ADB stronger on poverty alleviation, infrastructure

Vincent Lingga, The Jakarta Post, Baku | Business | Wed, May 06 2015, 8:02 AM 

The 67-member Asian Development Bank (ADB) ended its annual meeting on Tuesday with a 50 percent boost to its lending and grant resources to as much as US$20 billion a year and stronger institutional and financial capacity to help developing members prepare bankable infrastructure projects.

“This will scale-up our operations to eliminate poverty and promote sustainable development in the region,” ADB president Takehiko Nakao noted at the closing news conference in Baku, Azerbaijan. 

Nakao cited poverty, besides lack of infrastructure, as one of the region’s most pressing development challenges, pointing out that 544 million Asian people still lived on less than $1.25 a day. 

“However, according to a new measure developed by ADB last year, about 1.4 billion Asian people are categorized as poor — about 40 percent of the region’s total population. This is unacceptable,” Nakao added.

In infrastructure, ADB will focus on using the public-private partnership (PPP) plan more effectively, ensuring the operational sustainability of infrastructure projects and applying the highest standards for safeguard policies to protect people and the environment.

Nakao said ADB had undertaken rigorous vulnerability assessments for projects, as relatively small upfront investments based on such assessments could save lives and avoid large-scale infrastructure rehabilitation costs later.

He reiterated that ADB would cooperate and co-finance with the China-led Asian Infrastructure Investment Bank (AIIB) but based on “our shared understanding of the importance of international safeguard standards”.

In a related development on the sidelines of the ADB meeting here, the governments of Japan, Canada and Australia committed to providing a total of $64 million for an ADB facility to help developing member countries such as Indonesia prepare, structure and place PPP infrastructure projects in the market.

“Although there is keen interest to attract private investment into infrastructure, many countries still struggle with key success factors, mainly adequate implementation resources to prepare, structure and place transactions in accordance with international best practices,” noted Ryuichi Kaga, head of ADB’s PPP office, which was established last September.

Kaga cited Indonesia as a developing member that badly needed capacity building for infrastructure project preparations under the PPP plan.

The financial support will further be backed by the stronger institutional capacity ADB will gain from its PPP co-advisory agreement with eight global commercial banks to provide independent advice to governments in developing Asia on how best to structure PPP projects to make them attractive to private investors.

The eight banks are Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Credit Agricole CIB, HSBC, Mizuho Bank, Macquarie Capital, Societe Generale and Sumitomo Mitsui Banking Corporation.

ADB has estimated that developing Asia needs to spend $8 trillion between 2010 and 2020 on national infrastructure. Many governments hope to boost finance for energy, roads, railways, ports, airports, water and other key infrastructure through PPP projects.

The Indonesian government itself has estimated it needs at least $80 billion within the next year to speed up its infrastructure development. 

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Jakarta banking on AIIB funds

By Vincent Lingga in Jakarta the Jakarta Post(China Daily USA)

Only about two months after the inauguration of President Joko Widodo's government last October, Indonesia decided to join the China-led Asian Infrastructure Investment Bank (AIIB) as a founding shareholder for obvious reasons.

As Southeast Asia's largest economy, yet with acutely poor and inadequate infrastructure, Indonesia badly needs to speed up its infrastructure development to improve connectivity within the vast archipelago and to connect the country with global supply chains.

The president rightly put infrastructure on top of his working programs because high quality infrastructure - from reliable power and water supplies to well built roads, seaports and airports - is central to a country's development.

But the $80 billion financing needed for his ambitious infrastructure development for the next five years is simply not available domestically.

The government will be able to fund only about 20 percent of the needed investment and expects the remaining 80 percent to come from the private sector, but the national private sector, notably banks, is simply unable to put up the shortfall.

The AIIB, launched in Beijing last October with an initial equity capital of $50 billion, is a great alternative source of funds. It will supplement the ASEAN Infrastructure Fund, which was set up in 2012 by members of the Association of Southeast Asian Nations. The Manila-based Asian Development Bank is the administrator of the AIF and provides technical support.

As Indonesia's Finance Minister Bambang Brodjonegoro noted recently, the AIIB will focus on large projects, filling the gap left by other multilateral lending institutions such as the ADB and the World Bank.

Indonesia is confident that the AIIB, led by China, that has the world's biggest foreign exchange reserves, and with the support of almost 60 countries committed to join the bank, will be able to develop into a multilateral infrastructure bank with a high credit rating.

The market also believes that with the participation of so many developed countries, the standards of governance and accountability within the AIIB will be high, thereby further boosting its credit rating.

A high credit rating in turn will create a virtuous circle as the AIIB will then be able to attract additional financing from institutional investors such as pension, insurance and sovereign wealth funds, currently estimated globally at $50 trillion.

A high credit rating is vital for the AIIB because as a non-commercial bank it must depend mainly on the capital market to strengthen its lending resources.

As the bank steadily builds up its reputation, its involvement in a project or a transaction, whether through financing or guarantee support, will give such an undertaking greater credibility with host governments, private investors and lenders.

Good cooperation with the World Bank and ADB, which have long experiences in project financing, could also increase the likelihood that the AIIB will become an efficient supplement to those two development banks.

As the AIIB steadily replenishes its funding resources and develops a broader body of skills and expertise, it will eventually be able to assist public-private partnership centers in Asian countries in formulating enabling laws and regulations.

Hence, on a very positive note, the AIIB has a great chance of becoming an efficient and credible supplement to the World Bank and ADB, which are perceived to be dominated by the United States and Japan, respectively.

Indonesia's participation in the AIIB should also be seen as another step forward in further deepening the economic cooperation between the world's second-largest economic powerhouse and Southeast Asia's largest and most vibrant economy.

(China Daily USA 04/24/2015 page3)

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View point: Bad times produce good policies: Visa-free facility to boost tourism

Vincent Lingga, Jakarta | Opinion | Sun, March 22 2015, 6:36 AM 

Bad times usually produce good policies because the government and politicians, jolted out of their complacency, can easily agree on reform policies to prevent things from worsening. This again is clearly reflected in the latest package of policy instruments launched early this week to shore up the weakening rupiah.

The reform package has been designed to bolster exports, reduce imports and reinvigorate foreign investment, thereby decreasing the current account deficit. The effect of all these measures are expected to strengthen the rupiah, which during the first 10 weeks of this year alone has depreciated by 6 percent against the strengthening US dollar.

Allowing the rupiah to be debased further by negative market sentiment will lead the economy into a crisis with spiraling inflation, eroding people’s purchasing power and increasing absolute poverty.

The package includes the waiving of visa requirements for tourists from 30 countries, including EU members, three Arab countries, as well as Canada, China, Japan, Mexico, New Zealand, Russia, South Korea and the US.

Tourism officials estimate that the visa-free facility, currently available to only 15 countries, including nine ASEAN members, will increase tourist arrivals this year by 1 million, from 9.4 million last year, bringing in an additional US$1.2 billion in foreign exchange revenues (assuming a tourist spends an average $1,200).

This policy drastically departs from the one taken by then president Megawati Soekarnoputri in early 2003, which abolished the visa-free facility for short-term visitors from 37 countries for the sake of what was then called “national interests and national pride”.

The government claimed at that time that a number of visitors, including drug traffickers, had abused the visa-free facility to do illicit business or work illegally in Indonesia.

The visa-free facility is one of the strongest policies to facilitate tourist arrivals. According to the UN World Tourism Organization, the number of international tourists grew by about 5 percent annually over the last five years until 2013 to reach 1.1 billion globally.

International tourism has been one of the world’s top exports, generating almost $500 billion in revenues in 2013, the bulk of which was in the Asia-Pacific region.

International tourism is known to be a resilient industry, never suffering a deep and lasting recession and able to recover quickly because the need to travel, whether for business or leisure, is too deeply ingrained in our societies to be easily effaced.

As a resource-based industry, tourism is also one of the most suitable businesses that Indonesia should develop because of its multiplier effects and the labor-intensive nature of its operations.

Travel-related businesses such as hotels, restaurants, transportation, handicrafts and cultural shows are all labor intensive, the very kind of enterprises needed to absorb the huge pool of job seekers.

As a vast archipelago country rich in culture, natural attractions and heritage sites, Indonesia has great potential to attract tourists from around the world.

Travelers are able to revisit Indonesia each year without having to go to the same tourist destination, as there are dozens of fairly accessible attractions in Java, Sumatra, Kalimantan, Sulawesi, Papua and the Moluccas, besides the world-famous Bali.

Yet, due to a lack of well-designed promotion programs and poor policy coordination, Indonesia remains among the less favorite destinations in ASEAN. This deficiency is quite damaging because the coordination of policies or activities in the sectors related to tourism has become one of the biggest barriers to wooing foreign tourists to Indonesia.

However good its promotion and marketing programs, the Ministry of Tourism and Creative Economy cannot do much to attract tourists, because the quality of Indonesia as a tourist destination is determined by factors outside the domain of this ministry.

A simple example. Smooth, expedient visa processing and an efficient customs inspection service at airports are more effective in attracting tourists than the distribution of tourist brochures. But these services are not under the jurisdiction of the tourism ministry.

In fact, the ministry handles only one aspect of tourist development and marketing and, unfortunately, not the most important one.

The more important pillars of the travel and tourism industry such as transport infrastructure, health and hygiene, security and regulatory requirements are completely beyond its control as they lie under the jurisdiction of other ministries.

The quality or image is determined not by promotional activities, but primarily and largely by how efficient, reliable and good our regulatory and physical infrastructure (customs, visa, health, transportation, hotels and other support services) are.

The 2009 Tourism Law stipulates the strategic importance and need for the strategic coordination of policies and activities in various sectors related to travel and tourism such as customs, immigration, quarantine, security and order, physical infrastructure, health and promotion.

But it does not elaborate how policy coordination will be institutionalized and managed on a day-to-day basis, only saying that the coordination will be led by the president and vice president and technical details on the coordination will be formulated in a presidential decree.

It is therefore most imperative that the visa-free facility should be supported by good policies to improve the regulatory and infrastructure framework in travel-related services and businesses.
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The writer is a senior editor at The Jakarta Post.

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Vincent Lingga
Senior Editor, The Jakarta Post
http://vincentlingga.com/
Mobile:+62811 945485

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The Week in Review: Mahakam gas block in spotlight

By Vincent Lingga, The Jakarta Post March 15, 2015

The government has finally decided not to renew the production sharing contract of Total Indonesie of France and Japan’s Inpex for the Mahakam gas block in East Kalimantan, instead awarding the concession to state-owned oil and gas company Pertamina.

 Although the decision will end years of uncertainty about the status of the giant gas concession, many complex issues still overshadow the 46-year-old contract, which will expire in 2017. Details, including the terms and conditions of the transfer of the concession to Pertamina, have yet to be determined.

The composition of the new shareholders of the concession is even more socially and political sensitive.

Excluding the administrations of East Kalimantan province and Kutai Kartanegara regency from the negotiation loop regarding the participating interests (shares) in the gas concession could set off social and political turbulence and even protest demonstrations to block access to the hydrocarbon complex.

The issue of the participating interests in the Mahakam block for East Kalimantan province and of Kutai Kartanegara regency is crucially sensitive. Regional administrations have often demanded shares in resource-based businesses, such as mining ventures located in their areas, even though they have neither the financial capacity nor the managerial capability for buying assets worth hundreds of millions of dollars.

In May 2011, East Java’s governor at the time, Saifullah Yusuf, threatened to close access to the West Madura offshore oil and natural gas block in a strong protest against the central government, which had turned down the demand of the provincial administration for 40 percent of the shares in the oil and gas field.

In April 2011, the West Sumbawa regency administration sponsored massive demonstrations against the US$3.8 billion copper and gold mine of PT Newmont Nusa Tenggara (NNT) because it was prohibited from acquiring an additional 7 percent equity stake in the mine.

Such misguided, unfriendly attitudes had by and large been experienced by PetroChina in Jambi when East Tanjung Jabung regency sealed off 26 of its 140 producing oil wells in May 2013, by ExxonMobile, which returned its Gunting oil block in Jombang, East Java, because of local opposition to its drilling operations, by Mubadala Petroleum of United Arab Emirates in Ruby field in the Makassar Straits and by Inpex in the Masela block in Maluku. Even though oil mining firms operate under production-sharing contracts (PSC) with the central government (through the Upstream Oil and Gas Regulatory Special Task Force, SKKMigas), mining contractors must still obtain dozens of permits from the local administration for mining activities.

Latest data at SKKMigas show an oil mining contractor requires 32 permits for exploratory drilling, 25 for production development and seven permits for production operations from the central government and regional administrations.

In today’s democracy local communities often use freedom of expression to make further demands of resource-based companies in their areas — often with the prodding and support of civil society organizations or NGOs.

Another important factor for ensuring sustainable production of the concession that accounts for almost one-third of Indonesia’s total gas output is which foreign oil companies Pertamina will select as its partners in operating the gas block.

Certainly Pertamina, despite its decades of experience in the petroleum industry, still needs technical and managerial assistance from major foreign oil firms as its partners to operate the giant gas field.

Total Indonesie earlier said 100 wells per year should be drilled in the block and around 10,000 well interventions be performed annually to maintain a daily production of 1.7 billion standard cubic feet of gas and condensate of about 62,000 barrels of oil equivalent. The concession also requires more than 500 logistical support vessels to operate.

Given the complexity of the operations and logistics, many have raised concerns about the big risk of output disruption if Pertamina immediately takes over the block without the assistance of foreign partners. Also, given the estimated $2.5 billion of annual working capital and investment needed for the operations and production development at the Mahakam gas field and the limited resources of national banks, Pertamina will have to borrow from foreign banks.

Pertamina alone will likely be unable to obtain such a huge sum of foreign credit even though the gas reserves in the Mahakam block are more than enough to serve as security for the loans. The state oil company needs foreign partners with high credit ratings to convince foreign creditors, and Total Indonesie and Inpex, the current concessionaires and the operator of the block, seem to be the best suited for that role to secure smooth transition.

Total Indonesie had since 2007 proposed a five-year transition in transferring the block’s operations after the termination of its contract to ensure a smooth transfer of the operations to Pertamina. But political pressures and rising resource nationalism had made the previous government of Susilo Bambang Yudhoyono afraid to make a firm decision on the status of the contract.

Ideally considering the complexity of operations and the big investment needed for production development, the status of the contract should have been decided at least five to 10 years before its expiry.

How well the government handles the termination of the Total-Inpex contract will impact the investment climate in the hydrocarbon industry as there are 20 similar contracts, accounting for 30 percent of national oil output, that will expire within the next five years.

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Vincent Lingga
Senior Editor, The Jakarta Post
http://vincentlingga.com/
Mobile:+62811 945485

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Vincent Lingga
Senior Editor, The Jakarta Post
http://vincentlingga.com/
Mobile:+62811 945485

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Commentary: Corruption damages tax culture, discouraging compliance

Vincent Lingga, The Jakarta Post, Jakarta | Commentary | Fri, March 06 2015, 

We support the demonstrations on Tuesday by an estimated 400 officials of the Corruption Eradication Commission (KPK) who poured out their frustrations over the government's pathetic attitude toward the weakening of the anticorruption drive and the bashing of the KPK over the past two months.

The demonstrations were triggered by the decision of the KPK leaders to stop processing the corruption case against Comr. Gen Budi Gunawan and hand over it to the Attorney General's Office (AGO), whose institutional integrity is perceived as much lower than that of the KPK. They are afraid the AGO would eventually drop the case within the detested framework of political compromises.

As graft busters who grapple daily with various cases of corruption, KPK officials know for sure that Budi's corruption case is air-tight, rooted in alleged money laundering practices whereby a suspect or defendant is treated with the presumption of guilt. That is because within the framework of the 2002 Money-Laundering Law, the indictment is virtually the verdict as the burden of proof lies on the shoulder of the suspect or defendant. 

Unfortunately, the campaign to debilitate the KPK and the weakening of the national movement against graft is occurring when the estimated 25 million corporate and individual taxpayers are preparing their 2014 income tax returns, which they have to file before the March 31 deadline.

The bashing of the KPK will hurt the government program to expand the tax base and achieve its tax revenue target of 16 percent of gross domestic product (GDP) in 2019, much higher than the current 12 percent, which is the lowest in the ASEAN region.

All over the world, stronger law enforcement alone is never enough to encourage tax compliance. Tax efforts should be undertaken as a campaign to nurture a high level of tax culture, which is key to voluntary tax compliance because there would never be enough auditors in the government payroll to examine taxpayers' returns.

About 20 million people have now been registered as individual income tax payers and this number will increase steadily in line with the higher capacity of the tax system to net new taxpayers.

True, strong law enforcement would help develop voluntary tax compliance by making the cost of tax evasion and non-filing of tax returns very costly to taxpayers. People will fulfill their tax obligations if they know that their chance of being caught by tax officials and auditors is high.

But voluntary tax compliance, which is prompted more by the willingness of people to pay income taxes, is influenced more by the public's perception of the integrity of tax officials, the efficiency of the tax administration and the government's credibility in general, rather than by repressive measures. 

A high degree of voluntary tax compliance (tax culture) requires a climate of mutual trust between taxpayers and tax officials and the public's perception of clean government. Here lies the crucial importance of the anticorruption drive.

But this prerequisite is now being damaged by the bashing of the KPK, so far the most trusted and most powerful and capable corruption buster in the country. 

If the public perceives the government is highly tolerant of corruption, taxpayers may simply ask themselves why they have to pay taxes if most of the money will eventually end up in the pockets of corrupt officials. Taxpayers will go all out to find any loopholes within the taxation system to avoid and to evade taxes.

President Joko "Jokowi" Widodo, who used integrity and clean government as the main pillars of his election platform last year, must also realize the close relationship between taxation and democracy. The more aware the people are of their civic duty as taxpayers, the more assertive they will be with regard to their rights.

As US political thinker Harry L. Hopkins, the architect of the New Deal, which was crafted to cope with the Great Depression in the 1930s, once said, "we shall tax and tax, spend and spend and elect and elect."

The rationale is that there is no taxation without representation as citizens demand something — either in the form of public services or a stronger say in political decisions on resource allocation — in return for increased taxation. 

As government dependence on tax receipts from the people has increased, so has the interaction between the state and society, forcing the government to be more responsible to its citizens. 

This development will exert a political impact as more and more people will see themselves not merely as citizens or "governed people" but as taxpayers who pay the government and its personnel. Further down the road, this also requires civil servants to change their mindset from the ones who regard themselves as the dispensers of free public services to those responsible for serving the ones who pay for the government's operations.

Concerted campaigns by the taxation directorate general and generous incentives offered to registered taxpayers have succeeded in attracting almost 20 million voluntary taxpayer registrations. 

Government regulations have created so many disadvantages for individuals without taxpayer registration numbers that even employees, whose income tax is already withheld by their employers, voluntarily registered themselves to get taxpayer identification cards.

However, the dramatic increase in the number of registered taxpayers will not automatically increase income tax filing, unless the government steadily improves the public's perception of its integrity, as reflected in clean government and high standards of fiscal accountability. 

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Commentary : Tax amnesty could lead to money laundering

Vincent Lingga, The Jakarta Post, Jakarta | Headlines | Mon, February 09 2015, 7:48 AM

The idea of a tax amnesty has been in and out of public-policy debate since 2003 or five years after the 1998 political and economic crisis when jittery Indonesian tycoons reportedly rushed overseas billions of dollars in financial assets.

The main objective is to encourage businesspeople who have parked their funds mostly in Singapore to repatriate and plough them back into Indonesia's economy, thereby generating jobs and eventually expanding the tax base.

At first glance, such a facility seemed necessary, but the debates died out on strong public opposition, especially after Boediono took over the leadership of the government's economic team in December 2005. Boediono had strongly opposed the tax amnesty lobbies even when he was finance minister under the Megawati Soekarnoputri administration until late 2004.

Considering the current economic and political conditions, now seems the right time to revive the tax-amnesty concept. The idea is attractive to the government of President Joko "Jokowi"'Widodo, which is strapped for big investment to fund its ambitious programs aimed at spurring growth to over 7 percent from about 5 percent now. The government is also fed up with massive tax evasion, as indicated by the persistently lowest tax ratio in the ASEAN region.

The House of Representatives, where the majority of factions are controlled by political parties chaired by businessmen, certainly loves such a tax pardon. In fact, it was the Indonesian Chamber of Commerce and Industry (Kadin) that aggressively lobbied for that facility between 2003 and 2005.

Their main point of argument is that since the corruption-infested tax directorate general is unable to track tax evaders and uncover their hidden assets, there is no harm in offering them one-shot tax amnesty if the facility can set off massive repatriation of capital.

These proponents also reckon that conglomerates will not hesitate to reinvest in Indonesia to expand the economy and create jobs once their previously hidden assets are declared legitimate under the amnesty program.

The facility also could net a large number of new taxpayers, including small and medium enterprises (SMEs), thereby broadening the tax base for future tax collection. Tax registration will also legitimize SMEs and consequently improve their access to finance.

Then, since the tax court system in the country is perceived to be both corrupt and overburdened, a tax amnesty may allow the tax administration economize on prosecution costs. No wonder, given these potential benefits, many countries, including developed ones, have granted one-shot tax amnesties.

But the opponents of a tax amnesty also have equally strong points against such a scheme, on account of the absence of an efficient, strong tax administration system. The core argument against the tax pardon is that such a facility would mostly benefit the big tycoons, including the former bank owners, who, according to an investigative audit by the Supreme Audit Agency (BPK) in 1999, misused the bulk of the tens of billions of US dollars Bank Indonesia extended in emergency liquidity credits to help bail out the banking industry in 1998
and 1999.

It would gravely insult the public's sense of justice if those tycoons, which had been released from criminal charges under hastily drawn debt-settlement agreements, were granted tax amnesty under a weak and corrupt tax-administration system as it is now.

Such a scheme would virtually allow them to launder their hidden assets.

The opponents argue that despite our desperate need for new private investment, granting an indiscriminate tax amnesty would only damage the credibility of our tax-collection system in the future.

Certainly, big tax evaders who have no good faith in obeying our tax laws would see such tax amnesty only as a once in a lifetime opportunity to get one-shot amnesty for their past tax evasions and debts, and then it will be business as usual under the inefficient and corrupt tax system.

Our tax-administration system is not yet efficient and firm enough to make tax amnesty effective to achieve its main objectives because the facility should be provided through a good mechanism and the tax amnesty period should immediately be followed by strong and consistent law enforcement against tax evaders and manipulators.

Finance Minister Bambang Brodjonegoro said the bold tax measure would be stipulated in the proposed amendments to the General Taxation System Law, which have been put on the priority legislative agenda of the House this year.

The following are several types of tax amnesties that have been implemented in developing and developed countries in the past, including in the United States: one-shot filing amnesty (the waiving of penalties for non-filers who begin filing), record-keeping amnesty (the waiving of penalties for past failure to not maintain statutorily required records provided records now start to be kept), revision amnesty (an opportunity to revise past tax returns without penalty), investigation amnesty (a promise to not investigate the source of incomes disclosed) and prosecution amnesty( immunity from prosecution for detected offenders).

Without clear and credible commitment to administrative reform, an amnesty may signal the weak enforcement capacity of the tax administration, with consequently adverse revenue consequences during and after the amnesty.

A subtle and often neglected signaling effect of an amnesty will impact the workload of the tax administration, given limited administrative resources. The tax directorate general has complained that the number of its tax auditors now is barely one-third of its real need to develop a strong tax-administration system.

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View Point: Plunging price of oil resolves several complex problems for Jokowi

The Jakarta Post, Jakarta | January 25 2015 | 1:30 PM

The more than 55 percent plunge in oil prices since July has resolved several potentially explosive political and economic problems for the new government of President Joko "Jokowi" Widodo.

But he should not get complacent, as the condition is largely a matter of good fortune.

As the saying goes, lightning never strikes twice in the same place. This could be the only oil-price down-cycle during Jokowi's five-year term until October 2019.

The government, therefore, should seize the opportunity for energy reform to reduce the nation's dependence on fossil fuels and gear up the economy for weathering perpetually volatile oil prices.

As a net oil importer since 2004, Indonesia enjoys a state-budget windfall savings every time international oil prices drop steeply that creates fiscal room for a massive cut or the abolishment of fuel subsidies. Now that oil prices have fallen to below US$50 a barrel, the government expects to save almost

Rp 200 trillion ($16 billion) throughout this year.

The government should not succumb to the temptation to squander the huge savings on populist programs. It should instead direct them toward more productive programs in poverty alleviation and infrastructure to improve our economic competitiveness.

The government made the right policy with its quick decision to put domestic fuel prices on a managed floating market-price mechanism early this month.

This move immediately set off a virtuous circle: it will spare the government from wasteful political bickering with the House of Representatives every time international oil prices rise sharply and has freed the government from being held hostage to the wildly volatile international oil market.

In the oil market nothing is simple. Predicting oil prices is always a mug's game because the prices are influenced by both economic and non-economic factors.

In mid-2008, for example, international prices skyrocketed to a peak of almost $150 a barrel, but collapsed to as low as $47 later the same year. A similar down-cycle has taken place since last July.

Consequently, by its very nature oil trading is beset by uncertainty and it is not just due to the precarious geopolitics in countries where most of the world's oil reserves are located.

But bringing domestic fuel prices closer to — or on par with — their economic costs will also remove the fuel-subsidy time bomb.

But more important is that abolishing subsidies will encourage the development of renewable energy, energy efficiency and conservation.

Energy reform will cut Indonesia's trade deficit and, consequently, the current account deficit, which has been exerting strong downward pressure on the rupiah exchange rate.

But energy reform should not end at putting fossil fuels on a managed floating market-price mechanism.

The government should instead bolster energy diversification programs by providing fiscal incentives for investment in developing more biofuels and gas and their infrastructure, mini hydro-power, geothermal and other renewable energies.

In short, the government should launch a more concerted effort to implement the 2007 Energy Law that stipulates strategic measures aimed not only at reducing dependence on fossil fuels but at compelling the government to provide incentives for energy efficiency and conservation.

Companies should be given fiscal incentives to invest in energy-conservation programs, such as in-house management of energy efficiency; performing maintenance and housekeeping measures; replacing select equipment; or modifying entire manufacturing processes.

No one can predict how long the oil price down-cycle will last or where prices will bottom out. But the government should design a formula for determining the ceiling and floor prices for oil to cope with future price volatility.

Ceiling prices should be set at levels that will encourage fuel efficiency, but which will not impose large subsidies on the state budget. Floor prices, meanwhile, should be designed to make the development of renewable energies like biofuels, geothermal and biomass still commercially viable.

The oil-price collapse has changed almost all the basic assumptions used for predicting key economic indicators for the 2015 state budget for the better.

We are glad to learn that the proposed amendments in the 2015 state budget the government proposed to the House will allocate the bulk of savings from the slashed fuel subsidies to developing infrastructure.

The rationale is that poor and inadequate infrastructure has become the biggest barrier to investment and among the main drivers of high logistics costs limiting the competitiveness of exports.

But given the dismal record in infrastructure development over the past decade, the new government should be able to make headway on several vital projects, including roads, airports, seaports and power generation that have been stalled for several years due to arduous land-acquisition procedures.

Making a breakthrough in such high-profile projects as the multibillion dollar Batang power plant in Central Java; the access road to Indonesia's biggest seaport, Tanjung Priok; and the access railway to Soekarno-Hatta International Airport in Tangerang will boost market confidence in the government's capacity to develop basic infrastructure.

Fortunately, this year marked the start of the full enforcement of the 2012 Land Acquisition Law, which provides stronger legal certainty for land appropriation for infrastructure projects.

The law stipulates a clear-cut, shorter time frame for land acquisition, expedites court proceedings for appeal and mandates the appointment of an independent committee for setting compensation levels with property owners.

The acute lack of strong legal frameworks to regulate land acquisition and rampant land speculation has long been the main obstacle to infrastructure development, as the costs of land often make projects financially unfeasible.

Vincent Lingga

The writer is senior editor at The Jakarta Post.

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The week in review: Crackdown after plane crash

The Jakarta Post | Editorial | Sun, January 11 2015, 9:41 AM

The Dec. 28 crash of AirAsia flight QZ8501 from Surabaya to Singapore has set off an overall review of Indonesia’s civil aviation industry, prompting a series of forensic audits on airline operations and the aviation regulatory system, placing  the country’s airline safety in the international spotlight.

Several heads have rolled within the civil aviation directorate general, the state-owned airport management and other related operating bodies. Even the Corruption Eradication Commission (KPK) has hinted at the possibility of joining the fray as allegations of bribes have surfaced regarding the flight route and slot designation process.   

Findings of investigations that suggest that the flight had not been properly licensed further strengthened the perception that Indonesia is one of the world’s most hazardous places in terms of civil aviation safety.

The government immediately suspended AirAsia’s permit to operate the Surabaya-Singapore route and promised to take equally harsh measures against other airline companies failing to comply properly with the whole process of flight and route permits.

Since 2007, the US has effectively barred Indonesian carriers from increasing flights to American destinations. The EU currently has Indonesia on a “blacklist” with substandard safety records; only the national flag carrier Garuda Indonesia is permitted to fly into the continent

The EU and US have implicitly acknowledged that their great concern is no longer limited to the safety of individual airlines but is also focused on the competence of the civil aviation regulatory body, especially its air safety certification directorate, which is in charge of issuing pilot licenses, aircraft operation certificates for new airlines and safety approval, a function that can make or break an airline.

Deeply rooted in the issues over the country’s air safety standards is the integrity and technical competence of the air safety certification directorate.            

In sharp contrast to these air safety concerns, the full-fledged liberalization of civil aviation has spurred high growth in the industry. There are about 400 planes carrying more than 50 million travelers annually. Air traffic has been growing at annual rate of over 15 percent.

As of last May, the International Civil Aviation Organization’s audits assessed Indonesia’s air-safety oversight system as inadequate, even below Pakistan and India.  Likewise, the EU noted late last year that the air safety oversight system in Indonesia still needed substantial improvement.

Transportation Minister Ignasius Jonan promised an overall reform of the whole civil aviation regulatory and operating bodies, covering such aspects as route licensing, slot allotment, air traffic control services allotment, airport management and navigation and aircraft inspection.            

The Transportation Ministry went further to even intervene in the flight fare structure by fixing the minimum ticket prices of scheduled airliners to as high as 40 percent of the mandated ceiling (maximum) fares. This boils down to an increase of 10 percentage points in the lowest fares allowed for all scheduled services, including those of low-cost or budget airliners.

The ministry argued that the higher fare structure would give airline companies adequate financial space for maintaining reliable flight safety standards.

Even though analysts argue that such a market intervention appeared to be an overkill as  there was no direct link between ticket prices and safety, civil aviation officials still think that such tough measures are required to maintain public confidence in the industry.

Hopefully, this “air safety turbulence” will not affect the implementation of the ASEAN Open Skies policy, set to be fully effective by the end of the year, because this policy will boost connectivity and people’s movements in the region and in turn spur regional economic growth.

Under the new policy, Southeast Asia’s skies will be transformed into a single aviation market as part of the ASEAN Economic Community commitments.         

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Indonesia, a country with the world’s largest Muslim population, has joined other nations in condemning the brutal shootings at the office of the satirical magazine Charlie Hebdo in Paris that killed 12 people, including three cartoonists, the chief editor and two police officers.

No form of violence can be accepted and Indonesia supports France’s efforts to bring the perpetrators to justice, Foreign Minister Retno LP Marsudi said.

Indonesian Ulema Council (MUI) chairman for international relations, Muhyiddin Junaidi, said the international community should not generalize the attack as a part of Islam but he conceded that the shootings could strengthen anti-Muslim feelings.

In Banda Aceh, Rosnida Sari, a Muslim lecturer at Ar-Raniry State Islamic University, has been intimidated and threatened by Acehnese clerics and fellow lecturers and bullied in social media after she invited a number of her students to visit and hold dialogues in a church in Banda Aceh last week.

Rosnida said she had been accused of “Christianizing” her students and had been temporarily suspended by the university.

She defended her initiative, arguing that the church visit, conducted voluntarily, was part of her creative teaching method to make Muslim students understand other faiths and build mutual understanding and religious tolerance.

An alliance of NGOs have called on the government to protect Rosnida and uphold academic freedom.

— Vincent Lingga -

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With weak oil market, time is ripe for managed floating fuel prices

Vincent Lingga, The Jakarta Post, Jakarta | Headline | Thur, December 17 2014.

Now that steadily declining international oil prices have hit a five-year low at US$60/ barrel, compared to the $105 average assumed for the 2015 fiscal year, the government has a great opportunity to slash, or even abolish, the wasteful spending on fuel subsidies that cost almost $20 billion annually over the last three years.

When subsidized fuel prices are on par with international levels, which analysts estimate can occur when oil prices fall to as low as $60/ barrel, the government could put fuel prices on a managed float mechanism where prices will adjust according to market rates, as Malaysia did earlier this month. This mechanism was adopted in early 2002 under Megawati Soekarnoputri’s administration.

It was called a “managed float”, not a “free-float” system because the mechanism was still tied to fixed-ceiling prices, whereby the government could intervene in retail-fuel prices if oil prices increased dramatically.

But President Joko “Jokowi” Widodo seems to favor a fixed-subsidy mechanism, a move campaigned for by former finance minister Chatib Basri over the past two years. But then president Susilo Bambang Yudhoyono and the House of Representatives didn’t support that idea.

The fixed-subsidy scheme will fix the rupiah price of fuel subsidy per liter, irrespective of oil-market price developments or rupiah-rate movements.

Under this regime, the price of fuel subsidies per liter will neither fluctuate alongside oil-market prices nor rupiah-rate quotations, as it will be the price of the subsidized fuels that must rise or fall monthly following the oil-market quotations.

But whichever of the two alternative policies the government chooses, the decision should be based on the real economic costs of domestically refined and imported fuels, calculated in a transparent and credible manner. As we now depend on imports for almost 60 percent of our daily fuel needs of 1.66 million barrels and because imports consist of both crude oil and refined oil products, the production costs can vary, depending on the sources.

The problem, though, is that independent analysts and the general public tend to question the reliability of the production-cost figures used as price references by the state oil company, Pertamina, to estimate the fuel subsidies.

Under the current fuel-subsidy regime, the prices of subsidized fuels are fixed at a certain level. However, the final amount of subsidies ultimately depends on the average oil-market price and the rupiah exchange rate. Since oil prices and the rupiah exchange rate tend to fluctuate wildly, the final amount of fuel subsidies also tends to increase dramatically.

The benefits of implementing a fuel-price floating system or a fixed-subsidy scheme are quite obvious: It will relieve the government from the burden of having to haggling with the House every time international oil prices rise sharply, and it will free the government from being held hostage to the wildly volatile international oil market.

Predicting oil prices is always a mug’s game, as prices are influenced by both economic and non-economic factors. In mid-2008, for example, international prices skyrocketed to a peak of almost $150/ barrel, but plunged to as low as $47 later in the same year.

Bringing fuel prices closer to their true costs will also remove the fuel-subsidy time bomb from the government’s fiscal management.

But even more importantly, abolishing subsidies will encourage the development of renewable energy, promote energy efficiency and energy conservation. It will also help stop fuel-export smuggling, which has been rampant due to the porous coastal borders of the world’s largest archipelago.

Energy reform will also cut Indonesia’s trade and, consequently, the current-account deficit, which has been exerting strong downward pressures on the rupiah exchange rate.

Our experience during the first year of the flotation policy in 2002 showed that by allowing for automatic monthly price adjustments, the government was able to provide policy predictability for the market and protect the economy from sharp price adjustments and their shocking inflationary pressures.

The price signals conveyed by this policy will serve as a guideline for companies to conduct in-house management of energy efficiency through maintenance. It will also encourage companies to take housekeeping measures and replace equipment, which could require additional investments or the modification of the entire manufacturing process — moves that may require large-scale investments.

Cheaper oil should also create the momentum needed for the government to gradually phase out the low-quality gasoline with RON (registered octane number) 88.

Most countries have shifted to fuel with RON levels above 90, which are cleaner burning, more efficient and make engines perform better. Malaysia, for example, has long used only RON 95 and RON 97 fuels. Before Malaysia fully floated its fuel prices earlier this month, RON 95 gasoline was sold at RM2.30 (Rp 9,200) per liter, carrying a subsidy of Rp 520/liter. RON 97 gasoline (non-subsidized) was sold at the equivalent of Rp 10,200.

It would technically be impossible to stop selling RON 88 gasoline (strangely called “premium” gasoline) immediately due to the limited capacity of domestic refineries. But technical preparations for a gradual phase-out of this low-quality fuel should be made as part of the overall fuel reform program.

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View Point: Shaking up and cleansing the oil regulatory body

Vincent Lingga, The Jakarta Post, Jakarta | Opinion | Sun, November 30 2014, 1:15 PM

The fastest pace and widest breadth of reform taking place under President Joko “Jokowi” Widodo’s 50-day-old government has taken place at the Ministry of Energy and Mineral Resources (ESDM) for the right reason.

The ministry administers, manages and oversees the development of natural resources (oil, natural gas and all other minerals) worth hundreds of billions of dollars in exports, import procurements, taxes and royalties every year.

In a country perceived as one of the most corrupt in the region, senior officials at the ministry and all other agencies under its jurisdiction, notably those with authority for supervision, licensing and procurement, are understandably vulnerable to corruption.

No wonder, Jero Wacik who was replaced last month by Sudirman Said, is now a corruption suspect and Rudi Rudiandini, the former chief of the Upstream Oil and Gas Regulatory Special Task Force (SKKMigas) is now in jail for graft.

 Jokowi’s first move in setting off reform at the ministry was appointing Sudirman, an anti-corruption activist and good-governance champion, as the new ESDM minister.

 Sudirman, an auditor by training, who also graduated from business management from George Washington University, has built years of experience in state and private oil companies and has demonstrated his managerial and leadership qualities in many institutions and organizations.

He was among the founders of the Indonesian Transparency Society antigraft movement and the Institute for Corporate Governance. Sudirman served for almost two years as a vice president at the state oil company Pertamina in charge of reforming its supply chains – Pertamina was at the time considered one of the most inefficient and most susceptible to corruption. But he quit in 2009, reportedly owing to intense lobbying by a strongly influential oil mafia.

 Sudirman rightly selected the oil and gas sector of the mining industry as the first target of his bureaucratic reforms, again for a strategic reason.

The hydrocarbon industry plays a central role in the economy as it is still the main source of primary energy (about 70 percent), contributing almost 6.5 percent of the gross domestic product, US$31 billion in revenues to the national budget (23 percent) and $22 billion in foreign investments a year, of which 60 percent is spent on local goods and services.

 Indonesia is already mired in an oil crisis with the supply-demand gap exceeding one million barrels a day. Crude oil and fuel imports, which last year totaled $42.1 billion, have been responsible mainly for the ballooning current-account deficit and downward pressures on the rupiah.

Worse, according to the Indonesian Petroleum Association (IPA), oil reserve replacement was at only 47 percent last year. The association estimates that annual investments in exploration alone should be tripled to over $11 billion within the next five to 10 years to prevent a widening oil deficit and another $30 billion a year investment in production development is needed, or otherwise the oil deficit could reach 2.5 million barrels per day.

But which investors would be willing to risk so huge a sum of capital if an oil company requires almost 70 types of permits from the national and regional governments, involving 284 processes and 17 agencies, and is subject to land and building tax even during the exploration stage?

According to IPA, the average time needed by oil companies to monetize proven reserves has increased from five years in the 1970s to more than 10 years in the late 1990s and 15 years in the 2000s mainly because of the arduous licensing system, bureaucratic inertia and corruption.

Thus Sudirman’s quick decision taken just a few days after his inauguration, to replace the director general of oil and gas and the chief of SKKMigas, is quite strategic.

He also immediately started preparations for the selection of officials for the levels of directors general and directors at his ministry through an open, competitive recruitment process.

The appointment of Amien Sunaryadi, a former deputy of the Corruption Eradication Commission (KPK), to head SKKMigas signals a massive shake up and reform within the regulatory body.

It plays a key role in the petroleum sector because this regulatory body oversees the management and business plans of all national and foreign companies operating in the hydrocarbon sector.

Sunaryadi’s previous experience as a senior operations officer for the Anti-Corruption Action Plan (ACAP), a cooperation program of the government and the World Bank’s Department of Institutional Integrity (DII), from 2009 to 2012, well equipped him with high managerial ability and technical competence to develop a strong institutional-integrity system at SKKMigas.

The DII has been well known for its success in establishing a strong integrity system within the multilateral development bank, which is constantly exposed to the risk of corruption and other forms of malfeasance as it operates in many developing countries.

The program was designed to build effective internal control mechanisms within projects or an institution able to explicitly identify governance-related risks to achieving project objectives, thus improving project-level governance.

The overall aim of ACAP is to improve management, monitoring and oversight within the Indonesian public sector.

Sunaryadi, an auditor by training, is believed to be able to disseminate within SKKMigas the expertise to audit business processes and eventually develop innovative ways to communicate with civil society organizations, soliciting public feedback on the quality of public services provided.

The reform of SKKMigas, combined with the recent slash of fuel subsidies to bring fuel prices closer to and eventually on par with the actual costs, would contribute greatly to mitigating the risk of corruption within the petroleum industry.

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Finding the best path toward sustainable palm oil

 Vincent Lingga, The Jakarta Post, Kuala Lumpur | Opinion | Tue, November 25 2014, 8:43 AM

The world’s largest palm-oil companies gathered here last week, sharing the best practices of what is assessed as the model of sustainable oil-palm plantation development.

Several of them magnanimously admitted mistakes amid the mounting campaigns by consumer and environmental organizations, but then they have often been accused by international green NGOs of being the main drivers of deforestation.

The occasion was the 12th conference of the Roundtable on Sustainable Palm Oil (RSPO), a global body of plantation companies, refiners, consumers and green groups, which promotes the development of socially, environmentally and economically sustainable palm oil.

Indeed palm-oil companies are most likely the first to be blamed, with pulp producers next on the list of culprits, every time haze pollution caused by forest fires in Sumatra or Kalimantan hits Singapore or Malaysia.

But it also happens that Indonesia and Malaysia, which together account for more than 85 percent of global palm-oil production, are home to the biggest palm-oil and pulp and paper companies.

Indonesia, now the world’s largest palm-oil producer with more than 30 million tons of annual output, has often been notoriously cited as the third-biggest polluter globally as the country has allegedly expanded its oil-palm estates, currently estimated at almost 10 million hectares, by destroying its rain forests.

But international environmental NGOs and consumer organizations cannot simply tell Indonesia to stop expanding its oil-palm estates because this crop turns out to be the most productive among all vegetable oils, with yields more than nine times as high as soybean, rapeseed oil, peanut oil and sunflower oil, which are cultivated mostly in developed countries.

Indonesia’s palm-oil industry, according to the industry’s association, now directly employs more than 4.5 million workers and earns about US$20 billion in export earnings a year. Yet more significant to the economy is that 40 percent of the oil-palm plantations are owned by smallholders with acreages ranging from two to 20 ha.

According to the Rome-based Food and Agriculture Organization, palm oil accounts for almost 40 percent of global vegetable-oil production, estimated at 145 million tons last year, with soybean, rapeseed, peanut, corn and sunflower accounting for the remaining 60 percent.

Douglass Cress, a senior executive of the United Nations Environment Programme (UNEP), who attended the big gathering, acknowledged the paramount role of the RSPO as an independent promoter of sustainable palm oil as it included all the representatives of the whole spectrum of the industry.

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The causes of deforestation or forest fires are rooted in the most basic problem of poverty.

“I am impressed by the open and frank discussions in this forum where companies talk about their successes and failures within the palm-oil industry. It is really a brave thing to do,” Cress noted.

That is why UNEP had signed a cooperation agreement with the RSPO to jointly implement programs to enhance the sustainable development of palm oil, he said, hoping that RSPO would become a model for similar programs for other farm commodities.

But the representatives of environmental NGOs and smallholders still have a lot to complain about the RSPO’s performance, notably with regard to the still weak market reception for sustainably produced palm oil.

RSPO secretary-general Darrel Webber acknowledged that even though the capacity of RSPO-certified sustainable palm oil at present already accounts for 18 percent of global output, only about 50 percent of the sustainably produced palm oil has been taken up by the market.

Several European countries, including the United Kingdom, France, Germany, Sweden, the Netherlands, Norway, Denmark and Belgium, and major corporations such as Nestle, Unilever, Carrefour and Johnson & Johnson, have committed to 100-percent RSPO-certified sustainable palm oil in 2015.

But Europe takes only around 4 million tons from Indonesia, which exports over 20 million tons annually, and supplies more than 50 percent of the RSPO-certified palm oil.

The RSPO did boast more than 1,750 members representing the whole spectrum of the palm-oil supply-chain. But as long as the growth of market uptake remains slow and the premium price enjoyed by certified palm oil remains rather insignificant, market faith in the RSPO certification program could decline.

It is perhaps because of this low market uptake and the perpetual international criticism of the palm-oil industries in Indonesia and Malaysia that both countries have launched their own certification schemes: Indonesia Sustainable Palm Oil (ISPO) and Malaysia Sustainable Palm Oil (MSPO).

But the launch of the ISPO and MSPO should actually be welcomed as the result of the increasing awareness on the part of the governments of the vital importance of sustainable management of palm oil, not as competitors to the RSPO.

However, the operation of three different certifications of sustainability for the same commodity and toward the same goal seems a waste of resources. After all, the principles of sustainable management promoted and audited under the three schemes for their respective certification processes are by and large similar, covering such elements as transparency, legal and regulatory compliance, best production practices, environmental responsibility and commitment to local community development.

Now that UNEP has engaged with the RSPO, the UN body is expected to help develop synergy between the three sustainability-certification schemes, or else they could cause confusion and unnecessarily add to the production costs. Consumer or market pressures alone cannot make the campaign for of sustainability sustainable in the long term.

It would be counter-productive if foreign green NGOs and consumer organizations, which are among the most assertive members of the RSPO, try to intervene in implementing changes in Indonesia. There are rules which are already in place and numerous ministries and local government agencies that have to be brought into the process.

The causes of deforestation or forest fires are complex as they are rooted in the most basic problems of poverty, unemployment and weak law enforcement. The blunt fact is that poor farmers trees are usually worth much more dead than alive.

Put another way, land is worth more as cropland than as forests as the benefits from trees such as capturing carbon emissions and embodying biodiversity are hard to price. They are also intangible concepts for farmers who are preoccupied with the question of what to eat tomorrow.

It will be difficult to change the behavior of small farmers illegally cutting trees and burning degraded forest lands and peats if they remain gripped by dire poverty. 

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The writer is senior editor at The Jakarta Post.

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The week in review: Jokowi and childish lawmakers

What a striking difference between the executive and legislative branches of the government. On one side, the House of Representatives has been wasting taxpayers’ money on protracted squabbles less than one month after its installation, with the coalition of opposition parties continuing to pursue the politics of vengeance for the losing presidendial candidate Prabowo Subianto.

Prabowo’s coalition of opposition parties and President Joko “Jokowi” Widodo’s supporting coalition remained deadlocked in a fight for the leadership positions of the working commissions at the House. On the other side, President Jokowi and his Working Cabinet immediately set themselves to work hard at fulfilling the needs of the people.

Vincent Lingga- The Jakarta Post | Editorial | Sun, November 09 2014, 12:49 PM

Early this week, Jokowi launched a newly-designed social assistance program to protect the most vulnerable groups of people from the inflationary impact of a series of painful reforms the government will soon launch to prevent the public sector from going into bankruptcy and to lay a stronger foundation for the economy. The social assistance program has been designed to shift the fuel subsidy from consumptive to productive use and at the same time to promote financial inclusion by using mobile-banking mechanisms to deliver compensation funds for almost 16 million poor households.

The concept is to move away from the commodity-based subsidy to a better targeted people-based subsidy focusing on the needs of poor farmers and fishermen.

Simply lowering the fuel-price subsidy by 40 percent would save billions of dollars that could be allocated for the expanded social protection programs and badly-needed infrastructure development.

Reform is usually difficult during good times when economic growth is robust and the financial market is optimistic because the government and politicians become complacent. This was the situation in Indonesia between 2010 and early 2013 when structural reforms virtually stalled.

But the economic conditions inherited by the government of Jokowi, although not critical yet, are already quite bad, with the state budget and current account being threatened by widening deficits caused by rising oil imports and weak commodity exports. 

Hence it is a good time now to bite the bullet and launch the long-delayed reforms. This is the momentum that the Jokowi government seized by launching the newly-designed social assistance programs to cushion the most vulnerable segments of the people from the short-term pains likely to be inflicted by the upcoming fuel-price increase. 

Earlier last week, only one day after installing his Cabinet, Jokowi launched a national campaign of bureaucratic reform initially focusing on the streamlining of business and investment licensing. He made an impromptu inspection of the Investment Coordinating Board (BKPM) to proclaim his commitment to making things quite easy for doing business in Indonesia.

Earlier this week, the President gathered all provincial governors in a joint working conference with the Cabinet, discussing the vital importance of private investment in reinvigorating the economy in view of the severely limited fiscal capacity.

Jokowi urged the governors to woo investment by establishing one-stop service centers for investment licensing and gave them one year to complete the reform, or face penalties in the form of smaller fund-transfers from the central government.

In the meantime, Coordinating Maritime Affairs Minister Indroyono Soesilo announced on Wednesday that the government would soon grant visa-free entrances for visitors from Australia, China, Japan, Russia and South Korea to woo more tourists to Indonesia. The government also is fine-tuning a government regulation to expedite the licensing process for yachts and international cruise ships to Indonesia to one or two days, also to attract more tourists to spend their money on boosting the Indonesian economy.

Likewise, Indroyono added, he is also reviewing the arduous licensing process in the fishing industry to enhance the role of Indonesian companies in the marine-resource industry and at the same time prevent illegal foreign poaching of the fishery resources. These programs will bolster tax and non-tax (license fees) revenues for the government for reinvestment in human resource and physical infrastructure development.

More funds for the provision of the people’s basic needs will be available immediately after the government launches its fuel-energy reform within the next two weeks. 

While we feel encouraged at seeing the high pace of the government program, it is quite discouraging to see how the process of selecting the leaders of the House and its commissions has led to a bitter division in the legislature into two seemingly irreconcilable camps. 

We had expected high-quality debates on government policy in the House after the opposition parties repeatedly affirmed their intention to play the role of an effective check-and-balance mechanism. 

What we instead observed is a misguided political fight between the party elites to maintain their privileged positions at the expense of the common people’s interests. The coalition of opposition parties seemed intent only to harass the Jokowi government. We are flabbergasted to see how the six parties within the opposition coalition have allowed themselves to be used for the egotistical agenda of their leaders.

Fortunately, though, the common people seem indifferent or simply cynical about the childish squabbles in the House. There is no similar sentiment at the grassroots level. The current conflict in the legislature has much to do with the immaturity of the leaders of the opposition parties.

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