Survey finds govt offices lack integrity

The Jakarta Post, Jakarta  |  Sat, 03/29/2008 1:18 AM 

The country’s fight against graft has been dealt a big blow after a survey Friday found the public sector and the general public alike condoned corruption.

Conducted by the Corruption Eradication Commission (KPK) between August and October last year, the integrity survey discovered 30 government offices and state companies providing public services had low integrity scores, averaging only 5.33 on a scale of one to 10.

Responsible for law enforcement, the National Police ranked in the bottom five. Ironically, the Justice and Human Rights Ministry ranked last with a score of 4.15.

The Religious Affairs Ministry, which deals with moral behavior, fared slightly better with 5.15.

“The average score is considered worse than the integrity levels of public sectors in other countries,” KPK deputy chairman Moch. Jasin said about the results of the survey.

During the survey, KPK pollsters interviewed 3,611 participants who were direct users of 65 public service units and state companies across Greater Jakarta.

Despite mechanisms and systems in place to smooth service delivery, corruption among public officers has not changed. The survey found 31 percent of the participants said they were discriminated against by officers for not paying grease money, while 29 percent said the officers they dealt with were used to receiving tips, gifts or rewards.

“The corrupt behavior is supported by the lack of transparency and information related to delivery time and costs,” Jasin said.

The situation is exacerbated by the general public’s tolerance of corruption. The survey discovered the majority of participants considered rewards for public officers acceptable. Of the participants surveyed, 20 percent admitted offering tips, gifts and rewards for accelerated services. The highest reward recorded in the survey was Rp 150 million (US$16,480).

It was the first integrity survey ever conducted by the anti-graft body, which is currently investigating corruption cases involving the Bank Indonesia’s governor and senior officials, House of Representative members, regents and a prosecutor.

Jasin said the survey would be held every year, with the upcoming one extended to 100 government offices and state corporations. The next survey will also look into bribery practices in the recruitment of state employees.

He said the survey would provide the government with the much-needed input for its drive against graft and raise public awareness to fight corruption.

“We hope the preventive measures against corruption will regain investors’ trust and convince them the country is cleaning itself up. If corruption and illegal levies were eradicated, we wouldn’t have such a high-cost economy,” Jasin said. (ewd)

Government to maintain conducive business climate : President

Jakarta (ANTARA News) - President Susilo Bambang Yudhoyono said the government would continue to maintain a conducive business climate in the country so that business people could play a bigger role in efforts to solve problems faced by the nation.

Addressing the 8th National Meeting of the Indonesian Businessmen's Association (Apindo) at the State Palace here on Wednesday, the president said if a conducive business climate was maintained, business players could contribute to the country's

"If tax revenues increase, it will help the government advance development and improve the people's welfare," the president said.

On the occasion, the head of state also called on business makers to create harmonious relations between workers and employers.

"If they have a problem, a solution has to be found that benefits both sides," he added.

Yudhoyono also called on businessmen to make use of business opportunities although at present global economic conditions were less favorable and energy sources were limited.

"Change the obstacles into opportunities for the sake of business development," the president told the participants of the meeting.

In the meantime, Apindo Chairman Sofyan Wanandi in his address asked the government to help the business world by improving and wrapping up a number of business regulations.

"We need the government's support in improving a number of regulations. There are still a number of laws such as on taxes and manpower that have not been finalized," Wanandi said.

Local governments are hurting more than making things better

Debnath Guharoy, Consultant, The Jakarta Post | Tue, 03/25/2008 12:43 AM

Decentralizing power, by shifting control from the central government to smaller local governments, is the will of the local population and can only be deemed progressive in a new democracy like Indonesia.

But it is a new system fraught with problems. In a special poll recently conducted across the country, Roy Morgan Research measured the response to the rollout of local governments.

In a sample projected to represent the views of close to 90 percent of the population, Roy Morgan interviewed 2,083 people aged 14-years and older.

Almost half the people interviewed felt the actions taken by members of their local government were in the member's individual interest or in the interest of their political party.

Although answers to the survey did not significantly vary according to gender or location, the young were much less forgiving.

Furthermore, 63 percent believed there had been no improvement to their economic situation since regional autonomy had been introduced.

Merely 15 percent thought their economic situation was improving and 21 percent actually thought they were worse off. This is not a ringing endorsement for the progress of democracy.

Critics will argue the decentralization of power has created more obstacles in the fight against corruption. The banter among businessmen today has changed. Instead of "Madame Ten Percent" paving the way for business to get started, in the days of the dictatorship, there are now numerous little wheels to grease in a much larger democratic machine.

Idle chatter aside, the desire to create smaller fiefdoms, by politicians wanting to carve an ever-growing number of provinces, is a worrying sign.

Today Papua is witnessing a small group of ousted politicians trying to reclaim power by slicing up the sparsely populated territory into smaller provinces for their own gain.

However, the people of Indonesia have greater faith in the federal government with the "Good Government Monitor", updated every 90 days, showing a further improvement in the October-December 2007 quarter.

Almost 60 percent believe the national government is "doing a good job running the country", a dip of just 1 percent from the previous quarter, and only 31 percent "don't trust the current government", down 3 percentage points from the previous survey.

Seventy-two percent have faith in democracy, while 87 percent believe the fight against corruption remains "one of the major problems affecting this country".

After a difficult two years, it appears the average family's main income earner was able to pay monthly household expenses in the October-December quarter of 2007. The Roy Morgan Consumer Confidence Index continued to climb upward, reaching a robust 115 during that period.

Not surprisingly, marketers across the spectrum of products and services, including fast-moving consumer goods, cellular networks and motorcycle manufacturers, all ended the year satisfied with the progress made under difficult economic conditions.

The long and difficult stretch appears to be improving, finally. But while signs the local economy is improving offer glimmers of hope, the economy is held hostage by an increasingly fragile global economy coping with the twin shocks of oil price increases and the subprime mortgage crisis in the United States.

These conclusions are based on Roy Morgan Single Source, the country's largest syndicated survey with more than 27,000 Indonesian respondents annually, projected to reflect almost 90 percent of the population over the age of 14. That is a universe of 140 million people.

The results are updated every 90 days. The opinions expressed here are my own.

In the creation of wealth, families and societies are enriched in numerous ways and every employer can justifiably feel proud of the contributions they make. But there are a myriad opportunities for employers to go the extra mile.

Some are leading by example. In Bangladesh, Mohamed Yunus of Grameen Bank has shown the way, empowering millions through his micro-financing schemes. And Mo Ibrahim of Celtel is promoting good governance across Africa with grants to governments setting high standards.

These new heroes are just two examples of businesspeople from the developing world joining the ranks of living legends like Bill Gates and Richard Branson.

In Indonesia, the fight against corruption cannot be won by the government alone. Associations like KADIN, Indonesia's chambers of commerce, need to take the lead in assisting the government in the fight.

Although passing a resolution is merely the first step, it can act as a call to action for individual CEOs and captains of industry to pass the message along the chain of command.

Without collective awareness, leading to individual action, Indonesia's fight against corruption will be a losing battle. If local governments are encouraged to wield power for individual gain, the situation will magnify exponentially.

The cynics among us have probably stopped caring. To them I recommend Barack Obama's "Audacity of Hope".

The writer can be contacted at Debnath.Guharoy@roymorgan.com

Survey sees slower biz expansion in first quarter

Novia D.Rulistia , The Jakarta Post , Jakarta | Tue, 03/18/2008 1:15 AM

Expansion in the business sector is likely to slow down in the first quarter of 2008, emulating a similar trend in the previous quarter, a Bank Indonesia survey says.

According to the survey released Monday, the nation's business sector expanded by 15.25 percent in the fourth quarter of 2007, a drop from 21.99 percent the previous quarter, which was the highest quarterly growth recorded in 2007.

In the first quarter of last year, the sector contracted by 0.24 percent.

It is estimated the decline in the last quarter will continue into the first quarter of this year, in part because of slower demand, the survey found.

Entrepreneurs, the survey respondents, said although there would be an increase in business activities in almost all sectors in the first quarter of this year, the growth would be slower than in the previous quarter.

"Growth in business expansion will occur mostly during the first quarter of this year in industries such as processing at 5.81 percent, and mining and exploration at 4.47 percent.

"Agriculture, farming, forestry and fisheries will grow at 3.7 percent, and services at 3.18 percent," BI's director for economic and monetary statistics, Triono Widodo, said when launching the survey.

Triono added while the business climate was expected to improve, only 22.37 percent of the respondents said they would invest in expansion during the first quarter of this year.

This figure is lower than that in the first quarter of 2007, 27.54 percent.

Most respondents said interest rates were the main barrier to investment, followed by poor infrastructure, banking access and licensing procedures.

The survey, which involves more than 2,500 companies across the country, is conducted by the central bank every quarter, except for investment, which is conducted in the second and fourth quarters.

The companies surveyed operate in nine sectors that contribute significantly to the economy, including agriculture, mining, infrastructure, trade and services.

Japanese investors focus on local potential

Aditya Suharmoko , The Jakarta Post , Jakarta | Wed, 03/12/2008 1:36 AM

To attract more foreign direct investment (FDI) from Japan, Indonesia needs to take a good look at what's happening in local markets.

The reason is that motives make Japanese investors go overseas have shifted -- from a need for low production costs to an interest in the potential of local markets, a seminar concluded on Tuesday.

"Previously, Japanese investors considered low production costs, including the cost of labor and raw materials, the main reason for investing in a country.

"Now they consider local market, including future growth potential and the size of the market, as the main factor," Japan Bank for International Cooperation (JBIC) senior economist Susumu Ushida told the seminar.

JBIC data showed Indonesia in 2007 as the 8th most-promising country for overseas business, far below neighbors Vietnam and Thailand, coming in third and fourth, respectively.

University of Indonesia economist Faisal Basri said in response to such trends, the government should improve domestic markets to attract FDI from Japan investors.

"It is time for the government to improve the market. Indonesia actually has enough potential, if not huge."

However, according to JBIC, intense competition with other companies, poor infrastructure and security, and social instability are among the obstacles confronting Japan-based companies who wish to do manufacturing or otherwise invest here.

Of the development elements regarded as problematic, electricity, communications and road networks are considered most daunting.

Should the government fail to address these immediately, Japanese capital will flow to Indonesia's neighbors, especially Thailand and Vietnam.

JBIC director general Masaaki Amma said Japanese investors now perceived Thailand and Vietnam as ahead of Indonesia in attracting FDI.

The investors said Indonesia hadn't done enough to improve its investment climate.

Japan is one of Indonesia's largest investors. Between 1967 and 2007 Japan pumped some US$40 billion into the country and last year was ranked No. 4 in terms of Indonesian FDI, according to the Investment Coordinating Board (BKPM).

To address infrastructure problems, BKPM deputy chairman for investment planning Luky Eko Wuryanto said the government this year allocated Rp 59 trillion (about $6.43 billion), far above 2007's Rp 41.8 trillion.

"About Rp 16 trillion will go to road development," he said.

Bad roads in the country have increased transport and vehicle maintenance costs, in turn driving up the price of goods.

"There will be impediments (in securing funds from Japanese investors) unless the government improves the infrastructure," said Indonesia-Japan Economic Committee head Kusumo Martoredjo.

Islamic funding initiative aims to help reduce poverty

Desy Nurhayati , The Jakarta Post , Jakarta | Sat, 03/08/2008 12:10 PM

Indonesia has come out in support of an initiative by the Islamic Development Bank (IDB) to establish a fund aimed at promoting solidarity and cooperation among Islamic countries in line with poverty alleviation movements.

President Susilo Bambang Yudhoyono on Thursday met with the president of the IDB, Ahmed Mohammed Ali Al Madani, at the State Palace.

They discussed the idea of establishing the Islamic Solidarity Fund for Development (ISFD), which was proposed during an Organization of the Islamic Conference (OIC) meeting in 1991.

Finance Minister Sri Mulyani Indrawati said after the meeting the ISFD was a fund collected by OIC member countries and the IDB to be disbursed for poverty alleviation programs in Islamic countries.

"As of now, we have collected US$2.6 billion, with $1.6 billion from OIC members and the remaining from the IDB. We have targeted to collect $10 billion," she said.

"We will invest the money and use the profit to finance poverty alleviation programs, such as through public-private partnerships in micro-financing and other activities that are aimed at improving the economy."

She said other initiatives would include delivering technical assistance through vocational training, in a move to develop working skills and create more job opportunities.

The meeting was also attended by the former president of Sudan, Abdel Rahman Swar Al Dahab, IDB regional office director Ahmed S. Hariri, an adviser to the IDB president, Mansour bin Fetten, and former Indonesian president B.J. Habibie.

"President Yudhoyono said he fully supported the idea and would discuss it with other OIC members in the upcoming summit in Senegal," Sri Mulyani said.

She said it would require the commitment and contributions from all OIC members, and that it would take years to completely realize the idea.

The decoupling debate

As America's economy struggles to stay aloft, the developing world is learning to spread its wings

From The Economist print edition, Mar 6th 2008 | HONG KONG

MANY nasty words begin with the letter D: death, disease, depression, debt (when you drown in it) and deflation. “Decoupling”, on the other hand, has a nicer ring to it, even if it is the source of a great deal of controversy. Economists continue to argue about whether or not emerging economies will follow America into recession. The most pessimistic claim that “it makes no sense to talk about decoupling in an era of globalisation”: economies have become more intertwined through trade and finance, which should make business cycles more synchronised, not less. The slide in emerging stockmarkets on Wall Street's coat-tails appears to endorse their view. Yet recent data suggest decoupling is no myth. Indeed, it may yet save the world economy.

Decoupling does not mean that an American recession will have no impact on developing countries. That would be daft. Such countries have become more integrated into the world economy (their exports have increased from just over 25% of their GDP in 1990 to almost 50% today). Sales to America will obviously weaken. The point is that their GDP-growth rates will slow by much less than in previous American downturns. Most enjoyed strong growth during the fourth quarter of last year, and some speeded up, even as America's economy ground to a virtual halt and its non-oil imports fell.

One reason is that while exports to America have stumbled, those to other emerging economies have surged (see chart 1). China's growth in exports to America slowed to only 5% (in dollar terms) in the year to January, but exports to Brazil, India and Russia were up by more than 60%, and those to oil exporters by 45%. Half of China's exports now go to other emerging economies. Likewise, South Korea's exports to the United States tumbled by 20% in the year to February, but its total exports rose by 20%, thanks to trade with other developing nations.

A second supporting factor is that in many emerging markets domestic consumption and investment quickened during 2007. Their consumer spending rose almost three times as fast as in the developed world. Investment seems to be holding up even better: according to HSBC, real capital spending rose by a staggering 17% in emerging economies last year, compared with only 1.2% in rich economies.

Sceptics argue that much of this investment, especially in China, is in the export sector and so will collapse as sales to America weaken. But less than 15% of China's investment is linked to exports. Over half is in infrastructure and property.

It is not just China that is building power plants, roads and railways; a large chunk of the Gulf's petrodollars are also being spent on gleaming skyscrapers and new airports—not to mention ski-domes in the desert. Mexico, Brazil and Russia have also launched big infrastructure projects that will take years to complete.

The four biggest emerging economies, which accounted for two-fifths of global GDP growth last year, are the least dependent on the United States: exports to America account for just 8% of China's GDP, 4% of India's, 3% of Brazil's and 1% of Russia's. Over 95% of China's growth of 11.2% in the year to the fourth quarter came from domestic demand. China's growth is widely expected to slow this year—it needs to, since even Wen Jiabao, the prime minister, warned this week of overheating—but to a still boisterous 9-10%.

Smaller economies in Asia look more vulnerable. For example, Malaysia's exports to America amount to 22% of its GDP, and they fell by 18% in the year to December. Yet its annual GDP growth jumped to 7.3% in the fourth quarter, thanks to consumer spending and a jump in government infrastructure investment.

Mexico's exports to America are an even larger 27% of its GDP. Real GDP growth held steady at 3.8% in the year to the fourth quarter, but manufacturing jobs are falling and workers' remittances from abroad are falling. Retail sales grew by only 1% in the year to December. Yet the economy is holding up better than during previous American downturns, partly because high oil revenues have enabled the government to increase investment by around 50% over the past year.

American downturns have often caused the prices of oil and other raw materials to slump, but this time China's surging demand is propping up prices and fuelling booms in Brazil, Russia and the Middle East. Brazil's exports jumped by 26% in the year to February. In turn, if prices stay strong, so will China's exports to commodity-producing countries. A sharp slowdown in China would hurt them more than an American recession will.

Act global, think local

A recent IMF study* by Cigdem Akin and Ayhan Kose offers some support for the idea that you can have both decoupling and globalisation at the same time. They divide 106 countries into three groups—developed, emerging, and low-income developing countries (which are less integrated into the world economy)—and then measure how the correlation between economies has changed over time as cross-border flows have expanded. They find that growth has indeed become more synchronised among developed economies and also among emerging economies. But, surprisingly, economic activity in emerging economies has diverged (or decoupled) from that of developed economies over the past two decades. The impact of rich economies on emerging economies' growth has fallen sharply.

The popular argument is that business cycles should become more synchronised because in a globalised world everyone is in the same boat. But this rests on an out-dated impression that poor countries mainly export to rich ones. Instead, emerging economies' trade with each other has risen faster and now accounts for over half of their total exports. Emerging markets as a group now export more to China than to the United States (see chart 2).

Some contend that this mainly reflects imports of intermediate goods into China for assembly; the finished goods are then exported to America and so will be hurt by slower growth. There is some truth to this. However, an analysis by BCA Research, a financial research firm, finds that Asian exports to China are increasingly driven by China's own domestic demand. A growing share of emerging economies' exports are also commodities sold to China.

Another reason why globalisation and decoupling can co-exist is that opening up economies has not only boosted poor countries' trade, it has also spurred their productivity growth and hence domestic incomes and spending. In 2007 emerging economies' real domestic demand grew by an average of 8%, almost four times as fast as in the developed world.

A severe recession in America could still have a nasty impact on the developing world if commodity prices collapsed and if it caused stockmarkets to fall more steeply, depressing global consumer and business confidence. A sharper fall in the dollar could also further squeeze emerging economies' exports.

But for perhaps the first time ever, developing countries would be able to make full use of monetary and fiscal policy to cushion their economies. In the past, when they were net foreign borrowers, capital inflows tended to dry up during global downturns as foreign investors shunned risky assets. This forced governments to raise interest rates and tighten fiscal policy. Economies with large external deficits, such as South Africa, Turkey and Hungary, are still vulnerable. But most emerging economies now have a current-account surplus and large foreign reserves; many have a budget surplus or are close to balance, leaving ample room for a fiscal stimulus if necessary.

Perhaps the best support for decoupling comes from America itself. Fourth-quarter profits of big companies, such as Coca-Cola, IBM and DuPont, were better than expected as strong sales growth in emerging markets offset a sharp slowdown at home. In other words, bits of American business are rising above their own economy. With luck, the world economy can rise above America's.

*"Changing Nature of North-South Linkages: Stylized Facts and Explanations", IMF Working Paper WP/07/280.

Related Story:


Share of GDP: China, India, Japan, Latin America, Western Europe, United States (Last 500 Year)

Economy see 'paradoxical growth'

The Jakarta Post , Bogor , | Thu, 03/06/2008 1:21 AM

Economists attending a discussion in Bogor on Wednesday to review the country's economic performance over the last five years concluded that Indonesia suffered from a paradox in growth.

International Center for Applied Finance and Economics director Iman Sugema said an excess of liquidity had become the main character of Indonesia's economy.

However, he said, the superfluous funds, which theoretically came from gains generated from trade and services, had not been reflected in a growth in investments.

"Indonesia's success in improving its exports between 2003 and 2007 has not been accompanied by exporters' willingness to invest their surpluses here," he said.

In short, he said, the growth of export value, which benefited from the increases of commodity prices, failed to generate growth in production capacity, particularly in sectors such as agriculture, mining and agro-industries.

Another speaker at the discussion, Aviliani, a widely known economist, said the excess of liquidity also came from gains in portfolio investments.

She warned that if the growth of direct investment in the real sector continue to fail to match the growth of investment in the capital market, which is mostly dominated by foreign funds, it could lead to another economic crisis similar to 1997.

Aviliani said the foreign funds could exit the country anytime.

"If the funds went away before the direct investment level improved, the rupiah rate could be affected very badly."

Aviliani also expressed her belief that most Indonesian exporters were not genuine industrialists.

"They are merely traders. That's why they do not reinvest into the sector which has benefited them," she said.

An expert on the agricultural economy at the University of Lampung, Bustanul Arifin, said the sluggish investment level was also due to the government's failure to transform the high level of public saving into investment.

"The level of saving in Indonesia is around 37 percent, higher than 12 percent in the United States. The problem is how should the government use this high level of saving for improving the investment levels," Bustanul said.

Arif Iman Sunarso from Bogor's agriculture university IPB looked at the economic problems from a different perspective.

He expressed concern with how the economy, despite 6.32 percent growth last year, was still unable to resolve unemployment, which currently stands at more than 37 million people, or around 16.5 percent of the total workforce.

Poverty, he said, also remained high with about 37 million out of the total population of 224 million living beneath the poverty line.

President want people`s empowerment program sped up, expanded

Bogor, West Java (ANTARA News) - President Susilo Bambang Yudhoyono has asked Coordinating Minister for People`s Welfare Aburizal Bakrie to accelerate and expand the coverage of the national program for people`s empowerment (PNPM Mandiri).

Speaking during a visit to Bogor Wednesday to observe implementation of some projects under the program, the President said it was important for all parties to help make the program a success so that the country`s poverty rate would drop and the people`s welfare improve.

"All state officials and local leaders must take part (in the program) and ensure that the program remains on track," he said.

He also asked the relevant cabinet ministers to periodically make field visits to observe the implementation of the program in the regions.

The president launched the PNPM program in April 2007 after considering people`s aspirations.

The President also asked West Java Governor Danny Setiawan to soon disburse PNPM funds totaling Rp720.63 billion that had been allocated for 3,598 villages in 383 sub districts in the province.

"I don`t want to see the funds remaining idle for too long. Everything has to be done fast and meet the targets," he added.

The government would increase the fund allocation for the program to accelerate the achievement of the poverty alleviation target in accordance with the Millennium Development Goals (MDGs) in 2015, he said.

In 2007, the government had appropriated a total Rp3.6 trillion in funds for the PNPM program and the amount would be increased to Rp13 trillion in 2008.

Yudhoyono said, the PNPM program was part of the government`s policy to alleviate poverty. Although all the results of the poverty alleviation program would not be visible in the short term, the poverty rate was already showing a downward trend, he said.

During his visit in West Java, the President also commissioned a flyover in Depok and a complex of flats for low income people in Bogor.

The president was accompanied by a retinue consisting of Coordinating Minister for People`s Welfare Aburizal Bakrie, Agriculture Minister Anton Apriyantono, Public Works Minister Djoko Kirmanto, Public Housing Minister Yusuf Asyari, Education Minister Bambang Sudibyo, Environment Minister Rachmat Witoelar and West Java Governor Danny Setiawan.

Royal visit seen as boost for RI investment

Andi Haswidi and Novia D. Rulistia , The Jakarta Post , Jakarta | Wed, 03/05/2008 2:15 AM

BUSINESS AFFAIRS: Prince Andrew shakes hands with the Minister of Trade Marie Elka Pangestu before a meeting in Jakarta on Tuesday.

Prince Andrew, the Duke of York, was in Jakarta on Tuesday as a special envoy for trade and investment, aiming to strengthen bilateral ties between the United Kingdom and Indonesia and look for new business opportunities.

The high-level visit, business players said, would help bridge the perception gap between existing foreign investors in the country and potential investors on Indonesia's investment climate.

"Existing investors, many of whom have been here for decades, are generally upbeat and positive about doing business in Indonesia despite challenges that exists," British Chamber chairman Simon Morris said during a luncheon with the Duke in Jakarta.

However, he said, potential new investors often had a different perception that could negatively affect their business decisions when it came to investing in Indonesia.

"I have no doubt that visits like this, by the most senior level of UK trade and investment, can only help to ensure that such perceptions are gradually overcome. It will also help to ensure that business and investment decisions can be more informed and fact-based," he said.

During the luncheon, the Duke said he was here as part of the Indonesia-UK strategic partnership agreement signed by President Susilo Bambang Yudhoyono and then prime minister Tony Blair in March 2006.

"I want to make it clear that Indonesia is an important trading partner for the UK and offers us considerable potential for further growth, and that is for both directions," he said.

The Duke said the UK also had a great deal of business expertise to be offered, particularly London as a global financial capital, with advanced financial and business consultancy services.

Regular high-level visits, he said, are crucial in building a mutual relationship between the two countries. He invited President Yudhoyono to visit London to raise Indonesia's profile and showcase the opportunities that exist here and in the UK

The Duke also met with the President and Trade Minister Mari Elka Pangestu, before heading to Papua to visit British Petroleum's Tangguh project until Wednesday.

Mari reported after the meeting that the total value of Indonesia's exports to the United Kingdom reached Rp 1.4 billion and that her office was projecting a 10 percent growth this year.

Bilateral trade reached $1.72 billion in the first 10 months of 2007, a 6.5 percent increase from $1.61 billion during the first 10 months of 2006. Total trade in 2006 reached $1.98 billion.

"Together with the ministry of maritime affairs and fisheries, we're cooperating with the UK government in establishing a fisheries trade corridor which will help us meet the standards of exports," the trade minister said.

The UK is the second largest investor here after Japan, with total investments of $4.6 billion, mainly in the oil, gas and mining sectors, where British Petroleum, Rio Tinto and Shell are all active. UK investors also have stakes in automotive manufacturer PT Astra International and several hotels.

'Antara' asked to stay professional

The Jakarta Post

JAKARTA: President Susilo Bambang Yudhoyono asked national news agency Antara on Thursday to maintain internal professionalism, and to promote cooperation with agencies in other countries.

"The President considers that Antara has so far been able to maintain a good performance in journalism," Communication and Information Minister Muhammad Nuh said after a meeting at the State Palace.

Nuh said, due to the agency's transformation into a company, it had to restructure its organization, form a new vision and build new corporate values.

He said Antara had sound journalistic principles, maintaining objectivity and representing both sides on all issues.

Banks should pay more attention to SMEs

Novia D. Rulistia, The Jakarta Post, Jakarta

The banking sector needs to boost its lending to small and medium enterprises (SMEs) due to the sector's proven resilience and huge contribution to employment and the economy, a seminar determined Monday.

Ali Masykur Musa, lawmaker from House of Representatives Commission XI overseeing financial affairs, said that while the loans were on the rise, banks were still not meeting their potential when it came to extending loans to SMEs.

"So far, the SMEs only take about 40 percent of the annual lending provided by banks, while the other 60 percent goes to large companies," he said.

"That's not good enough considering the role the SMEs play in the economy."

According to the cooperatives and SMEs ministry, SMEs made up 90 percent of the country's 48.9 million business enterprises in 2006. They employed 96 percent of approximately 88 million workers that year.

"While other businesses are still struggling to get their feet back on the ground around 10 years after the (economic) crisis, the SMEs sector remains resilient and has been showing good performance in supporting the economy," Ali said.

Andang Setyobudi, head of research and development at Bank Indonesia's credit and SMEs directorate, said a fully empowered SMEs sector was the answer to Indonesia's wide income disparity.

"Funding accessibility for the SMEs must be increased. Not only from banks, but also from non-bank institutions, such as cooperatives, pawnshops and venture capital."

Andang said the central bank predicted bank loans to SMEs this year would increase by up to 20 percent from last year, on the back of a government program which provides funds to guarantee bank loans to SMEs.

The absence of collateral is among the key reasons behind banks' reluctance to provide loans to SMEs.

The government program, which was launched last November, involves six banks: Bank Rakyat Indonesia (BRI), Bank Mandiri, Bank Negara Indonesia (BNI), Bank Tabungan Negara (BTN), Bank Bukopin and Bank Syariah Mega.

Budi Gunadi Sadikin, director of micro and retail banking at Bank Mandiri, told the seminar the bank expected a 20 percent increase in SME credits this year.

In 2007, the bank disbursed Rp 15.7 billion for SMEs, up from Rp 9.25 billion in 2006.

US defense secretary: RI plays important role in Asian region

Jakarta (ANTARA News) - The U.S Government believed that Indonesia plays an important role in the Asian region with a world-wide impact, prompting many countries to establih cooperation with the Indonesian government, including in the military field.

"I have confirmed this to President Yudhoyono and believe that it is necessary for us and Indonesia to establish good relations as Indonesia is one of important countries in the region with global influence," visiting U.S. Defense Secretary, Robert Gates said after meeting President Susilo Bambang Yudhoyono at his office here on Monday.

Citing an example, Robert Gates said with its role in bringing about and maintaining peace, Indonesia has shown its role through its participation in peacekeeping forces in Lebanon.

"My talks with the president touched on how the U.S. can assist Indonesia as a democratic and constitutional country, and develop the condition militarily," he said.

Gates also said that the U.S. will help the Indonesian military conduct reforms and improve its capability particularly in air defense and maritime affairs.

"The assistance could be given in the form of training arms supply for which we are ready to help the best we can," he said, adding that the U.S.-Indonesia relations had been very good in these years.

Meanwhile, Indonesian Defense Minister Juwono Sudarsono on the same occasion said that the U.S.-Indonesian military cooperation will take the form of training and increasing the capacity of the main armament system especially the improvement of the capabilities of the Hercules cargo planes and F-16 jet fighters.

"Indonesia is considered to have played an important role in the region, with an international impact, therefore the U.S. Defense Secretary said the two countries will maintain their bilateral cooperation," Juwono explained.

Juwono said further in this case Indonesia established cooperation with several countries, including with the US especially because of its high military technology.

Therefore, the Indonesian government said it has no problems in cooperation with the United States, especially in the renewal of F-16 fighters.

Market supervisory body to promote share, bond issues

Aditya Suharmoko, The Jakarta Post, Jakarta

The stock market regulator's plan to introduce a so-called "shelf registration" scheme to ease procedural requirements for bond and share issues has been praised by business players.

Last week, the head of the Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK), Fuad Rahmany, said the agency would put into effect the scheme later this year, allowing firms to issue new shares or bonds over a shorter duration.

"The scheme will fasten the duration in the issuance of new shares or bonds, which is good for businesses. It will also be useful for companies wanting to do initial public offerings," Erry Firmansyah, Indonesia Stock Exchange chairman, told The Jakarta Post on Sunday.

Currently, it can take companies up to three months to fulfill all the requirements before they can issue new shares or bonds -- which many say hampers business.

The shelf registration scheme involves the registration of a new bond or share issuance that can be prepared up to two years in advance, so the issue can be offered quickly as soon as funds are needed or market conditions are favorable.

The scheme allows a single registration document to be used multiple times within two years.

It also gives underwriters greater flexibility in timing market issues and involves little or no increase in direct costs.

For example, a tollway company can launch a rights issue as soon as the government announces it will prioritize tollway projects.

"Under the shelf registration (scheme), companies that want to issue new shares or bonds more than once in a year do not have to register again prior to the next issuance," said Fuad.

Companies, he said, only need to update their documents should there be any changes prior to the next issuance, thus simplifying the bureaucratic procedures, while maintaining the companies' accountability disclosures.

Erry said the scheme would also help companies launch IPOs when the market was most favorable.

According to Bapepam-LK, the scheme has been adapted from the U.S., where the Securities and Exchange Commission -- whose main job is to enforce federal securities laws and to regulate the stock market -- permits the issuance of multiple securities through a single document.

An analyst at PT Eurocapital Peregrine Securities, Poltak Hotradero, told the Post if the scheme was properly implemented, it would benefit companies and shareholders by allowing companies to secure quick funding.

"And in turn, it (the scheme) will also grow the country's economy as companies can expand their businesses quicker," said Poltak.

However, he said, Bapepam-LK should scrutinize companies' updated documents to ensure they are not fabricated.

Muslim group backs SBY-JK for 2009

Desy Nurhayati, The Jakarta Post, Jakarta

One of the pioneer organizations of the United Development Party (PPP) has thrown its weight behind the incumbent president and vice president to run in the 2009 presidential election.

Chairman of the Indonesian Muslims Brotherhood (Parmusi) Bachtiar Chamsyah said here Friday the group would support President Susilo Bambang Yudhoyono and Vice President Jusuf Kalla on the basis of their success in handling the country's problems.

"Terrorism, corruption and other big problems have been handled strictly. That's why we should allow them to continue their leadership for the next term, so they can really settle the problems," Bachtiar, who is also the social services minister, said at the opening of Parmusi's national congress.

He said it would be impossible to completely settle the country's mounting problems in only five years.

In response, Yudhoyono told the congress participants not to be premature in making their choices for the upcoming election.

"There's no need to be in a hurry, just follow the political process," he said.

"I would rather focus on dealing with this country's problems than campaigning for the next election."

Parmusi was initially established as the Indonesian Muslims Party in 1968. Three years later, the Soeharto-led New Order regime merged the party with the largest Muslim organization Nahdlatul Ulama (NU), the Indonesian Tarbiyah (Education) Union and the Islamic United Party to form the (PPP).

In the late 1990s, Parmusi declared itself a non-political Muslim organization.

In the 2004 elections, Parmusi allowed its members to vote for any political parties besides the PPP.

They were also allowed to vote for any presidential candidates other than Hamzah Haz, who was supported by the PPP.

Some Parmusi members have since joined different political parties, with the majority still supporting the PPP.

Attending the event were PPP chairman Suryadharma Ali, Religious Affairs Minister Muhammad Maftuh Basyuni, Minister for Administrative Reforms Taufik Effendy, Coordinating Minister for People's Welfare Aburizal Bakrie and Communication and Information Minister Muhammad Nuh.

Constitutional Court president Jimly Asshiddiqie, deputy speaker of the People's Consultative Assembly AM Fatwa and deputy chairman of the Regional Representative Council Irman Gusman were also present.

FRIENDLY MATCH: Muhammadiyah chairman Din Syamsuddin (right) greets U.S. Ambassador to Indonesia Cameron Hume before the kick off of a friendly soccer match between Muhammadiyah and the U.S. Embassy in Jakarta on Friday. JP/R. Berto Wedhatama

President defends land use fees to save forests

Dessy Nurhayati and Adianto P. Simamora, The Jakarta Post, Jakarta

President Susilo Bambang Yudhoyono defended Friday a new regulation to impose fees on non-forestry firms to rehabilitate the country's deteriorating forests.

The regulation would raise extra money to finance reforestation programs, he said.

"The aim is good, to save our forests," the President told reporters after a limited Cabinet meeting at the Forestry Ministry.

In attendance were Vice President Jusuf Kalla, Coordinating Minister for Economics Boediono, Coordinating Minister for People's Welfare Aburizal Bakrie, Forestry Minister Malam Sambat Kaban and Finance Minister Sri Mulyani.

Yudhoyono said many people, however, misread the regulation and accused the government of renting out the protected forests to investors.

"The idea is not a forest-renting business. This is not to rent protected forests to mining companies," he said.

The President said the forest use fees of between Rp 1.2 million and Rp 3 million per hectare per year, as set in the regulation, could still be debated.

Environmental groups have said the fees were too low compared to potential environmental losses from open-pit mining activities.

Greenomics Indonesia has proposed the government raise the fees to US$16,000 per hectare per year.

Senior forestry official Yetti Rusli said the fee had been determined without prior research, by a team comprising inter-governmental officials.

"The decision (on fees) was made merely from computer simulations," she said.

Yetti said the team had calculated the projected production cost and revenues of non-forestry companies, including mining ones, when running businesses in forests.

"Therefore the fee could be changed depending on domestic and global economic conditions," she said.

Yetti said her office could not set higher fees for forest use as it would affect the country's investment climate.

Minister Kaban insisted the government would not award new licenses for open-pit mining companies to operate in protected forests.

"The forest use fee is only for companies failing to provide lands as compensation for the forest areas they use for their business," he said.

Data from the ministry shows there are currently 334 non-forestry businesses operating in the country's 293,556 hectares of forests.

The ministry is now examining 586 business proposals for licenses.

In 2004, the government agreed to allow 13 firms to run an open-pit mining business in protected forests, mostly in the eastern part of the country.

However, none of the 13 companies have started operations.

Indonesia contains the world's third-largest forest areas after Brazil and Congo, with 120 million hectares.

President Yudhoyono said the country had 66 million hectares of production forests and 33 million hectares of protected forests. The remaining 20 million hectares are conservation forests, he said.

He said the government would work to improve community-based forests to help raise the welfare of local people.

"We are now developing community-based forests in North Sumatra, Yogyakarta, West Nusa Tenggara and Southeast Sulawesi," he said.

SBY's pick of BI gov candidates seen as surprising but positive

Aditya Suharmoko, The Jakarta Post, Jakarta

President Susilo Bambang Yudhoyono's nomination of total outsiders to head Bank Indonesia was interpreted as an attempt at image control.

A surprise to some, the two nominees -- Bank Mandiri president Agus Martowardojo and vice president of asset management company PT Perusahaan Pengelola Aset, Raden Pardede -- could help give BI a new look after a recent bribery scandal said economists and a lawmaker.

The candidates were proposed by the President to the House of Representatives last Friday.

Standard Chartered economist Fauzi Ichsan, said Saturday the nomination might have come from the president's reluctance to name candidates from within BI, following a case of alleged graft at the bank.

Current BI governor Burhanuddin Abdullah has been named a suspect in the case involving some House members. Burhanuddin denied any wrongdoing, but made it clear he would not seek a second term as BI governor.

"Perhaps the President considers that BI needs (an injection of) fresh blood following the case," Ichsan said.

"However, the nomination was surprising."

Candidates expected to be nominated by analysts included BI senior deputy governor Miranda Goeltom, BI deputy governor Hartadi A. Sarwono, former BI deputy governor Aulia Pohan and Indonesia Stock Exchange president Erry Firmansyah.

The president is allowed to nominate up to three people.

Agus made Bank Mandiri -- formed by the merger of four state-owned banks having fallen into disrepute -- one of the most respected banks in the country. Mandiri is now the country's largest bank and had an NPLs rate of 3.8 percent for the first nine months of 2007, well within BI's maximum 5 percent limit.

"Agus is a master when it comes to bank restructuring," said Ichsan.

Separately, Citibank Indonesia economist Anton Gunawan said that while Agus' expertise lay in the banking sector, Raden was "more than capable" on monetary and fiscal issues.

Raden, who was an executive director at PT Danareksa between 2002 and 2004, also heads the Financial System Stability Forum (FSSK), created to synchronize fiscal and monetary policies and detect early signs of crisis.

"Raden has worked with the Coordinating Minister for the Economy since 2004. He was also an advisor for the Finance Minister," said Anton.

If elected, Raden would create a balance between the fiscal and monetary policies, according to Anton.

A member of the House's commission XI overseeing financial affairs, Dradjad H. Wibowo said that although the nomination had come as a surprise it could be read as the government's way to "clean up" BI.

"BI is now facing a problem related to the scandal. It may add to the trouble if the government insists on BI officials as candidates."

He said that although both candidates might lack certain capabilities -- as they both came from outside BI -- either of them would be able to count on support from other top BI officials if elected.

Burhanuddin's tenure ends on May 17, but regulations require the president to submit names three months early, meaning on Feb. 17.

Indonesian growth in 2007 fastest in 11 years

Jakarta (ANTARA News) - Indonesia's full-year growth for 2007 clocked in at 6.32 percent, the fastest rate since the country was hit by the Asian financial crisis 11 years ago, official data showed Friday.

The figure was slightly higher than the government forecast of 6.30 percent, but remained lower than the pre-crisis level of 7.8 percent recorded in 1996.

The Indonesian economy contracted 2.15 percent however in the last quarter of 2007 compared to a year earlier, but grew 6.25 percent compared to the same quarter in 2006, said Slamet Sutomo, deputy chairman of the statistics bureau.

"Some external and domestic factors have resulted in a contraction in the fourth quarter but full-year growth was slightly better than the government's forecast," Sutomo was quoted by AFP as telling a press briefing.

The results were within a range expected by economists.

Separately, President Susilo Bambang Yudhoyono said Indonesia may trim its gross domestic product growth forecast for 2008 to 6.4 percent, down from 6.8 percent due to the expected slowdown in the global economy.

The government is expected to submit its revised 2008 state budget to the lower house of parliament by the end of the month.

The government is also planning to raise its inflation target to 6.5 percent from 6.0 percent, Yudhoyono said during a gathering with provincial

The government's budget deficit is now forecast to come in at 2.0 percent of GDP, up from 1.7 percent, the president said, while the price of crude oil is projected to average 83 instead of 60 dollars per barrel.

Yudhoyono calls for eficient use of regional budgets

Jakarta (ANTARA News) - President Susilo Bambang Yudhoyono called on all provincial governors to use their respective regional budgets efficiently and optimally in the face of world economic turmoil.

Speaking before governors from across the country at the opening of a national working meeting of the Indonesian Provincial Administrations` Association (APPSI) at the State Palace here on Friday, the president called on the governors to use the budgets of their respective regions efficiently and optimally.

On the occasion, the president asked them to postpone unimportant programs and instead do more to improve the economy of poor people who live under the pressure of rising food prices.

"It does not mean that we have to reduce the amounts of regional budgets and postpone development projects, but we have to postpone what can be done later in order to help the poor people," Yudhoyono said.

The head of state also expressed hope that governors who want to adopt policies to optimize the use of their regional budgets should put the poor people`s interest at the top of their priorities.

In his opening address, Yudhoyono explained that the international economic situation such as the rise in world oil prices and recession in the United States were having a negative impact on the Indonesian economy.