'It's the brains, stupid': Kleinsteuber

Robert S. Finnegan, The Jakarta Post, Jakarta

Dr. Fritz Kleinsteuber is the Managing Director of the German- Indonesian Chamber of Commerce (EKONID) and has resided in Indonesia for 30 years.

Question: The Bali terrorist attack continues to dominate the news worldwide. What has the effect been to date on the Indonesian economy?

Answer: We have to differentiate between two different aspects as far as the economy is concerned. The first is our prime interests -- do the Bali bombings have any effect on foreign investment? Here the answer is quite simple: I would say almost none, because before the bombings foreign investment was already almost zero.

A little bit here and there, and this remains the same in the aftermath because there are three main reasons for foreign investment being circumspect on Indonesia: The first has to do with the rather negative image of Indonesia in general, since the fall of the Soeharto regime. The second has to do with China, as foreign investment continues to pour into that country as investors are rather obsessed with it, so they tend not to look at other countries.

The third is that Indonesia, compared with other Asian countries, did not emerge from the economic crisis of 1997 as fast as other countries appear to have done, whether they are past the crisis or not. However, the public perception is that they have done it. In particular South Korea, Thailand and Malaysia, so Indonesia ranks rather low on that scale in any event.

Conclusion: The fourth-largest country in the world, the investment darling of the early 90s was already off the radar screen, before the bombings. And in this regard I only speak about investment in the real economy -- not the stock exchange; in my eyes that is mainly speculation. It was already very difficult to attract foreign investment before the Bali bombings and afterwards, of course, things did not improve.

With regard to tourism: The Bali tourism industry is now already impacted, hotel occupancy down to singe digits. With December usually being the peak month for the Bali tourism business, prospects are terrible and nobody expects a quick return to a level needed to sustain the tourist economy.

Perhaps by mid-year 2003, which is holiday season in Europe, the situation might be better again. Tourism could return to Bali, I am quite sure about this. Indonesians, apart from the Balinese, will probably be the first to forget about this disaster. There will be a tourism industry again in Bali, but not now.

Q: Do you foresee any fundamental changes taking place in the tourism industry as a result of the bombings?

A: There could be quite a blessing in disguise -- and I hope people don't take this the wrong way -- because while the bombs killed many, many people, and this is tragic, the bombs also hit what kills Bali. This particular type of mass tourism in Kuta that was targeted, I firmly believe, is one of the reasons why Bali is not in balance anymore and why this very sensitive society appears to be out of tune.

Bali has become a destination for mass tourism, which was not formulated in the tourism master plan. In fact, the opposite was asked for in Bali: To develop tourism in a very specific and careful way in order to keep the society of Bali intact.

That master plan is almost 30 years old and as far as I know there were no upgrades or revisions made. As a result, business has now taken over in Bali and the island has developed into what it is now. I have no doubt that Kuta is especially a case in point where unbridled tourism is destroying a society and an island. I have no doubt about it.

Kuta has become an awful place; it is much liked by a certain target group of tourists who, in my opinion, belong elsewhere, not Bali. Not in this religiously and culturally, very fine-tuned society. That this development has taken place in Bali is a tragedy in itself.

I still hope that in the aftermath of the bombing it is also time to reflect on the future of Bali, and perhaps this terrible tragedy will lead to some introspection that will result in a more healthy and balanced development. Economically, the island is of course also no longer in balance. More than 70 percent of all Balinese depend on tourism now, and this is clearly a mono- structure. For instance, agriculture has declined drastically and for many years Bali has had to import rice.

The island is no longer self-sufficient in rice production -- it even used to be an exporter -- because the people work in the tourism industry. Some lessons might have been forgotten; Pelita (five-year development plans) should possibly be recalled. This is only one indicator that Bali is out of tune; it is of great concern to me.

Q: What steps should be taken to turn the Indonesian economic situation around?

A: We have to face the reality that some companies had already left Indonesia, before the Bali incident, for other reasons -- policy reasons. And this is something that only the Indonesian government can remedy. There are certain things that hurt the economy very much. Take, for example, imports from China almost destroying the local garment and textile industries: However, now, finally, at least there are efforts being made to curb these shady imports ...

Q: Through what methods -- tariffs?

A: Do they pay any duties at all? I'm not sure, because if they use the normal "submarine system" they just slip in with their products and underinvoice anyway. They simply don't pay what they should pay; otherwise the products could not be that cheap. Impossible. The government has to block this and furthermore bring about customs reform as well.

Everyone is waiting for this but I admit it will be very difficult. Very difficult and complicated because you hurt the interests of other people, not to mention the customs people. I understand that, but something has to be done.

We have big problems with taxation. Foreign companies are at a loss as to what to do. There is the infamous labor decree, no. 150, which is probably the main reason foreign companies leave. Therefore, in many fields the government requires action, and businessmen are all waiting and wondering why concrete action is not being taken to resolve these issues.

This has nothing to do with terrorism, nothing to do with social-cultural problems: This is just economic policy action. The whole business community is begging for such action. If only the government would finally act decisively, then we again might have something to sell abroad in order to attract foreign investment.

Q: And as far as addressing terrorism is concerned?

A: The terrorism issue is long-term. It is very obvious to me that the solution through which this society will find peace again and is open enough to live in peace with the outside world can only take place in very close cooperation with tolerant and peaceful Islamic organizations such as Muhammadiyah and Nahdlatul Ulama (NU). Only with them.

The days are over when it was possible for a strongman such as Soeharto to enforce peace with a gun. The Army is not that strong anymore; in reality it appears to be in a sad state of affairs. In any event, this scenario is simply not possible with this democracy and civil society will not accept it.

Therefore, finding a solution to get the country out of this mess can only be accomplished through dialog with the huge Islamic organizations that represent the majority in this country. There must be a united effort.

Q: Do you believe that terrorism revolves around religion?

A: Of course it does -- not exclusively, but there is a strong connection. Here, and in Ireland as well, with Christians fighting each other. I wonder how politicians and intellectuals can so stubbornly deny this. Are they afraid of their own shadows? Only by recognizing this fact can solutions be worked out.

I do believe that through close cooperation with the representatives of the Islamic faith and their organizations in this country these problems can be overcome, only then.

Q: Are you referring to the entire spectrum? Fundamentalists and moderates alike?

A: Fundamentalists will remain fundamentalists; there is not much to be done. They are cemented in their beliefs. However, fundamentalists are not necessarily terrorists, the vast majority are not. They are peaceful but have extreme beliefs; they don't hurt or kill others. The moderate majority of Muslim are united in their stand to sort out these terrorists and isolate them. In this manner religion and terrorism could possibly be disconnected and the problem eventually solved, but only through cooperation, not conflict. If, on the other hand, the problem is not solved, the Indonesian tragedy could go on forever.

Q: Do you think the international media plays a role in the problems facing Indonesia?

A: The international media always reports negatively on Indonesian incidents. Take, for example, 20 people demonstrating in front of the U.S. embassy. There is a big splash on TV in America or Germany -- totally out of proportion. CNN and BBC people come here and leave, making an indelible mark on the public consciousness; that of a burned country.

In reality and compared with other countries Indonesia is not the disaster the international media portrays it to be. It is ridiculous sometimes.

Q: What is, in your opinion, the greatest barrier Indonesia has to overcome?

A: Clearly, the lack of knowledge, education and training. The worst legacy of the New Order may be the sad state of schools and universities. How do young Indonesian intellectuals rank in international comparison? Compared with other countries, especially in Asia, Indonesia appears to be not too competitive. Is it one generation lost -- or two? The availability of masses of unskilled or semi-skilled workers was helpful in the past, but that leaves the country in a position where it always has to fight off others with still cheaper labor. Could the future be lost already? We should probably alter the famous slogan, "It's the economy, stupid", to, "It's the brains stupid"!