Jakarta Composite Index Breaks Another Record As Rupiah Hits 3-Year High

Jakarta Globe, Bloomberg, Reuters & JG | July 29, 2010

Investors keeping an eye on a screen showing their rising fortunes at the Indonesia Stock Exchange (IDX) in Jakarta. The JCI rose 39.34 points, or 1.3 percent, to close at 3,096.82, a record high for a third-straight day. Analysts say they expect they expect the index to keep heading up. (EPA Photo)

Jakarta. The market bulls on Thursday, pushed the benchmark stock index to a record high for a third-straight day and sent the rupiah surging to its highest level in three years as the strong economy and relatively high interest rates continued to attract funds from abroad.

The Jakarta Composite Index posted the biggest gain among major Asian stock markets on the day as some of the biggest companies reported healthy earnings, despite discouraging economic news from the United States on Wednesday.

The JCI rose 39.34 points, or 1.3 percent, to close at 3,096.82. Volume was unusually heavy, with 6.7 billion shares worth Rp 6.76 trillion changing hands. Gainers trounced losers 147 to 72.

The index has risen 22.2 percent this year, making it the best performer among Asia’s 10 biggest markets.

Meanwhile, the rupiah rose to its highest level since July 2007, trading at 8,973 to the US dollar as of the stock market’s close. The currency has appreciated 4.7 percent this year, after gaining 16 percent in 2009.

Brian Jackson, a Hong Kong-based senior emerging-markets strategist at Royal Bank of Canada, said he expected the exchange rate to reach 8,800 by the end of the year.

“Foreign investors are very positive toward Indonesia and they like the medium- to long-term growth story,” he said. “Inflation is picking up and we expect the central bank to raise rates by 50 basis points in the second half. The higher yield should further support the rupiah.”

Among outperformers on the stock market, PT Astra International, the country’s biggest listed company, climbed 3 percent, hitting a record Rp 52,800 after its first-half net profit rose 50 percent due to surging auto sales and higher coal prices.

Astra, controlled by Singapore’s Jardine Cycle & Carriage, reported a net profit of Rp 6.44 trillion ($715) in the first half. This compares with a net profit of Rp 4.24 trillion in the same period last year. Analysts forecast a full-year result of Rp 12.5 trillion.

Consumer goods firm PT Unilever Indonesia rose 3.6 percent and instant noodle maker PT Indofood Sukses Makmur gained 5 percent as the consumer sector entered a period of high earnings in the July-September quarter, dealers said.

PT Bank Central Asia, the country’s biggest lender by market value, said its first-half profit rose 20 percent as strong domestic demand lifted its loan growth.

BCA, controlled by conglomerate Djarum Group, said it earned Rp 3.9 trillion in the first half, which compared with a net profit of Rp 3.3 trillion for the same period last year.

BCA’s shares closed up 3.3 percent at Rp 6,200 before the company released its results. Its shares rose 23 percent in the first half, outperforming a 15 percent jump in the JCI, but underperforming the 28 percent rally for the biggest state lender, PT Bank Mandiri, in the same period.

Investors have pumped $414 million into local stocks this month, lifting net purchases for the year to $1.27 billion.

The government predicts the economy will expand 6 percent in the second half, after growth of 5.8 percent in the first six months, and economists surveyed by Bloomberg estimated that inflation reached 5.8 percent in July.

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‘Development funds for Papua among the highest’

The Jakarta Post, N | Thu, 07/29/2010 11:00 PM

President Susilo Bambang Yudhoyono called on Thursday for an audit of the disbursement of the state budget for the development of Papua island, saying that the achievement of the development on the island was far from satisfying.

“I think it would be important for us to conduct an audit on the special autonomy region development fund of Papua. I have received many letters, even accusing of our [Jakarta] carelessness for, among others, the lack of Papua’s development fund,” he said at the Presidential Palace on Thursday.

The President said that the progress of the two provinces in Papua should be far better than what were seen today because the government’s spending for the development in the two provinces were among the highest in the country.

Among the country’s 33 provinces, he said, Papua and West Papua provinces have the largest per capita development spending. “If there is no improvement there, then we have to know, why?” he said.

Analysis: Emerging market capital curbs may be just the ticket

Reuters, By Sujata Rao, LONDON | Wed Jul 28, 2010 11:32am EDT

(Reuters) - Investors are buying more long-dated bonds and overseas-listed shares in key emerging markets, suggesting capital controls set up in these countries may be helping curb volatile portfolio flows and currency swings.

While it is hard to gauge the net impact of controls set up in some developing countries, the experience of Brazil and Indonesia suggests it is possible to deter big speculative flows or redirect portfolio cash to less volatile assets without necessarily scaring investors off.

Last October, frustrated by a 30 percent surge in the real, Brazil slapped a 2 percent tax on foreign flows into its stocks and bonds. It was followed by Taiwan, Indonesia and South Korea, which have imposed a variety of milder curbs on capital.

Nine months on, investors say they are still putting cash in Brazil while Finance Minister Guido Mantega has been quoted as saying that the levy has changed the "irrational course" of the markets and that the real currency is now less volatile.

Fund managers say the tax has also raised millions of dollars in government revenue.

"Has this tax made my life tougher? Definitely yes. Has it put me off investing in Brazil? Definitely not," said Jose Cuervo, who looks after $6 billion in Brazilian stocks at HSBC.

Cuervo says the 2 percent levy has to be seen against the backdrop of 20 percent-plus corporate earnings growth.

To avoid the tax but still invest in Brazil, he buys American Depositary Receipts in Brazilian firms instead of the underlying Sao Paulo-listed stocks where possible. ADRs are priced in dollars and enable investors to sidestep cross-border and cross-currency transactions.

The tax has also slowed some cash outflows.

"In the past when we sold positions in local bonds we would move returns back offshore into dollars. But now we look to keep the money onshore in Brazil," says Brett Diment, who oversees $5 billion in emerging debt at Aberdeen Asset Management.

Data from Indonesia, another popular emerging market, suggests steps enacted there in June may have helped push out some foreign accounts from short-dated debt.

Jakarta now requires buyers of one-month central bank bonds to hold them for at least 28 days, making the short-term debt less attractive to cut-and-run speculators.

Foreign holdings of six-month Indonesia bills surged 37 percent in July, data shows. As foreigners raised duration, one-month yields rose while six-month and one-year yields fell 25-30 bps.

"The results are in line with what the government wanted: more investors in longer-dated bonds, but at the same time foreign ownership of Indonesian bonds is at a record high," said Standard Chartered currency strategist Thomas Harr.

TOO SUCCESSFUL?

Ironically, investors fear the relative success of Brazil's levy may tempt the government to raise it further.

"Brazil's local bonds are among the most attractive assets in EM, but if the real breaks much higher the market will be concerned about further measures," Diment said.

"So from that point of view (the tax) has been a successful measure in that it is limiting currency appreciation."

Some also worry that countries such as Colombia or Peru could follow Brazil's example.

The Institute for International Finance has cut its 2010 forecasts for emerging market capital flows, citing fear of more controls.

Across emerging markets, flows into equities have dipped from last year's highs and currencies have weakened, while bond flows are at record highs. This is significant as equities are widely seen as a key destination for speculative cash.

Central bank reserve growth, often used for calculating the ebb and flow of hot money, has also slowed. Developing countries' reserves grew $80 billion in the first three months of 2010, IMF data shows, versus a $200 billion jump the previous quarter.

Still, analysts are reluctant to pin these developments entirely on capital controls, noting that the industrialized world's poor growth outlook is weighing on emerging markets and creating a friendlier environment for bonds than stocks.

"In the past whenever G3 growth collapsed, flows to EM have slowed," says Claire Dissaux, strategist at Millennium Global citing 1998 and 2002. "You would have to believe in true decoupling to expect flows to continue at the same level."

Emerging central banks say it is not currencies or portfolio flows that they aim to curb, though, but hot money flitting from market to market in search of yield -- the type of cash that is widely blamed for past emerging market crises.

They may be fighting an uphill battle as emerging interest rates are rising, creating a powerful driver for speculative capital seeking returns in short-term deposits.

But multilateral lenders' surprising endorsement of calibrated controls may be tacit acknowledgement that the curbs do indeed discourage hot money.

A February paper by IMF economists noted "an effect on the composition of inflows rather than the aggregate volume" resulting from such curbs -- just the result the emerging economies are looking for.

(Editing by Hugh Lawson)

Roll Call Unfair, Cry Absentee Legislators

Jakarta Globe, Anita Rachman & Markus Junianto Sihaloho, July 29, 2010

Representatives have claimed that measures taken to make them attend plenary sessions are "unfair'. (Antara Photo/Widodo S Jusuf)

Jakarta. Session-skipping lawmakers on Wednesday reacted with anger to the House of Representatives secretariat’s move to reveal their poor attendance records.

“The House secretariat released unconfirmed data, which is very harmful because once they get it wrong, any party could sue them for defamation,” the Golkar Party’s Agus Gumiwang Kartasasmita said, adding that the data on his absences was incorrect.

Earlier this week, the secretariat released information showing that none of the nine parties in the House has ever had all of its lawmakers in attendance at a plenary session.

The House Ethics panel threatened to discipline the truants and the public reaction has been sharply critical.

The data showed that dozens of lawmakers skipped plenary sessions, with 12 of them ducking out of three or more sessions.

Ratu Munawaroh from the National Mandate Party (PAN) missed 10 plenary sessions. Democrat Nurcahyo Anggoro was not present for eight.

The data also said Jeffrie Geovani from Golkar skipped six sessions, while his party comrades Agus and Ibnu Muzir missed four each.

“I have permits from the party to skip plenary sessions because I have work to do,” Agus said, showing a permission letter issued by the party.

He acknowledged there were lazy lawmakers who were truant for no good reason, but insisted he was not one of them.

Other lawmakers said the report was unfair because it measured only attendance at plenary meetings. Akbar Faisal from the People’s Conscience Party (Hanura), who missed six sessions, said he had good reasons for his absences.

“I worked on the Bank Century scandal. I had meetings until 2 a.m. sometimes. I was very tired so I couldn’t make it to the plenary sessions,” he said.

He said the House should have a mechanism other than attendance reports to assess lawmakers. “The most crucial [work] is in the commissions,” he said.

House energy chairman Abdul Kadir Karding from the National Awakening Party (PKB), who skipped four plenary sessions, said accusing him of being lazy was unfair because his contribution to the commission was being ignored.

“I am a commission chairman, I always lead meetings in my commission,” he said.

Democratic Party chairman Anas Urbaningrum said attendance was part of a lawmaker’s responsibility, and that his party pushes its members to show up.

“I often tell our members that many cadres with a better spirit stand ready to replace them as lawmakers,” Anas said.

He called on all parties to be stricter with their members.

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Clerics take on corruption with fatwa on accountability

The Jakarta Post, Jakarta | Thu, 07/29/2010 9:01 AM

Charismatic Nahdlatul Ulama (NU) cleric Sahal Mahfudh has been re-elected chairman of the Indonesian Ulema Council (MUI), which wrapped up its national congress Wednesday with a number of new fatwas.

Some fatwas, including one concerning the need to apply the retroactive accountability principle in tackling corruption, have been lauded by the public as “progressive”, while others are said to be controversial.

Sahal, also chairman of NU’s lawmaking body, has held the position since 2000. Wednesday’s election will make him the longest serving leader of the MUI, which was jointly set up by representatives from the country’s major Islamic groups in 1975.

His predecessor, Ali Yafie, has chaired the council since 1990.

“The election for the members of the next MUI’s executive board began Tuesday night and finished at 7 a.m.

[Wednesday] morning,” Ichwan Syam, a member of a team tasked with forming the executive board, said as quoted by Antara.

The four-day congress also re-elected Din Syamsuddin, who was recently mandated to lead Muhammadiyah for the second time, as Sahal’s deputy. NU and Muhammadiyah are the country’s two largest Islamic groups.

The council produced seven fatwas during the congress. A fatwa is a legal opinion produced by a single or group of Muslim scholars. It is not legally binding and could be ignored as long as one has strong arguments to refute it.

One fatwa was made to push the law enforcers to apply the retroactive accountability principle. The council said Islam upheld presumption of innocence. In certain cases where an individual is alleged to have amounted wealth illegally, they are required to prove their innocence, the clerics said. A similar fatwa was issued by Muhammadiyah during its centennial congress in Yogyakarta early this month.

The MUI called for the revision of the country’s legislations to enable law enforcers to track down wealth from questionable origins of high ranking officials. Currently, when an official reports his wealth, the Corruption Eradication Commission, for example, cannot ask the person to explain the sources of accumulated wealth.

The council also urged housewives to ensure their husbands get their money through legal means.

“Women’s role is very strategic in many aspects of life, including in corruption eradication efforts,” the council’s propagation department head Amrulllah Ahmad said as quoted by detik.com.

Hasril Hertanto, a legal expert from the University of Indonesia said, “[The MUI] must provide arguments from the Islamic perspective, strengthening its calls using religious principles.”

People’s Consultative Assembly (MPR) deputy speaker Lukman Hakim Saifuddin also commended the council for supporting the nation’s anticorruption drive.

Responding to a recent controversy on if the government should censor gossip shows, the council declared watching them as forbidden according to Islam. The NU issued a similar fatwa in 2009 and Muslims apparently ignored it as so-called “infotainment” remains popular.

The clerics also issued fatwas banning sex changes and sperm banks. They also issued fatwas allowing pilots to break their fast while on duty as long as they pay compensation and the usage of breast milk banks.

Investment in Indonesia Increases: Government

Jakarta Globe, July 26, 2010

Office buildings in Jakarta. Domestic and foreign investment in Indonesia increased 40 percent in the second quarter of 2010 from the same period a year ago. (JG Photo/ Afriadi Hikmal)

Jakarta. Investment in Indonesia, including from both foreign and domestic investors, rose 40 percent in the second quarter of 2010 from the same period a year ago, said the country’s investment chief Gita Wirjawan on Monday.

The increase could show that strong economic growth and increasing consumer demand in Indonesia is leading more investors to make longer-term bets on the country, which has struggled to attract as much foreign direct investment as regional peers.

“Q2 investment growth rose more than 40 percent in total, year-on-year. Both domestic and foreign investment grew significantly. Investor confidence to our investment climate improved,” Wirjawan said after a meeting of government ministers.

He did not give the total investment level or a breakdown between foreign and domestic investment, but said further details would be released this week.

The state investment agency forecast that foreign direct investment would rebound 15 percent this year, after falling 27 percent to $10.8 billion last year.

Foreign investors staked $3.8 billion in Indonesia in the first quarter of 2010.

Indonesia has so far failed to match the levels of direct foreign investment attracted into regional powerhouses China and India, as investors are often put off by red tape, rampant corruption, and a shaky legal system.

Investors have, however, poured into the country’s markets in the past year, with the stock index and net foreign ownership of local debt both hitting record highs this month.

Reuters

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Local taxes, levies ‘kill’ businesses

The Jakarta Post, Jakarta | Mon, 07/26/2010 9:24 AM

Bylaws and regional regulations requiring companies to pay additional taxes and various types of retribution to provincial and regional governments have severely hurt the competitiveness of domestic products.

Indonesian Employers Association deputy secretary-general Franky Sibarani said Saturday

that excessive extra costs placed an additional burden on production costs and forced businesses to increase prices.

“If our products are more expensive than imports, it’s barely possible for us to compete,” he told The Jakarta Post.

He cited several bylaws that obliged businesses to pay large taxes, such as the soil water tax

in Bali, in force since Jan. 1 this year, which went up 1,000 percent to an average of Rp 2,300 (25 US cents) per square meter.

As the consequence of the increasing tax, several large bottled water companies, which previously paid between Rp 80 million and 90 million per month, now expect to pay between Rp 800 million and Rp 900 million per month.

“One bottled water company in Bali had to decrease its export volume and relocate its production facilities to another province due to the high tax,” he said.

Apart from the soil water tax in Bali, Franky also cited the North Sumatra administration’s tax on packaged products.

“The government imposes a tax on every product that is packaged of between Rp 5 and Rp 10,” he said.

He said the excessive extra costs collected by either provincial or regional governments put off foreign investors.

Regional Autonomy Watch (KPPOD) executive director Agung Pambudhi cited Finance Ministry data that showed 36 percent of all bylaws and regional regulations on tax and retributions had to be suspended because they ran counter to the 2009 Tax and Retribution Law.

From 2001 to 2009, the organization proposed that the Home Ministry suspend 3,735 regional regulations. In response, the Home Ministry suspended 945 regulations, issued warning letters for 22 regulations and revisions for six.

In the same period, the Finance Ministry also requested the Home Ministry suspend 4,885 bylaws, but as of today, only 1,835 have been suspended.

Agung said the regulations mostly required businesses to pay exces-sive extra costs that were illegal, according to the 2009 Tax and Retribution Law.

“For instance, there are by laws in West Java, East Java and North Sumatra obliging businesses to pay distribution tax if their products are sold in other provinces,” he said.

Citing another example, he said the Lampung administration did not indicate in their bylaws clear tariffs and time limits for new businesses to make permits, although article 156 of the tax and retribution law required it.

“There are also bylaws and regional regulations that require businesses to make ‘voluntary donations’ to the administrations when processing permits,” he said.

“But the administrations specify how much firms have to pay and if they don’t pay, they don’t get the permits.”

Agung said firms exploiting natural resources were hardest hit by the business-unfriendly bylaws and regional regulations.

“They have to pay many taxes, including for heavy equipment and road lighting as well as other illegal extra costs.” (rdf)

US financial reforms affect transparency in Indonesia

The Jakarta Post, Jakarta | Mon, 07/26/2010 10:18 AM

The Dodd-Frank Wall Street Reform and Consumer Protection Act in the US will affect the transparency in business dealings of foreign oil, gas and mining companies operating in Indonesia.

"The law will require oil, gas and mining companies overseen by the US Securities and Exchange Commission *SEC* to publish their income , tax payment and royalties to the host countries and the government of the US," Ridaya Laodengkowe, the national coordinator of Publish What You Pay Indonesia, said at a press conference in Jakarta.

The companies under the jurisdiction of the SEC will also have to disclose their flow of earnings, such as tax payments, bonuses, royalties and retribution fees to local administrators.

Given the fact that about 60 percent of the national oil production is contributed by companies listed on the US stock exchanges, the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act will undoubtedly affect the business transparency in Indonesia, he said.

"Major oil and gas companies operating in Indonesia such as Chevron Texaco, Total, Conoco Philips, Talisman, ExxonMobil, Royal Dutch Shell and British Petroleum will be affected by the law," he added.

Apart from oil ad gas firms, mining companies, such as Freeport, Newmont, BHP Billiton and Rio Tinto would also have to abide the law.

"Non-compliance could result in being delisted or suspended by the SEC," he added.

Transparency Indonesia deputy secretary-general Rezki Sri Wibowo said the Wall Street Reform Act was in line with the principle of the Extractive Industry Transparency Initiative (EITI), a global initiative requiring extractive industries to report their income to the public and the government.

"Indonesia has started to adopt the EITI by issuing in April a Presidential decree on the transparency of national and regional income of extractive industries," he said.

He added that the implementation of EITI through Presidential Regulation and the passage of the Wall Street Reform Act would serve as tools to push the oil, gas and mining industry operating in Indonesia to be more transparent.

However, the Presidential Decree on the EITI has not been fully implemented and has several weaknesses, he said.

Ridaya said the decree's implementation was hampered by poor preparation, citing the need to set up a team consisting of government officials, local administrators from oil, gas and mining firms, companies and NGOs.

"So far, we do not have a representative from the local administrations," he said.

The establishment of the team was needed and required by the EITI secretariat in Norway to oversee EITI execution in Indonesia.

"EITI needs a complete team by September," he said, adding that he expected full implementation of EITI once the team was ready.

Ridaya highlighted weaknesses in the Presidential decree, including the fact that it did not define the information that companies should disclose, such as tax payments, royalties, bonuses and other payments made to the government.

"The decree also does not regulate sanctions for non-compliance," he added.

"That is why we are happy with the deliberations of the Wall Street Reform and Consumer Protection Act because it clearly outlines sanctions."

Agus Suryono, a spokesperson for upstream oil and gas regulator BP Migas told The Jakarta Post that BP Migas would only abide by Indonesian-tailored production sharing contracts (PSC) as a framework for foreign oil, gas and mining companies.

"We will work based on the PSC framework, which mainly regulates the management and operation of companies," he said.

Regarding cash flow transparency, Agus said BP Migas only handled the cost recovery and listings.

"We do not control the disclosure of the companies' income, that remains the authority of the Finance Ministry," he added. (map)

President disappointed about corruption cases in tax office

Antara News, Wednesday, July 21, 2010 21:17 WIB

Ministers and high-ranking officials listen to President Susilo Bambang Yudhoyono (left) while he speaks to officials of the Taxation and Customs and Excise Directorate General and the Finance Ministry at the State Palace in Jakarta on Wednesday. The President instructed officials to stop rampant tax crime and irregularities at the two agencies. Antara/Widodo S. Jusuf

Jakarta (ANTARA News) - President Susilo Bambang Yudhoyono has expressed disappointment that corruption has continued to happen in the tax, customs and excise directorates general.

"Bluntly I have to express my disappointment because there are still corruption cases in your agencies ...there are still tax officers with extraordinary criminal records, unbelievable," the president said when giving directives to personnel of the Tax Directorate General and the Customs and Excise Directorate General at the State Palace, Wednesday.

He urged the agencies` personnel to carry out self-introspection if there is demoralization and de-motivation among their personnel following the people`s criticisms.

"The source, or main factor which has caused demoralization and demotivation is the attitudes of several personnel have stained the credibility of the Tax Directorate General, in certain cases in the Customs and Excise Directorate General," the head of state said.

He pointed out some examples such as the cases of Gayus Tambunan and Bahasym Asidi in tax fraud cases and a number of tax refund frauds in Surabaya (East Java) and Bandung (West Java).

Yudhoyono said on one hand he was satisfied with the agencies` performance, but on the other hand he was still disappointed.

He was glad the state`s incomes from tax, customs and excise have continued to increase significantly.

"This has been reflected from the state`s incomes since 2005-2009. In the 2004 State Budget, for instance, the total plus deficit was around one percent, meaning less Rp500 trillion. The State Budget 2009 has passed the figure of Rp1,000 trillion, more than double. And we know that around 70 percent are derived from the state income from taxes and customs and excise," he said.

He also expressed his happiness that reform process in the two directorates general has continued.

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Indonesia Gets New Coin, Reworked Rupiah Note

Jakarta Globe, July 20, 2010

Indonesia's new Rp 1,000 coin and Rp 10,000 note, which is a slightly bluer color. (Image courtesy of Bank Indonesia)

Indonesian Vice President Boediono on Tuesday unveiled a new Rp 1,000 coin and a slight change of color for the Rp 10,000 banknote.

Speaking before the currency was unveiled in Bandung at 3 p.m., Bank Indonesia official Dyah Makhijani said the new silver coin was made of steel and coated with nickel.

The coin would be emblazoned with Indonesia’s coat of arms, the Garuda Pancasila, with a traditional angklung set against Gedung Sate, the office of West Java’s governor, in Bandung on the reverse side.

The angklung, a traditional musical instrument made of bamboo, made headlines last year with some claiming that Malaysia was claiming the instrument as its own. 

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Regions ‘Misspent’ Trillions

Jakarta Globe, Nivell Rayda, July 19, 2010

The Supreme Audit Agency may have the answer as to why regional areas — particularly new provinces, districts and municipalities — continue to lag behind in terms of development.

Less than 6 percent of the state budget channeled to provincial and district or municipal governments is actually spent on development projects and public services, the agency, known as the BPK, has revealed.

“Most of the funding is spent on government facilities, such as offices and cars,” BPK official Rizal Djalil said in a statement on Sunday. “Little is allocated to the direct needs of the people.”

Since President Suharto resigned in 1998, seven new provinces and 205 new districts and municipalities have been established. Rizal said these new regional governments still relied heavily on central government funding.

“Every aspect [of the new regions] relies on the central government. Regional income is still not sufficient, not even enough to fund the regional governments’ operational budgets,” he said.

The findings follow a scathing assessment by President Susilo Bambang Yudhoyono, who has said that some 80 percent of the newly created administrations are not performing well.

According to Rizal, regional governments should focus on creating jobs and economic independence from Jakarta.

The central government has allocated Rp 344.6 trillion ($38.2 billion) this year to expedite the development of newly established regions. That excludes additional aid for social affairs, education and health, which also reaches hundreds of trillions of rupiah.

To make matters worse, the BPK also indicated that some of the funds earmarked for economic empowerment had been redirected to populist programs aimed at strengthening officials’ grip on political power.

Rizal said some funds had been used to finance short-term programs such as providing free basic commodities instead of more strategic programs such as job creation.

A study released by the Partnership for Governance Reform in January reported that provincial governments also seemed to be largely ignorant about the need to fund public health and education.

“Provinces on average allocate only Rp 14,004 per person each year [for public health],” the report said. “Some are as low as under Rp 4,000 per year.”

Provinces also failed to meet the 20 percent budget allocation for education mandated by the central government, the study found. Even the biggest spender on education, Riau Islands, which spends Rp 831,860 per student annually, only allocated 17.6 percent of its total budget to education.

Maryati Abdullah, a researcher from the Regional Study and Information Center (Pattiro), said greater regional autonomy had created more opportunities for officials to steal funds due to a lack of financial guidelines and oversight by the state.

“They don’t have a standardized supervisory system and, more often than not, there is political interest in overlooking the rampant corruption by local officials because the Regional Legislative Councils are just as corrupt,” she said.

Since it was set up in 2003, the Corruption Eradication Commission (KPK) has received more than 30,000 complaints from the public about corruption involving local administrations, and hundreds of regional officials have been jailed for graft.

Anies Baswedan, the rector of Paramadina University in Jakarta, said tighter controls were needed to rein in the regions. “The central government has been too lenient,” he said. “There is no transparency or accountability for local governments, so they get away easily with graft and neglect.”

The Ministry of Home Affairs said in May last year that it was examining the effectiveness of decentralization and preparing new rules on how regions should manage their finances.

Indonesian Lawmakers Stall on Financial Disclosure

Jakarta Globe, July 16, 2010, Armando Siahaan

Indonesia Corruption Watch says the unacceptably high number of legislators from the House of Representatives who have failed to return their personal wealth reports highlights the lack of will to fight graft. (Antara Photo)

Whether it’s because of negligence or a malicious intent to hide something, the failure of more than a hundred lawmakers to comply with the law and submit their personal wealth reports is unacceptable, antigraft activists said on Friday.

Fahmi Badoh, who leads the political corruption division of Indonesia Corruption Watch, said the tardiness indicates that there are lawmakers who fail to show a strong commitment in the country’s fight against corruption.

“This depicts how our politicians feel like they are immune to the law,” he said.

Or worse, he said, some lawmakers may have deliberately not filed reports in order to hide illegal or questionable assets. “We have seen a lot of corruption cases that took place in the House.”

The criticism comes days after the Corruption Eradication Commission (KPK) said 127 out of 560 lawmakers had yet to report their assets. The reports are due within two months of taking office. Lawmakers took office last October. According to the KPK, the Democratic Party had 42 tardy lawmakers, Golkar 27 and the National Mandate Party (PAN) 26.

“Unfortunately, there are no criminal sanctions [stipulated in the law] against them,” Fahmi said. “Right now, all [the KPK does] is just warn.”

Fahmi said that there should be concrete repercussions against such tardiness, as covering up personal assets could be a strong indication of a financial crime.

“[Criminal sanctions] should be included in the anti-corruption law,” he said.

At the very least, he said, there should be an in-house punishment mechanism within the House. “The House Honorary Council needs to be given more authority to punish because these lawmakers are perceivably damaging the honor of the [legislature]” Fahmi said.

House and party leaders should also push legislators to be more responsible in wealth asset reporting, he added.

Max Sopacua, deputy chairman of the Democratic Party, claimed lawmakers still had until July 21 to file reports. “Our party had instructed us all to report it as soon as possible,” he said.

Many new lawmakers needed time to become familiarized with the practice, he said. “Besides, we were very busy in the last recess visiting our constituents.”

Taufik Kurniawan, the House deputy speaker from PAN, denied that lawmakers from his party have been tardy, and that most members have yet to submit their reports because they were going to submit them collectively.

Tjahjo Kumolo, chairman of the Indonesian Democratic Party of Struggle (PDI-P), said that some PDI-P lawmakers’ reports had to be returned to be corrected.

“And we had instructed them to return it as soon as possible to be forwarded to the antigraft commission,” Tjahjo said.

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Legislators Convicted In Bribery Scandal

Jakarta Globe, July 12, 2010, Nivell Rayda

The Anti-Corruption Court on Monday sentenced two sitting legislators and a former lawmaker to four years in jail each for taking bribes in two separate graft cases in 2006 and 2007.

The three, Fachri Andi Leluasa, Azwar Chesputra and Hilman Indra, were also ordered to pay Rp 200 million ($22,000) in fines each or face an additional six months in jail.

Fachri and Azwar are from the Golkar Party, while Hilman is a former lawmaker from the Crescent Star Party (PBB).

The four-year sentences were, however, lighter than the five years sought by prosecutors.

“The defendants had admitted their crime, shown remorse and returned the bribe money they received to the state,” presiding Judge Jupriadi said when explaining the reasons for the more lenient sentences.

Both the prosecution and defense now have seven days to decide if they will lodge an appeal with the Jakarta High Court against the sentences.

In the first case, the three defendants were found to have received between Rp 335 million and Rp 450 million each to facilitate the conversion of a protected forest for the development of the Tanjung Api Api seaport in South Sumatra.

The bribes, Judge Dudu Duswara said, came from businessman Chandra Antonio Tan and former South Sumatra Governor Syahrial Oesman, and were issued to secure political support for the project and the consent of the House of Representatives’ forestry commission.

In his recap of the case, Dudu said Fachri, Azwar and Hilman had met with Chandra at a hotel in October 2006.

“Chandra gave Azwar Rp 1 billion for the entire [forestry commission], which was rejected by Azwar, who said the sum was insufficient,” the judge said.

The three defendants, along with former Democratic Party lawmaker Sarjan Taher and former National Awakening Party (PKB) lawmaker Yusuf Erwin Faisal, met again with Chandra and demanded Rp 5 billion, which was later distributed to all 21 members of the House commission.

Last year, the same court sentenced Sarjan and Yusuf each to four and a half years’ imprisonment for their roles in the case, while former United Development Party (PPP) lawmaker Al-Amin Nasution is serving 11 years for his role in the case.

Al-Amin was also charged with accepting Rp 2.2 billion in bribes in a similar forest conversion case in Riau Islands.

Chandra and Syahrial received three-year and two-year sentences, respectively, for their roles in the bribery scandal.

Another 15 lawmakers, who allegedly also received bribes in connection with the case, have not yet been charged. Despite the scandal, the seaport project continued and the facility is scheduled to be completed by the end of the year.

In the second case, the court ruled that Fachri, Azwar and Hilman were guilty of accepting up to 30,000 Singapore dollars each from businessman Anggoro Widjojo in relation to a procurement project within the Ministry of Forestry.

The House in 2007 rejected the ministry’s plan to procure a radio communications system from Anggoro’s company, PT Masaro Radiokom, because the company’s product was already obsolete.

Legislators, however, later gave the green light for the contentious project.

Anggoro is currently wanted by the Corruption Eradication Commission (KPK) in connection with the Forestry Ministry case, but is believed to be on the run and hiding in Singapore.

His brother, Anggodo Widjojo, is currently on trial for obstruction of justice and attempting to bribe KPK officials, allegedly in order to stop an investigation into Anggoro’s company.

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