LIPI urges RI to maintain ties with the U.S.

Tertiani ZB Simanjuntak, The Jakarta Post, Jakarta

The National Institute of Sciences (LIPI) advised the government on Tuesday to respond wisely to mounting demands by radical groups to sever diplomatic ties with the United States so as not to avoid great losses to the country.

"We will not gain any economic benefit from cutting relations with the U.S. In return there would be great direct impacts on Indonesia if ties are cut, not to mention indirect impacts," LIPI economics researcher Wijaya Adi said.

Disclosing a scientific forecast on the losses and the benefits of severing ties with the superpower, Wijaya revealed that Indonesia's exports to the U.S. in 2000 were valued at US$8.5 billion or 13.6 percent of total exports, which consisted mainly of labor-intensive products.

By comparison, Indonesia's imports from the U.S. in the same period were valued at $3.4 billion or 10.1 percent of its total imports. Most of the imports were raw materials or machines.

LIPI also calculated that Indonesia might lose $3.77 billion of total U.S. investment -- the sixth biggest in the country -- should diplomatic ties be severed, while other countries would likely follow the U.S. and cancel their foreign investments. Indonesia could also lose another $633.2 million in foreign exchange from tourism and $184.5 million from bilateral aid, Wijaya said.

Ties between the U.S. and Indonesia have generated job opportunities for at least 420,000 workers. Should they lose their jobs due to the cutting of bilateral ties, they would further burden the country where over 31 million people are already unemployed.

Even though LIPI suggested that the government not bow to demands from radical groups, it said pressure should not be put on the groups for fear that such actions could spark unrest among the grass roots.

Wijaya reiterated that it would not be easy for Indonesia to switch markets instantaneously as an alternative to other regions -- such as the Middle East or Asia Pacific countries -- because of the current unfavorable economic condition in the world market.

Wijaya's colleague, Mahmud Toha, argued that since the early 1990s, there had been an oversupply in the world market, where all countries strived to search for new markets for their products in other countries.

"By cutting economic relations with one country, Indonesia could not easily enter other markets which already have their own suppliers," he added.