Handicapping Indonesia’s Presidential Pick

WSJ – As Indonesia’s presidential election in July approaches, many of the country’s most keen political observers have identified Jakarta’s new governor, Joko Widodo—affectionately called “Jokowi”—as the leading contender. Some have even declared him to be virtually unstoppable in his march to the presidency. They may be in for a shock.

There’s no question that Mr. Widodo is popular and competent. A former teak furniture entrepreneur with a degree in forestry, he joined Megawati Sukarnoputri’s opposition Indonesian Democratic Party of Struggle (PDI-P) in 2005, and won election as mayor of the Central Java city of Surakarta. He then was hand-picked by Ms. Megawati to challenge an entrenched incumbent Jakarta Governor and surged to victory in 2012.

In both posts, Mr. Widodo has earned a reputation as an honest, pragmatic and hands-on politician with deep appeal especially among those tired of Indonesia’s largely recycled set of senior politicians. National surveys show him with as much as 45% of voter support, compared with just 12% for the next most popular potential candidate.

Polls also show PDI-P leader Ms. Megawati’s popularity has fallen down into the single digits. Having served as president from 2000-04, she lost elections in 2004 and 2009 to current President Yudhoyono. This year seems like the perfect time for Mr. Widodo to ride the core support of the still-strong PDI-P to victory.

Yet Mr. Widodo is largely unproven as a national politician. Running even a sprawling metropolis like Jakarta is no match for the complexity of managing the armed forces and police, or overcoming an obstreperous legislature representing the vast and culturally diverse provinces of the Indonesian archipelago.

An even more fundamental issue stands in Mr. Widodo’s way: While most pundits assumed that Ms. Megawati would step aside before this summer’s election, the daughter of Indonesia’s founding president runs the PDI-P like a family enterprise and is unlikely to abandon her deeply held view that Indonesia’s leadership is her calling. Over the holidays, first-hand accounts emerged of a meeting between Ms. Megawati and Mr. Widodo in which she told the governor that she would run for president and asked that he join the ticket as vice president.

Ms. Megawati is apparently hoping that Mr. Widodo’s popularity will catapult her into the presidency. This arrangement won’t clip Mr. Widodo’s political wings, she argued, because it would enable him to be the PDI-P presidential candidate in 2019, at which point he could serve two consecutive five-year terms.

For his part, Mr. Widodo has precious few options beyond showing public fealty to his party leader while hoping that someone else can talk Megawati out of running again. His carefully crafted image of a loyal protege and his careful observance of Javanese customs mean any move away from PDI-P would be seen as an act of extraordinary disloyalty. If none of the PDI-P senior party members is able to gently dissuade Ms. Megawati, the likely outcome is a painful and unnecessary loss for the PDI-P.

Ms. Megawati’s gambit would benefit Prabowo Subianto, a former general and now-divorced son-in-law of the late President Suharto. Although running a distant second in opinion polls, Mr. Prabowo is a favorite among voters seeking a strong and decisive character. They argue that he has the chops to hold back Islamic fundamentalists and return a sense of decisiveness and strength to Indonesia’s presidency after a decade of equivocations and power-sharing. [Click here for full article…]

‘Flat’ growth rate means tax revenue shortfall

xFLAT.img_assist_custom-512x389.jpg.pagespeed.ic.nIHposHaT_Jakarta Post – Indonesia is projected to again fall short of its tax revenue target next year as economic growth is expected to remain around a modest 5.6 percent.

Danny Darussalam Tax Center (DDTC) has projected that the country would manage to collect around Rp 1.21 quadrillion (US$99.49 billion) in tax revenue, or 94.5 percent of this year’s target of Rp 1.28 quadrillion.

“Slow recovery of global international trade — coupled with the current-account deficit, which will still be around 2 to 3 percent — will affect our tax revenue,” DDTC researcher Bawono Kristiaji said during a seminar on tax and fiscal outlook on Saturday.

He added that around 40 percent of the country’s value-added tax revenue came from import activities.

The country could increase its tax revenue next year in terms of percentage, but only slightly, he said.

The government failed to meet its tax revenue target by collecting only Rp 917 trillion, or 92.4 percent of the targeted Rp 995 trillion last year, according to data from the Finance Ministry’s Tax Directorate General.

Bawono said that the rise in interest rates and the infrastructure bottleneck in the country would hinder significant growth of capital transaction and foreign direct investment, leading to the loss of potential tax revenue.

“In addition, low compliance of taxpayers will also hinder tax collection,” he said.

According to the Taxation Directorate General’s data, only 41 percent of a total 24.8 million registered taxpayers submitted their income tax forms in 2012.

In 2011, 53 percent of 22.3 million registered taxpayers submitted their income tax forms.

The unclear boundaries between tax evasion and tax avoidance in the country were also one reason the government failed to hit its tax revenue target, with many tax cases left unresolved.

Tax evasion is defined as illegal non-payment or underpayment of tax, while tax avoidance is minimization of tax liability by taking advantage of loopholes in certain laws and regulations. [Click here for full article…]

Indonesia Wants to Keep Commodity Refining at Home

Excavators strip the overburden to reach tin ore in the mine pit at the PT Timah operations in Sungai Liat, Bangka Island, Indonesia, on Nov. 19, 2013

Excavators strip the overburden to reach tin ore in the mine pit at the PT Timah operations in Sungai Liat, Bangka Island, Indonesia, on Nov. 19, 2013

Bloomberg Business Week – Indonesian mines account for about 16 percent of the world’s mined nickel supply and about 18 percent of its bauxite, used to make aluminum. China has been importing ever-larger amounts of these and other minerals from its Asian neighbor. Yet the more the Chinese buy, the angrier the Indonesians have become. Because China buys the raw rocks and does its own processing, it is depriving Indonesians of jobs and tax revenue. More than 271,000 metric tons of nickel were mined in Indonesia last year, but only about 16,000 tons were processed inside the country, according to Bloomberg Industries. For the same period, China refined almost 565,000 tons of nickel, which is used to make stainless steel. Through much of last year, China stockpiled Indonesian nickel and bauxite to hedge against any action on exports the government in Jakarta might take.

“I just returned from China, and I saw with my own eyes 3 million tons of bauxite and 20 million tons of nickel ore over there,” Indonesia Industry Minister M.S. Hidayat told reporters on Jan. 8. “That’s what we want to stop.” Other countries, too, want to graduate from simple commodity economies to something more advanced.

On Jan. 12 the Indonesian government banned companies from exporting nickel ore and other raw minerals such as gold and copper unless they processed the ore first. “No more ore exports,” Energy and Mineral Resources Minister Jero Wacik said in December. “There should be refining or smelting.” Processed nickel is much more valuable than raw ore. [Click here for the full article…]

Govt to invite more foreign trade missions

Jakarta Post – The Trade Ministry will invite more foreign trade missions to visit the country this year as part of the ministry’s program to cope with the country’s sluggish exports.

The program will also include sending more trade missions to non-traditional export destinations and promoting sales of potential export products.

The Trade Ministry’s director general for national export development, Nus Nuzulia Ishak, said on Wednesday that beginning in March her office would invite foreign buyers to Indonesia to give them opportunities to meet local manufacturers directly. “We’re asking officials from all international trade-promotion centers to bring overseas buyers to visit a selection of regions in the country, so that they can observe and select products firsthand,” she told reporters in a press conference.

She hoped the reverse trade missions would be able to produce export transactions worth at least US$120 million. Her office will allocate up to Rp 8 billion ($653,862) of the directorate’s total budget of Rp 231 billion this year for the trade-mission program.

The export outlook for Indonesia is not expected to change much this year as the recovery in the global economy remains sluggish.

Trade Minister Gita Wirjawan recently said that the government expected exports to remain stagnant at $180 billion, the level estimated for last year, as no significant increase was expected in world trade. [Click here for full article…]

Military Will Not Be Involved in Politics, Chief Insists at Leaders’ Meeting

General Moeldoko, the commander of the Indonesian Military, said that the army would stay out of politics and not ‘disrupt democracy’ in Indonesia. (TNI) (JG Photo/ Dhana Kencana)

General Moeldoko, the commander of the Indonesian Military, said that the army would stay out of politics and not ‘disrupt democracy’ in Indonesia. (TNI) (JG Photo/ Dhana Kencana)

Jakarta Globe – Members of the military were reminded that they needed to maintain the highest degree of political neutrality during opening remarks at the 2014 Military Leaders meeting in Jakarta on Wednesday.

“If the TNI [Indonesian Military] tries to have a hand in politics, it would disrupt democracy,” Gen. Moeldoko, the TNI commander, said at the meeting at military headquarters. “The military is determined not to be involved.”

Moeldoko stressed that serving armed forces personnel were prohibited from supporting politicians or political party activities by providing any kind of facilities ahead of elections, such as venues, transportation or other forms of support.

He noted that sanctions would be meted out to any TNI members found supporting political campaigns.

“Members of the army are not allowed to wear a political party’s uniform. We will ensure that the army will not be involved in politics,” he said.

During the meeting, Moeldoko underlined that the military was prepared to assist with the 2014 legislative and presidential elections, including in logistical operations, provided no political risks were involved.

“I don’t want to be a scapegoat. Please make sure the schedule and the time line for logistics delivery is clear,” he said, in a reference to the controversy over the late delivery of ballots and other supplies for the 2009 polls.

“For instance if the KPU [General Elections Commission] asks us to send items to remote areas and according to our calculations there is not be enough time but we deliver anyway, we will eventually be blamed,” he added. [Click here for full article…]

Indonesia Extends Retirement Age

Jakarta Globe – Indonesian civil servants, even those about to retire next month, will have to clock in for at least another two years before collecting their pensions, under new Ministry for the Empowerment of the State Apparatus regulations.

The ministry raised the national retirement age for civil servants from 56 years old to 58 years old, Tasdik Kinanto, ministry secretary, said on Wednesday. Those who planned on retiring from service by Feb. 1 will see their terms automatically extended another two years, he said.

The law was passed on Dec. 19 by the House of Representatives. It still needs President Susilo Bambang Yudhoyono’s signature to go into effect.

“For the technical arrangements, the head of the State Personnel Agency [BKN] will issue a circular,” Tasdik said

He said that the two-year extension was for civil servants that usually handled administrative duties. For first- and second-ranking officials in the civil service, the retirement age has been extended four years to 60 years old.

With the new extension, some 11,000 civil servants would see their retirement postponed.

The law also says that civil servants found guilty of serious disciplinary violations may be discharged, albeit honorably. [Click here for full article…]

Amnesty Calls for Strengthening of Aceh Truth and Reconciliation Bylaw

Rebel members of the Free Aceh Movement (GAM) hold a drill at Lhok Juk village, in the East Aceh subdistrict of Peudawa, on May 17, 2004. (AFP Photo)

Rebel members of the Free Aceh Movement (GAM) hold a drill at Lhok Juk village, in the East Aceh subdistrict of Peudawa, on May 17, 2004. (AFP Photo)

Jakarta Globe – Amnesty International has praised the Aceh parliament for passing a bylaw in December to establish a truth and reconciliation commission to investigate the abuses that took place during 30 years of conflict between Acehnese rebels and the Indonesian military, but emphasized that more needed to be done before the process could begin in earnest.

“The establishment of truth commissions is an important step toward understanding the circumstances that led to past violations, learning from the past to ensure that such crimes will not be committed again, and ensuring that shared experiences are acknowledged and preserved,” Amnesty said.

The Aceh House of Representatives passed the bylaw on Dec. 27, 2013. It has since been submitted to the Ministry of Home Affairs, where it will wait for approval.

The establishment of the commission forms part of the 2005 Helsinki peace deal and the 2006 Law on Governing Aceh to end the conflict — between the separatist Free Aceh Movement (GAM) and the Indonesian military — which began in 1976, at a cost of between 10,000 and 30,000 lives.

“Addressing these past crimes would not only contribute to healing the open wounds of the civilian population, it would also help strengthen the rule of law in the country which can help secure the peace process in the long term,” Amnesty said.

“However some provisions in the bylaw fall short of international law and standards and should be strengthened to ensure that the truth commission operates effectively.”

The organization said the definition of human-rights abuses should be expanded beyond those defined in the 1999 Indonesian Law on Human Rights to include all violations set out in the Universal Declaration of Human Rights and other treaties that Indonesia has ratified. [Click here for full article…]

Jokowi and Prabowo woo Muslim voters, visit NU, Muhammadiyah

Jakarta Post – The two strongest contenders in the 2014 presidential election — popular Jakarta Governor Joko “Jokowi” Widodo and chief patron of the Great Indonesia Movement (Gerindra) Party Lt. Gen. (ret) Prabowo Subianto — each made overtures to the country’s two largest Muslim organizations on Wednesday, apparently to attract the support of Muslim voters.

Jokowi, a member of the Indonesian Democratic Party of Struggle (PDI-P), attended a closed-door meeting with leaders of Nahdlatul Ulama (NU), including chairman Said Aqil Siradj, at the organization’s headquarters in Central Jakarta to discuss the organization’s upcoming national assembly scheduled for May, one month before the presidential election.

NU treasurer Bina Suhendra, who was present at the meeting, said in the meeting NU leaders formally asked Jokowi to open the assembly, an honor that had been performed by President Susilo Bambang Yudhoyono in recent years.

Bina said that the presence of Jokowi, who is currently the most popular politician in the country, would be of great importance to the Muslim organization.

Prabowo meanwhile paid a visit to Muhammadiyah headquarters in Central Jakarta, located only three kilometers away from that of NU.

During his meeting with leaders of the organization, Prabowo talked about his presidential campaign platform.

Prabowo later had a 30-minute closed-door meeting with Muhammadiyah chairman Din Syamsuddin. [Click here for full article…]

Govt agrees to ease ore export ban

Jakarta Post – The government has finally agreed to ease the ore-export ban just a few days before the Sunday deadline amid protests from the country’s mining companies including PT Freeport Indonesia and PT Newmont Nusa Tenggara.

The new policy, which will allow mining companies to continue to export their mineral concentrates until 2017, is subject to approval from President Susilo Bambang Yudhoyono (SBY), who last week asked related ministers to find a loophole in the export ban.

Energy and Mineral Resources Minister Jero Wacik said on Wednesday that mining companies that had indicated their strong commitment to constructing smelters would be allowed to continue to export their mineral products.

For that purpose, the government had also agreed to reduce the minimum purity rate of the mineral products that could be exported so that the miners could continue to export their mineral concentrates, Jero said following a meeting with ministers from related ministries.

The meeting was held to find a legal loophole that could be used to bypass an article in the 2009 Mining Law that requires miners to process their ores in local smelters before selling them overseas. The measure, which will technically ban miners from exporting their unprocessed ores, will be implemented by Sunday.

To implement the ban, the Energy and Mineral Resources has set minimum purity levels for each mineral product to determine that added-value activities have been created. However, the regulation on the purity levels of the mineral products has been strongly opposed by the mining companies because they face difficulties in achieving the levels through their existing processing facilities. [Click here for full article…]

Problems Mount For Indonesian Elections

NJ.com – As Indonesia prepares for the most important elections in the country’s history, technical problems and political corruption threaten the credibility of the fast approaching polls. The 2014 legislative and presidential elections will be just the fourth national poll for the world’s fourth most populous country in the 15 years since the fall of the dictatorial Suharto regime. Accommodating for nearly 200 million voters spread over 17,000 islands in the Southeast Asian nation is a monumental task. However, the 2004 elections were widely viewed as free and fair while the 2009 polls faced problems but managed to get a passing grade by most international observers. For the 2014 cycle, the challenges and accusations of manipulation are mounting by the day to an unprecedented level while the stakes to conduct free and fair elections could not be higher.

Political corruption continues to plague the Indonesian government and erode public trust in political parties and the electoral authorities due largely to greed, abuse of power, and inadequate financing laws and oversight. In perhaps the most ominous sign of potential electoral manipulation, reports are surfacing that the Indonesian Electoral Commission (KPU) is banning international election observers except for those handpicked “friends” of the ruling party. Several presidential candidates have expressed serious concern over the challenge that rampant corruption represents to this young democracy, still working to build its foundation of representative government. Gerindra party founder and leading presidential candidate Prabowo Subianto has stated he will stamp out government corruption and manage the government like a business, incorporating “modern management techniques: IT, transparency and e-government.” Many polls are responding to his no-nonsense approach to addressing the country’s biggest challenges and his popularity is continuing to rise as a result. [Click here for full article…]