Tommy Soeharto named suspect in graft case

The Jakarta Post

JAKARTA (Antara): Indonesian prosecutors have named the son of former President Soeharto a suspect in a Rp 175 billion ($19 million) graft case involving a lucrative clove monopoly, the attorney general said Thursday.

"We've revived the case with Tommy Soeharto as our suspect," said Attorney General Hendarman Supandji.

In the 1990s, Hutomo "Tommy" Mandala Putra, youngest son of the former autocratic leader, chaired an agency tasked with regulating the trade of cloves, a key ingredient of popular local cigarettes.

The government released soft loans to the agency so that it could buy cloves directly from farmers in a bid to improve their livelihoods.

"But he was found to have misused loan money given to the agency to buy cloves from farmers," Hendarman said.

The Attorney General said his office was gathering final documents prior to filing the case with court.

Elza Syarief, Tommy's lawyer, could not immediately be reached for comment.

Prosecutors filed a civil suit against Soeharto last week seeking to recover hundreds of millions of dollars in state funds allegedly misused by one of the former president's charitable foundations.

Soeharto, who stepped down in 1998 following enormous people demonstrations, was charged with graft but escaped prosecution after he was reckoned too ill to stand trial.

The former president and family members deny any wrongdoing.

Since President Yudhoyono's high-profile graft campaign began, officials ranging from a former religious affairs minister to the Governor of Aceh province have been jailed on corruption charges.

The anti-graft drive is being closely watched after critics say it has failed to take on some powerful vested interests.

Kadin unveils road map to industrial growth

Andi Haswidi, The Jakarta Post, Jakarta

In an effort to provide markers for the revitalization of industry, the Indonesian Chamber of Commerce and Industry (Kadin) has unveiled its vision and road map for the next 25 years.

"By 2030, we should have become a nation with advanced industry and a strong commercial sector through improved investment and competitiveness," Kadin chairman Muhammad Hidayat said during a visit Wednesday to The Jakarta Post.

After the crisis, Hidayat said that Indonesia had endured a series of leadership changes, with none of the leaders offering a clear development vision, especially as regards how to make the industrial sector the main locomotive of the economy.

"This vision and industry road map are the product of nine months of research by our economics team, together with more than 100 business associations grouped under Kadin. We are going to soon present it to the President as recommendations," Hidayat explained.

Faisal Basri, the head of Kadin's economics team, said that the business chamber had identified ten business sectors as having the potential to drive industrial development.

The most important thing was to achieve steady economic growth of more than 7 percent beyond 2010 so as to improve investment attractiveness and global competitiveness, boost job creation and reduce poverty.

Of the ten sectors, four -- the textile and shoe, electronics, automotive and shipping sectors -- were identified as priorities by the road map so that the economy could grow at above 7 percent.

"The textile industry is often deemed to be a sunset industry, which is untrue. The only thing that has reached its sunset in this industry is the machinery.

"The industry itself contributed net exports of US$7 billion in 2005 as a result of strong demand and branding," Faisal said.

"We want the 10 sectors to support each other. Take the case of the petrochemical industry and the fertilizer industry; they are cutting each other's throats due to a lack of gas, despite the fact that both are controlled by the state. It would be wonderful if they could create synergies," Faisal said.

In the road map, Kadin wants to see six concrete and strategic steps being taken by the government to help rebuild the country's industrial foundations.

The steps include fiscal incentives to increase investment and competition; financial support for the aquaculture industry; prioritizing of agricultural product development; legal support for the plantation sector; and strengthening bilateral trade relations.

John Prasetyo, Kadin vice chairman for international economic cooperation, said that the vision and road map could serve as a framework for the government in formulating more detailed approaches and policies.

"There is a saying that to have a vision is to be able to forget the past and innovate anew, a process that is also referred to as creative destruction. The question is whether this nation is ready for a new vision?" John said.

I-Box

Industries expected to ramp up economic growth to above 7 percent

Textile and textile products, shoes and sandals

Electronics and components

Automotive and components

Shipping

Industries expected to improve investment and competitiveness

Infrastructure development

Capital goods and machinery

Petrochemicals and fertilizers

Industries expected to contribute to poverty alleviation

Aquaculture

Agriculture, livestock husbandry, forestry, plantations,

farming, food processing

Cultural products

Bank Indonesia, Kadin to set up cooperation forum

Jakarta (ANTARA News) - Bank Indonesia (the central bank) and the Indonesian Chamber of Commerce and Industry (Kadin) agreed Tuesday to set up a cooperation forum (FKKBI) aimed at improving the country`s economic performance.

"This forum is part of our efforts to pursue better cooperation between fund users and providers," the forum`s coordinator, Djoko Sarwono, said.

He expressed hope that the forum would serve as a venue for bankers and businesspeople to discuss a wide range of issues related to the country`s business world.

Bank Indonesia Governor Burhanuddin Abdullah meanwhile said the forum would hopefully become a good institution for bankers and businesspeople to disseminate and exchange information to resolve investment issues in the country.

Since the reform movement was launched a decade ago Bank Indonesia had changed into a monetary institute or central bank which only had special function to maintain monetary stability, particularly to keep inflation in check, he said.

Before the reform movement, the central bank had expertise needed to handle various economic problems, he said.

"We had the expertise during the New Order government. Therefore, we will take advantage of the available resources to promote our economic performance," he said.

Kadin Chief MS Hidayat said Indonesian economic players must do their utmost to catch up with their foreign rivals.

"Vietnam has now been growing too far. We must keep our eyes on this," he said.

Education to get biggest state budget allocation

JAKARTA(Antara): President Susilo Bambang Yudhoyono said he had agreed to give education the biggest state budget allocation among all state-financed sectors in order to support the improvement of the quality of education in the country.

"The education sector will be given priority and the largest amount of subsidy. Believe me, the government with a clear and rational mind will strive to manage and spend the budget more fairly," he said at a meeting with participants of the 3rd national meeting of the Association of Indonesian Private Universities (APTISI) at the State Palace.

The President, flanked by Education Minister Bambang Sudibyo, Minister/State Secretary Hatta Rajasa, Manpower and Transmigration Minister Erman Suparno, said he had agreed to continuously increase the education budget to fulfill the mandate of the constitution.

According to the Global Competitiveness Index of the World Economic Forum 2006-2007, Indonesia now ranks 50th out of 125 countries or 19 grades higher than before in the matter of economic competitiveness.

In the same period, the quality of the country`s education system ranks 23rd. "It is improving. Only Singapore and Malaysia rank above us while other Asean countries are below us," the president said.

Indonesia, Philippines agree to cooperate in energy sector

Jakarta (ANTARA News) - Indonesia and the Philippines in their Joint Committee meeting here on Friday agreed to cooperate with each other in the energy sector, including in development of geothermal energy.

"Indonesia and the Philippines have also agreed to increase their cooperation in the fields of fisheries, agriculture, forestry, education and culture," Indonesian Foreign Minister Hassan Wirajuda said on the meeting`s sidelines.

He said trade relations between the two countries so far had kept on increasing with their bilateral trade in the 2002-2008 period having grown by an average of 18.7 percent per year.

"In 2006, bilateral trade between Indonesia and the Philippines reached a value of almost Rp1.7 billion," he added.

The two countries, Hassan said, also agreed to futher develop their trade and investment relations by establishing more mutual business contacts, removing trade obstacles and increasing exports to each other.

Philippine Foreign Minister Alberto G Romulo said on the same occasion, the cooperation between Indonesia and the Philippines was a meaningful symbol of the two countries` similarities and geographical proximity.

He said the cooperation should be expanded to cover air transportation in order to increase the tourist flows to the two countries.

Besides cooperation in the energy sector, the two countries also agreed to cooperate in security and defense matters, and in the migrant workers` issue.

The meeting was the fourth the two countries have held so far with the third having taken place in Manila in December 2002.

It was preceded by a senior officials` meeting on July 12.

The meeting`s results were to be contained in an agreement to be signed by the two foreign ministers later on Friday.

Government encourages development of creative economy

Jakarta (ANTARA News) - The government will encourage the development of a creative economy which produces culture-based products to increase the state`s foreign exchange earnings.

"The challenge to us is giving an added-value to the products and branding both on the local and global market," Minister of Trade Marie Elka Pangestu told a seminar on fourth stage development: "Cultural Heritage and Creative Economy", here on Wednesday.

Right now, products of the culture-based creative industry contributed only 1.9 percent to the GDP, while in the industrialized countries the contribution reached 30 percent.

Singapore started developing a creative economy in 2005, and its contribution to their foreign exchange revenue had reached 3-4 billion US dollars.

Globally, culture-based creative economy contributed 2 trillion US dollars to the world`s GDP, and may reach 10 trillion US dollars by 2010.

Therefore, the seminar and discussion held during the Cultural Exhibition dedicated by President Susilo Bambang Yudhoyono on Wednesday (July 11), are expected to produce an action plan and blueprint on the development of creative economy.

In the meantime, the Central Bureau of Statistics is determining the share of cultural products of the creative industry in the GDP. And the trade ministry is finalizing the mapping of a culture-based handicraft industry scheduled for completion in October this year.

"All of Indonesia`s cultural creative industries have good prospects on the export market, and it is therefore necessary to be boosted," she said.

She also said that some of the commodities which could be developed as cultural creative industrial products are food spices, advertisement, work designs, the art of dancing, and some other arts and cultural product, like coffee, tea and spices.

"Imagine a country like Korea which has only ginseng, but it can produce beverages, cosmetics and other products from ginseng only," she added.

The minister also said that Indonesia needed a new promotion agency carrying Indonesia`s good image around the world.

"A favorable image will boost investment and trade," she said.

Players in the cultural creative industry would have to make an adaptation on the domestic and overseas market to develop cultural creative products and improve human resources.

Giving an example, she said that "lurik" (kind of striped woven cloth) can be developed into a kimono, and sold to Japan. "Sasando" from East Nusa Tenggara if electrified becomes an electric bass guitar.

Indonesia still adhering to social justice-oriented economy, says Yudhoyono

Jakarta (ANTARA News) - President Susilo Bambang Yudhoyono has said Indonesia still adhered to an economic system marked by social justice even though the world had entered the globalization era.

"In accordance with the consensus reached among our founding fathers, the economic system we adhere to is still social-justice-oriented, not capitalistic nor communistic," Yudhoyono said in his address at a function to observe the 60th National Cooperative Day in Nusa Dua, Bali, on Thursday.

Present at the event which has brought together 2,500 cooperative members were Cooperatives and Small and Medium Enterprises Minister Suryadarma Ali, Trade Minister Mari Elka Pangestu, Culture and Tourism Minister Jero Wacik, Cabinet Secretary Sudi Silalahi, Indonesian Cooperatives Council (Dekopin) chairman Adi Sasono, and former State Enterprises Minister Sugiharto.

On the occasion, the president said that many parties had asked what kind of system was being applied by Indonesia in runnin its economy.

"Under present developments, there is what is known as a neo- liberalist economic system or liberalistic economy. But this system is not our choice because it is in principle free-trade-oriented and frequently considered a distorted imitation of another country`s economic system," the president said.

There also was the capitalistic system where the economy was running based on market mechanisms and marked by efficiency and competition.

"But in reality the liberalistic and capitalistic systems are unable to improve the economy or reduce imbalance among the people. The communistic system which does not believe in market mechanisms also failed to reach its goal," he said.

Therefore, the president said, the globalization era should be understood as putting a premium on equitable coooperative partnerships that are beneficial to the economy and the nation.

He said, 10 years ago the Indonesian economy was at rock bottom because of the crisis that had sharply increased the country`s poverty and unemployment rates as well debts.

However, the president added, the post-crisis economic growth had entered a new period and for the first time since the crisis reached 6 percent.

Lawmakers sanctioned over corruption

JAKARTA (The Jakarta Post) : Deputy chairman of the Honor Council at the House of Representatives, Gayus Lumbuun, said Tuesday the council has imposed sanctions on five lawmakers who allegedly received non-budgetary funds from the Fisheries and Maritime Affairs Ministry.

"We will reprimand two of the lawmakers and submit the dossiers of the other three to the Corruption Eradication Commission for further investigation," Gayus told reporters.

"The Honor Council unanimously agreed on the (imposed) sanctions. We will not uncover their names or their respective factions as regulated in the House's statutes," he said, referring to a council meeting held Monday evening.

However, media reports have identified the five lawmakers as Slamet Effendi Yusuf and Awal Kusumah of the Golkar Party faction, Endin A.J. Soefihara of the United Development Party faction, Fachri Hamzah of the Prosperous Justice Party faction and A.M. Fatwa of the National Mandate Party faction.

Gayus said, however, that the sanctions on the five lawmakers were only the beginning as 39 other legislators are alleged to have illegally received ministry funds under incumbent Minister Freddy Numberi.

Officials fear project leader postings

The Jakarta Post

JAKARTA: Dozens of mayors from Indonesia's eastern regions lodged complaints with Vice President Jusuf Kalla on Tuesday over their inability to build infrastructure in their respective mayoralties.

The mayors said this was because only a small portion of officials were willing to be appointed as leaders of infrastructure projects.

"Only a very small number of people are willing to be project leaders ... and as a result, numerous infrastructure projects in the regions have been put on hold," All-Indonesia Association of Mayoralties chairman Jusuf Serang Kasim told a meeting with Kalla at the Vice Presidential Palace.

Jusuf, also mayor of Tarakan in East Kalimantan, said the officials' reluctance to be appointed project leaders was the result of the many police and AGO investigations into government officials over corruption allegations.

"Their reluctance has also been triggered by the current law which allows for the questioning of government officials in the absence of their superiors' approval. Therefore, we propose the establishment of a memorandum between the Home Ministry, the National Police and the AGO that will require the superiors' approval prior to questioning the officials."

RI, Vietnam to set up pepper agency

The Jakarta Post, Jakarta

Representatives of Vietnamese and Indonesian pepper associations met Monday to tackle the nuts and bolts of establishing a joint committee to improve the marketing, quality and supply of pepper on the international market.

Currently, Vietnam and Indonesia account for over 45 percent of global pepper supply.

Indonesian Pepper Exporters Association (AELI) chairman Hassan Widjaja said the committee would compile statistics on global pepper supply and demand to avoid excess supply that could lead to price collapses.

The committee will be established at the end of the year based on a memorandum of understanding signed April 5, he added.

According to the memorandum, the statistics and information to be collected by the committee would concern such things as crop sizes and prices, quality standards and trade contracts. The committee would also monitor legal and regulatory changes in the importing countries.

"We want to make sure that our two countries obtain adequate information on global conditions in the pepper market so that they can avoid signing contracts that only benefit the buyers," said the deputy chairman of the Indonesian association, Mustakim H. Widjaja.

The committee would hold annual meetings to discuss market conditions and to standardize export contracts.

Mustakim said that exporters currently applied different contracts, including those issued by the International General Produce Association (IGPA) and the American Spices Trade Association (ASTA).

"In the future, we hope exporters from both countries will adopt one standard-form contract to avoid misunderstandings," said Mustakim.

"China and Brazil, who were present at Monday's meeting as observers, are considering joining the committee."

Vietnam is the largest pepper exporter in the world, accounting for 33 percent (90,000 tons) of global supply in 2007, followed by Brazil on 15 percent (40,000 tons) and Indonesia on 13 percent (35,000 tons).

The total global supply for this year is expected to amount to 270,000 tons, while global demand is predicted to reach 376,500 tons, led by rising demand from Russia, China and India.

"With an additional carry-over stock from last year of 59,000 tons, the global supply will suffer a shortfall of 47,500 tons," said Mustakim.

Vietnam Pepper Association chairman Do Ha Nam said that the shortage would lead to higher prices. Prices currently stand at about US$3,500 per ton.

"We predict the price could rise to $4,000 per ton next year if the bad weather and pest attacks prevail," he said.

Indonesia and Vietnam export their pepper mostly to the European countries and the United States.

Vietnam, as the largest exporter, recorded a total export value of $146 million in 2006, and expects the figure to reach $250 million this year.

Minister: Indonesian cooperatives to revive

Jakarta (ANTARA News) - State Minister for Cooperatives, Small and Medium Enterprises (SMEs) Suryadharma Ali launched the revival of Indonesia`s cooperative societies as pillar of the people`s economy by setting up 70,000 quality cooperatives across the country.

"The government has allocated more than Rp3.6 trillion in the 2005-2007 period for the empowerment of cooperatives and SMEs," the minister told Antara here Tuesday.

He appealed to all parties to support efforts of reviving cooperatives.

The minister admitted that the image of the cooperatives has not been so good, and therefore tried to improve them through various programs and activities.

"Cooperatives should no longer become means for corrupt practices, or only giving debts which cannot be paid. It is high time to cooperate with the government in the transparent and independent development of cooperatives," he said.

In the past three years, cooperatives in Indonesia have been playing a significant role in the empowerment of the people`s economy both in the rural and urban areas.

Although constitutionally cooperatives were no longer defined as a pillar of the people`s economy, they have proved themselves as supporters to the life of the financially less fortunate.

He pointed out that about 28 million people have joined more than 133 cooperative societies in Indonesia.

"Cooperatives as the people`s economic corporate bodies have provided financial facilities, consumer goods at affordable prices, marketed the products of their members and contributed to the absorption of workers," he said.

Cooperatives which serve their members to save and borrow money turned out to be able to provide capital to small- and medium-scale enterprises in the rural areas.

The minister said his office would develop this type of cooperatives as a micro-nonbank financial institution.

In observance of the 60th anniversary of Cooperatives Day (July 12) the minister called on cooperative advisors, executives, managers, supervisors, members and sympathizers in the country to turn the 28 million cooperative members into basic capital for their development so that they would be able to create job opportunities and eradicate poverty.

"This is not only a hope but also a strong wish and determination of all the Indonesian people to achieve justice, democracy and prosperity for all," he said.

China executes the former head of its food and drug agency

By Joseph Kahn, The International Herald Tribune

Published: July 10, 2007

BEIJING: China executed its former top food and drug regulator on Tuesday for taking bribes to approve untested medicine, as the Beijing leadership scrambled to show that it was serious about improving the safety of Chinese products.

The Beijing No. 1 Intermediate People's Court carried out the death sentence against Zheng Xiaoyu, 62, the former head of the State Food and Drug Administration, shortly after the country's Supreme Court rejected his final appeal.

Zheng, who had appealed his May 29 sentence on the grounds that it was "too severe" and that he had confessed to the bribery charges against him, became the first ministerial-level official put to death since 2000 and only the fourth since China opened it doors to the outside world nearly 30 years ago.

The official Xinhua press agency announced the execution but did not say how Zheng was killed. In most cases, the court police execute prisoners by shooting them in the back of the head, though recently the police have also used lethal injections.

China carries out more court-ordered executions than the rest of the world combined, according to human rights groups. But even by local standards, the sentence against Zheng was unusually harsh and its execution uncommonly swift.

Read More ....

IMF sees Indonesia 2007 GDP growth above 6 pct, 6,5 pct next years

Jakarta (ANTARA News) - The International Monetary Fund expects Indonesia's gross domestic product (GDP) growth this year to beat the Fund's initial projection of 6 percent, given strong exports and rising levels of direct investment, IMF Indonesian representative Stephen Schwartz said.

"Our (initial ) projection was 6 percent. Based on recent trends, we do see some upside potential, in particular as a result of the strong export growth and if investment picks up faster than our baseline projection in the second half," Schwartz told Thomson Financial.

"I think the government's more ambitious target of 6.3 percent should be achievable," he said.

Schwartz said he expects the Indonesian economy to grow at between 6.5-7 percent over the next few years, supported by rising exports and investments, and lower inflation levels.

Schwartz said he expects consumer price inflation to "finish well within Bank Indonesia's range of 5 to 7 percent this year."

He said benign inflation and the downtrend in the central bank's benchmark interest rate, which currently stands at 8.25 percent, are positive signs for the economy.

"Lower inflation (and easier rates) is an encouraging development because it will stimulate corporates to borrow more and boost consumer sector growth.

Indonesia`s first semester investment up to Rp65.27 trillion

Surabaya, E Java (ANTARA News) - The Indonesian government licenced foreign and domestic investment projects worth Rp65.27 trillion in the first semester of 2007, up 52.60 percent from the same period last year, an official said.

"Of the total, Rp36.9 trillion (US$4.1 billion) came from foreign investment and the rest from domestic investment," Head of the Investment Coordinating Board (BKPM) Mohammad Lutfi said in an investment seminar here Tuesday.

The investment in the second semester of 2007 far exceeded the BKPM-set target of Rp41.54 trillion for the period, he said.

The BKPM had set itself the target of attracting domestic investment worth Rp11.58 trillion and foreign investment worth Rp29.96 for the first half of 2007.

Data from the BKPM show paper, paper-related and printing industries topped the list of domestic investment projects with Rp14.16 trillion, followed by metal, machinery and electronic industries, food industries, plantation and construction sectors.

Meanwhile, basic chemical, chemical goods and pharmaceutical industries were listed as the biggest source of foreign investment with US$1.526 billion, followed by paper, paper-related and printing industries, food industries, mining and trade sectors.

West Java remained the biggest recipient of domestic investment with Rp10.353 trillion, while East Java was the most-preferred foreign investment destination with US$1.567 billion.

"The foreign investment mostly came from Britain, Taiwan, Singapore, Japan and South Korea," Lutfi said.

He said the government continued to encourage investment inflows by easing investment policies.

"The government is committed to overcoming unemployment and poverty. One of the efforts is encouraging investment to creare more jobs," he said.

He said the government aimed to attract US$426 billion in investment in 2009 to achieve an economic growth rate of 6.6 percent.

Reaffirming the ten commandments for businesses

Vincent Lingga, The Jakarta Post, Geneva

Business leaders from developing and developed countries have reaffirmed their strong commitments to conducting responsible business practices based on the UN Global Compact's ten principles in human rights, labor, environment and anti-corruption.

The leaders stated in a declaration at the end of the Global Compact Leaders Summit here Friday, that only through responsible business practices can a more sustainable and inclusive global economy be realized.

The ten principles, which have been promoted by the UN Global Compact initiative since 2000, are in essence the core values of what is now well-known as the "corporate social responsibility" (CSR) concept.

But the basic question is: Are the codes of conduct worth more than the paper they are written on? Will voluntary initiatives such as the Global Compact lead to the types of changes needed to contribute to a cleaner environment, better working conditions, more humanitarian development and the curbing of corruption?

This was one of the toughest questions raised during the summit by the representatives of civil society organizations and business leaders who questioned the reputation of several companies attending the meeting.

However, the Global Compact is not a regulatory instrument. There is no enforcement mechanism beyond public scrutiny and the requirement for participants to report annually on progress in meeting commitments to the ten principles.

Rather, the Global Compact relies on public accountability, transparency and the enlightened self-interest of companies, labor and civil society to initiate and share substantive action in pursuing the ten principles.

Some stakeholders are skeptical.

Whatever goals a company pledges to reach, or standards to obey, such as fair working conditions and the protection of human rights, there must be a specific, practical application. Without this, codes will set only the overall ground rules for corporate conduct.

Critics attack the notion that voluntary codes can serve as a method of corporate accountability because corporations can simply use their participation as a substitute for real progress, distracting the public from the continuing violation of human rights, labor rights or environmental standards.

UN Secretary General Ban Ki-Moon, who opened the summit, acknowledged these weaknesses, stressing that companies which fail to meet their commitments within two years will be delisted from the UN Global Compact.

In fact, according to Global Compact Executive Director Georg Kell, 335 companies were delisted from the network last year for failing to report significant progress in implementing the ten principles.

Business executives, however, who have been observing the impact of the CSR campaign as the concerted effort, have kept a spotlight on undesirable practices. At various times, companies have stopped doing business with overseas contractors who disregarded standards.

Often companies lead the way to improvement. For example, a decision by Reebok not to sell soccer balls made through child labor practices was swiftly followed by similar commitments from other companies. This happened despite the (short-term) costs such commitments entailed.

"Our foreign buyers have always scrutinized our operations to ascertain whether our pulp and paper are derived from sustainable plantations," said A. J. Devanesan, president of Asia Pacific Resources International Holdings (APRIL), which operates a two-million ton capacity pulp industry in Riau.

In fact, pulp which is certified as sourced from sustainable managed forests or plantations commands higher prices than uncertified product, added Devanesan, who attended the summit meeting.

The summit urged the Global Compact's 4,000 members to encourage their supply-chain partners and other organizations they do business with to integrate the core values of human rights, environment, labor and anti-corruption into their operations.

Good corporate practices bring commercial benefits too. They help firms achieve a variety of goals: Protect their corporate reputation, improve employee morale, enhance consumer and client loyalty, and avoid costly criminal and civil proceedings.

Even mainstream investors are now paying more attention.

Recent studies by McKinsey & Company consultants conclude that while the capital markets have not yet mainstreamed environmental, social and good governance norms, there have been many investor initiatives which encourage socially responsible, ethically right and environmentally friendly investment.

The consulting company estimated there are now more than US$8 trillion investment funds managed by firms which factor environmental, social and governance issues into their investment analyses and decision-making processes.

So, while some stakeholders feel many companies just pay lip service to standards, these codes do in fact have bite. Companies who do not practice what they pledge risk adverse publicity and customer loss, even black-listing.

What currency should we be saving?

Colin Bloodworth , Jakarta Post

This is probably one of the questions I am most frequently asked.

The simple answer is that we should be accumulating wealth in the currency of end use. In other words, if you are a U.S. national and you are planning to return to the U.S. you should be saving U.S. dollars. If you are British it should be pounds sterling, if Australian, Aussie dollars, and so on.

What if your base currency is rupiah?

If you are Indonesian then naturally this is your base currency and the one you would expect to hold.

Many expatriates plan to make Indonesia -- perhaps Bali -- their permanent or eventual home so should they also be building up their wealth in Rupiah?

This is where the base currency principle breaks down since the rupiah is prone to devalue over the long term. When I first came to Indonesia in 1983 the exchange rate was Rp 600 to US$1.

As the rate today is around Rp 9,000 that represents a 1,500 percent devaluation over 24 years. If it continues to devalue at the same rate over the next 24 years the exchange rate will be Rp 135,000 to the $1 in the year 2031.

(You may wish to cut this article out and compare the actual rate in 2031!)

Now, before you rush off to convert all your rupiah to dollars, bear in mind that the trend is a long-term one. In the short term the rupiah can hold its value for a number of years and under a stable government such as at present, could even appreciate.

But if you are looking long-term then it would be wiser to hold a "hard" currency. The U.S. dollar is not necessarily the only one to consider.

When do devaluations hurt?

A gradual devaluation can actually be beneficial to a country as it helps its exports to be competitive. Devaluations hurt when they are sudden and severe.

It is now 10 years since the Asian financial crisis broke. At first it affected only Thailand but the domino effect soon dragged Indonesia into the abyss and it ended up suffering more than the other countries and eventually resulted in the collapse of the regime.

The rupiah fell from around Rp 2,500 to $1 to as low as Rp 15,000 at one stage. Expatriates paid in foreign currencies enjoyed a brief windfall as they were able to snap up bargains in rupiah before reality caught up.

For many, their windfall was short-lived as they became too expensive to employ. Expat hotel managers, executive chefs, English language teachers and others on local contracts left Indonesia in droves.

Their numbers have never recovered, to the chagrin of landlords who could once demand three years' sky-high rent -- in cash, in advance.

But how did the devaluation affect the Indonesian farmer in the rice fields or the average employee in the city?

They would certainly have had no understanding of foreign exchange. The impact on them was even more devastating because the cost of goods and services rocketed as a result of the weak currency.

Hundreds of thousands found themselves unemployed. Today, the economy has recovered substantially, wages have caught up and easy loans have created a boom in domestic spending, although millions have yet to share the benefits.

We are unlikely to see a repeat of 1997 but a hard lesson was learned by many.

Could the U.S. dollar collapse?

There are the odd commentators who consider the dollar could go through the floor. Although rupiah-watchers tend to compare rupiah with dollars there has not been significant movement of late but both currencies have actually fallen against stronger currencies such as the British pound, the euro and the Aussie dollar.

The U.S. dollar could indeed fall further for several reasons, among them the long-standing and massive budget and trade deficits, plugged only by continuing inflows from cash-rich countries.

Then again, it is likely that interest rates in the U.S. will start falling before those of other Western countries. These arguments are logical, but logic does not always apply.

Countries like China and Japan would stand to lose heavily if the dollar fell due to their huge reserves in the currency.

Nevertheless, it is evident that a shift to other currencies is taking place so the days of the all-dominant U.S. dollar could be numbered.

The message here for the small investor is that if you do not have a single, solid base currency then it would be wise to diversify your currency holdings.

What if you are paid in U.S. dollars?

With the exception of those hired locally most Western expatriates are paid in U.S. dollars, even though the majority are not American.

Consequently, over the years, expatriates have tended to build up their savings in dollars. Another justification is the fact that there is a much larger universe of funds in U.S. dollars and it cannot be denied that big business is dominated by American companies.

With the slide in the dollar over the past few years, however, many people are questioning the wisdom of holding dollars when they are falling in value against their home currency.

Cash is not risk-free

There is a common misconception that keeping money in the bank is safer than investing it. Those who mistimed the stock markets will never be convinced otherwise!

But it is actually high risk in two respects; first, cash is unlikely to hold its purchasing value over time and second, the currency of your cash deposit could lose its value against other currencies.

A few years ago someone told me he was not interested in investing and kept all his money in U.S. dollars (the currency he was paid in) in a deposit account.

He thought his money was safe but in fact he lost 40 percent in less than three years. How could that be? No-one stole money from his account but the fact is he was European and in euro terms the value of his deposit fell 40 percent.

Indeed, over a period of years even major currencies can swing wildly against each other. When the euro was launched in 1997 it was valued at 1.17 to US$1.

Within a couple of years it had fallen to 0.80 but now it has shot up to 1.34. So playing the currency game can bring rich rewards or heavy losses!

What currencies should we choose?

In the short term you need to hold a certain amount of cash in whatever currency you have commitments. If you have a business with local staff to pay then it makes sense to keep funds in a rupiah deposit.

Even if there were a devaluation it would be some time before wages adjusted. But in the longer term you need to keep in mind the tendency of the currency to fall.

If you are an expatriate then you should be building up assets in the currency you expect to eventually use. It may not prove to be the strongest currency but it is less risky that having all your money in the wrong currency.

Some currency diversification may be justified. You will probably always need to have some holdings in U.S. dollar funds due to the dominance of U.S. companies.

If you plan to settle in Indonesia or are not certain where you might settle then you need rupiah for the short term and a mix of major currencies for the long term.

Perhaps more importantly, you need to be invested in solid assets, including equities, real estate and commodities, as they can protect you against a falling currency.

What about gold?

Gold was a major currency in ancient times and it is still seen today as a safe haven in times of global unrest. It also has a place as a reserve currency, there is constant demand from the jewelry trade and its supply is finite.

If you have ample holdings in cash, stocks, real estate and other assets there is no harm in holding up to 5 percent of your assets in gold and precious metals. They can be easily accessed via mining funds or bullion funds without having the headache of taking physical delivery.

Men may find that their wives quite like the idea of investing in gold if it comes in the form of jewelry. I would not like to be around as your financial adviser, however, when the markets dictate that profits should be taken and the asset sold!

Colin Bloodworth is a senior financial adviser with Financial Partners International. If you have any questions relating to personal finance you may contact him at tel. 5208099 or e-mail: colin.bloodworth @financial-partners.biz.

Japan satisfied with Garuda`s Air safety standard

Tokyo (ANTARA News) - Japan`s Civil Aviation Bureau (CAB) said a Garuda Indonesia GA-881 plane can continue to fly to the Japanese destinations following its spot checks carried out on the plane over the weekend.

"The CAB`s inspection team is satisfied with the air safety standards of Garuda planes," Arif Wibowo, Garuda Regional Manager for Japan, China, Korea and the United States, said Saturday.

The results of the spot checks suggested that Japan differed from the European Union (EU) about the air safety standards of Garuda planes, he said.

The spot checks came nearly a week after the EU`s aviation experts issued a recommendation for the 27-nation block to ban all 51 Indonesian airlines from flying to the region, citing unsafe flights as a reason.

Japan is the second country that believes Indonesian airlines remain airworthy.

The Australian Embassy in Jakarta said this week that Australia`s Civil Aviation Safety Authority (CASA) had confirmed that a series of spot checks carried out on Garuda so far this year had not identified any major problems.

N Nakamura, who led the spot checks on the Garuda plane on Friday (July 6) said the Indonesian flag-carrier was highly committed to complying with air safety and security regulations.

It took a day for the CAB`s inspection team to carry out the spot checks on the Garuda plane serving the Tokyo-Denpasar-Jakarta route.

Given the results of spot checks, Japan had no reason to ban its citizens from using Indonesian airlines, Arif said.

Economic think tank sounds alarm bells over possible second crisis

The Jakarta Post, Jakarta

An economic think tank has warned the government of a possible sudden reversal in short-term capital inflows, which it says could destabilize the economy and cause even more chaos than the 1997 meltdown.

The Institute for the Development of Economics and Finance (Indef) told a media briefing Thursday that the government had to be aware of the "easy-come-easy-go" nature of hot money.

"We don't mean to frighten the government, but to warn them about the possibility of a crisis similar to the one in 1997," said Indef director Iman Sugema.

Iman said that the country was seeing massive inflows of hot money in circumstances that were remarkably similar to the conditions prevailing before the previous crisis some ten years ago.

At the end of the first quarter, the country had received Rp 45 trillion in capital inflows, which had been invested mostly in stocks, financial assets such as central bank certificates (SBI), and government bonds.

If a second crisis materialized, its impact would be more severe than that of the first crisis, according to Indef's economist Aviliani as some of the country's economic indicators were actually in worse shape now than they were in 1997.

"Even though GDP is now higher than in 1997, the figures show that the number of poor and jobless people is higher now than ten years ago," said Aviliani.

According to official statistics, before the 1997 crisis the country had 34 million poor people, while the number of poor currently stands at around 39 million.

"The unemployment rate is currently 10.54 percent, double the 1997 unemployment rate, which stood at 4.86 percent," she added.

"The government also has a higher debt burden now, which amounts to Rp 5.3 million per person, an increase of more than 600 percent compared to ten years ago."

Iman said that another factor that could contribute to a second economic crisis was the "disconnection" between the financial sector and real sector.

"Investors prefer to invest their money in the financial markets than the real sector as they offer higher returns in a shorter time. As a result, the unemployment and poverty rates remain high despite the liquidity of the capital markets," said Iman.

"Currently, banking sector funds parked in SBIs amount to Rp 238 trillion, and are predicted to reach Rp 300 trillion by the end of this year, while lending to the real sector has yet to improve,' said Iman.

Indef suggested that in order to avoid such a crisis, the government would need to control capital inflows and encourage the growth of the real sector so as to strengthen the economy's fundamentals.

BI cuts rate to 8.25% to keep momentum going

Urip Hudiono, The Jakarta Post, Jakarta

Stable consumer prices and sound government finances appear to have come together in propitious alignment to allow the central bank to cut its benchmark interest rate to its lowest level in two years.

Bank Indonesia trimmed its key rate Thursday by a quarter percentage point to 8.25 percent, continuing its string of rate cuts since last year, with only one pause in April. This brings the BI rate to its lowest level since its introduction at 8.5 percent in July 2005.

"Inflation is under control and on a downward trend. Stability in the financial markets has also been maintained in line with the improved performance of the banking sector," BI governor Burhanuddin Abdullah said after the central bank's Board of Governors policy meeting that decided on the rate cut.

The markets welcomed Thursday's rate cut, with the Jakarta Stock Exchange Composite Index rising 1.13 percent to 2,220.931 points. The rupiah traded only slightly weaker at Rp 9,017 per dollar from Rp 9,000 the previous day.

Burhanuddin said that both headline and core inflation had facilitated the latest rate cut due to a coming together of supply and demand. The improving balance of payments and relatively stable exchange rates had also played their roles.

The Central Statistics Agency reported earlier this week that on-year inflation had fallen to 5.77 percent in June from 6.01 percent in May, although monthly inflation saw an uptick to 0.23 percent from 0.1 percent the month before.

Core inflation was slower at 5.4 percent on-year from 5.62 percent last month.

The balance of payments, meanwhile, saw the country's trade surplus rising to US$3.7 billion as of the end of June, and foreign exchange reserves reach US$51 billion. The rupiah-dollar exchange rate averaged Rp 8,968 per dollar during this year's first half, an increase of 1.5 percent compared to the first quarter.

As for the banking sector, lending continued to rise to Rp 118.02 trillion (US$13.1 billion) as of the end of May -- up nearly 16 percent from the same period last year.

Deposits reached Rp 145.31 trillion, up 12 percent, meaning that the banking sector now has assets of some Rp 1,720.9 trillion under management.

Burhanuddin said he expected the latest rate cut would enable businesses to obtain cheaper loans, and spur more bank lending, investment and spending for higher growth ahead.

All this will, however, depend on banking sector lending rates, which are still hovering between 14 and 16 percent so as to give the banks a margin on their deposits.

The banks' deposit rates are based on the Deposit Insurance Agency's ceiling rate on guaranteed deposits, which currently stands at 8.5 percent, and will be reviewed on July 14.

Lower inflation and interest rates should help boost economic growth, which stood at 6 percent in the first quarter, slightly better than last year's overall rate of 5.5 percent.

Coordinating Minister for the Economy Boediono was upbeat that growth in the second quarter might actually be faster than 6 percent. The government has a growth target of 6.3 percent for this year.

China's foreign minister in town for talks to boost trade ties

Abdul Khalik, The Jakarta Post, Jakarta

China's Foreign Minister Yang Jiechi held talks here Wednesday with Indonesian counterpart Hassan Wirayuda on ways to double bilateral trade in the next three years.

After the talks between the two delegations, the two foreign ministers signed a memorandum of understanding on economic and technical cooperation, as well as on China's commitment to provide a grant of 10 million yuan (Rp 12 billion) to assist Indonesia's development.

Indonesian Foreign Ministry director for Asia and the Pacific Yuri Thamrin said it was hoped bilateral trade would reach US$30 billion by 2010 from last year's $15 billion.

The visit by the newly appointed Yang, only his third overseas stop since becoming foreign minister, after Mongolia and North Korea, shows the importance of Indonesia for China, Indonesian Foreign Ministry spokesman Kristiarto Soeryo Legowo said.

"Indonesia is seen by China as an important country in the region and the world, as it is a non-permanent member of the United Nations Security Council. That's why Indonesia is a priority," he said.

Kristiarto said both ministers expressed satisfaction with the level of relations since a strategic partnership agreement was signed in 2005.

Foreign Ministry director for international treaties and legal affairs, Arief Havas Oegroseno, said the two delegations also touched on the need to speed up the realization of an extradition treaty between the countries.

"Hopefully, we can conclude the treaty before the end of the year. Right now, we have finished the first round of negotiations. And we have begun drafting the treaty. We will resume the talks early in August," he said.

The two ministers also discussed regional issues, focusing on the latest developments in Myanmar and North Korea.

China has played a key role in both issues. Myanmar has been a close trading partner of China.

Critics have said its economic relationship with Beijing has allowed Myanmar's military junta to hang onto power after Western countries slapped an embargo on it for its human rights violations and its slow move toward democratization.

China and Russia vetoed a U.S.-led resolution at the UN to apply further sanctions against Myanmar earlier this year.

Yang also brief Hassan on the success of China and other six-party countries in persuading North Korea to shut down its nuclear reactors.

The Chinese foreign minister ended a three-day visit to North Korea on Wednesday before leaving for Indonesia.

Official news agency Xinhua reported that Yang's visit to North Korea focused on his talks with the country's leader, Kim Jong-il, on Tuesday, with both sides touching on a series of issues including the nuclear issue.

China, host country of the six-party talks, wants to see the "full implementation" of the existing agreements on the nuclear issue on the Korean Peninsula, Yang said.

Kim said there have been some "signs of easing" on the peninsula and all parties concerned should take initial actions.

The Chinese foreign minister was in Pyongyang after a three-day visit to Mongolia.

New negative investment list 'treading water'

Urip Hudiono, The Jakarta Post, Jakarta

The government has issued its latest so-called negative investment list, which sets out a more comprehensive description of which business sectors are closed to foreign investors.

The new list, required under the recently enacted Investment Law, governs a total of 338 business sectors, of which Trade Minister Mari Elka Pangestu said 69 sectors would now be more open than before, with 11 becoming more restrictive.

The previous 2000 and 2001 negative investment lists covered 83 sectors.

The list increases the number of closed sectors to 25 from 11 previously so as to protect the national interest in such areas as public health, the environment, culture and natural biodiversity. It also prioritizes 43 sectors for small and medium enterprises (SMEs).

Other sectors will, however, be more open to foreign investors than before. Under the new rules, non-national investors will be allowed to take controlling stakes in banks (up to 99 percent), the power sector, oil and gas industry, tollway operators, water companies, agriculture and plantation firms (95 percent), insurance firms (80 percent), the pharmaceutical industry (75 percent), health services (65 percent) and construction (55 percent).

In the telecommunications sector, foreign investors will be allowed to own up to 65 percent of cellular operators, but only 49 percent of fixed-line phone companies.

Other sectors that will also be opened up to overseas investment include transportation and education, although these are limited to 49 percent. Foreign investors can also join up with local firms in the tourism and recreational sector in designated parts of the country.

Mari said the list would not be applied retroactively.

Coordinating Minister for the Economy Boediono said he expected the new negative investment list to provide more clarity and transparency as it summarized the prevailing rules governing investment in each sector.

He also said that the government would set up a team to regularly review the list.

The list comes into effect three years from the date of its issuance, that is, in 2010, and applies throughout the country, including special economic zones.

The business community cautiously welcomed the new list.

However, Indonesian Chamber of Trade and Industry (Kadin) chairman M.S. Hidayat criticized the use of the unusual formula, "50 percent foreign ownership", in a number of sectors, saying that this was uncommon in normal business practice.

"There's no such thing as a 50:50 business. It's either a majority stake or a minority one. It has to do with decision making," he said.

Hidayat said Kadin would evaluate the list with representatives of the overseas chambers of commerce and others from the business community so as to elicit suggestions and comments about it, including the question of incentives for investments in pioneering sectors.

International Business Chamber chairman Peter G. Fanning questioned how the list would be applied, although he admitted it offered more clarity and transparency, while the restrictions it imposed would be unlikely to have adverse consequences for investment in Indonesia.

"It's not a step back. But it's not a leap forward either," he said.

U.S. offers RI debt-for-nature swap

Abdul Khalik, The Jakarta Post, Jakarta

The United States has agreed to include Indonesia in a debt-for-nature swap that will involve US$19.6 million of the country's debt to the U.S. being used to finance tropical forest conservation programs.

The U.S. Embassy here said in a statement that under the Tropical Forest Conservation Act (TFCA), a portion of Indonesia's debt could be reduced and re-directed to finance conservation of the country's tropical forest, considered as one of the world's largest and most diverse.

"The U.S. Treasury Department will provide a provisional allocation of $19.6 million for the treatment of eligible debt. Initial discussions toward an agreement are expected to begin in the coming weeks," the embassy said.

It added that once concluded, the swap package for Indonesia would be one of the largest under the TFCA.

Indonesian Forestry Minister M.S. Kaban welcomed the U.S. announcement as a beginning of a bold measure to conserve the country's forest.

"This is good news," he said during a meeting with representatives from the U.S. Embassy.

The embassy said the U.S. government welcomed Indonesia's participation in the program as it recognized the country's forests as some of the most significant and biologically diverse in the world.

Foreign Ministry director for American affairs Harry Purwanto also hailed the announcement, saying Indonesia's proposal for the debt swap had paid off.

"We submitted proposals for debt swaps to several countries, and the proposal to the U.S. was one them. We hope more countries agree to our proposals," he told The Jakarta Post.

With outstanding sovereign foreign debt of $74.1 billion, Indonesia must pay around $7.8 billion a year on the interest and principal.

The embassy said that to date, 11 countries in Africa, Asia, and Latin America had entered into debt-for-nature agreements under the TFCA.

"These agreements will generate more than $135 million to conserve important tropical forest in these countries over the course of 10 to 25 years," it said.

The embassy said the program might be expanded to include coral reefs, often referred to as the rain forest of the sea.

This year, the Indonesian government has earmarked Rp 4.1 trillion ($454 million) from the Forestry Ministry's rehabilitation fund and the state budget to rehabilitate damaged forest throughout the country.

Many have warned of the rapid destruction of Indonesia's forests. Greenpeace recently applied to the Guinness Book of World Records to have Indonesia included in its 2008 edition for having had the fastest rate of deforestation in the world between 2000 and 2005.

Indonesia is estimated to have lost 72 percent of its approximately 123.35 million hectares of ancient rain forest, and half of what remains is threatened by commercial logging, frequent forest fires and land clearance for palm oil plantations.