Suryadharma Ali Resigns from Cabinet to Fight Hajj Graft Charge

Jakarta Globe, Ezra Sihite, May 26, 2014

Former Religious Affairs Minister and United Development Party (PPP)
chairman Suryadharma Ali. (JG Photo/Fajrin Raharjo)

Jakarta. Religious Affairs Minister Suryadharma Ali resigned from the cabinet on Monday after he was charged by the Corruption Eradication Commission (KPK) in relation to alleged impropriety in the country’s $5 billion fund for the hajj pilgrimage.

“Suryadharma Ali has returned the mandate as religious minister back to president Susilo Bambang Yudhoyono and the president has asked Suryadharma to submit a written resignation within a day or two,” State Secretary Sudi Silalahi told a press conference Monday.

Suryadharma met with Yudhoyono at the Istana Bogor in West Java, and Sudi said Yudhoyono had urged Suryadharma to concentrate on mounting his defense against the corruption charges.

Suryadharma has denied all charges against him and insisted that the matter is a misunderstanding.

“The President advised Suryadharma to be strong and be prepared — being made a suspect is not the final say on the matter,” he said.

Suryadharma was named a suspect by KPK on Thursday and was handed a travel ban for six months by the immigration office. He maintains that he has no case to answer and his supporters emphasized the importance of the presumption of innocence, but Yudhoyono said in Manila at the weekend that the business of state could not be jeopardized by the furor surrounding Suryadharma. Yudhoyono’s comments were a clear indication that Suryadharma’s days at the ministry were numbered.

Activists and analysts had repeatedly called for his resignation and urged Suryadharma to follow the example set up by former youth and sports minister, Andi Alfian Mallarangeng, who immediately announced his resignation after he was named a suspect by KPK in the Hambalang sport center graft case.

Indonesia’s hajj fund is a centrally managed account comprising deposits paid by people wishing to go on Islam’s greatest pilgrimage to Mecca, Saudi Arabia. Pilgrims must deposit around $2,000 and sit on a waiting list for between 12 and 17 years.

A general view shows pilgrims performing evening prayers in Mecca’s

 Grand Mosque on October 8, 2013. Indonesia's religious affairs minister has

 been charged with corruption over the alleged misuse of the country's hajj

fund. (AFP Photo)

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Asian Development Bank set to appoint first Chinese chief economist

Want China Times, Staff Reporter 2014-05-25

Dr Shang-Jin Wei attends the "New Openness in China" forum held
at Beijing's Tsinghua University, Oct. 17, 2012. (Photo/CFP)

For the first time in its 48-year history, the Asian Development Bank (ADB) will invite a Chinese national to serve as its chief economist, reports the Shanghai-based China Business Daily, citing bank sources on May 23.

Dr Shang-Jin Wei, a professor of finance and economics at Columbia University in the US, may soon be appointed as chief economist of ADB, while serving concurrently as director of its Economics and Research Department. ADB has yet to announce the appointment as of press time, however.

Wei has been a shining star among Chinese economists. He has held the position of professor at Columbia's Graduate School of Business since 2007 and is also director for the National Bureau of Economic Research's (NBER's) Working Group on the Chinese Economy. His main academic research has focused on such fields as international finance, international trade, government's governance and reform, the Chinese economy and macroeconomics.

According to rankings of a total 31,000 global economists issued in 2012 by IDEAS, a RePEc (Research Papers in Economics) service hosted by the Research Division of the Federal Reserve Bank of St Louis, Wei ranked in 152nd place, the best ranking among Chinese economists.

When Justin Yifu Lin wound up his four-year service as chief economist of the World Bank in June 2012, Wei was one of the hottest candidates for the post. Some in the economics circle even commented that as far as academic achievements and age are concerned, Wei will most likely become the first Chinese national to win the Nobel Prize for Economics.

In a recent e-mail to Shanghai's National Business Daily in response to questioning on the rumors, Wei said, "As ADB has yet to announce the appointment, I have no comment on it." But he acknowledged to the paper that if the appointment becomes a reality, he will be first native Chinese to serve as ADB's chief economist in its history.

ADB's current chief economist, Changyong Rhee, is from South Korea, while his predecessor, Dr Jong-Wha Lee, was also South Korean. The bank's current deputy chief economist Zhuang Juzhong is Chinese, however.

After graduating from Fudan University in Shanghai in 1986, Wei received his masters in economics from the University of Pennsylvania in 1988, and receive a masters in business administration (finance) and a PhD in economics from University of California, Berkeley in 1991 and 1992, respectively.

Wei's outstanding performance in the economics field has mainly resulted from his dedicated research efforts, China Business Daily said. Wei's most prominent research paper in China is a NBER working paper titled "Tracing Value-added and Double Counting in Gross Exports."

The research paper found that China contributes a value-added of only US$6 to the entire global supply chain of Apple's smartphones for each iphone assembled in the mainland, but the whole export value of US$358 for each iphone exported from China is calculated into the nation's gross exports. It marked the first time for a Chinese economist to use the value-added accounting method to figure out how China's gross exports are seriously bloated.

World Economic Forum Gives SBY Global Statesmanship Award

Jakarta Globe, May 23, 2014

Indonesia's outgoing president Susilo Bambang Yudhoyono has been
honored by the World Economic Forum. (Reuters Photo/Toru Hanai)

Manila. Indonesian President Susilo Bambang Yudhoyono was awarded the Global Statesmanship Award on Friday at the 23rd World Economic Forum on East Asia for his achievements during his time in office.

He was the third recipient of the award since the WEF was established in 1971. The two other recipients were Felipe Calderon in 2012, when he was president of Mexico, and Luiz Inacio Lula da Silva in 2010, when he was president of Brazil.

“I stand before you now with a sense of pride for what Indonesia has become today,” said Yudhoyono, whose second five-year term ends in October. “In a world marked by political turbulence, economic uncertainty, and strategic tensions, Indonesia does have a good story to tell.

“We have achieved that critical point of no return in our democratic development. We have proved to ourselves and to the world that we do not have to choose between democracy and development, and that indeed we can have both political freedom and high economic growth at the same time.”

On Thursday, Yudhonoyo reiterated that the 10-member Association of Southeast Asian Nations (Asean) could reach its development agenda to double the region’s combined gross domestic product to around $4.4 trillion by 2030. With millions of poor people across the region, Asean could also try to reduce the region’s poverty rate to 9.3 percent in the same time frame, he said. World Bank data show 43.3 percent of Indonesia’s population lived on less than $2 a day in 2011, compared to 52.7 percent in 2009.

“But as an optimist, I do see the glass as half full,” Yudhoyono said on Thursday. “I believe our generation is now endowed with the resources and knowhow to beat age-old problems of poverty, deprivation and conflict.”

Indonesia has embarked on a plan to support economic growth, aid the poor, promote jobs and protect the environment, he said.

“The overall purpose is to attain sustainable growth with equity,” Yudhoyono said on Thursday. “By pursuing this strategy over the past 10 years, we have been able to stimulate growth, reduce inequity and alleviate people from poverty.”

Susilo Bambang Yudhoyono was presented the award at a launch sponsored by the Lippo Group, which is the parent company of the Jakarta Globe.

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The Future Is Bright for Europe, Indonesia

Jakarta Globe, Giacomo Tognini,  May 23, 2014

According to data from the Ministry of Manpower, 6,351 Europeans currently
call Indonesia their temporary home. (JG Photo/Boy T. Harjanto)

Jakarta. Indonesians and Europeans don’t always get along. When asked how they felt about one another, one source asserted that “British people keep to themselves,” while another exclaimed that “Indonesians are rude.” Stereotypes abound whenever diverse cultures meet, even in the supposedly globalized world we live in today. Indonesia and Europe are no exception, yet trade, travel, and cooperation between the two continue to grow.

The two cultures made contact for the first time when Portuguese explorers reached the Sunda Kingdom in 1512, leading to centuries of Dutch and Portuguese colonization of the archipelago. Nowadays, an estimated 6,351 Europeans live in Indonesia, 13.8 percent of all the expatriate residing in the country, according to a May 10 report from the Ministry of Manpower and Transportation.

While the history between the two is hardly pleasant, Indonesia’s rapid economic development and the advent of the European Union have led to strengthened ties and increased cultural exchange. According to a December 2013 report by the Indonesia Diaspora Network, 185,512 Indonesians make the Old Continent their home, in addition to approximately 700,000 people of mixed or Indonesian descent in the Netherlands.

In the post-war era, Europeans arrived to work in diplomacy and Indonesia’s expanding industries, and many more traveled to experience its natural and cultural wonders. Conversely, some Indonesians emigrated to seek a better life in Europe during economic trouble at home.

Whereas Europeans continue to come to Indonesia for the same reasons, today people increasingly move in the opposite direction for higher education. The European Union’s recent push to attract more foreign students to study in its renowned universities by providing scholarships through its Erasmus Mundus education outreach program has been successful. Around 7,000 Indonesians studied in the EU as of 2013, many of whom receive financial aid from the European Commission.

However, a clear cultural divide remains between Indonesians and Europeans across the continent.

“I definitely love living here, but I have to say it takes a lot of effort to make friends,” said an Indonesian student in London. “My closest friends here aren’t British.”

When it comes to other nationalities, she had a different perspective: “French people are a bit condescending, I feel like Italians are the friendlier bunch.”

Europeans in Jakarta mention a similar experience adapting to their host culture.

“We have a completely different mentality because we are separated by centuries of history,” said an Italian woman who has lived in Indonesia for a year. While she admires the natural beauty of the country, she “cannot stand the traffic that paralyzes this city and the complete lack of respect for the environment.”

The EU and the Indonesian government have long collaborated on a variety of bilateral projects to aid in the resolution of significant issues. The Blue Book on EU-Indonesian Development Cooperation published in 2013 outlines six areas of partnership: education, economic cooperation, the environment and climate change, good governance and human rights, disaster preparedness and conflict prevention and health, water and sanitation. Many of these target specific regions of the island nation that require more help in certain areas and less in others to maximize efficiency.

Along with the EU as a whole, Indonesia is among the members of the G-20, an organization that represents the world’s 20 largest economies. Indonesia is now the 10th largest, as revealed in a World Bank report published in 2014. As a result of Indonesia’s growing economic clout, the EU is seeking a Comprehensive Economic Partnership Agreement (CEPA), a deep free trade agreement. The union was Indonesia’s second largest source of foreign direct investment (FDI) behind Japan in statistics released by the Indonesia Investment Coordination Board in 2012, although it has fallen in the rankings since due to slower yearly increases of investment compared to South Korea and Singapore.

As the second-largest democracy and the world’s largest Muslim nation, Indonesia has tremendous geopolitical importance. This is likely to increase, given the archipelago’s strategic location in a region witnessing the ascent of China and India. Europe is taking note: President Susilo Bambang Yudhoyono visited at least four European countries in his second term, and German Chancellor Angela Merkel, Dutch Prime Minister Mark Rutte, and British Prime Minister David Cameron visited Indonesia between 2012 and 2013. These are signs of the country’s rise as an influential player in the international arena.

In the future, a continent emerging from an economic crisis and still searching for its place in a global chessboard dominated by the United States and China could gain from increased cooperation with a nation seeking a role commensurate to its massive demographic and economic expansion.

The two have much to learn from one another. Sarah Braga, a Portuguese-Luxembourg student in Jakarta, believes that “Europe has become a very individualistic region, whereas in Indonesia it’s more about a sense of community.”

“Indonesians are a people that know how to laugh and be happy even in times of difficulty,” said an Italian resident of Jakarta. “This is something that Europeans should learn from.”

Related Article:

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Asian logging companies 'use British islands for tax dodging'

Calls for crackdown as investigation finds huge Indonesian corporations evading tax through network of secret shell companies in British Virgin Islands and other tax havens

The Guardian, The Observer, John Vidal, environment editor,  Saturday 10 May 2014

In the British Virgin Islands it is easy to set up shell companies, which makes
them popular with companies and the wealthy. Photograph: Neil Rabinowitz/Corbis

Giant Asian logging companies that make billions from destroying rainforests use a labyrinth of secret shell companies based in a UK overseas territory, the British Virgin Islands (BVI), which operate as a tax haven, according to documents seen by the Observer. The 13 companies own millions of acres in Indonesia, provide much of the world's palm oil, timber and paper, and use complex legal and financial structures to keep their tax liabilities low.

An unpublished two-year investigation by anti-corruption experts, and seen by the Observer, says Britain should launch a major investigation into the use of the BVI and other tax havens by "high-risk" sectors such as Indonesian forestry. This follows a court case in Jakarta in which one of the world's largest palm oil companies, owned by billionaire Sukanto Tanoto, was fined US$205m after being shown to have evaded taxes by using shell companies in the BVI and elsewhere. The company has agreed to pay the fines.

Documents arising from the case show that Tanoto's company, Asian Agri, systematically produced fake invoices and fake hedging contracts to evade more than $100m of taxes.

According to evidence contained in more than 8,000 papers, the company, which employs 25,000 people in 14 subsidiaries and owns 165,000 hectares of plantations, was engaged in "routine and systematic fraudulent accounting and book-keeping practices" using British jurisdictions.

It is easy to set up shell companies in the BVI, and this makes them a favourite destination for Asian corporations and individuals. A cache of leaked documents obtained by the International Consortium of Investigative Journalists showed last year that nine of Indonesia's 11 richest families had used tropical tax havens.

Although there are legitimate uses for offshore companies, critics say tax havens fuel corruption and allow corporations and individuals to dodge taxes. "Powerful forest and palm oil conglomerates have set up shell companies in the BVI, Cayman Islands and Bermuda, but lack of transparency – including public access to the names of the actual owners of shell companies – makes it difficult for governments to monitor the legality of their activities," said Stephanie Fried of Ulu Foundation, a US organisation that tracks international financial flows. "Clearly, a full international investigation is needed not only by Indonesian authorities, but also by those in the BVI, the UK and other jurisdictions."

A government spokesperson said: "The government put tax and transparency at the heart of the UK's G8 presidency. As a result, the UK's overseas territories are consulting on establishing a central registry of beneficial ownership and on whether it should be publicly accessible. We believe a registry of this kind would provide the best outcome for sound corporate behaviour and for helping authorities, including those in developing countries,prevent misuse of companies for illicit purposes." 

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China Offshore Secrets

Asian logging companies 'use British islands for tax dodging' - New
Wealthy in China need new tax haven as Switzerland U-turns on banking privacy - New
Offshore tax-dodging piece shows anti-Chinese bias: report
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China's cash haven in the British Virgin islands – the key points
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Wealthy in China need new tax haven as Switzerland U-turns on banking privacy

Want China Times, Staff Reporter 2014-05-10

The Credit Suisse Group building in Zurich, Switzerland, March 12, 2012.
(Photo/CFP)

The agreement of Switzerland to disclose information on banking accounts in its territory, at the risk of its time-honored status as the world's foremost tax haven, may prompt the wealthy worldwide, including Chinese nationals, to search for new shelters for their fortunes.

Switzerland, the world's largest offshore financial center, announced the sea change in its policy on May 7, pledging to turn in detailed information on the banking accounts of foreigners in the nation, which represents a breakthrough in the global crackdown on tax evasion. The change marks a departure from the nation's insistence over several hundred years on protecting the privacy of bank customers.

The change has been made apparently in response to the long-standing pressure of Western nations, notably Germany, France, and the UK, which have urged other nations to include Switzerland on a blacklist of "uncooperative tax havens," due to the convenience for some enterprises and individuals worldwide to use their accounts in the country to evade tax and launder money.

The US and other Western nations have stepped up their pressure on Switzerland to change its banking policy, as part of their effort to crack down on tax evasion amid their dire financial straits.

The development coincides with an anti-graft campaign sweeping China. In 2013, the State Council issued a decree requiring Chinese residents to report their overseas assets and liabilities, violation of which are liable to just under 300,000 yuan (US$48,200) in fines for institutions and just under 50,000 yuan (US$8,000) for individuals.

According to Shanghai-based China Business News, Huo Jianguo, president of the Institute for International Trade, Economy, and Cooperation, under the Ministry of Commerce, pointed out the decree was meant to improve transparency with regard to the assets of Chinese nationals. Yang Xianyong, researcher at the Institute of Finance and Economy, under the Chinese Academy of Social Sciences, said that the decree means the government is preparing to levy tax on overseas assets.

As the world's largest offshore financial center, Switzerland boasts over 300 private banking institutions, which manage US$2 trillion of offshore assets, or one third of global savings.

Many experts believe that with Switzerland facing mounting pressure on its operations of offshore financial centers, Singapore may overtake its status in the future. As the world's second largest offshore center now, Singapore boasted US$1.3 trillion of assets, mainly owned by customers from Asia-Pacific and the Middle East, under the custody of its fund managers as of the end of 2012. Singapore also agreed on May 6 to disclose information on the banking accounts of US nationals and enterprises, in order to facilitate a crackdown on tax evasion by the US government.

Although most other tax havens, such as Liechtenstein, Cypress, Luxembourg, Monaco, Bermuda, and the British Virgin Islands, have pledged to take similar steps, rich people around the world can still transfer their assets to Panama and Dubai, among others, which have yet to pledge information disclosure for their foreign-owned bank accounts.

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World Bank: Indonesia World’s 10th Largest Economy

Jakarta Globe, May 04, 2014

An employee of Bank Negara Indonesia moves a pack of 100,000 Rupiah
notes at the bank’s head office in Jakarta. (Reuters Photo/Supri)

Jakarta. Indonesia has the 10th largest economy in the world, according to a recent report by the World Bank, with the country contributing 2.3 percent of global economic output.

The report released the findings of the 2011 International Comparison Program (ICP), which assesses economies based on purchasing power parity (PPP) and noted that Indonesia moved up six places and leapfrogged more developed countries such as Spain, South Korea and Canada.

The ICP round gathered over 7 million prices from 199 economies in eight regions, with assistance from 15 regional and international partners.

In the top nine are the United States, China, India, Japan, Germany, Russia, Brazil, France and Britain.

The middle-income economies of Indonesia, China, India, Russia, Brazil and Mexico now account for 32.3 percent of world gross domestic product. That compares with the 32.9 percent contributed by the six largest high-income economies, United States, Japan, Germany, France, United Kingdom, and Italy. The report also showed that the United States was about to lose its status as the world’s biggest economy, as China is likely to surpass it by the end of this year, faster than widely anticipated.

The United States has been the biggest economy in the world since overtaking the United Kingdom in 1872.

The Organization for Economic Cooperation and Development (OECD) has predicted that China will overtake the United States by 2016 while China itself is hoping to become number one by 2019. According to the report China’s GDP was nearly 87 percent of the US GDP in 2011, while India had moved up from being in 10th position in 2005 to the third-largest economy, overtaking Japan.

However, some say the PPP is just one measure to judge the performance of the world’s economies and that developing nations like India and China still have a lot of catching up to do.

“When, for example, we measure international purchasing power expressed in dollars, which matters in international trade, the United States, Europe and Japan continue to be the dominant economies in the world,” Frederic Neumann, co-head of Asia economic research at HSBC in Hong Kong said as reported by International Business Time, which quoted CNBC.

President Susilo Bambang Yudhoyono was quick to respond. “This morning I received a report that Indonesia has become the world’s 10th largest economy. Thank God, it is all of our efforts and hard work,” he said through his twitter account.

He said the nation continues working to reach higher levels of prosperity.

“This is of course a good start. But we still have a long way to go as we are facing many challenges. However, God willing, we can overcome those challenges,” he told a gathering in Jakarta later in the day.

Finance Minister Chatib Basri said the achievement was an endorsement of the government’s economic policy. “That means Indonesia’s economy is on the right track and we have made significant progress because a couple years ago we were in 16th position,” Chatib said, as quoted by Detik on Sunday.

But many other reports pointed out that while the rise of Indonesia should be praised, it has an uneven growth rate, with a widening gap between rich and poor.

Citing a forthcoming report by the World Bank, the Economist warned that real consumption grew by about 4 percent a year on average from 2003 to 2010. But for the poorest 40 percent of households it grew by only 1.3 percent. In contrast, consumption by the richest 20 percent grew by 5.9 percent.

Based on this data, the magazine concluded that the rich are getting richer much more rapidly than the poor.

The growing inequality between low-income groups and high-income groups has also been indicated by the country’s worsening Gini coefficient — which represents income disbursement — from 0.29 in 2000 to 0.38 in 2011, a drop of almost a third in equality.

The Economist also points to the fact that the informal sector accounts for 70 percent of the country’s GDP, meaning that the vast majority of Indonesia’s working population has no guarantee of minimum wage and protection from the government.

People are forced to go informal because manufacturing in Indonesia is hamstrung by decrepit infrastructure, rigid labor laws and protectionist policies that make it difficult for its factories to be competitive, according to the magazine.

Indonesia has increased its social spending, the magazine reported, adding that the government has bold plans to introduce universal health care by 2019.

However, government spending is still skewed towards the rich, with about 20 percent of the central government’s budget, or 282 trillion rupiah ($24.5 billion) this year, going on energy subsidies. Cheap gasoline benefits the rich, who are its biggest consumers.