THE INTERIM MANAGER:

An Effective Corporate and Individual Solution to Crisis Indonesia’s rapidly-changing economy and environment are leading organizations to expand and contract their workforce according to demand.

What has emerged is a widespread use of contracting out work and the rise of “interim managers.”

Image: www.chato-mgt.com

By Pri Notowidigdo

W

hat is an “interim manager?”

Margaret Coles, a journalist who specializes on management issues, described the interim manager as “a new breed of corporate person, who steps in on short notice, sorting out problems, setting up operations or filling whatever gap has suddenly appeared in the management structure.”

The interim manager can play diverse roles. He can bridge a gap or fill one while an organization is looking for a permanent manager. He can also manage a crisis following an unexpected departure or death of a senior employee. He can take charge of a specific project such as a factory move. Or, he can be a “trouble-shooter” and manage a turnaround especially for a company in trouble.

The interim manager provides an effective solution to corporate crises and other managerial issues of finding resources. The organization hires a qualified, highly experienced, free-lance executive and drops him into a business dilemma and provides him with a specific mandate and a limited length of time to implement it.

You may now be asking: “Aren’t we talking about management consultants?” No, there’s a difference. Consultants, in general, offer recommendations and strategic planning. The role of interim managers is to implement, in the short term, but with a view to the long-term interests of the client.

Consultants often have little experience in implementation.

Yet, this is increasingly what clients demand. And, to be fair to consultants like myself, major consultancy firms are aware of this and have increasingly taken appropriate measures to implementation as well.

Apart from the benefits to organizations, interim management also meets the individual’s desire for autonomy and appeals to the successful, experienced professional with entrepreneurial spirit.

Take the case of Anthony Brown, a senior finance and accounting professional. The company where he worked underwent corporate downsizing. As a result, he became one of the

employees who was retrenched.

Suddenly finding himself without employment, what was he to do now? The world financial tsunami sparked massive corporate downsizing so the prospects looked grim for him. Who was going to hire a 56-year-old human resources professional? To make things worse, who was going to hire an expatriate human resources professional in Indonesia?

“When I reflected on my career, I realized that what I was really good at was managing change.

However, once the change was in place, a different type of manager was needed. That meant that I was going to be looking for a new job every one and a half to two years,” he said.

Anthony’s response was to of-

fer his services as an interim manager and he positioned himself as The Portable Change Manager.

The first few assignments came from networking. After a while, he became visible in the market, and was often approached by senior executive search consultants like myself for interim management responsibilities with their corporate clients.

A benefit for Anthony was that prospective employers regarded his age as added-value.

Anthony found that while there were often other candidates who were younger and had better academic qualifications, the client saw in him a lot of hands-on and practical experience.

For the individual like Anthony, or maybe like you, there were a number of valuable lessons learned from being an interim manager. One lesson was that Anthony had learned the value of maintaining a balance between learning and doing, and very importantly, of planning ahead to create options.

Another lesson had been to use

the flexibility, which came from taking greater charge of his own career path, to ensure a healthy balance between work and the other critical life streams – social/domestic, personal health, and general development of the mind.

A third lesson had been the power of networks. Almost every career move he has made and all the most interesting jobs he has done, have come through knowing someone or, more importantly, being known.

An interim manager career is not for everyone. If you value security, an ordered and disciplined life, are not adventurous, it will certainly not be for you. Yet, for an increasing proportion of seasoned managers, interim management is going to be a significant part of their future. Perhaps it will be for you.

The writer is Senior Partner of Amrop – Context Driven Executive Search. He can be contacted at prijkt@cbn.net.id and www.amrophever.com

An interim manager career is not for everyone. If you value security, an ordered and disciplined life, are not adventurous, it will certainly not be for you. Yet, for an increasing proportion of seasoned managers, interim management is going to be a significant part of their future.

Perhaps it will be for you.

The President Post

www.thepresidentpost.com

November 27, 2009 11

Industry Indonesia Set to Become Top Textile Producer To achieve this goal, the government plans to tackle all problems related to the textile industry in the country, including on domestic market share, export orientation and self-sufficiency in raw materials that could help improve competitiveness.

By Eka Putri

I

ndonesia hopes to become the world’s top textile producer or at least belong in the same league as other major textile producing countries such as China and India.

To achieve this goal, the government plans to tackle all problems related to the textile industry in the country, including on domestic market share, export orientation and self-sufficiency in raw materials that could help improve competitiveness.

“There are many issues that need to be addressed in order to become a top world textile producer,” Industry Minister MS Hidayat said during the national textile conference recently.

According to Hidayat, issues that need to be addressed included textile research and development institution, a better understanding of the market system of export destination countries, keeping up with the latest fashion developments and the environment, including the consumption patterns of the export market, self-sufficiency in providing own raw materials and increasing domestic market share.

Hidayat said the textile industry is a labor-intensive sector that could provide jobs for millions of people and therefore any prob-

lems impeding its growth should be eliminated. The textile industry must first control the domestic market share and at the same time bolster exports, he said, adding that this includes improving the competitiveness of the products.

“My wish is to see Indonesia become a giant by 2014, before I finish my term,” he said.

To boost export, the government has required four major seaports to operate around the clock as part of its commitment to boost trade this year. The move has been highly praised by the Indonesian Textiles Association (API).

API Deputy Chairman Ade Sudradjat said the plan would speed up the flow of imports and exports through ports. He said the customs and excise offices should have started operating 24 hours a day long ago like other seaports in Malaysia and Singapore.

Previously the four ports — Tanjung Priok in North Jakarta; Belawan in Medan, North Sumatra; Tanjung Perak in Surabaya, East Java; and Soekarno-Hatta in Makassar, South Sulawesi — were only open for eight hours a day, six days a week.

The new hours, announced by

the government, are being tested at the ports and will be officially implemented in January.

The Tanjung Priok port is anticipating an increase in the amount of general cargo it handles from 9.4 million tons in 2008 to 10.2 million tons this year.

dependenc on imported cotton.

“The dream to become a world giant textile producer could be realized if we can meet our cotton demand,” said Hidayat.

Commenting on the minister’s ambition to make Indonesia a giant textile producer, API Chairman Benny Soetrisno said that is

Indonesia is currently developing innovative textile fibers as part of its efforts to become selfp-sufficient in textile raw materials. It will also gradually increase the level of cotton production.

Textile industry absorbs around 1,841,520 workers or 15% of the total labor in the manufacturing sector. Textile exports last year exceeded US$10 billion.

Indonesia is currently developing innovative textile fibers as part of its efforts to become selfpsufficient in textile raw materials.

It will also gradually increase the level of cotton production.

Data at the Agriculture Ministry show that national cotton production has increased from 1.2 tons per hectare in 2005 to 4-6 tons per hectare last year, gradually reducing the country’s 99.5%

possible provided the government fixs problems related to the industry such as financial support, unstable rupiah exchange rate against the US dollar and smuggling activities that have shrunk local producers’ market share.

“To become a world giant, one must be in the world’s top three,” said Soetrisno, adding that Indonesia is currently number 12, way behind China and India, but number 8 for garments.

API recorded an upward trend in local consumer buying power for textile and garment products in Q3-2009 but predicted

that the downtrend in export demand will continue until the end of the year.

Soetrisno said purchasing power had started to grow in Q3 after a sluggish demand from Q42008 until Q2-2009.

He said of the US$6 billion domestic market potential, local textile products could only tap into around US$4 billion annually, with the remaining market share absorbed by both legal and illegal imported products.

“We don’t fully control the domestic market due to classical problems such as smuggling,” said Soetrisno.

However, API Executive Secretary Ernovian Ismy said that local producers may end up with less than half of the domestic market by the end of the year if the government fails to stamp out illegal textile imports.

He urged the Trade and Industry Ministries to stamp out illegal imports and to enlist the help of domestic producers in doing so.

“Clearer and more transparent action need to be taken by the two [ministries] to stem this wave of illegal textile imports,” Ismy was quoted as saying by The Jakarta Globe.

“They also need to involve us in the process of preventing illegal imports and in conducting field surveys of importers to see whether they comply with the government’s requirements [to be registered as authorized importers].”

Meanwhile, Ade Sudrajat said the domestic market share continues to shrink and blamed the condition on the significant rise in imported textile products flooding the market.

He said the Trade Ministry has given too many import licenses to those [who claim to be] importers/producers, without verifications in the field.

He went on to say that API had complained about the influx of imported textiles in the domestic market, and found that many of

the importers were not producers but traders and brokers.

Aside from illegal imports, Sudrajat also attributed the condition to low import duties imposed on Chinese, Japanese, and Korean products.

licenses to importers/producers based on recommendations and verifications provided by the Industry Ministry.

Industry Ministry Director General for Metal, Machinery, Textile and Multifarious Industries Ansari Bukhari said regulations covering importation of textiles required both verification by the state superintending firm Sucofindo upon issuance of import licenses.

Textile machinery rejuvenation program

“My wish is to see Indonesia become a giant by 2014, before I finish my term.”

M.S. Hidayat Industry Minister

He said import duties on Chinese textiles averaged 5% as part of the implementation of the Association of Southeast Asian Nations-China free trade agreement (AC-FTA). Indonesia has imposed zero import duty on Japanese textiles, particularly for sophisticated ones, because of the Indonesia-Japan Economic Partnership Agreement (IJ-EPA).

The government said it has two sets of regulations controlling textile imports: a 2008 Trade Ministry regulation on imports of particular products such as garments, and a 2009 Trade Ministry regulation on imports of upstream textile products.

Trade Ministry official claimed that the ministry issued import

After launching the machinery rejuvenation program in 2007, the government plans to halt it in 2012. The program was implemented under two schemes that basically provide subsidy and price discounts for companies that plan to rejuvenate their machinery.

Industry Ministry Director for Textile Industry Arryanto Sagala said while the ministry plans to discontinue the program in 2012, it will largely depend on the prevailing situation.

“A similar program in India was held only until 2012. Initially, we wanted to hold it for only three or five years at the most,” he said.

When the program started in 2007, 103 textile companies had registered for the incentive, but only 92 companies were able to meet the requirements imposed by the government. In 2008, only 175 out of 191 companies met the requirements.

This year, only 186 out of 210 companies that registered for the program were ready to realize their investment to buy new textile machinery, which is targeted to reach Rp1.85 trillion.

However, given the low budget absorption in the previous years, the Industry Ministry will slash the restructuring funds by Rp100 billion next year to Rp140 billion, from the earlier allocated budget of Rp240 billion this year.

Developing Digital-Based Technology, Environmentally-Friendly Electronic Products The challenges in the future are to build an electronic industry that keeps up with the market developments related to products based on more advanced technology.

By Rachmat Gobel

T

he fast-moving and inevitable globalization continuously forces us to make adjustments in all areas.

There are at least two key factors that need to be observed with regards to the electronic industry: Market trends (global and domestic) and the extent our industry structure can keep up with market developments.

Market segmentation and national electronic industry

The consumer electronic products are usually divided into two major segments, namely household use and personal use. These markets continue to grow in line with improved economic growth or the public’s rising purchasing power.

The basic or so called “beginning electrical life” for These two factors are very cru- household electronic prodcial in our bid to meet the Na- ucts focuses on radio-castional Industry Policy stipulat- sette players, television ed under Presidential Decree No. sets, electric fans and water 28/2008, jet pumps. which As the purchasing powstates that What’s also important I ndoneer improves, is to produce sia should consumers will move to “enrichhave a reenvironmentallyliable telement electrical friendly and energylife” for products matics industry such as refrigeraefficient products to by 2020. tors and washing cater to consumer However, machines.

The demand. it is hard next stage is seeing to imaga stronger consumine that er purchasing power that will enlarge Indonesia can meet the goal if it is not sup- the market for digital technologyported by a reliable electronic in- based personal use products (bedustry, especially in an era where ginning digital life) such as LCD computer, communications and television sets, personal computcontents industry (CCC) are fast ers/notebooks, digital cameras, Ibecoming integrated, forcing oth- Pods and mobile phones. er sectors such as telecommunications, semiconductor and conGiven the current national, resumer electronic, to be included gional and global economic situin the telematics industry (TI). ation, it is predicted that product

demand for enrichment electrical life group (refrigerator,s washing machines and ACs) and digital-based personal use products such as LCD television sets, personal computers/notebooks, digital cameras, I-pods and mobile phones will c ont i nue to

beginning electrical life products, which still hold a great market potential, and only a few has tapped into the enrichment electrical life segment.

Even fewer have touched the digital-based products. The foundation of the national electronic industry structure in the beginning electrical life product market is still not strong enough. This is why, in part, imports of electronic products and components remain high in the past few years.Without improvements through restructuring and reorientation, the electronics industry will collapse, and the nation’s industry development policies that put the telematics industry as the country’s top commodity will not be met.

Future policy imperatives

grow.

The challenges in the future are to build an electronic industry that keeps up with the market developments related to products based on more advanced technology.

What’s also important is to produce environmentally-friendly and energy-efficient products to cater to consumer demand.

However, this of course requires much advanced technology level and production process. On the other hand, most companies in the country are still focusing on

Restructuring and reorientation of the nation’s electronic in-

dustry development policy is critical. We have to prevent a recurrence of the Fairchild and National Semiconductors cases in the 1980s. At the time two US multinational companies, Fairchild and National Semiconductors, had relocated their semiconductor assembling plants in Indonesia, which actually provided the domestic electronic industry with an opportunity to make a great leap, to

Malaysia.

However, the unfavorable investment climate in Indonesia in 1984 forced them to relocate their plants to Malaysia, which then provided better policies. As we can see, Malaysia’s electronics industry now enjoys rapid growth. As such the challenge to develop a national electronic industry lies in the government providing policies with clear and accurate directions to industry players.

The first step is to form a common perception and sound harmony among related government institutions (the industry, trade, finance, and education minsitries, and legal enforcement bodies) and with academics and research and business sectors.

Securing the domestic market

With a population of more than 200 million people, Indonesia has a huge untapped domestic

market potential to boost competitiveness and the real sector, especially the manufacturing industry.

In the consumer electronic products, the domestic market only absorbed around 34% of national production, or Rp9.8 trillion, from the total Rp24 trillion in domestic market potential (2008), with the remaining controlled by both legal and illegal imported products.

The business sector highly appreciates the government’s efforts to protect the domestic market (especially to anticipate the global crisis) by way of, for example, the issuance of Trade Minister Decree No. 44/M.DAG/ PER/DAG/2008 of 1 November 2008. Under the terms of the decree, the government tightens import activities of certain commodities, including electronic products, by allowing their entries only via five ports, namely Tanjung Priok, Tanjung Emas, Tanjung Perak, and Belawan, as well as Soekarno-Hatta, Makassar and several other airports.

Other pressing issues that need to be addressed, especially related to policies, are: • Import duties harmonization to provide room for both industry and industry players • Components to tap optimally the market’s potential • Acceleration in implementing SNI that refers to global

market standards to minimize smuggling and to protect consumers • Giving SMEs more opportunities to produce “beginning electrical life” products by providing them with bigger access to technology • Provide incentives to boost digital-based electronics • Improving human resources quality in the electronic sector by improving the education and labor regulation systems The writer is deputy chairman of the Indonesian Chamber of Commerce and Industry (Kadin Indonesia) in charge of industry, research and technology

With a population of more than 200 million people, Indonesia has a huge untapped domestic market potential to boost competitiveness and the real sector, especially the manufacturing industry.

The President Post

12 November 27, 2009

www.thepresidentpost.com

Human Capital Seven Steps for Managing and Measuring the Performance of HR

Note that that the learning and growth perspective of the higherlevel scorecard serves as the customer perspective of the HR Scorecard. This is because the learning & growth objectives etc within the enterprise Balanced Scorecard represent the outcomes of HR’s work. HR’s work is carried out within the internal process perspective of its own score-

One of the many benefits of building a functional Balanced Scorecard is that it forces the HR leadership team to debate and reach agreement as to exactly what value they must deliver to the enterprise (outcomes such as talent management, compensation, leadership development, etc,). They must then determine how the HR organization will deliver these interventions and to ask hard questions around whether the function has the required skills to do so - and if not to identify how these will be developed.

The difference between the Balanced Scorecard approach and conventional HR management highlights another key benefit.

Through the Balanced Scorecard, all people management and measurement processes are organized around HR’s deliverables, not around HR’s sub–functions such as benefits, recruiting

or compensation. Debating the scorecard allows senior HR managers from the various specialties to get a clear picture of how HR deliverables work together in ensuring positive people-related results for the enterprise.

For HR organizations within Indonesia, the HR scorecard will likely become a popular and effective tool for HR leaders that are increasingly pressurized to show the value, especially bottom-line, that they provide to the enterprise.

Indeed, our experience tells us that the process that HR leaders must go through to build an HR scorecard might be as useful as the resulting Balanced Scorecard itself. Not only can the process help create a common purpose within the leadership team, powerful outcomes can be achieved

when HR leaders spend time with business leaders in focus groups or one-to-one interviews discussing what is expected from HR (a key input to the Balanced Scorecard creation process).

Through such forums it is often found that there is a big discrepancy between what HR thought they were delivering to the business and the perceptions of line managers. Put another way, HR might have thought it was delivering value to the organization but their business partners might, based on their experiences, think otherwise. With this understanding, HR can ensure that its objectives properly represent the strategic needs of the business units – HR’s customers.

And bear in mind that the Balanced Scorecard is a strategic management framework, so creating a properly formulated and architected HR scorecard enables a strategic mindset to be inculcated within the whole of the HR organization. A HR scorecard can force the function out of an administrative and into a higher value–adding view of how its work impacts the whole organization, as shown in an Enterpriselevel Balanced Scorecard.

But note that it is not unusual that a HR scorecard is built without there being an enterprise-level Balanced Scorecard (or is built as a pilot – to test the waters if you will – before creating and rolling out a higher-level scorecard system).

So let’s consider a seven-step process for creating an HR scorecard that may be used whether a higher-level scorecard is in existence or not.

1

Step one is about taking the time to understand and internalize the strategy of the enterprise. This is clearly the starting point for moving forward. Without this understanding, there is little point in creating the Balanced Scorecard. The HR scorecard assumes that the HR leadership team has a sense of what’s

6

important for the business.

Step six in building the HR scorecard is where the functional leaders set the performance targets that monitor how the function is closing the gaps between present and desired performance.

Wherever possible targets should be stretching and based on benchmarks. But note that although stretching, targets should be realistic as there is little to gain from setting targets that are simply unachievable. This highlights the importance of HR understanding its present capability levels and what needs to be done to close any gap.

2

Step two sees HR pulling from the enterprise-level strategy the key people imperatives (skills and competencies) that are required for delivering to that strategy. These people imperatives will serve as the steer for the subsequent scorecard creation.

3

Step three is the articulation of the strategic ‘people imperative’ questions that the scorecard should answer, such as ‘do we have the talent that we need to be successful in the future?’ and ‘is our HR delivery cost effective?’ Here it is vitally important that HR leaders spend time with business leaders in order to properly understand the people imperatives and aligned questions.

7

Step seven sees HR leaders set the strategic initiatives that will deliver to the targets. By identifying strategically critical HR objectives HR leaders should be able to prioritize initiatives, and thus allocate resources to those that will deliver to the strategy at the expense of those that will not.

4

Step four sees HR leaders debate and agree on the HR strategic objectives, as will be described in an HR Strategy Map. Typically, but not prescriptively, these objectives will flow from a top-level financial objective through effectiveness (how HR is building human capital) and efficiency (how HR is delivering the highest quality services at the lowest possible cost) themes.

Once the HR scorecard is created, the next step is rollout within the function. For HR there may be particular challenges around the use of performance measures, particularly where the function has no real history of working with anything more than rudimentary metrics. That said, devolving the scorecard to individual departments is a powerful way to ensure that all staff in HR are aligned to the objectives on the HR Scorecard and through that to the strategic goals of the enterprise.

5

Step five is about the creation of strategic measures to support the objectives. Sample financial metrics might include the following: Human capital value added: Revenue – (operating expense + compensation costs + benefits) divided by total FTE , which answers the question ‘what are people worth’; Cost per hire: Advertising + agency fees + employee referrals+ travel cost of applicants and staff + relocation costs + recruiter pay and benefits divided by operating expenses, which provides a clear measure of the cost per hire and along with turnover costs show the bottom-line hit taken when employees leave.

For HR organizations within Indonesia, the HR scorecard will likely become a popular and effective tool for HR leaders that are increasingly pressurized to show the value, especially bottom-line, that they provide to the enterprise.

This article is extracted from the book: Managing Human Capital in Indonesia: Best Practices in Aligning People with Strategic Goals (Azkia, Indonesia, 2009)

FIGure 1: Example of a HR Balanced Scorecard Strategy Map ����������� �����

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In an ideal setting, the HR scorecard will be deployed alongside an enterprise scorecard.

When this is the case (and as we shall explain later it often is not), the HR organization must hardwire its own Balanced Scorecard with that of the enterprise. A useful way to achieve this is by using a Human Capital Linkage Model (see figure 3).

card. This linkage sets the agenda for HR’s internal processes and own learning & growth perspective. The learning & growth perspective with a HR scorecard describes what the function must do itself to build the capabilities and competencies to deliver to its customer-focused objectives (customers being the organization’s business units).

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M

any Human Resource (HR) professionals have long argued that the function has responsibility for areas that are too ‘intangible’ or ‘soft’ in nature to be subjected to rigorous measurement and assessment, such as competency development and motivation.

Yet significant numbers of HR organizations throughout the world are disproving this argument. They are building and deploying a function specific version of a popular enterprise strategy management

framework called the Balanced Scorecard. The Balanced Scorecard assesses and measures performance against one financial and three non financial (customer, internal process and learning & growth) perspectives. It does so through a Strategy Map that shows the cause effect relationship from learning & growth objectives through to financial outcomes (an example HR Strategy Map is shown in Figure 1) and a supporting scorecard of measures, targets and initiatives, as shown in figure 2.

James Creelman

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Many Human Resource (HR) professionals have long argued that the function has responsibility for areas that are too ‘intangible’ or ‘soft’ in nature to be subjected to rigorous measurement and assessment, such as competency development and motivation.

Krishnan Rajendran

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Naresh Makhijani

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FIGure 2: HR Balanced Scorecard Strategic Objectives F1

• Increase Shareholder Value F2

Measures (sample)

Targets

Initiatives

HR Effectiveness Price Eaming Ration

10% CAGR

• Increase Human Organization Effectiveness

Revenue per Employee

4.5% growth

HR Efficiency

• Increase HR Organization Efficiency

HR Cost / Employee

<4%

C1

Build Customer Partnership

Service Agreements in Place (%)

90%, 95%, 100%

Service Agreement Program

C2

Customer Satisfaction

Service Agreement Feedback

85% rating

Account Review Program

C3

Employee Satisfaction

Employee Satisfaction Survey

80% rating

Employee Survey

I1

Manage Customer Relations

HR Strategic Plans

90% Participation

HR Strategic Planning Process

Time with Customer

10% hrs/week/ee

• Recruiting & Selection

Benchmark Ranking

Top Ten in Market

• Training & Development

Key Initiatives Tracking (from Linkage Scorecard)

I2

Deliver World Class Services Gold PArtner Program HR4U

• Performance Management • Compensation & Reward • Knowledge Management • Communication & Education • Leadership Development I3

Manage Operating Efficiency • Same as I2

Cost per transaction

5% reduction

Cycle Time

21 days

Cost Training

L1

Develop Strategic Measurement Skills

# of employee trained on measures

50%, 80%, 100%

Scorecard Implementation

L2

Amplify HR Best Practices Sharing

Best Practices Identified/Transferred

90% survey rating

Knowledge Management

L3

Ensure a Shared Mindset/Alignment

Personal Goals Linked to BSC

80%, 90%, 95%

L4

Fill the HR Leadership Pipeline

Key Position Depth Chart

80%, 90%, 95%

L5

Provide information for Decision Making

IT Milestone

80% on schedule

www.thepresidentpost.com

The President Post

November 27, 2009 13

Tourism Pura Luhur Uluwatu:

BEAUTIFUL AND SACRED One of Bali’s holiest temples is not only majestic but also offers a spectacular and sweeping view of the Indian Ocean and, of course, stunning sunsets.

Text and Photos by Taufik Darusman

A

rguably the most spectacular Hindu temple on the island of Bali, Pura Luhur Uluwatu is perched majestically about 80 meters above sea level on the edge of a steep cliff at

the southern part of Bali.

Pura Luhur Uluwatu, a classic expression of ancient Bali, is regarded as one of the six main temples in Bali.

It is one of the Sad Kahyangan Temple in Bali (six big groups of Bali temples) and is situated in Pecatu Village, the subdistrict of South Kuta, Badung Reg e nc y, about 25 km south of Denpasar.

Pura means temple while luhur is “something of divine origin”.

Uluwatu is actually two words combined into one; ulu is “land’s end” and watu means “rock” in the island’s old language.

The area is open to public, so it is not uncommon for its parking lot to be inundated by giant buses transporting tourists from all over the world. But they come not only for the temple but also for the stunning panorama and the to-die-for sunsets.

Dedicated to the spirits of the sea, the famous temple is an architectural marvel built with black coral rocks.

Built in the eleventh century during the era of Empu Kuturan, Pura Luhur Uluwatu is one of the oldest temples in Bali.

(Empu is a title denoting the person’s excellence in literature,

philosophy and craftsmanship.)

Some five centuries later a priest, Dang Hyang Niraratha, rebuilt it to what you see today.

The temple is so sacred that up to the turn of the 20th century it is said that only the princes of Denpasar were allowed to worship there.

A word of caution: Monkeys, always on the lookout for a free bite, abound here, and warning signs remind visitors about their aggressiveness, which can manifest in their going after your sunglass or camera.

There are two ways to reach the temple; the first is taking the steep path along the cliff, while the second is to enter from the candi bentar (gate), festooned with carvings that have become the landmark of the island.

After going through an open central courtyard, you reach the main gate which has two ganeshas (elephant-headed guardian statues) one on each side.

On the left and right of the main gate are shrines, astasari (for festival offerings), a shrine dedicated to Dang Hyang Nirartha, and several other shrines, called bale tajuk, for spiritual guardians of Nirartha—all of them impressive in their own right.

Another but smaller courtyard is in store before you reach the three-tiered pagoda Meru, which is dedicated to Nirartha who, as legend has it, achieved selfenlightenment here.

Best time to visit the temple is during weekdays and before sunset time. This is when the place is tranquil, allowing you more time to explore what is considered to be one of Bali’s most important temples, and to contemplate.

The temple is so sacred that up to the turn of the 20th century it is said that only the princes of Denpasar were allowed to worship there.

It is also the time when you can watch dolphins and turtles in the sea.

The downside, of course, is that you will miss the sunset, which is actually just as beautiful elsewhere in Bali.

While you’re there, make time to visit the beach, considered to be one of Bali’s best surfing spots.

How to Get There

About 45 minutes from Nusa Dua, or 75 minutes from Kuta or Tuban, by car or motorcycle.

There is a minimal entrance fee to enter.

Sarongs are available for rental at the entrance.

Reprinted by permission from Garuda inflight magazine.

The President Post

14 November 27, 2009

www.thepresidentpost.com

Technology Technology and Innovation to Grow Asian Economies

O

IDC also found employment in the Asia Pacific IT industry, and of IT professionals in IT-using organizations, will grow by 2.768 million by the end of 2013. This is a 21 percent increase on 2009 figures. Interestingly 35 percent of all IT employment will be software related.

The study further investigated the role Microsoft plays in stimulating economies by growing and supporting companies with-

E-Government Interoperability Frameworks Power of Technology and Innovation Government agencies at all levels want to harness the transformative power of technology to increase openness, efficiency, citizen satisfaction and ultimately become more service-oriented.

Historically, information technology (IT) in the public sector often operated within silos, resulting in many disconnected systems trying to serve a single citizen population. Unlocking and connecting these silos can enable greater coordination and integration across agencies – and in turn deliver more efficient, effective, and seamless services to citizens. Spurred by this realization and the need for change, governments worldwide are undertaking a variety of eGovernment initiatives, with the goal of transforming how public services are delivered using a whole-ofgovernment approach.

One key element to realizing eGovernment’s transformative potential is the concept of interoperability—the connecting of diverse data, systems, people and processes. A holistic approach to interoperability at the technical, policy, and organizational levels enables governments to focus on the policy and legal issues that must be resolved so different government entities can work together. Effective interoperability also allows governments the choice to combine hardware, software, and services for new systems that will meet their objectives, as well as the confidence that new technology purchased today will connect to their existing infrastructure.

Frameworks: One Tool to Facilitate the Business of Government Interoperability can be achieved in many ways. One tool that has emerged to help optimize the business of government and address governmental interoperability is the eGovernment Interoperability Framework (eGIF). eGIFs can be excellent tools to identify cross-organizational issues to be solved and to plan the extension of services across departments, applications, and to citizens in a more seamless manner.

In order to achieve interoperability and deliver efficient eGovernment services, successful eGIFs should include both technology and policy components. Technology elements include the consideration of standards and architectures required to build and implement key IT solutions. Policies create the necessary legal structure to enable government to fund, execute, and participate in interoperability projects.

When establishing interoperability frameworks, successful eGIFs focus on enabling the business of government, rather than mandating specific technology approaches. Technology and business-neutral procurement policies focusing on business objectives provide governments the freedom of choice to obtain the best “value for investment” over the life of the product or service, while achieving the best solution for meeting established goals. This approach pro-

motes innovation and competition among the broadest range of suppliers, and ensures that companies new to the market, or more focused than the market leaders, can participate equally.

While eGIFs can provide significant benefits, overly prescriptive frameworks can add friction and hinder collaboration between stakeholders, as well as potentially locking governments into outdated, ineffective, or inefficient solutions.

Technology mandates can force interoperability through homogeneity; however mandates have the unfortunate side effect of embedding specific technologies into policy.

These technologies can remain frozen in place despite ongoing market-driven innovation, potentially limiting future interoperability.

Similar problems can occur when a relatively new standard is mandated without proper testing in the market. As a result, many state and national governments and international bodies have recognized that procurement practices and interoperability policies built on objective criteria and maximum technology neutrality achieve the best results.

The most effective eGIFs should provide a framework for analyzing interoperability issues at three key levels – technical, semantic, and organizational – while including the minimum essential guidance to achieve interoperability. The technical issues involved in connecting disparate government systems and services have been largely addressed through normal market innovation, and limiting prescriptive guidance allows the most successful market-driven technologies to be utilized.

Consequently, some of the most successful eGIF programs focus instead on the challenges of semantic and organizational interoperability.

These mature eGIFs recognize the importance of agreement among government entities on how to describe the information they hold in their systems and the processes they perform, while allowing the market-tested technologies to enable technical data interoperability.

Commitment to Openness and Interoperability Technology has fueled economic growth and enabled governments to reach their citizens in new and innovative ways–the challenge now has become enabling all these technologies to work together to create greater citizen value. Innovation is increasingly open and collaborative. Microsoft is beginning to work in more open and transparent ways, sharing ideas, and providing access to intellectual assets, while participating in the broader technology community, including open source.

Microsoft is committed to providing our public and private sector customers with interoperable products and applications to help them reach their goals. The company is developing technologies that facilitate integration and interoperability between current and legacy systems, enabling governments the freedom to focus on the challenges and opportunities of better serving their constituencies.

$4,013,038 in cash grants awarded to NGO partners (USD)

13 Microsoft Innovation Centers are located in Asia

4,884,202 people have been trained through the Community

172 employees across Asia Pacific are focused on

16,500,335 teachers and students have been trained through

24,207 business partners across the region ensure

$27,547,778 in software donations made to NGO partners (USD)

Development

Research and Development

By Emilio Umeoka

missioned from global IT research firm, International Data Corporation (IDC) echoes this sentiment. The study shows IT spending for Asia-Pacific in 2009 will be USD$300 billion (or about 21 percent of the global expenditure) and will grow at 4.8 percent per annum, against GDP growth of 3.4 percent.

7 Microsoft locations focused on Research and Pacific

Technology continues to improve and will continue to be a key driver in any economy positioned for growth and ingenuity.

ver the past 18 months the global economy has gone through a fundamental reset, forcing everyone to asses how they operate and look for new efficiencies to drive productivity, innovation and cost savings. That being said I am optimistic, both the about the imminent opportunities and long term economic prospects for business and policy makers across the entire Asia Pacific region.

Emilio Umeoka The globalization and innovation that made the last decade so dynamic for businesses globally, has not changed. Technology continues to improve and will continue to be a key driver in any economy positioned for growth and ingenuity.

A recent study Microsoft com-

Understanding The Impact: An Overview of Microsoft in the Asia Pacific Region*

in the Microsoft ecosystem. The ecosystem consists of companies that make and sell devices running Microsoft software, or write applications that run on Microsoft platforms. This includes resellers, distributors, service firms, and training companies. What it found was for every USD$1 of revenue Microsoft generates in Asia-Pacific, companies within the Microsoft ecosystem generate USD$10.97.

The fact is in any economy, IT is key to innovation, generating opportunities to create competitive advantage, increase productivity and reduce costs. Companies and governments that

“For every USD$1 revenue Microsoft generates in Asia Pacific, companies within the Microsoft ecosystem generate USD$10.97”

technology is easily accessible

227,268 people have been certified on Microsoft technology

The writer is the President of Microsoft Asia Pacific

Partners in Learning

* Microsoft Asia Pacific consists of the following subsidiaries: Australia, Bangladesh, Brunei, Indonesia, Korea, Malaysia, New Zealand, Philippines, Singapore, Sri Lanka, Thailand and Vietnam.

MICROSOFT ECONOMIC IMPACT STUDIES - ACROSS ASIA The IDC Economic Impact Studies for Microsoft (2009) measure the size of the local IT industry, including hardware, software, and services as well as Microsoft’s local economic impact in Asia Local Investment by Ecosystem IT Spending

pursue innovation to drive new efficiencies position themselves to emerge stronger, quicker and more successfully from these economic times.

Technology Skills Programs

Software Spending

USD$125 billion USD$300 billion USD$42,205 million

Average Local IT industry revenue per $1 of Microsoft Revenue

USD$10.97

Total IT Employees

12,566,590

Total Software-Related Employees Total Number of New Businesses Created (2009-2013)

4,405,145 32,000

The President Post

www.thepresidentpost.com

November 27, 2009 15

Mining The Contribution of Mining to National Prosperity The mining industry contributes 4% of Indonesia’s GDP, up by 1% after hovering at 3% or less for years on end.

By Noke Kiroyan

I

had been working overseas and had just arrived back in Indonesia early September 1997 with my boss to take up my job in Jakarta. He noted that the rupiah, which used to be stable at 2,200 to the US Dollar, had dropped to 2,500. Having spent the past six years in industrialized countries I had lost the sense of what the “correct” relation between the two currencies should be. I was aware, however, that in those days the Rupiah had always been maintained at a stable rate to the US Dollar.

It turned out that I came home just as what later is to be known as the “Asian Financial Crisis” was about to unleash its fury. Eventually it engulfed and brought down the political and economic edifice that President Soeharto had meticulously constructed over many decades. The president stepped down in May 1998 and slowly the political and economic situation began to unravel.

While we were going through the entire chain of events, after briefly wondering what it was all about, we all set out to resume what we have been doing previously. We were blissfully unaware that the Indonesian society was about to change while we were thinking of picking up just where we left off in May 1998.

The mining industry was no different from other industries or society at large, for that matter. We resumed the struggle to gain acceptance of our view of how the 8th Generation of Contract of Work ought to look like. In proposals for a Mining bill we included all the improvements that we thought were needed to get the industry moving again after the downhill slide precipitated by the Busang Affair and all its ramifications. There is no doubt that in the late nineties the mining industry stood at ill repute not only in Indonesia, but practically all over the world.

Then came another change that we were totally unprepared for. The devolution of administrative powers to the regions that is popularly known as regional autonomy was ushered in by laws No. 22 and 25 of the year 1999.

The irrevocable march toward greater autonomy of the regions continued relentlessly, unimpressed by all our admonitions about the dire consequences that may result from handing over authority to regions that had no capacity to nourish the mining industry. After rebuking the central government – albeit gently – for not having done enough to promote the mining industry, we suddenly discovered it was actually our biggest ally—we tried desperately to convince everyone who cared to listen that it must have most of its powers restored.

So, a decade down the track, how are we in the mining industry now? Actually, we are doing fine. According to noted Indonesian development economist and Fellow at the Australian National University, Budy Resosudarmo and his fellow researchers, the mining industry contributes 4% of Indonesia’s GDP, up by 1% after hovering at 3% or less for years on end. Considering what the industry has gone through,

we are actually not doing too badly after all. And, it is worth bearing in mind that the 4% is on the basis of an economy that has crossed the five-hundred billion US Dollar mark in 2008. Indonesia is now a member of G-20 and is gingerly settling in into its newly won status as a middle income country.

What we have witnessed over the years may to a certain extent be explained by a diagram (Figure 1) from Daniele Barberis in her book “Negotiating Mining Agreements”. I quote a passage of her book to put the diagram in context.

“In order to understand how host-country governments formulate mining policy it is helpful to consider the nature of policy-making in general. Policymaking at a national level is a complex process involving many factors and reflecting many influences. It requires a state within whose boundaries the process will take place and a government to formulate and implement policy. At the heart of the process lies the national political will.”

Our Constitution is the fountainhead of ideology. All discourses on natural resources – including mining – refer to what the constitution meant to say or is interpreted as expressing the views of our Founding Fathers about this matter. The constitution has gone through a few amendments, but Article 33 remains unchanged. It ordains that all natural resources must be controlled by the state and utilized to the greatest benefit of the people.

The legal construct that is known as the Contract of Work was devised to accommodate this view and simultaneously to allow foreigners to operate mining companies—not on their own right, however, but on behalf of the state as its appointed contractors.

The good of the community as the ultimate goal of the national policy-making process was to be achieved by the economic contribution of the mines working for the Indonesian state as contractors.

Law No. 4/2009 on Minerals and Coal Mining was issued earlier this year. While to some extent providing the much yearned for legal certainty, this is still a work in progress, as several important matters like divestment requirements are yet to be formulated in implementing regulations. Ultimately, everything boils down to dollars and cents. If, after taking into account all the risks associated with mining in this country are quantified and measures have been taken to control them, and a mining company still sees the

figure 1: National policy-making process

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Source: Daniele Barberis (“Negotiating Mining Agreements”)

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opportunity of doing reasonable business, it will carry on. Quite a few have done so.

While the direct economic benefits are an outcome of the business purpose of conducting mining operations, there is another aspect that may contribute to prosperity: Corporate Social Responsibility (CSR), and one of its most common manifestations in the mining industry is Community Development.

The mining industry has taken CSR seriously long before others even started thinking about it.

It is no coincidence that most of the initiatives in the mining industry during the late nineties to practice CSR were driven by subsidiaries of international mining companies. The international mining world in those years began to respond positively to pressures from NGOs and local communities. At the same time, theories about CSR began to coalesce around the concept of sustainable development that gives equal weight to the three com-

ponents for development to be called sustainable. i.e. the economic, social and environmental aspects. The sustainable development movement has found fertile ground in the mining world that was adopting a new way of responding to societal issues after years of contentious relationships between mining companies and many of their stakeholders.

The concept of CSR has evolved further and efforts are currently underway to achieve a common platform on what social responsibility constitutes.

Mining companies operating in remote and economically less developed regions, as is the case with most operations in Indonesia, are very familiar with the topic of community development since more than a decade ago. As the diagram shows (Figure 2), it is part of the core subjects of ISO 2006 that has yet to reach its final stage and be launched in 2010 after prolonged delays. My point is, the mining industry played a very crucial and pioneering role in de-

figure 2: SEVEN CORE SUBJECTS OF ISO 26000

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veloping CSR. It should be very clear by now that CSR is very much ingrained in the operations of mining companies—social responsibility is an integral part of running mining operations, Dissociating CSR from operations would create a disconnect between the two. Not only would there be divergent interests between the people conducting the respective functions, it will be wasteful as well.

What we used to deem as purely technical issues have an impact on the environment and communities. Competence in both areas needs to be developed if we are to run mining operations well these days, which is not too say that such competence would preclude social issues from occurring.

However, they will be foreseeable and to a degree manageable, provided we actively try to find out how we are perceived and why various groupings that have an interest – a stake - in our company view us in different ways that shape their attitude toward and expectation from us.

Without knowing who our stakeholders are we would not know how they perceive the company and relate to it. So, before anything else we need to identify them. The next issue to resolve is the opportunities and challenges our stakeholders present. We will not be able to deal with these issues effectively by imagining there is a fence behind which we can retreat when there is an external threat, as what we perceive as threats will always be there and we need to be able to deal with them confidently. A diagram is included here (Figure 3) to describe the steps in a systematic

figure 3: elements of stakeholder management

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Source: Carroll, A.B., Business Horizons No. 34 1991 (“The Pyramid of Corporate Social Responsibility - Towards the Moral Management of Organizational Stakeholders”)

and much simplified manner: A particular aspect of CSR that is closely associated to mining operations is community development, which is not about doling out company largesse as some people, also within the industry, believe. There is a way to combine business aspects with CSR directly to generate greater prosperity around mining companies in a systematic way.

I once initiated an economic impact analysis by a reputable scientific institution to ascertain the contribution of the mine to the local and regional economy from a macroeconomic standpoint. It is the only way to measure true economic impact objectively, and the resulting multiplier effect may be traced, critiqued and replicated by others using the appropriate scientific tools.

My thinking was to gear com-

munity development efforts in the direction that generates economic growth in the communities by supporting programs proposed by the various stakeholders in a meaningful way. After a few years a similar economic measurement should be conducted to ensure that the company is indeed stimulating growth, and by analyzing the components of regional growth it would be possible to quantify the impact of community development.

There may be better ways of contributing to the local communities, enhancing their prosperity and sustainability of the operations concomitantly. By extension the national prosperity will be increased, and the contribution of the mining industry to GDP may grow beyond 4% over time.

The writer is Managing Partner in Kiroyan Partners.

The President Post

16 November 27, 2009

www.thepresidentpost.com

Infrastructure I

Background

nfrastructure has been a main topic of discussion in Indonesia for the past couple of decades, but delivery of projects has been thoroughly disappointing, especially since the Asian economic crisis of 1997/8. Prior to this, following liberalization of the banking sector in 1989, the early to mid-90s saw the construction of toll roads in the Jakarta area under selected developers, without which today’s traffic congestion would have made travel in the capitol city even more difficult.

Will the Proposed Objectives for Infrastracture be Achieved?

On the question of infrastructure the leadership has agreed that investment in the country’s needs would have to be a priority, and infrastructure became one of the key platforms of the government ticket.

By Dr. Scott Younger OBE

The first private sector power concessions were placed at this time and preparatory work on the Jakarta water concessions was concluded, with the concessions signed with two major international water companies in February 1998 as the political crisis was coming to a head. The collapse of the rupiah saw the halt to a large number of toll roads that had been placed among some new potential developers, albeit these were inadequately prepared to honour the terms of their concessions. It was also a difficult period under the political turmoil of the time for the water concessionaires, and saw the postponement on any further power developments.

The first steps to overhaul the antiquated port operations at Tanjung Priok (Jakarta) and Tanjung Perak (Surabaya) were initiated with the introduction of international container terminal operators in partnership with stateowned port companies, Pelindos II and III, respectively. The next few years saw almost no movement on infrastructure, as the country recovered from the economic crisis, while concurrently a major overhaul took place as the nation transformed itself from an autocratic to a fully democratic structure of government and devolution of government procedures to the regions.

Infrastructure conferences of 2005 and 2006

The outcome of the 2004 General Election process saw the introduction of the first fully democratically elected president and legislature. On the question of infrastructure the leadership has agreed that investment in the country’s needs would have to be a priority, and infrastructure became one of the key platforms of the government ticket.

In early 2005, an impressive event was put on in the Jakarta Convention Centre and attracted a wide range of foreign interest of different hues, investors, funders, developers, etc. The government paraded a long list of priority projects in the various infrastructure sub-sectors. However, as the months followed, with no progress taking place, it was realised that none of the projects was adequately prepared, and the laws and regulations were not in place to attract foreign investment.

The risks and returns were unfavourable.

Following attempts to address some of the issues, and put better laws on the statute book, a further conference, with less ambitious targets, was held towards the end of 2006. While more realism was apparent, government was clearly advised that more work was required on laws and regulations, as well as project definition, before the private sector would start putting its funds into infrastructure development. Even major local banks, which were accumulating healthy reserves, were taking a cool look at entering funds for debt support.

Funding required

Early in the 1990s it was realised that investment in the order of US$15 bn/annum over a period of ten years would be required to provide the necessary build-up of infrastructure to support a growth rate of no less than 7%, the level deemed necessary to improve the unemployment and poverty conditions. It was also recognised that a very significant portion of the requirement would have to be secured from

without suitable replacement and internal lack of realism have delayed the establishment of an industry that is modern and fit to meet the needs of the nation, and which would welcome the absolutely necessary investment from the private sector.

The infrastructure mega project, Suramadu Bridge

private sector sources.

Nowadays, with the lack of investment, whether from the public purse or private sector, the government has assessed that the investment in infrastructure required over the next 5 years to be Rp 1,429 trillion (~US$140 bn), with the government budget only able to provide about US$40 bn.

While significant progress has been made since the mid-decade conferences, it will be extremely unlikely for the private sector to find a level of investment of US$20 bn/annum. There still remains wariness by any form of investor to risk funding Indonesian projects. But it will still be a measurable achievement to have the process underway and significant projects with private sector funding under construction, and this must be a primary goal.

Photo: www.skyscrapercity.com

capital city that the power generation and distribution situation is precarious. People living further afield have had to live with this situation for many years. While the recent Jakarta problem can

be put down to operational error, the whole industry has been languishing for more than a decade.

Both past misguided actions from the legislature – cancellation of the new electricity law in 2004

The infrastructure investment climate

Since the failure to attract investors and developers in 2006, the government has been introducing laws and implementing regulations across the infrastructure sector to try to attract private funding and involvement. Progress has been made, but more remains to be done, which includes education of public sector servants to understand and deal properly with private sector concerns over terms of engagement, including realistic tariff structures and a fair say in operational control.

Several forms of support funding arrangement have been or are being set up through the Ministry of Finance to deal with land acquisition issues, which have been particularly difficult in the need to push on with the much delayed toll road programme, especially for Java, and guarantee funds, as well as special initiatives set aside for assisting infrastructure development in the regions.

However, it is too early to note whether these are going to be effective or adequate in stimulating infrastructure development generally and the level of private sector involvement that is needed.

Priority actions

Urgent attention is required in power, roads and transport, especially, dealing with the long neglect in ports and shipping, and in pursuing the myriad of projects in the area of water and waste.

The recent power cuts in Jakarta have brought it home to the

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PUBLISHED BY Yayasan President University CEO & EDITOR IN CHIEF Ali Basyah Suryo CONTRIBUTORS Atmono Suryo Cyrillus Harinowo Hadiwerdoyo Naresh Makhijani Taufik Darusman Thomas W. Shreve Wuryastuti Sunario Vidya Dahlan

EDITORIAL & ADVERTISING/ CIRCULATION DEPARTMENTS Cory Margaretha LAYOUT & DESIGN Mohamad Akmal

While considerably more large power generation is needed in Java, with real stimulus to output from renewable geothermal sources as part of the solution, proper support with realistic tariffs is required to develop the long neglected supply requirements of the many millions that live elsewhere in the archipelago. Many of these are without any power and others are daily facing unreliable supply. Here there are many opportunities for investing in renewable power such as geothermal, perhaps low temperature in some instances and with mini and micro and run-of-river hydro an obvious target, as well as the introduction of small bio and solar energy solutions. However, quick action on agreeing to realistic tariffs is required, while PLN bleeds money everyday trying intermittently to keep old, badly maintained diesel genera-

tors functioning.

Water storage and supply schemes are a priority; Bappenas has produced a list of 10 major projects that they would like to see constructed using a PPP approach, especially for the transmission of the stored water. Some of the schemes have been attracting interest. The daily supply requirements for the city of Jakarta will continue to be at the forefront of actions needing attention.

With water as the one truly regionalised sector, regional governments need help to upgrade the systems, usually inadequate and inefficient, for which they are responsible. And what about wastewater and sanitation, all highly featured in the Millennium Development Goals and due for realisation in 2015?

With the passage of the new ports and shipping law in March 2007, there is much ongoing discussion of the role of the four state-owned port companies, Pelindos, in future port operations, the need for port expansions and new ports, and where

they should be located.

While Tanjung Priok is due for further expansion, this can only be achieved to a limited extent and there is some urgency in defining a new port or ports locations to serve the industries situated in West Java and Banten, some 50% of the whole national output. The shipping fleet is old and many ships are small; many new ships to meet growing expansion and targets are required. Altogether many billions of dollars need to be invested in the sector over the coming years.

In the meantime, the Ministry of Transportation has to push ahead to put out new regulations which address the issues of the law and the needs of the industry, and encourage private investors to play a major role in providing funds and expertise to this long-neglected and key area of Indonesian transport infrastructure.

Most road infrastructure developments concern expansion of the regional networks, which would be primarily the responsibility of local governments. However, key toll road sections remain unbuilt, especially on Java, and it must be a priority as road funds are now available to assist the process of land acquisition, and to pursue vigorously a steady rate of completion of the trans-Java network. Further, sections that can help alleviate the highly unsatisfactory congestion that increases steadily in the Greater Jakarta area need to be pushed; DKI Jakarta has recently unveiled key routes.

In April 2010, Indonesia will be playing host in Jakarta to a major infrastructure conference and exhibition, Infrastructure Asia 2010. This will be an early opportunity for the government to showcase its serious commitment to investment in infrastructure and attract private sector funding.