New decree to ensure resource transparency

The Jakarta Post, Jakarta | Fri, 04/30/2010 10:46 AM

The President has signed a decree appointing a multi-stakeholder working group that will be responsible to ensure public access to data on government revenues from the exploitation of non-renewable resources.

The working group will have the authority to demand information, additional data and input from the central government, regional governments and companies in the oil, gas and mining industries.

Advisor to the President on environmental matters Emil Salim told The Jakarta Post on Thursday the working group would consist of a supervisory team, consisting of five government ministers, himself, and an executive team.

The executive team will comprise of director levels from the Coordinating Economic Ministry, Energy and Mineral Resources Ministry, Finance Ministry, upstream and downstream oil and gas regulators and representatives from regional governments, industry associations and NGOs.

“Companies will have to provide information to the public on how much they pay and to whom. Accountability is what we’re after. There must be transparency and accessibility to information,” Emil said.

Emil said the presidential decree, which was signed on April 23, signified that Indonesia was moving toward adopting the Extractive Industry Transparency Initiative (EITI), a global initiative announced at the World Summit on Sustainable Development in Johannesburg, South Africa in 2002.

Ridaya Laodengkowe of Publish What You Pay Indonesia, a coalition of NGOs for transparency of extractive resources management, said the main task of the working group was to reconcile data of paid revenues from the government and private companies.

The data reconciliation, he said, would curb disputes on revenue distribution between the central and regional governments, and provide certainty to companies in the oil, gas and mining industries.

The contribution of the oil and gas sector to state revenues reached Rp 184.7 trillion (US$20.5 billion) in 2009, down by 39.3 percent compared to Rp 304.4 trillion in 2008 on the back of lower oil prices. By average, the sector contributed about 30 percent of state revenue annually.

The mining sector contributed Rp 42.6 trillion in 2008 and Rp 51.6 trillion in 2009 to state revenues.

Ridaya added that the adoption of EITI practices would also help reduce ecological damage caused by poor management of work concessions given to contractors on natural resources.

EITI senior advisor David W. Brown said countries adopting EITI principles would benefit from an improved investment climate as the management of natural resources would become transparent.

Brown said five countries that had implemented EITI for more than five years had been able to improve their rating in the Transparency International corruption perception index by an average of 10 percent.

Suyitno Padmosukismo, executive director of the Indonesia Petroleum Association, greeted the signing of the decree, saying players in the oil and gas industry were already accustomed to transparency in their business operations.

“However, I don’t think the decree will improve the investment climate. There are other issues more relevant to the climate such as government inconsistencies in sticking to the sanctity of contracts,” Suyitno said. (not)

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Indonesia Losing Luster for Oil & Gas Investors: Survey

Barclays Capital upbeat on Indonesian economy

Vincent Lingga, The Jakarta Post, Jakarta | Fri, 04/30/2010 10:53 AM

Barclays Capital is upbeat on Indonesia’s economy, predicting growth of 6.5 percent this year driven mainly by robust household spending on the back of healthy consumer confidence and an improving employment outlook.

The prognosis by the investment banking arm of Barclays Bank PLC, the second largest bank in Britain, is even more bullish than the government’s estimate of 5.8 percent, the International Monetary Fund’s 6 percent, the Asian Development Bank’s 5.5 percent and the World Bank’s 5.6 percent.

“Domestic consumption will continue to be the main driver of growth, while the purchasing power will get a boost from the 10 percent pay rise for civil servants, bullish sentiment in the stock market, credit growth and rising commodity prices,” Barclays Capital regional economist Prakriti Sofat said.

She told The Jakarta Post on Thursday that she didn’t see any big risk of a sudden reversal in portfolio capital inflows, which had been increasing sharply over the past year because the high interest rate differential was only one of the positive factors wooing fund inflows.

“Many investors also look into the medium- and long-term prospects of the economy, which are positive,” she added.

Sofat also observed positive development in the employment sector as the informal economic sector had been doing well as a shock-absorber of the labor surplus.

She did not see any risks of instability arising from the increasingly antagonistic relations between the government and the parliament.

“The political noise will only be a short-term distraction because the politicians will eventually come to their senses and take into account public interests,” she said.

The UK investment bank observed that with strong growth, benign inflation and supportive balance of payments outlook, Bank Indonesia would most likely maintain the benchmark interest rate at 6.5 percent in the first half but with a slight tightening in the third quarter, ending the year with the rate at 7.25 percent.

With a robust balance of payments ending the year with a surplus of around US$14 billion (2 percent of gross domestic product) and a continued rise in financial flows offsetting the reduction in the current account surplus as well as a strong recovery in both foreign and domestic investments, the rupiah rate is forecast to range between Rp 8,800 and Rp 9,000 for the year.

Barclays Capital’s commodity analyst Yingxi Yu saw a substantial contribution from the commodity sector to invigorating domestic consumption, citing strong income support from the rise in coal, palm oil and tin prices.

Sofat added that fundamentally, Indonesia’s economy was quite different from a decade ago as the national balance sheet becoming increasingly sound.

“Indonesia’s balance of payments condition is strong with large foreign exchange reserves [of $80 billion], the government debt to GDP ratio has declined steadily [to less than 30 percent] and the corporate balance sheet is also strong with low leverage,” she said.

Indonesia Losing Luster for Oil & Gas Investors: Survey

Jakarta Globe, Yessar Rosendar, April 29, 2010

International oil and gas executives have growing reservations about investing in Indonesia, according to a survey by PWC. (Antara Photo)

The “shine” is wearing off of Indonesia as an investment destination for international energy companies, despite the global energy rush and the country’s massive reserves of oil and natural gas, according to a survey released by PricewaterhouseCoopers on Thursday.

According to PWC, executives from oil and gas companies cited rising concerns about uncertainty over cost-recovery legislation, corruption, interference by government agencies, the sanctity of contracts and the general regulatory structure of the upstream and downstream oil and gas industry. The executives said they were increasingly skeptical about the chances for positive change in these five areas in the near term, according to PWC.

“Indonesia still regarded as attractive. However, the shine seems to be wearing off,” said William Deertz, lead technical adviser for energy, utilities and mining practices at PWC Indonesia. “There is a shift of sentiment, survey participants seems less optimistic in near term improvement, which is not good for investment.”

PWC surveyed 317 executives from 76 foreign and domestic oil and gas companies. The findings come at a time when the government is struggling to find ways to reverse the gradual decline in national oil production.

Once a member of the Organization of Petroleum Exporting Countries, Indonesia is now a net importer of crude, and is struggling to reverse steadily declining output, targeted this year at 965,000 barrels a day.

The government provided some measure of relief and certainty to investors this week when it announced it would not proceed with a plan to limit the amount of expenses oil and gas companies could claim under the cost-recovery process.

The unsettled regulation and the issue of limits has been a major concern for investors.

“Cost-recovery that changed midway is unacceptable,” Deertz said.

Ron Aston, president of the Indonesian Petroleum Association, which represents almost all oil and gas producers in the country, said Indonesia was still attractive as long as the investment climate remained positive. Indonesia still has basins that contain large reserves, he said.

“The fundamental thing for the oil and gas industry across the world is geological prospectivity, so it’s certainly attractive,” Aston said.

However, the government needed to take steps to make the sector more attractive to international investors, he said.

Over the next few years energy companies are set to invest around $1 billion to explore the blocks around the Makassar Strait, even though it was uncertain whether oil was in the area, Aston said, adding that this highlighted the high level of risk involved.

“It’s a staggering fact that they invest billions of dollars just to see if something is there.”

The government should complete the cost-recovery regulation very soon, because it will enhance production activities in oil and gas, he said.

“There is a misconception. Cost recovery is not a reimbursement, it’s government investment so that production can increase,” Aston added.

Edy Hermantoro, director of upstream oil and gas at the Energy Ministry, said Indonesia still has enormous oil and gas potential. According to ministry data, in January 2009 the country had potential oil reserves of 3,695.39 million barrels of oil and proven reserves of 4.303.1 million barrels of oil.

The whistle blower seeking his roots` support

Antara News, Thursday, April 29, 2010 20:57 WIB

Pagaralam, S Sumatra (ANTARA News) - Susno Duadji, the whistle blower on the fiscal mafia case involving rogue tax official Gayus Tambunan and several police officers on Thursday visited the South Sumatra hamlet where he lived as a child.

His return was meant to win the local people`s support for his efforts to help reveal big corruption cases, including those that had caused the country to suffer trillion-rupiah losses.

The former police`s chief detective came to Tebad Gunung hamlet, Lubuk Buntak village, Dempo Selatan sub-district, Pagaralam district, South Sumatra, where his parents` graves are also located.

Speaking to the local press here , he said he was deeply concerned about the sufferings of poor Indonesians while the government bureaucracy and law enforcement agencies were infested with corrupt officials.

"Indonesia is actually a rich country but corruption has made our people suffer a lot. The state`s money which should have been used for improving the people`s welfare is often stolen by corruptors," he said.

Duadji reiterated that his efforts to help reveal the legal mafia practices within the national police force were not meant to seek position or popularity.

Instead, he did all for the sake of a better Indonesia and the people`s welfare, he said.

"Indonesia will be a much more prosperous country if it can be freed from corruption. So much of the state`s money could then be be saved. I do believe that our people`s sufferings can be eliminated, if corruption is eradicated," he said.

The corruption cases in such sectors as taxation office and oil company, could have so far been revealed to the public, he said.

In this context, law enforcers should not only probe the corruption case involving the low level employees but also those in top positions, Susno Duadji said.

"I believe that the big corruption cases will be revealed, including those causing the country to suffer Rp70 billion, Rp100 billion or even Rp1 trillion losses," he said.

In revealing these big cases, the law enforcers need to prioritize state officials in the central government level before handling those in the regional government levels, he said.

In combating corruption, the participation of every Indonesian was needed regardless of their social and professional backgrounds, he said, adding that his return to his hometown was asking for the people`s support and visiting his parents` graves.

Susno Duadji was the whistle blower who revealed the mafia case and engineering practices within the police force in connection with Gayus Tambunan`s money laundering and corruption cases.

He had been questioned by the police investigators as a witness for the Gayus Tambunan and Arowana fish cases.

The case of rogue tax official Gayus Tambunan came under the spotlight after the police named him a suspect in connection with a suspicious Rp25 billion bank account in his name.

At least 12 middle ranking officials of the Indonesian finance ministry were allegedly involved in tax brokering cases.

In connection with Tambunan`s case, the police had arrested Haposan Hutagalung, who was Tambunan`s lawyer from June 8 to September 1, 2009, and two middle-ranking police officers.

The Gayus Tambunan fiscal mafia case had also triggered a suspension of Lampung provincial police chief Brig Gen Edmon Ilyas from his position to facilitate an investigation into his alleged involvement.

Sjahril Djohan whom Susno Duadji simply referred to as "Mr.X" when he was summoned by the House of Representatives` members recently was also detained after police investigators named him a suspect for the Arowana fish case.

Indonesia Seen Recovering in Strong Q1 Earnings Reports

Jakarta Globe, Bloomberg & Reuters, April 29, 2010

A slew of strong first-quarter results on Thursday from some of Indonesia’s biggest companies provided further evidence that the domestic economic recovery is on track.

State-controlled miner PT Timah, diversified firm PT Astra International, cement maker PT Semen Gresik and three banks — PT Bank Central Asia, PT Bank CIMB Niaga and PT Bank Permata — all posted healthy numbers.

Higher international commodity prices and strong consumption, supported by low inflation and low interest rates, are driving the recovery. Finance Minister Sri Mulyani Indrawati predicted this month that the economy would grow by between 5.5 percent and 6 percent this year.

Thursday’s results “definitely strengthen the assumption that the domestic economy is recovering,” said Suryadi Candra Kasih, head of research at PT eTrading Securities. Although the assumption had already been “priced in by the market,” he said, “we are penciling in significant earnings growth for Indonesian commodities companies this year.”

Timah, the world’s second-largest tin producer, said its first-quarter net income had surged almost tenfold to Rp 141.82 billion ($15.7 million) because of an increase in the price of the metal.

Timah’s bumper result follows that of PT Aneka Tambang, Indonesia’s second-biggest metal producer by market value, which last week announced that its first-quarter profit had more than doubled to Rp 201.9 billion.

Astra International, an automotive retailer and distributor with interests in plantations and finance, said first-quarter net profit rose 60 percent to Rp 3.014 trillion. The gains were more modest but still significant at Semen Gresik, which reported Rp 802.5 billion in first-quarter profit, up 17.8 percent.

Consumer-oriented companies have also enjoyed a strong earnings in the first quarter. “Cement and consumer-goods companies, except telecommunications, will likely continue posting strong earnings growth this year,” Suryadi said.

PT Bank Central Asia, the country’s largest bank by market value, posted a 16.6 percent rise in first-quarter net income to Rp 1.9 trillion. CIMB Niaga, the local unit of Malaysia’s CIMB Group Holdings, reported a first-quarter net profit of Rp 524.2 billion, more than double that of the year before, while Bank Permata said its first-quarter net profit was up by 62 percent to Rp 269 billion.

Suryadi said all three banks were likely to enjoy robust loan growth this year on the back of low inflation and interest rates.

“There may be some increase [in interest rates], but at the end of the year, the rates will still be low,” paving the way for more lending, he said.

BCA said on Thursday that its outstanding loans had grown by 12.7 percent in the first quarter to Rp 120.85 trillion from a year ago, driven by broad-based consumer lending.

BCA planned to maintain its 15 percent lending target, said Jahja Setiaatmadja, the bank’s vice president director. “Consumer lending will grow mainly on housing credit and vehicle credit,” he said.

Edwin Sinaga, president director of brokerage PT Financorpindo Nusa, said the strong earnings highlighted the improving local economy and were likely to lift the Jakarta Composite Index in the short term. But he warned that the JCI had risen too far.

“What I see happening now is euphoria from excess liquidity that has prompted local stock prices to jump and not reflect their fundamentals anymore,” he said.

To Stamp Out Corruption, Indonesia Must Make Honest Business Profitable

Jakarta Globe, Kanti Pertiwi, April 29, 2010

In the last month or so, the public has been bombarded with news of tax scandals involving sums that could have lifted millions out of poverty in our great nation. The relationship between private corporations and state officials — and the lack of oversight in that area — is again under scrutiny.

A naive perspective would be that the scandals are evidence of too many loopholes in our financial system. A better explanation is a chronic problem of bribery.

Looking at the latest data provided by the World Bank (in 2003), 44 percent of firms in Indonesia admitted to being expected to bribe public officials to get things done in customs, taxes, licenses and other government services.

On the same note, earlier this week the Hong Kong-based Political & Economic Risk Consultancy listed Indonesia as the most corrupt nation in the Asia-Pacific region. PERC studied the surveys on the perspective of executives as to whether an economy is corrupt. It is paradoxical for corporate governance theorists to expect would-be law-abiding business practitioners to have any effective control over their companies’ decision-making processes without some kind of regulatory transparency.

On one hand, there are those corporations that have fully adopted the spirit of ethical practice, while on the other, there are many others whose efforts are half-hearted at best.

In a preliminary study focusing on ethics in the workplace, the University of Indonesia found that policies varied widely across companies, even among those categorized as multinationals. One company may decide to integrate a full-day workshop on ethics into their induction program, while another sees no need. One respondent, a junior staffer from one of the largest multinationals in Jakarta, was convinced that payoffs to officials always occur off the radar of the rank and file; kept safely within the walls of the top management.

Employees from various companies also acknowledged that many aspects of daily decision making — outside the accounting or finance department — could put one’s integrity to the test. They cited examples of obtaining approval for claims in advertisements and escaping sanctions from spillover in the distribution of regulated products.

As far as a code of conduct is concerned, there is no consensuses on the degree of stringency or the severity of punishment for violators. Even if there are harsh punishments on paper, it rarely occurs that someone is taken to the ethics committee because, “we are all in the same boat.” If it does happen, it calls for whistle-blowers to act, but unfortunately they themselves are living under great threats — of being labeled “not a team player,” of missing promotions or even of losing their jobs.

A small number of companies in Indonesia, however, have tried to implement whistle-blower protection systems even though protection from the law for corporate crime is still absent. The lack of guaranteed protection, combined with our collectivist culture, has made it difficult to set up an effective whistle-blower system in our country, experts say.

Moreover, there is no specific institution with the authority to take measures against corporate irregularities. The government is moving slowly, choosing to leave it to the informal agreements that exist among business associations or other interest-based collaborations. Even the upcoming implementation of a law supposedly guaranteeing public access to information leaves us with the question of how we can enforce it effectively. Privately-held businesses are still as profitable as ever, thanks to “under the table” arrangements made by so-called civil servants.

When such corrupt alliances finally do get exposed, businesses continue to thrive, even when the person at the top of management is living behind bars (Artalyta is a case in point). Such blatant corruption calls for harsher regulations, such as the ones currently being discussed in Brazil, which include penalties ranging from fines of up to 30 percent of gross income to shutdowns of companies caught bribing officials.

The current state of “governance by relationship” is a great source of frustration for many businesses. Companies that are heavily monitored by their institutions in developed economies (think of the Foreign Corrupt Practices Act for US firms and the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions for members of the Organization for Economic Cooperation and Development) are the most prone to hefty sanctions, but at the same time they are being charged generally higher rates compared to their local counterparts, according to research. So for the sake of creating a going concern, they must strike the right balance between networking and breaking the law.

As far as societal contribution goes, our higher education curriculum lacks an emphasis on ethics. Talk with any business student and you’ll almost certainly find they are not fully aware of the workplace challenges that lie before them — busy are they are with case studies on corporate profitability, efficiency and branding strategies. The closest they come to ethics is corporate social responsibility instruction, which is often mistakenly interpreted as simply donating food and clothes to landslide victims or lending money to small businesses that happen to have potential revenue of Rp 200 million ($22,0) a quarter.

The government has yet to take a solid step toward a more systematic, integrated and sustainable approach to ethics education. This should include training education professionals to be role models on issues such as academic honesty and professionalism inside the classroom.

Academics argue that emerging economies such as Indonesia need to graduate from a system of personalized transactions to more impersonalized business with a third-party enforcer. As Columbia University professor Joseph Stiglitz has argued, informal networks necessarily breed cronyism, corruption and other institutional dysfunction. With the onset of free trade, companies must start embracing resource-based competition and leave behind networking-based competition.

According to some economic theorists, predictability only occurs as long as relationships can be maintained. That means that at a certain point, maintaining relationship will require too many resources. As a result, the needed transition will only take place once the cost of maintaining relationship-based governance starts to outweigh the benefits.

It is unnecessary to ask why businesses would want officials to make objective judgments when the businesses can dictate those judgments by spending just a fraction of the money they will eventually reap. It is a win-win situation for both the corrupt officials and the self-interested corporate leaders.

Unless a whistle-blower has the guts (and protection) to uncover such conspiracies, this relational type of transaction will continue to flourish. Whenever trust is a luxury, rules must be strengthened. And unless the systemic moral crisis is alleviated, we should expect further systemic crises in business, economics and industry, to hit our country in future.

Looking at the resilience of the existing corrupt institutions, we have a long road to travel to reach more rule-based governance in this nation.

Kanti Pertiwi is a lecturer in the Department of Economics at the University of Indonesia.

Noted lawyer’s son named suspect in graft case

Arghea Desafti Hapsari, The Jakarta Post, Jakarta | Thu, 04/29/2010 10:11 AM

The antigraft body announced Wednesday it had named the son of noted lawyer Adnan Buyung Nasution a suspect in a graft case centering around a government project to procure cattle.

Adnan is known as a respected lawyer and human rights defender. He is also a former adviser to President Susilo Bambang Yudhoyono.

A deputy chairman of the Corruption Eradication Commission (KPK), Chandra M. Hamzah, said the commission had in February named Iken BR Nasution a suspect in the multimillion-dollar case.

Iken was named a suspect “for taking part in the case involving the import of cattle ... under the Social Services Ministry’s poverty eradication program,” Chandra said during a hearing with House of Representatives’ Commission III overseeing legal affairs.

Iken is a commissioner of PT Atmadhira Karya, which allegedly was directly appointed as partner by the ministry in the purchase of the cattle, between 2005 and 2006. The project was valued at an estimated Rp 5 billion.

According to a 2003 presidential decree on procurement, direct appointment is only permissible for government projects worth less than Rp 50 million.

The ministry allegedly appointed the company to import 2,800 Steer Brahman Cross cattle from Australia.

However, the company fell short of supplying 900 animals and was accused of selling some outside the project.

Based on the KPK’s preliminary estimates, the fictitious import of cattle caused state losses of Rp 3.6 billion.

KPK spokesman Johan Budi said Iken would be charged with articles under the 1999 Law on Corruption, regulating acts of enriching one’s self or a corporation. The articles carry a maximum punishment of 20 years’ imprisonment and Rp 1 billion in fines.

The case has also implicated former social services minister Bachtiar Chamsyah. The KPK has previously named the latter a suspect. Bachtiar’s case, however, also involves the procurement of 6,000 sewing machines worth Rp 54 billion.

He also allegedly directly appointed a company for the procurement and inflated the price of goods.

An audit report from the Supreme Audit Agency (BPK) in 2005 showed the procurement of the sewing machines and the import of the cattle was suspicious.

The KPK began investigating the case in 2007 and found positive evidence early last year.

Iken is a commissioner of PT Atmadhira Karya, which allegedly was directly-appointed as a partner by the ministry in the purchase of the cattle.

We're listening

Wendra Ajistyama, The Jakarta Post, Jakarta | Wed, 04/28/2010 7:50 PM

We're listening: Corruption Eradication Commission (KPK) deputy chairmen (from left) Bibit S Riyanto, Haryono Umar, Chandra M Hamzah and M Jasin face questions from House of Representatives lawmakers during a hearing with Commission III on legal affairs about cases handled by the KPK, including the botched bailout of Bank Century. JP/Wendra Ajistyama

Boediono Blasts Banks for False Bank Indonesia Reports

Jakarta Globe, Ardian Wibisono, April 28, 2010

Vice President Boediono. (Antara File Photo)

Vice President Boediono, the object of relentless attacks over the Bank Century bailout, has taken banks to task for not providing credible and accurate information about themselves in the monthly reports they are required to send to the central bank.

Speaking at the opening of the annual conference of the Indonesia Banks Association (Perbanas), Boediono said accurate information was crucial for preventing crises and formulating effective policy when crises do develop.

Bank Indonesia governor at the time of the Century bailout in late 2008, Boediono is keenly aware of the importance of having good information. He came under months of fierce attack for his role in deciding to bailout the bank with some critics claiming the decision was taken without sufficient data to back it up.

Every month Indonesian banks are required to submit information to Bank Indonesia, including key financial metrics such as their amount of outstanding loans, their total assets and their capital adequacy ratio.

Banks should keep an eye on each other and Bank Indonesia should penalize lenders who submit false reports, Boediono said.

“Our banking industry structure is already good but it can still be improved, especially regarding the reliability of information. Bank reports have to be accurate,” he said.

“Information is the main basis on which to make decisions. Banks should watch out for each other and Bank Indonesia should set conditions to make sure the reports are accurate and sent in on time. If necessary there should be penalties,” Boediono added.

The central bank has long been criticized as weak and ineffective in supervising banks.

Bank Indonesia deputy governor Budi Rochadi on Wednesday told the Jakarta Globe that some banks did send in inaccurate reports. “Most of the banks that do it are small-sized lenders,” he said, adding that the reason banks might submit false data was to avoid being placed under Bank Indonesia supervision.

Since January, BI had improved its system for collecting reports from banks, Budi said. “Previously, it took more one and a half months to get all of the figures from a bank but now it takes less than a month and the information is more accurate.”

Budi said the central bank already fined banks who were found to have supplied false data but was considering making these penalties tougher. However, he declined to say what the penalties were.

“There’s a calculation but I don’t remember it,” he said.

Perbanas chairman Sigit Pramono said some banks were falsifying their reports, but he claimed that none of the banks who belonged to Perbanas did this. Out of the 121 banks in Indonesia, 78 are Perbanas members. Submitting false reports should be treated as a criminal act, Sigit said.

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6.3% Growth Expected in 2011

Jakarta Globe, April 28, 2010

The government expects national GDP to grow 6.3 percent for full year 2011, higher than 2010’s forecast of 5.7 percent, Finance Minister Sri Mulyani Indrawati said on Wednesday.

She added that 5 percent inflation was expected with investment growth of 11 percent next year. “Growth will still be dominated by domestic demand,” she said, adding that consumption was expected to grow 5 percent next year.

The economy expanded 4.5 percent last year, making it one of the only Asian countries to post positive growth in a year dominated by the financial crisis. 

Reuters

President reminds regional heads of their main tasks

Antara News, Wednesday, April 28, 2010 15:45 WIB

Jakarta (ANTARA News) - President Susilo Bambang Yudhoyono has warned regional heads against immersing themselves in their own politics at the expense of their primary tasks as government officials.

In his address to open the National Development Planning Congress 2010 attended by around 2,000 people consisting of, among others, governors, district heads, mayors from all over Indonesia here on Wednesday, the President also warned them against the tendency of enriching themselves and their family members.

"All of us, including myself, should not concern ourselves about enriching ourselves and our family members," the head of state said, calling on the governors, district heads, and mayors to work hard to develop their respective areas.

The president also asked them to leave behind the habit of blaming other parties, but instead, making every effort to immediately solve every problem arising in their areas.

"Let us free ourselves from the bane of irresponsibility," the president said.

At the meeting to draw up the government`s Work Plan for 2011, the head of state reminded the governors, district heads, and mayors that the objective of national development was to improve the people`s welfare.

The congress was themed "Acceleration of Just Economic Growth Supported by Consolidation of Central-Regional Government Relations" and translated into 11 national development priorities in 2011, namely bureaucratic and administration reform, education, health, poverty eradication, food resilience, infrastructures, business and investment climate, energy, the environment, natural disasters, least developed regions, the most outer and inner islands, post-conflicts, culture, creativity and technology innovation.

The results of the earlier two working meetings led by the President and attended by governors from the country`s all provinces at Cipanas (West Java) and Tampaksiring (Bali Province), became inputs in drafting the government`s work plan 2011.

The congress is also expected to synchronize programs, main activities, venues and budgets prepared by the ministries and government institutions, which are considered urgent and need to be implemented immediately.

Govt to raise civil servants’ salaries by 10 percent

Erwida Maulia, The Jakarta Post, Jakarta | Wed, 04/28/2010 4:19 PM | Business

Civil servants and military and police personnel will have their salary increased by 10 percent next year, Finance Minister Sri Mulyani Indrawati says.

“In 2011, there will be a salary increase which will be slightly higher than the inflation rate, which is predicted to reach 5 percent. The hike will be 10 percent. This is for the sake of the welfare of civil servants, the Indonesian Military soldiers and police personnel,” Mulyani told governors and regents meeting to discuss development programs for 2011 at the Bidakara Hotel in South Jakarta on Wednesday.

Mulyani said the state apparatus would also receive the 13th month salary.

Pensioners will also enjoy the increase, the minister added.

“It has become our policy in the last five years [to raise salaries],” Mulyani said.

The government, she said, would allocate Rp 81.3 trillion for the remuneration of civil servants, military and police personnel, the recruitment of 100,000 new civil servants and for bureaucratic reforms.

President opens development planning Congress 2010

Antara News, Wednesday, April 28, 2010 14:03 WIB

Giving direction: President Susilo Bambang Yudhoyono gestures during his opening speech at a national development planning meeting in Jakarta on Wednesday. Antara/ Widodo S. Jusuf

Jakarta (ANTARA News) - President Susilo Bambang Yudhoyono here on Wednesday opened the National Development Planning Congress 2010 which will last until May 1.

Aimed at drafting the government`s Work Plan for 2011, the congress is being participated in by around 2,000 people consisting of, among others, governors, district heads, mayors from all over Indonesia.

The congress` theme is "Acceleration of Just Economic Growth Supported by Consolidation of Central-Regional Government Relations".

The theme is translated into 11 national development priorities in 2011, namely bureaucratic and administration reform, education, health, poverty eradication, food resilience, infrastructures, business and investment climate, energy, the environment, natural disasters, least developed regions, the most outer and inner islands, post-conflicts, culture, creativity and technology innovation.

The results of the earlier two working meetings led by the President and attended by governors from the country`s all provinces at Cipanas (West Java) and Tampaksiring (Bali Province), became inputs in drafting the government`s work plan 2011.

The congress is also expected to synchronize programs, main activities, venues and budgets prepared by the ministries and government institutions, which are considered urgent and need to be implemented immediately.

After delivering his opening remarks, President Yudhoyono is expected to present copies of two books titled "Guarding the Momentum for Change: Evaluation of the Five-Year Implementation of the National Middle-Term Development Plan 2004-2009" and "The Administration and Regional Development Implementation: Strengthening Synergy between the Central and Regional governments and Among Regions," to three representatives, namely Jakarta Governor Fauzi Bowo in his capacity as chairman of the All Indonesian Provincial Governments Association (APPSI), Pacitan District Head Sujono in his capacity as chairman of the All Indonesia District Government Association (APKASI), and Palembang Mayor Eddy Santana Putra in his capacity as chairman of the All Indonesia City Administration Association (APEKSI).

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Customs office identifies suspected directors

The Jakarta Post, Jakarta | Wed, 04/28/2010 9:51 AM

The Directorate General of Customs and Excise confirmed Tuesday that the personal wealths of two of its officers were suspiciously large and admitted it had identified 25 loopholes in the directorate’s working system that were ripe for exploitation.

“In terms of positions they are equivalent to directors,” Director General of Customs and Excises Thomas Sugijata told reporters during the official opening of a new Customs and Excise office at Alam Sutera, Tangerang.

Thomas said the two officials were heads of provincial customs and excise offices, but refused to mention their names or where their officers were.

He identified them only by the initials T and J.

According to an internal source, T is head of the Jakarta office, and J retired in March as head of the West Java office.

The officials’ personal fortunes were disclosed by the Financial Transaction Reports and Analysis Centre (PPATK) earlier this week.

Thomas said the two were alleged to have been involved in corruption from 2005 until 2010.

“Their cases are now in the hands of the authorities,” he said referring to the Corruption Eradication Commission (KPK).

According to the KPK, T had assets worth Rp 3.97 billion, including Rp 1 billion in demand deposits, plus houses and land in Bekasi, West Java.

J was worth Rp 6.8 billion as of 2007, a wealth that comprised thousands of meters of land in Bogor, West Java, and a number of vehicles, including a Jeep Wrangler and a Harley Davidson motorcycle.

Previously, the PPATK uncovered suspicious amounts of funds in the personal accounts of tax officials Bahasyim Assifie, who had Rp 64 billion, and Gayus Tambunan, who had Rp 28 billion.

The two cases have led to an intensification of investigations into all departments within the finance ministry, including the Customs and Excise Office and the National Police, which have had officials implicated in case brokering.

Thomas said his office had launched an internal investigation to identify other violations, and that already 25 loopholes had been found in the office’s regulations.

Those included regulations on goods inspections, supervision of incoming and outgoing goods in restricted areas, importer registration, document inspection and the establishment of new offices, he said.

“We are now doing internal control so that there will be early warnings for any corrupt practices because officials are monitored by their superiors.”

“There will be no official who is not monitored,” he added.

Corruption Threatens to Corrode the Benefits of a Fledgling Democracy

Jakarta Globe, Rheizka Aulia, April 27, 2010

Mafias are not organizations usually associated with Indonesia — not in the vein of southern Italian families or the tattooed Yakuza of Japan. But I believe all kinds of mafias, and the corruption that is their lifeblood, have been around for centuries in our country. If steps are not taken to reduce their influence, then every single policy and every single incremental change that has been made in the march toward democracy will prove to be nothing but historical learning.

Indonesians knew firsthand of corruption even before the word “korupsi” became popular in everyday conversation. Even the name of the Dutch-owned trading association in colonial times, the VOC (Verenigde Oost Indische Compagnie, or Dutch East Indies Company), was jokingly referred to as Verhaan Onder Corruptie — “collapsed because of corruption.” Bribery, influence peddling, patronage, cronyism, nepotism, electoral fraud, embezzlement and every other kind of corruption has been practiced in our land for much longer that we care to sometimes admit. After a decade of political reform, we might ask: Has democracy in our country played the role of David to corruption’s Goliath? Has the cicak challenged the buaya?

Post-Suharto democracy has only been around for a decade and our nation has tried hard and holistically to adapt to the changes. Freedom of the press, decentralization, special autonomy, election of regional officials, direct elections for the president and members of the legislature, and the application of regional planning systems have all increased public awareness about the value of democracy. But most of our citizens remain skeptical about whether the daily practices of government institutions can ever be truly transparent and fair.

If we go to an immigration office, we do not have to line up to get our passport if we know someone “on the inside” and if we are willing to pay more. If we go to the office of the district head, we can get our identity card issued or renewed faster if we can “assure” the officer that we need it urgently. If we are caught by the police for not wearing a seat belt while driving, we can negotiate the price for our freedom on the spot as soon as the police officer asks: “Do you want to proceed with this issue now or in front of a judge?”

The reality is that corruption is widespread. Even if the government has tried to change the structure of institutions like the police to make them more democratic, well-meaning civil servants themselves seem to be unsure whether they can change the culture within their institutions. Meanwhile, many members of civil society still seem to condone corruption committed by low-paid officers because it is “common,” whereas corruption by higher-level officers is another thing. Most civil servants climbing the ranks take corrupt practices along with them. Corruption is systemic in many of our of national institutions and is not related per se to level, but rather as a perk of being in the institution itself.

But it is not all doom and gloom. One decade of reform has shown some positive signs, with public opposition to corruption gaining strength. Media nowadays not only run reports about corruption cases but also report how people react toward these cases. More people are telling stories about their own experiences of corruption, which has inspired others to do the same. Civil society organizations in some areas have tried to engage the public in the process of creating and monitoring local budgeting and involving themselves in budget allocation in order to prevent leakage of state-administered funds.

The above examples show that public demand for government transparency might be increasing, providing the government with a chance to change the culture within its institution. Governments, local and national, will be able to gain the public trust they so often say they crave if there is increased transparency, clean rather than “dirty” decisions and fair procedures in place in all areas of public service. Leaders will benefit from demonstrating consistency and openness in dealing with corruption cases in their midst.

Every instance of showing serious support for the process of democratization in Indonesia will eventually be beneficial for both government and the broader elite, so why are authorities making such a spectacle of high-profile cases on television? Corruption cases are becoming more and more like a reality show. How bizarre it must seem to outsiders when authorities allow a known member of the “legal mafia” to receive cosmetic treatments from a skin specialist while in jail. Cell bars are no hindrance to luxury.

What of other, bigger questions? When will the Bank Century case see resolution? Why is Gayus the only focus of attention? Why do authorities quickly turn their attention from one case to another? We should finish each case and then move on. Governments, elites and civil society all have a role to play in answering these questions.

But the burden on the government and the elites is disproportionately high: if they are not willing to support anticorruption measures seriously and systematically, democracy will not survive. Rotten, corrupt elites will only turn citizens into democratic “zombies” where they are allowed to voice their concerns but are not perceived as a vibrant constituency in the democratic process.

By accepting that large-scale corruption is inevitable, the government, other elites and civil society collude in creating an atmosphere that derides the benefits of democracy. People cannot be blamed for thinking that rampant corruption is winning the battle against democracy. It highlights that democracy has yet to deliver in relation to poverty, inequality and unemployment.

Although in its current fragile state it might not be clear whether democracy is the right device to increase the welfare of all of our citizens, it is worth a try — but not a half-hearted one.

Democracy needs a strong leader, not an authoritarian one. It needs strong institutions, not corrupt ones. It also needs its citizens to actively participate in demonstrations that have a purpose, resisting the pull into anarchy.

Passivity is not an option. Only if we implement democracy fully can we understand its real effects on our nation.

Rheizka Aulia is a research assistant at Strategic Asia, a Jakarta-based consultancy promoting cooperation among Asian countries.

Indonesia's Carbon Emission Cuts Will be Funded Domestically, SBY Says

Jakarta Globe, Camelia Pasandaran & Fidelis E Satriastanti, April 27, 2010

President Susilo Bambang Yudhoyono (right) introduces visiting Finnish Matti Vanhanen (second right, foreground) to the cabinet members at the Merdeka Palace on Tuesday in Jakarta. Vanhanen is on a two-day visit in the country. (Antara/Rumgapres)

Indonesia is not dependent on outside aid to realize its carbon emission reduction target of 26 percent, President Susilo Bambang Yudhoyono said on Tuesday, amid warnings the initiative could mire the country in more debt.

“The budget to reduce our emissions will come from Indonesia,” Yudhoyono said at a press conference with visiting Finnish Prime Minister Matti Vanhanen at the presidential palace. “We have allocated funds for it from the state budget. However, if there is any international aid in the form of capacity building, technical training, grants or others, we will accept it.”

Indonesia has committed to the ambitious target by 2020, mostly from the forestry sector and through the development of renewable energy. Sulistyowati, assistant deputy for climate change impact control, has previously said that at least Rp 83 trillion ($8.88 billion) would be needed to finance efforts to reach the target.

One of the programs is to eradicate illegal logging and corruption in illegal logging cases.

“We’ve formed a joint team consisting of the police, the Attorney General’s Office, the Corruption Eradication Commission, the Forestry Ministry and the Judicial Mafia Eradication Task Force [to tackle the issue],” Forestry Minister Zulkifli Hasan said.

Other countries have already offered help in the form of capacity building, technical training and technology transfer, while Japan has offered a $425 million loan for climate change mitigation efforts, signed during the Bali Democracy Forum in December.

At last week’s Earth Day discussion, Bank Information Center project coordinator Nadia Hadad warned the government against signing bilateral agreements with multilateral agencies, such as the World Bank or the Asian Development Bank, saying they would mire the country in more debt.

“Almost all funding to tackle climate change lies in mitigation rather than adaptation efforts,” she said. “However, the main focus of attention here is the funding mechanisms dominated by parties outside the UN Framework Convention on Climate Change.”

The UNFCCC has appointed the Global Environmental Facility as an operating agency to manage the Least Developed Countries Fund to help some of the world’s most vulnerable countries combat the adverse effects of climate change. Another source of funds is the Special Climate Change Fund, established in 2001 under the UNFCCC to finance projects that adapt systems to be more environmentally friendly.

There is also the Adaptation Fund, established by the Kyoto Protocol to finance adaptation projects in developing countries. These can include drought contingencies or shoreline management to fend off rising sea levels.

Meanwhile, multilateral agencies like the World Bank, Nadia said, had also set up their own mechanisms. “There are plenty of initiatives,” she said. “But unfortunately it’s not clear what all that funding is for.”

Indonesia launches special jail for the corrupt

The Washington Post

Reuters, Tuesday, April 27, 2010; 8:19 AM

JAKARTA (Reuters) - Indonesia on Tuesday launched a special jail for those charged or convicted in graft cases handled by the country's Corruption Eradication Commission (KPK).

Prison authorities have come in for considerable criticism in the past for allowing wealthy or influential prisoners to live in considerable luxury, with karaoke suites, personal attendants and masseuses and even mobile phones provided in exchange for bribes.

The country's prisons are also typically overcrowded.

"There is a common problem of overcrowding in our prisons," said Martua Batubara, the Justice and Human Rights Ministry's spokesman, adding that the safety of the more affluent convicts, such as those found guilty of corruption, was a consideration.

"We cannot mix criminal convicts with corrupt convicts if their safety is at risk" he said. "In prisons you will not get comfort, however safety is important."

The new three-storey detention center for the corrupt, built alongside an existing prison in east Jakarta, is designed to hold over 250 people.

President Susilo Bambang Yudhoyono, re-elected last year partly on a promise of tackling graft, is trying to push forward an anti-corruption agenda in order to attract foreign investment in Southeast Asia's largest economy.

In January, Indonesians were outraged when a presidential anti-graft task force discovered that Artalyta Suryani, a businesswoman convicted of bribing a prosecutor, had a private prison cell with a queen-sized bed, TV set and air conditioner, as well as access to a karaoke room.

(Reporting by Olivia Rondonuwu; Editing by David Fox)

Graft suspect Anggodo Widjojo inspecting a cell with Justice Minister Patrialis Akbar. (JG Photo/Safir Makki)

Related Article:

Indonesia's Corruptors Get a Home of Their Own

High-Profile Prosecutor Cirus Sinaga Arrives for Police Questioning

Jakarta Globe, April 26, 2010

The Medan house allegedly owned by former AGO prosecutor Cirus Sinaga, who was transferred by the AGO. (Antara Photo)

Suspended senior Attorney General's Office prosecutor Cirus Sinaga submitted for questioning at Police National headquarters for his role in the handling of the Gayus Tambunan fiasco.

“He is being questioned as a witness,” National Police spokesman Sr. Comr. Zainuri Lubis said in Kompas.com.

The high-profile and wealthy prosecutor was suspended after he chose not to file corruption and money laundering charges against tax official Gayus Tambunan. The Tangerang District Court acquitted Gayus of the sole embezzlement charge.

The case evolved into a major scandal after Comr. Gen. Susno Duadji, who had recently lost his post as the National Police’s chief of detectives, alleged that law enforcement officers in the Gayus case had taken bribes from the defendant.

Cirus was removed from his new post as the assistant for the special crimes unit at the Central Java prosecutor’s office because of the Gayus scandal, and transferred to a less significant job in the intelligence unit. The AGO, however, has confirmed the job transfer was not a demotion.

Zainuri said besides Cirus there were three other prosecutors who were questioned. They were Fadil Regan, Ika Safitri and Ika Kurnia. They were the case examiners.

Fadil was demoted one rank for one year because he played an active role in influencing the indictment document. Eka Kurnia and Ika Safitri Salim are low-ranking officials who joined the prosecution team on the Gayus case.

According to Zainuri, the police had sent an official letter to Attorney General Hendarman Supandji asking for permission to question the four officials but the police had not sent official summonses to the officials. “All of them came by their own consent,” he said.

The questioning is ongoing.

Related Article:

More info - Case: Gayus Tambunan