EU says Indonesia ties not changed by terror fears

EU says Indonesia ties not changed by terror fears

Agencies, Jakarta

European Union Trade Commissioner Pascal Lamy said on Saturday
the EU had not reviewed its trade policy with Indonesia despite
fears the world's most populous Muslim nation might become a
breeding ground for terrorist networks.

"Apart from strengthening our political dialog (with
Indonesia) ... nothing has changed dramatically," Lamy told
Reuters during a whirlwind visit to Jakarta.

"Obviously there is more sensitivity here because it's the
biggest Muslim area in the world but there has not been any sort
of evidence (Indonesia) is siding with al-Qaeda," he said,
referring to the terrorist network blamed for the Sept. 11
attacks on New York and Washington.

Indonesia has come under growing pressure in recent months to
do more in the war on terror, especially compared to Malaysia,
Singapore and the Philippines which have rounded up dozens of
Muslim militants.

Lamy, who estimated the EU's annual trade with Indonesia at 15
billion euros (around US$13.5 billion), said he was heartened by
growing political stability in the vast nation and the
government's economic reforms.

"... I get a sense that things have moved on here ... There
have been political changes and with these we hope prospects for
economic reform will increase," he earlier told a news
conference.

Lamy, who arrived in Jakarta late on Friday for a two-day
visit, is in Southeast Asia to strengthen regional and
multilateral trading links.

Meanwhile, Lamy and the Minister for Settlement and Regional
Infrastructure Soenarno signed on Saturday a 6.62 million euro
financing agreement for the development of irrigated agriculture
in Buleleng and Karang Aseam, Bali, a press statement said.

The EU is contributing 6.12 million euro to the project, which
is aimed at improving the living conditions of low-income rural
households by means of improved irrigation system.

Elsewhere, Lamy offered an optimistic view of the Southeast
Asian economy despite increasing diversion of investments to
China, saying the region had democracy as one of its assets.

"The fact is that because of its size, because of the
consistency of its policy, because of the track record China has
in terms of growth in the last 10 years, they have a track record
which is attractive, which others may not have," Lamy was quoted
by AFP as saying.

"Investors are looking at that, but then the next question is
so what?

"This region has assets. I mean it has positive assets in
terms of democracy for instance, which sometimes makes a decision
more difficult than easy. But it has assets," he said, in an
interview on Saturday.

China has been getting the lion's share of foreign direct
investments into Asia at the expense of Southeast Asia as
investors take advantage of the regional giant's potential market
of more than one billion people.

Lamy however said much of investment funds diverted from
Southeast Asia to China was in fact "local money".

"It's not sucking money out of this region. A lot of this
money is local money, including Chinese money, by the way, in
this region," he said.

"When you look at $40 billion' positive foreign direct
investment in China a year, we all know that a part of that is
rescinding money," he said.

Southeast Asia's 500 million population made it a viable
marketplace for investors, Lamy said.

"With developing countries like Vietnam, Cambodia and Laos
joining the group in an efficient way, in a positive way, it's a
good sign," he said.

"There's no fatality in this. Look at Japan, it was a big
history 20 years ago," he said.

He said the ASEAN Free Trade Area (AFTA), which came into
force on Jan. 1, had also received stronger support from member
countries.

The Association of Southeast Asian Nations (ASEAN) groups
Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the
Philippines, Singapore, Thailand and Vietnam.

Under the AFTA scheme, six of ASEAN's wealthier members have
cut tariffs on most goods traded within the region to between
zero and 5 percent. Newer members Cambodia, Laos, Myanmar and
Vietnam have until 2005 to follow suit.

There have also been proposals for an ASEAN free trade accord
with China -- a potential combined market of 1.7 billion people.

Philippines President Gloria Arroyo and Singapore trade
minister George Yeo have both called on ASEAN to hasten economic
integration if it wants to compete with China, which is enjoying
rapid growth.