2 x 22 48pt Optima Bold

2 x 22 48pt Optima Bold

New Cabinet needs to
negotiate on onerous debt

The new Cabinet faces a tight schedule in the following weeks.
Political economist Revrisond Baswir of the Yogyakarta-based
Gadjah Mada University shares his concerns.

Question: What do you see as President Megawati
Soekarnoputri's priorities?

Answer: Her priority should be the management of the budget
which is related to many things that are right before us, such as
the Paris Club meeting (in September), the meeting of the
Consultative Group on Indonesia and also the government's budget
proposal for 2002. The Paris Club talks are related to the 2001
budget; if we fail (to negotiate for debt rescheduling) at the
Club we could experience a default.

We need here a grand design on how to manage such matters.
What is the fundamental solution of the government regarding our
maturing debts? Are we going to ask for amnesty or is there
another way? This needs to be clear.

The threat of a deficit is there because of our these debts,
both (to lenders) inside and outside the country. Domestic debts
reaching Rp 53 trillion must be paid this year to Bank Indonesia
(central bank). With BI's interest rate of some 17 percent the
amount could reach Rp 60 trillion.

Interest for overseas debts which must be paid this year alone
will reach at least Rp 23 trillion ... The government also has
the burden of the earlier rupiah value of Rp 9,600 to the dollar
this year. This means until the end of this year the rupiah must
stay below Rp 9,000. All such problems are in front of us --
which must be resolved before September.
The Australian government and the World Bank has signaled that it
will consider amnesty of part of Indonesia's debts. Your comment?

Our debt should indeed be wiped out. The World Bank has all
the information showing that Indonesia has fallen into a very
heavy debt trap. So if the World Bank says it will conduct a
study it wouldn't be about how deep we're in debt; it would be
more likely on the prospects of Megawati's Cabinet. If the
government is friends with the International Monetary Fund it
will receive positive signals from them. They also want to see
whether the government can hold out to 2004 and what the
political map of the Cabinet is like. If they are satisfied with
everything they should be helping us wipe out our debt.

So Megawati's government should immediately follow up on this
green light from the World Bank?

Of course. The amount of foreign debt compared to our gross
domestic product has reached over 100 percent; this is the
strongest indication of our debt trap.

At the same time the government has a domestic debt of Rp 600
trillion. The burden of installments for our due foreign debts
this year is around US$14 billion. Meanwhile next year the burden
of debt installments to our export revenues will reach 54
percent; this means a continuous, annual threat to our foreign
exchange reserves.

So I see no choice for Indonesia other than to try to obtain
debt amnesty. We should not be ashamed of being declared as
having defaulted on our debt payments, given the circumstances.
The World Bank and Australia seem to be taking into account the
corruption under the New Order regime.

This is indeed the strongest reason (for appealing for
amnesty). So our request for debt forgiveness would not only be
because of the above condition but because of our historic
reality that such huge debts have not reached the people because
of the corruption of the New Order elite. This is categorized as
odious debt.

We should be grouped under the "heavily indebted poor
countries" which get a reduction of 60 percent on debt
repayments. Thirty-five countries are now in this category.

With a targeted deficit of 3.7 percent from the gross domestic
product for this year, the government must seek income by getting
as much as possible from state firms, mainly through
privatization. What are the prospects of privatization of state
firms in the near future?

If Megawati's Cabinet is really market friendly, there's a big
possibility that the pace of privatization will increase. This
means contributions from state firms (to state revenue) will no
longer be from distribution of dividends but from the sale of
private firms.
What about the relation to other policies?

The success of privatizing state firms is related to other
policies. If the Cabinet is market friendly the response will be
a stronger rupiah which will eventually attract investors to come
here.

Our sacrifice would be having to let go of the state firms
because foreign investors will clearly buy the firms whatever
their price in rupiah. Investors in strategic sectors will first
conduct due diligence studies before bargaining for the firms.
I'm sure the state firms will still be bought at the lowest price
levels.

What about the role of the Indonesian Bank Restructuring
Agency (IBRA)?

Their contribution is expected but the main priority is
restructuring the organization and revamping their work program.
The impression is that IBRA is too messed up. An overhaul is
needed although the target of its contribution to the state
budget can still be determined. The government is also slated to
increase fuel prices again this year given subsidy reduction.

This is quite sensitive. The fuel prices will depend on the
development of the rupiah and interest rates. I think subsidies
and the fuel price are still debatable; is an increase really
needed to cover the deficit or is another review needed, given
that some things are not yet clear on the actual production costs
of Pertamina.

What about the fiscal balance between Jakarta and the regions?

Very early in her term Megawati has had to face this problem
in the form of the CPP Block contract (with PT Caltex Pacific
Indonesia) .... This is a good start. So (the government) should
not harbor any wish to reduce regions' revenue, because regions
of course want more, not less. In general the Megawati government
should also resolve the implementation of regional autonomy and
pay attention to issues around Aceh, Papua (Irian Jaya) ... and
other potentially restive areas.

The government must realize that the crucial issue raised by
resource-rich areas affects investors' interest. Pride and
identity are important but the Acehnese would not raise their
voice if they didn't know there were gas resources there;
likewise people in gold-rich Papua and oil-rich Riau.

Megawati's government which seems to be compromising and
pragmatic has promised to please the market. This will lead to a
paradox; even the military may be used to face the regions, which
will face the demands of the local public.

Wiping out corruption is also important in securing investors'
trust. What can this government do?

Megawati's government is compromising here and there,
accommodating a number of political forces, so we can't expect
much regarding corruption. The paradox is while the government
has to be market friendly, corruption and money politics
continues to be widespread.

Combating corruption is related to decentralization of the
fiscal balance. By reducing the concentration of funds at the
center, the possibility for abuse of state funds at the center
becomes smaller.

It's true that giving regions the authority to manage big
funds can also lead to corruption but at least the management of
local administrations is closer to their people, enabling better
control. Strong monitoring by the public must be established.

I'm worried about the influence of (Megawati's) Indonesian
Democratic Party of Struggle (PDI Perjuangan) which gives too
much emphasis on the notion of unity, which may imply reducing
the spirit of giving a chance to regional administrations. The
party could very well sponsor efforts to amend the regional
autonomy law. (Asip A. Hasani)

2. 5Riswanda --

Megawati juggles need for professionals, appeasing opponents

2 X 20 36pt NCSBi

New Cabinet makeup:
To please and appease

Lecturer in politics Riswandha Imawan of the Gadjah Mada
University in Yogyakarta looks at the result of what he says is a
careful balance in the new, "transitional" Cabinet composition.

Question: How do you view the Cabinet lineup?

Answer: It clearly shows President Megawati Soekarnoputri's
careful effort to place figures that pose a low threat of
resistance from among the public.

The structure is not that different from the Cabinets of
former president Abdurrahman Wahid (Gus Dur); it's not slimmer.
Megawati seems to be avoiding confrontation. She wants to embrace
all political groupings. She also seems to realize that she
doesn't have much time to realize her Cabinet's program.
Therefore, she seems to regard her Cabinet as a transitional one.

That she picked figures of various backgrounds also shows that
she's avoiding many people getting annoyed. The appointment of
Faisal Tamin (former chairman of the Association of Indonesian
Civil Servants KORPRI) as State Minister of Administrative
Reform, Ali Marwan Hanan (of the United Development Party, PPP,
the largest faction in Muslim-oriented axis force) in charge of
cooperatives, and Bachtiar Chamsah (of PPP) as Minister of Social
Affairs are examples.

Yet, she did not assign them for key positions. She realizes
very well that the ministers in charge of cooperatives or social
affairs won't directly affect the heart of her leadership as well
as the core of the political dynamics. Therefore, she picked only
professionals for key positions.

Key positions are those directly related to the core tasks of
the Cabinet, which include economic recovery, restoring security,
handling the threat of disintegration and upholding supremacy of
the law.

The appointment of Susilo Bambang Yudhoyno as Coordinating
Minister for Politics, Social and Security Affairs is an example.
Indeed he's a (retired) military officer, yet he's an
intellectual in uniform. He knows very well the concepts of
politics, social and security affairs. The appointment of
Dorodjatun Kuntjorodjakti as Coordinating Minister for the
Economy is another example ...

What about the appointment of Yusuf Kalla as the Coordinating
Minister for People's Welfare?

I wonder why Megawati picked him, especially considering his
background as a businessman as well as former minister of
industry and trade, whose orientation was profit. Now he must
switch his orientation to a non-profit one.

The assignment of Matori Abdul Djalil as defense minister also
could be a problem in the future. Megawati's not just
demonstrating her gratitude to Matori, but has also considered
what was repeatedly said by former defense minister Mahfud M.D.,
that Gus Dur's has said the position should be for civilians.
This way, Megawati wants to avoid the resistance that would ensue
if the position was given to a military officer.

But by choosing Matori Megawati will need more time to
reconcile with Gus Dur's supporters -- Matori has also become a
problem for them. Moreover, people can also see ... that the
appointment was based mostly on the close friendship (between
Megawati and Matori).

Likewise the appointment of Said Agil Munawar as Minister of
Religious Affairs. He was the one who said we could have a woman
as president during the controversy regarding a woman president.
I fear she's just showing gratitude.

Could such considerations for choosing ministers harm the
Cabinet's performance?

I prefer to say, "no". The position as, say, defense
minister, does not directly influence the heart of political
dynamics here. The key position is the military commander. So I
can only conclude that the Cabinet formation was based firstly on
professionalism, second, balance of political power, third,
balance of regional power and fourth, in return for services
rendered.

And the impact on the Cabinet's overall performance?

As long as professionals are in key positions, it will not
have a bad impact. Budiono (Minister of Finance) and Rini
Suwandhi (Minister of Industry and Trade) are both experts in
those fields. Purnomo Yusgiantoro (Minister of Mining and Energy)
has expertise in management and mining ... For education, we have
Malik Fajar in charge of education ... The outstanding
development of universities under Muhammadiyah (second largest
Islamic organization of which Malik is an executive) is proof of
his great work. He has a clear vision on how education should be
developed. His reputation as a rector, too (of Muhammadiyah
University in Malang) is very good.

What is annoying is the appointment of Bambang Kesowo as State
and Cabinet Secretary. I cannot understand why Megawati decided
so, especially given people's suspicion that Bambang still holds
the New Order mentality. Combining the two positions could only
result in power centralization, which could again make the
presidency a sacred institution.

Also of annoyance is the appointment of (former legislator
from the military faction) Hari Sabarno as Minister of Home
Affairs and Regional Autonomy. He has no track record in the
field. Megawati will need more time to learn about the
ministry ...

What about the new State Ministry of Communication and
Information?

It will certainly receive strong reactions, especially from
the press. So an explanation is needed on what it deals with ...

Yet, overall the new Cabinet lineup is market friendly,
especially with Kwik Kian Gie (Minister of National
Planning/Chairman of National Planning Development Board) and
Laksamana Sukardi (Minister of Finance)Menteri negara BUMN not
finance minister) in it. The world sees them as reliable sources
for economic analysis on Indonesia.

But regarding Kwik, if everything is decentralized and the
Development Board is not as it was before, Kwik's expertise will
not be fully utilized there. (Sri Wahyuni)

3. 5Defense --

Security threats: Chinese dragon or uncle Sam's cabin?
1 x 40 36pt Optima Bold

India's security threats, from China to U.S.

NEW DELHI: George Bush plans to go in for Nuclear Missile
Defense (NMD) to ensure his country is not taken by surprise by a
rogue state. India itself faces this problem. A nuclear holocaust
by any miscalculation or intense hatred of a country considered
hostile will be the end of a civilized world.

Violent reactions are naturally expected from Russia, once a
super power and still a powerful nuclear state; and China with
ambitions to dominate Asia. Every country determines its
perception of threat and plans its defense accordingly. Weak
nations seek allies as happened after World War II, creating
alliances such as North Atlantic Treaty Organization (NATO) and
Warsaw pact. With the break up of the USSR, the US is the only
super power, militarily and financially. And they have no
intention of losing this status.

The strong criticism of America by our experts and opposition
political parties is surprising. Their main fear is that America
will become the sole super power and our endorsement will
adversely affect our relations with Asian allies. No names,
however, are mentioned. To be frank we have no friends in Asia or
the world. It is incomprehensible that our experts are ignorant
of our recent history since 1947. Vajpayee has clarified that the
aim of NMD is to ensure safety of the world against any
misadventure by a rogue state. Bigotry and blind hatred developed
over the years does not help in international relations.

There are no permanent friends or permanent enemies. Only the
country's interests are permanent. Our governments since 1947
flourished on slogans and sermons oblivious of threats to the
country. Let's look on our relations with China and Pakistan.
Nehru, of the imperious temperament, was intolerant of any
advice. He ignored Sardar Patel's 1950 suggestion to beware of
China. His gospel of non-violence, panch-sheel and Hindi-Chini-
Bhai-Bhai became the hallmark of our foreign policy. The Chinese
occupation of Tibet in March 1959 opened his eyes but it was too
late. The final humiliation came in November 1962 when China
launched an unprovoked attack in Arunachal Pradesh, which
shattered Nehru both physically and mentally.

At this hour of humiliation only two powers, America and
Britain came to our assistance, the two countries derided by us.
Our friends in the non-aligned movement, Nasser of Egypt and Tito
of Yugoslavia advised us restraint. For the Russians the Chinese
were their fraternal brothers and the Indians just friends. Let
us never forget this.

The Chinese again intruded in Arunachal in 1986 and occupied
Sum Dorong Chu Valley and still lay claim to Arunachal, Sikkim,
Darjeeling and 90,000 km, not yet specified, besides having
occupied Aksai Chin area. Recent reports by our ministry of
defense that every major city in India is within the reach of
Chinese missiles and that China is augmenting Pakistan's
capabilities in its striking power to include submarine launched
ballistic missiles, in order to achieve its goal of being a
superpower in the Asian Continent, somewhat akin to the South
East Asia Co-Prosperity sphere the Japanese had dreamt in World
War II.

It is not only India that is wary of China but Vietnam and
Japan as well. Jane's Fighting Ships 2000-01, the most authentic
source of information on armed forces, throws light on the latest
Chinese activities against India and Vietnam. "In 1998 Beijing
wrested control of a number of Vietnamese islands in Spratly
Islands in the south Pacific and hence the latter has beefed its
military presence fearing a repeat episode." None of its
neighbors trusts China and I say this because of my impressions
during one year's stay in Vietnam, Laos and Kampuchea.

Though weak these countries are proud of their heritage and
refuse to accept Chinese lordship. In the 1970s, Vietnam was
invaded twice by the Chinese.

Nearer home, "Tension in Indo-China Border" in Jane's
Intelligence Digest in November 2000 is an eye opener. In the 18
months China committed over "100 incursions especially in Ladakh
and Arunachal Pradesh at an alarming level."

Chinese naval activity in the Pacific and nuclear submarines
seen in the Indian Ocean left no option except to adopt a pro-
active policy by India. No wonder Vajpayee's government was
forced to declare China as enemy no 1 and Pokhran tests II and
III ordered in 1998. What a hue and cry was raised in India then
by political parties. But all kept silent when China became a
nuclear power. The CPI had not even condemned China during the
1962 war.

According to the Jane's Digest even Japan is alarmed at the
Chinese activities in the Pacific and Indian Oceans. This is
leading to changing political equations in Southeast Asia. Even
Malaysia and Singapore are apprehensive. India has already
established regular defense consultations with Vietnam and Japan
and held joint naval exercises including Malaysia in 2000.
Singapore has also agreed in principle to join such exercises and
one of its senior ministers felt that China and Pakistan are
rogue states. Recently our foreign minister during June this year
had also visited Australia and New Zealand. There will be no
peace unless we either surrender to Chinese demands or we seek
allies to checkmate China.

The Chinese ambassador to India has advised us not to support
the NMD. The Ambassador also feels that Russia, China and India
share similar views on world issues -- the latest kite flying
exercise. China has suddenly woken up to realities when its
hegemonism in Asia is threatened. India must be naive to fall in
their trap. Leftist intellectuals and prominent writers appeal
for a settlement. But on what terms? Why do they not appeal to
the Chinese to return Tibet to the Tibetans and openly declare
that they have no designs or claims on our territory?

One eminent writer has called our "endorsement of NMD as
demeaning", another thought it "long on flowery rhetoric, short
on realism". Our former foreign secretary, Salman Haidar wonders
"how closely we have weighed the implications of our decision on
our traditional friendships and established ties." But he is
silent on who these traditional friends are. We have none. The
NDA government is trying its best to have some.

With the kind of foreign policy expertise that we have we
suffered humiliation in 1962, and find ourselves in a mess in
Jammu & Kashmir and in the northeast. Surprisingly, the world
ignores Chinese hostility against India. I pose the following
question: rather than entering the Chinese Dragon or co-habiting
with the Russian bear, would it not be safer to enter what some
writers have derisively called "Uncle Sam's Cabin"? We gratefully
accepted this shelter in 1962. Now we have the strength somewhat
to stand on our legs after Pokhran tests II and III, and it
should not be easy to kick us around.

Hatred of India is the raison d'etre of Pakistan's existence.
It fought four wars with India between 1947 and 1999, and is
waging a proxy war for over a decade. China developed close
relations with Pakistan since 1966 on the basis of the old
statecraft -- your enemy is my enemy. Thanks to China's nuclear
and missile technology, Pakistan has attained nuclear status.
During Chinese premier Zhu Rongji's recent visit to Pakistan in
May, he lauded Gen. Musharraf for the 1999 coup and praised him
for establishing stability in Pakistan. As a quid pro quo the
General endorsed China's fear of the NMD and TMD (Theater Missile
Defense).

Trade, commerce, and cultural relations are not feasible
between India and Pakistan while the two armies face each other
in J&K and Pakistan is engaged in proxy war against India.
General Musharraf has often threatened a nuclear war. Power is
too serious a matter to be left in the hands of generals, and
absolute power corrupts absolutely.

During the 20th century two generals changed the future of
their countries and enhanced their prestige the world over --
Gen. Kemal Ataturk of Turkey and Gen. De Gaulle of France. Let us
hope Musharraf succeeds as the Ataturk of Pakistan, an ambition
he expressed after his coup in October 1999.

4. 5Troops -- U.S. troop withdrawal
2 x 15 36pt NCSB

U.S. should pull out
of the South: N.Korea

SEOUL: North Korea is yet again calling for the withdrawal of
U.S. troops from South Korea. Or, for the 121st time since 1948
-- if a quasi-governmental think tank is correct in its
calculations. Still, the latest call was particularly noteworthy,
coming after a lengthy silence and alleged acquiescence by
Pyongyang. The problem is, the ongoing fuss seems set to amount
to little more than another political dogfight.

During a weekend summit highlighting his almost month-long
train visit to Russia, North Korean leader Kim Jong-il re-
emphasized that the American troops should leave Korea, saying it
is "very urgent" for peace and security in the Korean Peninsula
and Northeast Asia. President Vladimir Putin expressed
understanding of the North's position, albeit wisely stopping
short of supporting it.

The reversal put President Kim Dae-jung into an awkward
position. President Kim had frequently said his North Korean
counterpart showed tacit approval of the American military
presence even after unification at their historic summit in June
2000. The opposition lost no time to criticize the President,
saying he either lied to the people or was cheated by Kim Jong-
il.

Neither should necessarily be true, though. Most voters would
like their elected leader to be neither a deceiver nor a dupe.
Rather, the North Korean strongman might have changed his mind in
the face of hardball tactics by the new U.S. administration. Or
he just referred to the U.S. troops' presence in the capacity of
a peacekeeper than occupying forces.

In any case, the latest change in Pyongyang appears to be
strategic rather than fundamental. The North has often hyped up
its propaganda whenever there arises the need for cementing
internal solidarity or appeasing hard-liners. Officials and
analysts here view it as an eye-for-an-eye tactic to dilute
Washington's proposed agenda of conventional arms reduction.

Also noteworthy in this regard is the U.S. response -- or lack
of it -- to the latest development. This in part reflects the
U.S. confidence in its role as a non-regional balancer, which it
believes is recognized by all regional players. Former U.S.
president Jimmy Carter recalled here Tuesday even the late North
Korean founder Kim Il-sung acknowledged the American presence in
a different, smaller form.

The rival political camps should stop their childish and
unproductive bickering over this and other inter-Korean issues.
Their "politicizing" of the South-North relationship has gone
beyond the tolerable level. The ruling party should no longer
monopolize the northern policy as a means of staying in power.
Nor must the opposition try to trip up the government in every
trivial step.

Fundamentally, the 37,000 American troops' presence here is a
matter between the United States and its host -- South Korea. No
third parties can or need to have a say in this. More frankly,
the decision is almost entirely up to Washington, the sole
superpower in post-Cold War era, based on its global geopolitical
strategy.

A recent report by Rand Corp., a conservative U.S. think tank,
well illustrates the point. To the relief of most Korean
nationalists, the paper envisions the earlier-than-expected
pullout of U.S. ground troops from Korea and Japan for relocation
in Southeast Asia. The new strategy, based on possible
reunification of the two Koreas, is aimed at encircling China,
America's potential new rival.

The study specifically cited three expected outcomes:
diverting expenditure saved from reduced ground forces to
developing new weapons, such as a missile shield; weakening the
alliance between North Korea, China and Russia; and stepping up
pressure on South Korea for arms purchases. And all of these are
based on deepening of regional conflicts instead of easing them.

Few Korean with a modicum of national identity -- even the
diehard anti-Communists -- would welcome the presence of foreign
troops on their soil for good. The latest debate on the North's
position here also comes amid increasing frustration and
discontent with the U.S. military presence, along with the
growing hosting costs, environmental degradation and other
violations.

Koreans have a long, shameful history of calling in foreign
soldiers under the pretext of national security, but actually out
of hatred and distrust of rival compatriots. Until when will we
need foreigners to seek partisan interests at the expense of our
own people? In this vein, Kim Jong-il should recognize it is only
the rapid reconciliation between two Koreas that can undermine
the rationale for a U.S. troop presence