'It's the brains, stupid': Kleinsteuber

'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"!