Indonesia should take leading anti-corruption role: watchdog

Jakarta (ANTARA News) - Graft watchdog Transparency International (TI) wants Indonesia to take a regional lead in curbing corruption by encouraging the adoption and enforcement of a key UN accord, its chairwoman said Monday.

After meeting with Indonesian President Susilo Bambang Yudhoyono, Huguette Labelle said more countries should ratify the UN Convention Against Corruption (UNCAC), especially in Southeast Asia.

"We need more countries to ratify it, and we recommended to the president... that he should take a leadership role in ensuring that there is a strong monitoring of this convention, so that it is not just a piece of paper," Labelle was quoted as saying by AFP.

Labelle said that as one of the founding countries and largest members of the Association of Southeast Asian Nations (ASEAN), Indonesia should promote the fight against corruption across the region.

She noted that Indonesia's leadership was crucial, especially as high-level officials were to meet on anti-corruption efforts in Bali in January.

Todung Mulya Lubis, chairman of TI Indonesia, said the global anti-corruption network wanted Jakarta to be active in promoting the issue at the upcoming ASEAN summit in Singapore.

"We asked the president to... introduce an anti-corruption agenda into the agenda of the summit," Lubis said, adding that TI was also pushing for an ASEAN Convention against Corruption.

"The president is very supportive and he assured us that he would take the anti-corruption issue to the ASEAN summit," Lubis said.

Yudhoyono came to power as the country's first directly elected president in 2004 on an anti-corruption platform, but critics have complained that his government's efforts to curb the practice have been lacklustre.

Commenting on Indonesia's recent anti-corruption record, Labelle said that "quite a lot of work has been done here to fight corruption, and that needs to be sustained and supported."

Indonesia is regularly rated as one of the world's most graft-prone nations.

President asks businessmen to help improve local welfare

Jakarta (ANTARA News) - President Susilo Bambang Yudhoyono has called on businessmen engaged in industry to maintain good relations with local people and help them improve their welfare through various social activities.

"I would like to advise owners of industrial enterprises, including gas and oil businessmen, in Indonesia that they should maintain good relations with the local people," the president said during a teleconference here on Tuesday with a number of workers in Ujung Pangkah-Gresik (Hess) and Lapangan Oyong-Sampang oil fields in East Java.

Before holding the teleconference, the president opened an Asia-Pacific Gas and Oil Exhibition and Conference organized by the Society of Petroleum Engineers (SPE). He also commissioned the production facilities of the Lapangan Ujung Pangkah-Gresik and Lapangan Oyong-Sampang (Santos) oil fields.

The president said industrial enteprise owners should pay attention to the local people so that they would also enjoy the benefits of economic growth.

"It should not happen that a major industry is operating and paying good salaries to its employees in a certain region while the region`s local people live in poverty," the president said.

He said the activities of industries would run well and smoothly if the local people could feel they also belonged to the company.

During the teleconference, Anton Pasaribu who worked in the maintenance section of the production facilities of Hess in the Lapangan Ujung Pangkah oil field, Gresik, said that the oil and gas field had been in production since April 2007. Its gas production had reached 100 million cubic feet which was channeled to state-owned electricity company PLN through the Java-Bali grid in Gresik (East Java).

The amount of investment in the Lapangan Ujung Pangkah (Gresik) and Lapangan Oyong (Sampang) oil and gas fields totaled US$1.232 billion. They employed 1,930 workers during the construction period and 528 employees after they had become operational.

The Ujung Pangkah field is expected to produce 100 million metric standard cubic feet per day (mmscfd) of natural gas, 1,800 bpld of condensate, 25,000 bopd (barrels of oil per day) of petreleum plus condensate and 6,000 bopd of liquefied petroleum gas (LPG).

The Oyong field was expected to produce 8,000 to 10,000 bopd of petroleum and 60 mmscfd of natural gas.

Ecolabel certified timber products the only way forward

The Jakarta Post, Jakarta

The Indonesian Ecolabelling Institute (LEI) said it was working toward better managing the increased demand for ecolabel-certified timber products from Indonesia.

Indonesia's furniture and handicraft group (Asmindo) and furniture maker PT Setyamitra agreed on the weekend via a memorandum of understanding (MOU) to work together with LEI.

By signing the MOU, all groups have committed to preserve the environment, market products made from certified forests and to improve the quality of timber products using available new technologies.

LEI said it would ensure Setyamitra would supply high-quality seedlings for reforestation programs and would use modern wood-turning technologies.

"The MOU shows our commitment to boosting the growth of certified community forests," LEI executive director Taufiq Alimi said in a press statement.

"We are confident this cooperation and a certification program on community forests will mean we are able to protect community forests, improve the community's welfare and improve our furniture exports," Taufiq said.

LEI had also helped find enterprises in Wonogiri, Central Java, to partner Setyamitra in its new focus on ecolabel-certified, export-quality products, he said.

The furniture company said it would open a marketing office in Yogyakarta and a furniture outlet in Kemang, South Jakarta.

Asmindo chairman Ambar Tjahjono said his association had been interested in Setyamitra's green program because it was committed to use timber from well-managed industrial forests.

"We want all furniture companies and those using forest products as raw materials to follow Setyamitra's example in preserving the environment and rejecting the use of illegal logging," he said.

Alimi said Indonesia's forested areas had declined to 90 million hectares.

He said only 1.1 million hectares were managed in accordance with the sustainable development program.

"We expect to certify community forests along the southern part of Java," he said.

"And we are pushing certification for customary forests in Sui Utik village, Kapuas Hulu in West Kalimantan.

"There are some major forestry firms currently in the process of certification.

"Hopefully, some 3 million hectares of forest will get LEI certification by 2009", he said.

LEI's communication manager Indra Setia said the growing demand for ecolabel-certified wood products had had a profound impact on the furniture sector, including buyers, agents and industry associations.

"Most are asking LEI how and where to get ecolabel-certified timber to meet their clients' demands," Indra said.

"We usually refer them to companies that have received ecolabel certification from LEI, particularly community forests in the southern part of Central Java."

Wonogiri regency in Central Java and Gunung Kidul regency in Yogyakarta have 5,200 hectares of community forest areas that are ecolabel certified.

The forests have an annual production of 90 cubic meters of wood.

Blogging party gets official stamp of approval

Mustaqim Adamrah, The Jakarta Post, Jakarta

Bloggers and internet publishing in Indonesia gained new legitimacy Saturday when Communications and Information Minister Muhammad Nuh declared Oct. 27 National Bloggers Day.

The announcement was made at Pesta Blogger (blogger party) 2007, Indonesia's first large meeting of bloggers, which around 500 people attended.

"I can see today the Indonesian blogger community is developing the use of IT facilities and filling information gaps in the country with blogging," the former rector of East Java's November 10 Institute of Technology said.

He said the gathering and blogging were both "revolutionary" and deserved support.

"Blogs can be educational, empowering and enlightening. That's why I can guarantee you curbing blogs will never happen in this country," said Nuh.

"I also notice most of the bloggers are young, which is good. As the proverb says, 'The future of a country is in hands of the young generation'. Wimar (Witoelar) is the only old one here," he kiddingly said, to laughter from the audience.

Having handled many talk shows, Wimar Witoelar was the moderator at a discussion at the gathering, which was initiated by public relations agency Maverick and driven by a team of bloggers.

Speaking at the discussion were Nuh, committee chairman Enda Nasution, Asia Blogging Network chief executive Budi Putra and Adrianto Gani of www.wikimu.com.

Budi, a former Tempo journalist and now full-time blogger, highlighted the importance of blog contents.

"No one will visit and revisit your blog no matter how cool your blog design is unless you have something substantial to offer," he said.

Well-developed content, Budi said, would automatically attract more visitors and might create business opportunities with advertisers as media for advertisement "is getting narrow".

The gathering drew not only Jakartan bloggers, but also an Indonesian living in neighboring Malaysia's Kuala Lumpur and many others from West Sumatra's Padang, West Java's Bandung, Central Java's Semarang, Yogyakarta, South Sulawesi's Makassar and Central Sulawesi's Poso.

There are 150,000 bloggers in the country.

A blogger and correspondent for The Jakarta Post in Poso, Ruslan Sangadji, said he had traveled to Jakarta with the help of friends.

"I spent Rp 1.28 million (US$140) using the money I collected from my friends. And now I don't have more money to go home," he said, to laughter.

"I eagerly came to learn how to build blogs for the Palu (Central Sulawesi) community."

Violinist Maylaffayza, who writes for 11 blogs, was also among the participants.

"Please do blog because blogging is all about reaching out to people, making friends from all around the world, creating personal relationships and can be very educational," she said.

Indonesia finance minister sees investment, growth

Jakarta (ANTARA News) - Indonesia's finance minister said investors are returning to Southeast Asia's biggest economy, following the government's steps to tackle corruption and improve the overall investment climate.

Sri Mulyani Indrawati, an economist who was appointed finance minister by President Susilo Bambang Yudhoyono in 2005, said that Indonesia has seen a recovery in foreign direct investment and is now on a faster growth track.

As finance minister, she has focused on cleaning up the country's notoriously corrupt tax and customs departments, putting in reputable senior officials and paying higher salaries so that employees are less tempted to seek bribes.

"We are trying to lay the foundations for an attractive investment climate," she told Reuters in an interview.

"Some of those policies take time so if you talk about tax, customs, bureaucracy reform, if you talk about infrastructure, corruption, land issues, national, local government - not all of them have been overcome successfully, but for some of them there is some progress."

Foreign direct investment (FDI) in Indonesia climbed to $8.54 billion in the first nine months of 2007, well ahead of the $5.98 billion invested in the whole of 2006, and not far off the record $9.86 billion achieved in 2000.

Indonesia desperately needs to attract foreign investment in order to improve its creaking infrastructure and create jobs.

Open unemployment is 9.75 percent or about 10.5 million people, but an estimated 30 percent of the labour force is either jobless or under-employed.

Investors have frequently cited corruption, a weak legal system and tough labour laws as deterrents.

Indrawati said that foreign investment has been mainly in the pharmaceuticals and chemicals sectors, as well as in the food sector, but she expects the mining and agricultural sectors to attract more foreign funds in future.

Strong Growth

The rise in FDI is one of the reasons why economic growth is likely to remain strong, she said.

"According to many leading indicators such as tax, customs, imports of capital goods, foreign direct investment realisation, bank lending, corporate bond issues, all those show capital spending is increasing," Indrawati said.

She said she expects the economy to grow between 6.2-6.4 percent in the third quarter, accelerating to 6.5 percent in the final quarter of the year, due to strong investment and consumption.

Indrawati said the economy would expand 6.3 percent in 2007 -- the fastest pace in 11 years -- meeting the government's target. A Reuters poll in September predicted the economy would grow 6.1 percent in 2007.

Growth momentum will remain strong in the first half of next year, she said, but a slowdown in global growth could affect Indonesia in the second half of 2008. The government has forecast growth of 6.8 percent next year.

Indonesia plans to raise money in the international bond market in the first quarter of next year, Indrawati said, although she declined to give details of the bond size or currency.

Indrawati also said that the recent sharp rise in global oil prices would have a positive impact on the state budget as every $10 increase in the oil price above $60 -- which is the government's base price for its budget calculation -- adds

300-500 billion rupiah ($32.9-$54.9 million) to the budget.

Indrawati said that even though Indonesia is a net importer of oil, the higher oil price would not hurt state finances because Indonesia exports gas and the price of those exports would also rise in line with the higher oil price.

Indonesia is the only OPEC member in the Asia-Pacific region, but about 30 percent of its oil product consumption has to be met by imports due to flagging output. However, the country is a major exporter of liquefied natural gas.

The finance minister warned that the subprime mortgage crisis in the United States may weaken global demand next year, and that this in turn could hurt demand for Indonesia's key commodities, including palm oil and minerals such as coal.

"For next year, in order to achieve 6.8 percent (growth), we are going to be very vigilant. I am still quite optimistic on the first semester because this very strong momentum is still on going," she said.

"In the second semester we have to very vigilant, the impact of this subprime mortgage problem or credit crunch in the United States and Europe will affect global growth," she said.

Indonesia's Pertamina fined for perjury in Karaha case

By Muklis Ali, Sat Oct 27, 2007 12:47pm BST

JAKARTA, Oct 27 (Reuters) - Indonesia's state oil and gas firm Pertamina has paid $500,000 to Karaha Bodas of the United States because a former Pertamina official committed perjury in a court case, a lawyer for the Indonesian firm said on Saturday.

Pertamina and Karaha agreed in 1994 to develop a geothermal energy project in Indonesia's West Java province, but the plan stalled after the 1997-98 Asian financial crisis, triggering a long legal battle.

Karaha, which had spent $111 million on the project, in 1999 asked a Swiss arbitration panel to force Pertamina to repay its lost investment and cover future profits.

The tribunal awarded Karaha -- which is owned by Caithness Energy LLC and FPL Energy LLC, a subsidiary of FPL Group (FPL.N: Quote, Profile, Research) -- $261 million in 2000, but the legal battle dragged on in the U.S. courts.

Karaha said that the case took far longer to settle and incurred additional legal costs because a Pertamina official gave false information in court regarding the ownership of certain petroleum refineries in Indonesia, according to a court document seen by Reuters. Karaha had asked for $8.2 million in sanctions.

Ainun Naim, who was Pertamina's chief financial officer at the time, had denied that the refineries were owned by Pertamina, according to the document, which meant Karaha could not recover money owed to it by seizing the proceeds from petroleum sales.

Read More ....

Taxes, labor laws cited as problems

Ika Krismantari, The Jakarta Post, Jakarta

Despite considerable macroeconomic improvements, Indonesia still needs to review its tax system and labor laws if it wants to compete with other countries in attracting foreign investment, American businesspeople say.

During a meeting with Industry Minister Fahmi Idris here Friday, the American businesspeople representing major multinational companies said the sales tax on luxury goods and uncertainty in labor laws remained major obstacles to foreign investors doing business in the country.

The businesspeople said the tax and labor problems made Indonesia less attractive than other Asian countries such as Vietnam.

Speaking to the press following the meeting, Minister Fahmi acknowledged the American businesspeople's concerns over the high luxury tax and labor problems.

The businesspeople asked the government during the meeting to review the luxury tax system, which they said hampered the sale of luxury goods such as expensive electronics products and cars.

Representatives of major American companies including Ford Motor Company, General Electric, Freeport McMoran, Coca-Cola Company, ExxonMobil, McDermot International and Oracle Corporation are currently visiting Indonesia as part of a trade mission organized by the U.S.-ASEAN Business Council.

Besides meeting the minister of industry, the delegates also met with other government officials including Energy and Mineral Resources Minister Purnomo Yusgiantoro.

Fahmi said his department was coordinating with the Finance Ministry in reviewing the tax system, particularly the luxury tax.

The government imposes a luxury tax ranging between 10 and 50 percent. For auto sales, the rate of the luxury tax is 30 percent for a passenger car with an engine capacity less than 1,500 cc and 40 percent for autos with a higher engine capacity.

The local automotive industry has asked the government to impose a luxury tax based on prices rather than the type and engine capacity of vehicles.

U.S.-ASEAN Business Council president Matthew P. Daley said Indonesia also needed to change its labor laws to attract more foreign investors.

"Indonesia is known as the country which applies the biggest severance pay. If you compared the severance pay in Thailand, Vietnam, the Philippines and even in the U.S., they are far lower than Indonesia's. You will find in that area, Indonesia is not competitive, especially in the labor-intensive industry sector," Daley said.

He said the government needed to adopt a national "single window system", under which all business permits needed by investors are issued in one place using an electronic system.

He welcomed the government's recent decision to enact a special regulation on free trade zones as "one approach that has been helpful for American companies to do business in Indonesia".

Earlier this month, the government issued three government regulations to make the entire area of Batam island and parts of Bintan and Karimun islands a free trade zone, in which all import tariffs, value added taxes, luxury good taxes and excise duties can be eliminated.

The council's director for Indonesian affairs, Christopher Anderson, said during the five-day visit here, four companies including Ford, Caterpillar, power company AES Agriverde and International Paper had indicated their intention to expand their businesses in Indonesia.

There are no details on investment plans.

Students say carbon trading not what they're looking for

Adianto P. Simamora, The Jakarta Post, Jakarta

Long-time environmentalist Emil Salim on Friday told students looking for work to investigate opportunities in what described was a booming carbon trading business in Indonesia -- but he received a cool response.

"Carbon trading is a future opportunity for you," Emil said.

"Start preparing yourself to become a consultant or broker for emission trading business."

But students at a seminar co-organized by Paramadina University and the United Nations said they were more interested in working for companies abroad or for foreign companies based in Indonesia.

Carbon trading is part of the clean development mechanism (CDM) set in the Kyoto Protocol to encourage countries to reduce emissions and receive financial rewards via the carbon market.

But Gilang Ramadhan, a third-semester international relations student said, "I want to be a diplomat or at least work in foreign countries".

"If I fail to reach my ambition as a diplomat, I will apply for a job with a foreign company in my hometown in Kalimantan," Gilang said.

Emil wanted to sell-in to the students the idea of becoming consultants in the carbon trade industry.

He said such positions would be responsible for calculating carbon dioxide (CO2) reduction and for working on draft projects for the government and United Nations Executive Board.

If the UN Executive Board approved a consultant's project idea, a Certified Emission Reduction (CER) certificate would be granted.

One CER is equal to one ton of CO2 priced between US$5 and $10 on the carbon market.

Once a project is given CERs, a broker would then be able to trade the CERs with developed countries who have the obligation to reduce emissions.

The CERs can be traded with 38 industrialized countries except the United States and Australia who have not agreed to the Kyoto Protocol.

Kyoto obliges developed countries to reduce emissions by five percent from their 1990 level before the year 2012 when the protocol expires.

Many industrialized countries prefer to host carbon reduction projects in developing countries to avoid economic losses.

Emil, who will head the Indonesian delegation at the Bali climate change conference in December, said he was optimistic the CDM scheme would run beyond 2012.

"There will be more funds disbursed for carbon trading," he said.

The UN Executive Board has so far approved 819 projects worldwide -- 34 percent in India and 15 percent in China.

The World Bank said the global carbon market trade volume was worth less than $1 billion in 2004.

But the value skyrocketed to $11 billion in 2005 and to more than $30 billion last year.

The government said Indonesia could supply 2 percent of the global carbon trading market, or equivalent to a reduction of 125 million tons of CO2.

Indonesia so far has approved 24 carbon projects since 2005, nine of which are yet to gain approval from the UN Executive Board.

The government is trying to tap incentives through CDM from its 120 million hectares of forest -- the world's third largest after Brazil and Republic of Congo.

Minister: investors see luxurious goods sales tax as high cost

Jakarta (ANTARA News) - Industry Minister Fahmi Idris said that sales tax on luxury goods (PPnBM) was regarded as a high cost by investors in the automotive and electronic sectors.

"Sales tax on luxuries is still deemed as high cost for investment in the automative and electronic industries, and often caused problems," Fahmi Idris said after a meeting with a delegation of the US-ASEAN Business Council for Indonesia, here, on Friday.

He further said that actually the industry ministry already had discussed the sales tax on luxurious good with the Finance Ministry in the last year, and it was decided that the tax on electronic products like television sets, for instance, will depend on their size (inches), and the tax on cars will depend on their engine size, he said.

Fahmi said that the US business delegation came here to discus among other things the sales tax on luxuries.

President Yudhoyono Receives Leadership Award

Friday, 26 October, 2007 | 17:31 WIB

TEMPO Interactive, Jakarta: President Susilo Bambang Yudhoyono received the Leadership Award from the US-ASEAN Business Council at the Shangrila Hotel, Jakarta, yesterday (25/10).

According to US-ASEAN Business Council’s President, Matthew Daley, Yudhoyono received this award as he is considered a leader who managed to handle tsunami and earthquake disasters that hit Indonesia. “In addition, Indonesia’s economy also grew favorably,” said Daley, in his opening speech before giving the award.

The award was given during a dinner with United States and Indonesian businesspeople. Also attending the event were Trade Minister Mari Elka PAngestu, Head of the Investment Coordination Agency (BKPB) M. Lutfi, and Chairman of the Indonesian Chamber of Commerce and Industry (Kadin) M. S. Hidayat.

President Yudhoyono expressed his gratitude for the award. He stressed that the award was not only for himself but all the Indonesian people. “This isn’t the work of one man, but the whole nation,” he said.

Sutarto

Govt to set guidelines for industries

Urip Hudiono, The Jakarta Post, Jakarta

The government is finalizing a raft of regulations aimed at developing the industrial sector into a tightly knit network of self-supporting sectors, with manufacturers serving as the future backbone of the economy.

State Minister for National Development Planning Paskah Suzetta said a presidential regulation for the so-called "National Industry Development Road Map" is expected to be issued by November, along with related regulations from other ministers.

These will include regulations from the Finance Ministry regarding incentives for certain "technology-intensive, pioneer industries", Paskah said.

He said the government would, under the road map, still have a hand in the development of industries, to ensure maximum economic growth and employment.

"There will be incentives for several industries, and the government is still providing certain guidelines. It will not be left entirely to market mechanisms," Paskah said after a recent meeting on the matter with Coordinating Minister for the Economy Boediono and other related officials.

The road map, based on the government's 2004-2009 mid-term development plan, as well as assessments from both the Industry Ministry and the Indonesian Chamber of Commerce and Industry (Kadin), envisages Indonesia becoming a newly industrialized country by 2024.

This is expected to be achieved through the systematic and comprehensive development of such priority industries as agriculture, transportation, telecommunications and information, as well as certain manufacturing and small-to-medium-sized industries.

Kadin, in its "2030 Vision and 2010 Industry Road Map", proposed four focus manufacturing industries: the electronics, textile, automotive and shipping industries.

A deputy to the coordinating minister for the economy, Edy Putra Irawady, said the road map would also provide several facilities for small industry, mainly concerning the import of raw materials.

"Small industries sometimes cannot afford to import raw materials by themselves, so this must be facilitated through a collective importer... Small industries involved in refurbishing goods also need goods exempted from existing import restrictions."

The National Industry Development Road Map will aim at developing eight industrial regions in the country, based on a "cluster" of related industries making up a supply-chain network among themselves.

Many existing industries lack such a scheme, resulting in inefficiencies, where an industry is located in one area but its supporting industry is in another.

Problems in infrastructure and public services hampering industries are also expected to be resolved through the road map, as it provides better coordination guidelines among government agencies.

VP urges major cities to develop mass transport systems

The Jakarta Post

JAKARTA (Antara): Vice President Jusuf Kalla on Wednesday asked major city administrations in the country to soon develop mass transport systems to overcome transportation problems and anticipate a continuous increase in the prices of fuel oil.

"We must develop ideal and low-priced mass transport systems as a solution to transportation problems," he said when opening Indonesia Transport & Logistics Expo 2007 at the Jakarta Convention Center.

With global crude prices hitting a record high of US$95 per barrel now, Indonesia could no longer rely on highway transport systems which were getting crowded and congested, he said.

"Therefore, more mass transport systems must soon be developed in major cities in Indonesia," he said.

Without mass transport systems, people would be exposed to high-cost economy due to transportation difficulties, he said.

Government to scrap VAT on coal

Urip Hudiono, The Jakarta Post, Jakarta

Following a protracted debate over the various duties on coal, the government says it will scrap the value-added tax (VAT) on the commodity.

The Finance Ministry's director general for taxation, Darmin Nasution, said in the latest proposed amendment of the VAT law coal would be excluded from the list of taxable goods, effectively exempting the commodity from the 10 percent tax.

The tax exemption, which is expected to provide more certainty for businesses in the sector, will still not apply to products derived from coal, Darmin said.

"There's always been a dispute over the VAT on coal, because in 1983 it was non-taxable then in 2000 it was taxable," he said Tuesday.

"We have now suggested coal be non-taxable again."

Being non-taxable, the government can simply collect royalties from coal producers without having to provide restitution -- or tax refunds -- for certain production facilities.

Darmin did not say how the tax exemption on coal might affect tax revenue. The government expects to collect some Rp 152 trillion in VAT revenue for this year and Rp 186 trillion for 2008.

A debate over the exact duties on coal arose in 2000 when a government regulation stipulated coal was non-taxable, which contradicted the VAT law at the time, which said the commodity was taxable.

This resulted in complaints from coal producers, who did not know how to claim tax refunds, affecting their cash flow and increasing production costs on facilities that had previously enjoyed tax incentives.

In reaction, many coal producers decided to withhold royalty payments to the government, which as of last year amounted to some Rp 5.4 trillion ($600 million).

The situation has been further aggravated because since 2005 the government has imposed a 15 percent tax on the commodity to ensure supply for the domestic market.

Demand for coal -- both for export and domestic use -- has been on the rise.

Indonesia, among the world's largest coal producers with 193 million tons in 2006, exported $4.6 billion worth of coal in from January to August, 2007, up 17 percent from the same period last year.

Local demand has risen in line with the government's energy diversification campaign to use more coal and gas rather than oil for industrial uses and power generation.

'Longest Idul Fitri holiday in world' under questioned

Adianto P. Simamora, The Jakarta Post, Jakarta

Indonesia enjoys the longest Idul Fitri holiday in the world so House of Representatives Speaker Agung Laksono has asked the government to review its policy on holiday seasons.

"The government needs to conduct an audit to determine the benefits and losses around the Idul Fitri holiday for the (sake of the) national economic condition," Agung said.

Agung said other countries held their Idul Fitri holiday for no more than four days.

"The 10-day break is the longest holiday in the world," he said.

"Many industry players have complained about a decrease in productivity due to the holiday."

The end of Idul Fitri festivities should have seen most government employees return to work Monday -- but officials at the State Ministry for Administrative Reforms ran surprise inspections on state offices just to make sure.

President Susilo Bambang Yudhoyono on Monday received at the Merdeka Palace his Palestinian counterpart Mahmoud Abbas, who arrived in Jakarta on Sunday to hold bilateral meetings Monday.

Susilo was accompanied to the meetings by Coordinating Minister for People's Welfare Aburizal Bakri, Foreign Affairs Minister Hassan Wirayuda and National Police chief Gen. Sutanto.

South of the Medan Merdeka square, Vice President Jusuf Kalla held a surprise inspection to find most chairs at the Vice Presidential Office already filled.

Kalla's secretary Tursandi Alwi said more than 90 percent of government employees working in office returned to work Monday.

"Officials who are absent have secured permits," he told Antara.

Kalla's special deputy for people's welfare Azyumardi Azra and deputy for economic affairs Tirta Hidayat were still out of town.

State Minister for Administrative Reforms Taufik Effendi carried out surprise inspections on several offices, including the South Jakarta Mayoralty office, state-run Persahabatan hospital and Gambir district office in Central Jakarta.

Taufik said his office had dismissed 500 civil servants in the last two years due to poor performance.

"Many of these dismissed officials were too lazy to come to their offices," he said.

The minister's deputy for accountability affairs M Rusdi paid a visit to the Attorney General's Office (AGO) in South Jakarta.

"Most of the officials were at their office on Monday," he said.

The AGO said it would impose firm sanctions against officials who did not return to work after the Idul Fitri holiday.

Most private enterprises and state offices resumed work Wednesday.

Transportation Minister Jusman Syafii Djamal said the number of holiday makers for this year's Idul Fitri reached 11.4 million -- a five percent increase from 2006.

China Cuts Asia Imports as Korea, Singapore Lose Jobs

By Michael Dwyer

Oct. 22 (Bloomberg) -- The U.S. isn't the only country watching jobs and manufacturing migrate to China. Increasingly, so are China's closest neighbors.

The nation is reducing its reliance on imports from the rest of Asia as it makes more of the higher-value-added intermediate and capital goods it previously bought from abroad. That is threatening growth in countries whose export sales are already in danger of erosion from the U.S. slowdown.

More than 13,500 electronics-product workers in Singapore have lost their jobs since 2004, according to Ministry of Manpower statistics. The International Monetary Fund last week forecast Singapore's growth rate will fall to 5.8 percent in 2008 from an estimated 7.5 percent this year and sees weaker expansion in the Philippines, Malaysia, Taiwan and South Korea.

``China is moving up the supply chain,'' says T.J. Bond, chief Asia economist at Merrill Lynch & Co. in Hong Kong. ``The view that China produces labor-intensive goods but purchases high-value-added goods from abroad may be roughly correct today, but it need not last forever.''

China is already providing fewer ``positive spillovers'' to other East Asian countries, according to the IMF.

``The structure of China's external trade in the last few years looks very different from 10 years ago,'' IMF economist Li Cui said in a September report. ``As China begins to specialize in more parts of the production chain, its imports of intermediate goods from the region could start to fall.''

Transferred Production

The move by Tokyo-based Toshiba Corp., Japan's largest chipmaker, to transfer notebook-computer production to China cost its former source, the Philippines, as much as $1 billion in lost exports annually, according to figures from the industry's national trade association.

China's President Hu Jintao, in his policy speech at the Communist Party congress in Beijing last week, reiterated his goal of moving the nation's manufacturers from simple assembly of final products to designing and turning out high-technology goods.

``Fifteen to 20 years ago, China could only make 20 to 30 percent of the components it needs to assemble products,'' says J.R. Ong, managing director of Singapore-based First Engineering Ltd., which supplies Palo Alto, California-based Hewlett-Packard Co., the world's biggest maker of personal computers, and Seagate Technology Inc. of Scotts Valley, California, the top maker of hard-disk drives. ``Today, that's climbed to 80 to 90 percent.''

Fewer Jobs

First Engineering employs 950 workers in six plants in China, Singapore and Malaysia. Ong says it has cut manufacturing jobs in Singapore by as much as 90 percent, moving most of them to China.

Some countries in the region are already taking steps to reduce their dependence on exports of manufactured goods. Singapore's government is promoting pharmaceutical, biomedical and petrochemical production, moving away from electronic components. Malaysian Prime Minister Abdullah Ahmad Badawi is seeking to develop service industries to diversify the economy.

``The region will have trouble maintaining growth momentum over the long term if it continues to rely primarily on traded goods.'' says Kim Eng Tan, a credit analyst at Standard & Poor's in Singapore.

The IMF forecasts that the growth rate in the Philippines will fall to 5.8 percent in 2008 from 6.3 percent this year.

`Import Substitution'

China's so-called ``import substitution'' took off after its entry into the World Trade Organization in 2001, according to Grace Ng, an economist at JPMorgan Chase & Co. in Hong Kong. WTO membership brought a ``surge'' of foreign investment that helped lift China ``up the production chain,'' she says.

China's average annual import growth rate declined to 10.5 percent in 2005-2006 from 24 percent in each of the previous four years, while exports kept growing at about a 25 percent annual rate, according to United Nations statistics.

``The evolution of the new production networks in Asia is something that we need to watch,'' says Deepak Bhattasali, chief Asia economist at the World Bank in Washington. ``We need to make sure that all the countries in Asia participate equally in it.''

That's far from guaranteed. Moving operations to China often comes at the expense of workers and suppliers who are left behind.

Shuttered Factory

Maxtor Corp., owned by Seagate, closed its Singapore plant in 2005 with the loss of 5,500 jobs as the maker of hard-disk storage products shifted output to China. Seagate and National Semiconductor Corp. of Santa Clara, California, the maker of chips for mobile devices such as Apple Inc.'s iPhone, have also transferred production to China from Singapore.

Eng Teknologi Holdings Bhd., a Malaysian maker of hard-disk drives and consumer-electronics parts, used to buy components and castings from suppliers in Penang, where the company is based, says Alfred Teh, executive chairman. Now, Eng Tek's Chinese plant in Dongguan is switching to Chinese suppliers, ``which are cheaper, faster, minus all the shipment costs.''

The Dongguan factory in southern China buys about half its components from outside China, down from as much as 80 percent two to three years ago, and that share may fall to 20 percent to 30 percent, he says.

New-Generation Phones

Osaka-based Matsushita Electric Industrial Co., the world's largest electronics maker, closed its mobile-phone assembly factory in the Philippines in 2005 to focus on new-generation phones it will make in China.

Even Asia's more-developed economies, such as Japan and South Korea, aren't exempt from China's import-substitution strategies, says JPMorgan's Ng. Exports from Japan and South Korea to China have slowed ``markedly'' in the last two years, she said in a report earlier this year.

The Chinese government is encouraging steelmakers, including Shanghai-based Baoshan Iron & Steel Co. and Wuhan- based Wuhan Iron & Steel Co., to make more higher-grade metal to replace imports from rivals such as Tokyo-based Nippon Steel Corp. and Pohang, South Korea-based Posco.

Growth in South Korea's shipments of electronics to China fell to 9.4 percent in the first 11 months of 2006 from 62.2 percent in all of 2003, according to JPMorgan. Japan's machinery exports to China have also decelerated, rising 19.5 percent through November last year compared with 41.9 percent in 2003.

Seoul-based LG.Philips LCD Co., the world's second-largest maker of liquid-crystal displays, plans to cut as many as 1,500 jobs in South Korea this year and relocate some manufacturing to Guangzhou in southern China, the Seoul Economic Daily reported in August.

``You have to be in China to survive,'' says First Engineering's Ong. ``There is no other choice. Most of the players are already there.''

To contact the reporter for this story: Michael Dwyer in Singapore at Mdwyer5@bloomberg.net

Ministries to cooperate on local heritage

The Jakarta Post, Jakarta

The Culture and Tourism Ministry will soon sign an agreement with the Justice and Human Rights Ministry in an attempt to protect the nation's cultural heritage.

"In order to avoid other countries claiming aspects of Indonesia's heritage, we approached the justice ministry about listing our heritage with them," Mukhlis Paeni, director general for culture, art and traditional movies at the Culture and Tourism Ministry, told The Jakarta Post on Saturday.

He said the ministry had started to conduct research into the heritage of some regions in cooperation with the United Nations Educational, Scientific and Cultural Organization (UNESCO).

"We are currently looking further into the Negara Kertagama documents, which are an important part of Indonesia's heritage," Mukhlis said.

The Negara Kertagama transcript was written in the 14th century during the Majapahit period and details the kingdom's success in achieving good governance and a people-based economy.

Mukhlis said due to the sheer volume of significant historical documents on Indonesia, the ministry could not work alone to achieve its target.

"We have conducted joint studies into heritage and folklore with several universities," he said.

The ministry also hoped other ministries and private companies would eventually become involved in efforts to preserve the country's heritage, he added.

Indonesia's claims to its heritage and folklore have been challenged in the past, with Malaysia having made claims to the Rasa Sayange traditional folk song and several batik designs, as well as the angklung (bamboo musical instrument).

Prahasto Wahju Pamungkas, an Indonesian intellectual property rights representative with the International Development Law Organization, said Malaysia could not have patented batik.

"Patents are only for the invention of new forms of technology," Prahasto told the Post.

He said the responsibility to copyright folk songs with no known creator fell with national governments.

"But if a song has been modified, the copyright for the modified version belongs to the people who modified it. And this is permitted as long as it does not harm the original creator," Praharso said.

He said efforts to search for, collect and list aspects of Indonesia's cultural heritage should be followed up by registering them with the intellectual property rights directorate.

"This will require a huge amount of money and time. The government should involve the public in its efforts to preserve the country's heritage.

"Forging cooperation with non-governmental organizations could be a good start," he said.

Surabaya to host regional investment promotion expo

The Jakarta Post, Jakarta

The Investment Coordinating Board (BKPM) will hold a regional investment promotion expo in Surabaya this week, the second such regional event this year in which all 33 provinces will showcase their respective business and investment potentials.

The expo, which will be held on Oct. 24-26, will give around 1,500 invited investors the chance to participate in round table discussions and forums, according to Darmawan Djajusman, BKPM deputy chairman for investment promotion.

This year's first regional expo was held last month in Batam.

"Invitations have not only been sent to local and overseas companies, but also to foreign business chambers as far away as Brazil -- who have by the way confirmed their participation," Darmawan told The Jakarta Post recently.

"Our representatives in foreign countries have also been actively involved in promoting this event," added Yuliot, BKPM director in charge of domestic promotion.

Yuliot said the agency organized the event in an effort to promote investment opportunities in the country. "Every year, we organize two major regional events and two others overseas."

Earlier in the year, the BKPM organized a promotion investment exhibition in Seoul, South Korea and plans to hold another one in Paris later in the year.

Since the monetary crisis, Indonesia has been boosting efforts to lure foreign investors in order to help fuel its consumption-driven economy.

By promoting investment opportunities in regions, the government is hoping to spark competition among the provinces in terms of ensuring a business-friendly climate.

All efforts, however, are often still riddled with classic problems, such as complicated licensing procedures and bureaucratic red-tape.

According to the latest survey from the World Bank and its private sector, the International Financial Corporation (IFC), Indonesia remains a tough place for investors.

The survey says 105 days are required for an investor to start up a business in the country, far longer than its main regional competitors like China, Malaysia and Vietnam, let alone Singapore.

Acknowledging this, Yuliot said many regional governments, and especially the BKPM itself, have continued to address such issues and have in some cases, made some improvements.

"With the BKPM, for instance, all procedures can now be completed within five working days. The target is actually 10 days.

"More and more regencies have set up a one-roof investment service. Around 200 regencies are now doing this, although most of them are located on the larger islands, such as Java and Kalimantan," Yuliot said.

He said the Surabaya event would also host a forum in which businesspeople from East Java could meet with relevant ministries and agencies to discuss the problems caused by the Lapindo mudflow disaster.

VP: economic growth of over 7% possible with hard work, determination

Padang, West Sumatra (ANTARA News) - Vice President M Jusuf Kalla has expressed optimism that Indonesia`s economic growth in the next few years will exceed seven percent if supported by determination, hard work and unity of all of the nation`s components.

"Next year, our economic growth rate should not be less than those of India and Vietnam, namely around eight percent," the vice president said here on Saturday when officially opening a meeting of Minang businessmen.

According to Kalla, currently Indonesia had all prerequisites to make progress as the country was free from conflicts, had abundant natural resources and enjoying political stability.

"The most important thing is unity, determination and hard work. The (political) elite should not fight each other," he said.

A high economic growth was necessary to help lower the poverty rate, he said. However, the government needed the support of the private sector and businessmen to reach a high economic growth, he said.

"Therefore, the government keeps on encouraging the business sector. The spirit of entrepreneurship should be continuously developed," Jusuf Kalla said before the Minang businessmen.

The vice president cited Japan as an example of a country whch had been defeated in a world war but had been able to rise again and develop quickly. So had Germany. He said the two countries succeeded because they had very strong spirit to make progress.

"Japan was defeated in the world war, however, it rose again and progressed. Germany was also beaten in the world war, but it later also made rapid progress. We were never defeated in a war, but we lost in morale, so that we often ask for assistance and loans from other countries," the vice president said.

Therefore, starting now , Indonesia should stop asking for assistance and depending on other countries, Jusuf Kalla said. Indonesians should be able to carry out national development using their own brains and ability, he said.

"We can achieve all that with our spirit of independence. No country can make progress without having spirit," he said.

Indonesia migrant workers score big

The Jakarta Post, Jakarta

Indonesian migrant workers continue to make major contributions to the country's economy through their remittances home.

During the second quarter, migrant workers sent home US$1.5 billion, a 5.4 percent increase from the same period last year, according to Bank Indonesia.

The central bank said it expected the full-year figure to reach $4.9 billion.

Triyono Widodo, Bank Indonesia's director for economic statistics, said Friday the figure was about the same as last year, although there was the possibility of a slight increase.

"It is possible that we will see higher remittance revenue this year because the number of migrant worker placements has been increasing," Triyono told news portal tempointeraktif.com

Data show an increase both in migrant worker placements in several countries, as well as a rise in average salaries for migrant workers, especially for those in Singapore and Saudi Arabia.

The minimum montly salary for a migrant worker in Singapore has risen to S$350 from S$280. In Saudi Arabia the minimum salary has risen to 800 real from 600.

Triyono said the higher remittances had pushed the current transfer into a surplus.

"Because of the remittances, the current transfer in the second quarter of this year experienced a US$1.3 billion surplus, a $100 million increase from the $1.2 billion of last year's surplus."

Migrant workers in Malaysia and Saudi Arabia, two major destination countries for Indonesian workers, contributed $1.1 billion of the second quarter remittances, or some 73 percent of the total.

Of Indonesia's 4.7 million legal migrant workers, around 83 percent work in those two countries.

On the outflow side, foreign workers in Indonesia in the second quarter remitted $224 million to their home countries, a 19 percent decline from the same period last year.

Jakarta to host largest ever trade expo

The Jakarta Post, Jakarta

Jakarta is gearing up to host the country's largest ever trade fair, in which more than 960 local businesses and 3,000 potential international buyers will participate, a top official said.

The 2007 Indonesian Trade Expo (ITE), scheduled to run from Oct. 23 to 27 at the Jakarta Fairground in Kemayoran, is expected to help boost the country's export industry, which has been projected to grow this year by between 14.5 and 20 percent.

"The Trade Expo will be the country's best and largest marketing avenue for our leading exporters and is aimed at attracting thousands of potential buyers from abroad," Trade Minister Mari Pangestu told a media gathering Friday.

Mari said growth in areas other than the oil and gas sectors in Indonesia had been promising this year.

"Growth is quite high at around 19 to 20 percent, so now we are looking at how to make this growth rate sustainable," she said.

"Trade exhibitions are obviously one way to boost exports."

Mari said the event, named "Innovative Design with Local Value and Contemporary Spirit", was a way to promote the country as a prominent player in the global economy, particularly in the international trade and export sectors.

"The ITE also serves as an ideal impetus to encourage Indonesians to appreciate and support locally-made products," she added.

The highlight of the annual expo, which was first held in 1986, will be Indonesia's Icon Pavilion, which spans 6,000 square meters.

The pavilion will showcase the products of 213 companies and 44 service providers and will offer potential products for export including agro produce such as coffee and crude palm oil, furniture and automobile parts. It will also offer services and products in the areas of information technology and construction.

During the event, the Trade Ministry will also present 29 companies with the 2007 Primaniyarta Best Exporters Awards.

Last year's winners will also exhibit their products in the Icon Pavilion.

This year's trade expo is expected to generate at least US$200 million in total sales, up approximately 17 percent from last year's total of just over $170 million.

As part of the expo, local entrepreneurs, international buyers and investors, foreign trade delegates, Indonesian delegates based abroad, economists and members of the government have been invited to participate in the Trade Expo Forum.

The forum will serve as a medium for information and knowledge exchange on current global market trends, opportunities and challenges.

RI investors confident over economy, ING survey says

Urip Hudiono, The Jakarta Post, Jakarta

Indonesian investors are on par with their top regional peers in terms of perception of a better economy ahead, where they can expect higher returns for their investments, a regional survey has revealed.

There is also a growing interest among local investors, who usually prefer to invest in the country's property sector, to put their money in the stock markets, the survey from ING Asia Pacific revealed recently.

A total of 47 percent of Indonesian investors believe the local economy will improve in the next three months, with 29 percent having similarly said so of the previous period.

This follows a generally optimist outlook in the region, with more than 70 percent of investors in China and India showing confidence in their respective country's economy and investment environment. More than half of the respondents in Malaysia, the Philippines, Hong Kong and Singapore also share an upbeat view on the future economy.

Only Japan showed a pessimist attitude, with only 26 percent of respondents expecting a more favorable economy, in what the survey says is a possible reflection of the country's recent political changes.

The first of the quarterly-planned surveys from the Amsterdam-based insurance group and New York-based TNS research firm included the responses of 1,038 individual investors in 13 Asia-Pacific markets.

Investors in Indonesia led the region with their confidence in being able to reap more handsome profits from their investments, with 55 percent of respondents seeing a higher return-on-investments (ROI) level, from 40 percent in the previous three-month period.

Investors in the Philippines, Malaysia and Thailand followed suit, with those in China and India only slightly less optimistic. There were less respondents in the remaining countries that saw a higher ROI level ahead.

"Indonesia's improving macroeconomic condition has given local investors more confidence," ING Indonesia spokesperson Robert Scholten said of the survey, which was released earlier this week.

"Investment in property, which has been a sunset sector since the spike in fuel prices, is significantly on the rise."

Indonesia's property sector is indeed still attracting the majority of investments in the country, with 58 percent of respondents still considering the practice of purchasing land, houses and apartments as a major part of their portfolio.

This compares to local stocks as the main investment choice of respondents in Japan, Hongkong, Singapore, Korea, China, Taiwan and Thailand.

More Indonesian investors are eyeing prospects offered by the local stock market, with 17 percent of respondents planning to invest in shares in upcoming initial public offerings (IPOs) over the next three months. This is up from the 4 percent who did so in the previous period.

Caution should, however, still be exercised along with the growing confidence in investing, as Scholten noted the survey found investors in more mature economies were more conservative in their outlook, while those with a short investing history tended to be extremely optimistic.