RI-Malaysia relations remain strong in 2003

RI-Malaysia relations remain strong in 2003

Veeramalla Anjaiah, The Jakarta Post, Jakarta

The relations between Indonesia and its neighbor Malaysia
displayed a great deal of maturity and activity in 2003. The
dispute over Ligitan and Sipadan islands, the mass deportation of
illegal Indonesian workers and Malaysia's first leadership change
in a generation all failed to dent the strong relations between
the two Muslim-majority democratic states.

These issues underscored both countries' desires to nurture
cordial ties, while attempting to overcome the hiccups and
enhance bilateral relations.

Thanks to the rapport between the leaders of the two countries
and Indonesia's acceptance of the International Court of
Justice's judgment on Ligitan and Sipadan islands, relations
remained strong throughout the year.

The Hague-based International Court of Justice (ICJ) said in a
December 2002 judgment that both the disputed islands belonged to
Malaysia.

Though the ICJ's decision was a bitter pill to swallow,
Indonesia -- the world's largest Muslim-majority nation and
Southeast Asia's regional power -- accepted it in line with the
ASEAN spirit despite an uproar in its House of Representatives
that lasted for several months.

Indonesia is the chairman of the Association of Southeast
Asian Nations (ASEAN).

Bilateral ties became somewhat strained in late 2002 following
the mass deportation of thousands of illegal Indonesian workers,
a few of whom were even jailed and caned for resisting the
deportation process.

In an unprecedented move, Malaysia deported nearly half-a-
million illegal Indonesian migrants in a short space time and in
a manner that many considered "inhuman".

The Indonesian government had difficulty in coping with the
influx, and housed the returnees in tents near the border. A
number of people, including women and children died due to the
lack of sanitation and health facilities in the camps.

Demonstrating an ability to overcome its dissatisfaction in
deference to Malaysia's sovereignty, Indonesia respected Kuala
Lumpur's decision on the deportations.

Thanks to Indonesia's active engagement of Malaysia, both
countries -- which share a common vision of relative pluralism,
tolerance and equal opportunity -- have been enjoying close and
cordial relations since the end of the konfrontasi (1965-67) era
when the countries came to the brink of war.

In the context of longstanding relations between the two
countries, Malaysia's former prime minister Mahathir Mohamad said
in August 2003 that he did not see any hurdles in maintaining a
close relationship with Indonesia.

"There are no problems in our relations," said Mahathir. "We
find it easy to cooperate in all fields."

Malaysia's Foreign Minister Syed Hamid Albar also backed
Mahathir's view.

"Our bilateral relations are very good. We manage them very
well. We know that there are differences in approaches and some
sensitive issues. But we know how to overcome these differences
and handle those sensitive issues," Hamid Albar told The Jakarta
Post in Malaysia's new administrative capital, Putra Jaya, last
year.

He was referring to the ongoing thorns in the bilateral
relations, like the annual haze problem, migrant workers, illegal
logging, human trafficking, terrorism and border problems.

In 2003 alone, Indonesia's first female president, Megawati
Soekarnoputri, made three visits to Malaysia and met Mahathir
more than half a dozen times in various international forums.

Megawati visited Kuala Lumpur in February to attend Non-
Aligned Movement Summit, Kuching in August for annual
consultations and Kuala Lumpur again in October to attend the
Organization of the Islamic Conference meet. On Mahathir's part,
he attended his last ASEAN Summit in Bali, where Megawati bid
farewell to one of the great leaders of ASEAN and the builder of
modern Malaysia, with tears and a standing ovation.

With the retirement of Mahathir on Oct. 31, the rapport
between the Indonesian and Malaysian leaders has not ended.
Megawati met Mahathir's successor Prime Minister Abdullah Ahmad
Badawi to improve bilateral cooperation on Dec. 11 in Tokyo while
attending the Japan-ASEAN Summit.

Actually, Indonesia and Malaysia need each other. Malaysia
needs Indonesian workers to help support its growing agriculture,
industrial and infrastructure sectors, while Indonesia badly
needs foreign investment -- a rare commodity since the financial
crisis -- from countries like Malaysia in order to create new
jobs for its millions of unemployed youth.

Meanwhile, bilateral trade has been growing faster despite of
the 1997 economic crisis that plunged Indonesia into turmoil.

"In fact, Indonesia is our biggest trading partner in the
ASEAN region. And our trade with Indonesia kept increasing even
during the crisis period," said Malaysia's Minister of
International Trade and Industry Rafidah Aziz, who visited
Jakarta recently.

The total value of bilateral trade in 2002 was US$3.1 billion.
This was an improvement on the trade value in 2001, which stood
at $2.8 billion. Indonesian exports to Malaysia in 2002 were
recorded at $2.0 billion, accounting for around 4 percent of
Indonesia's total exports of $57.15 billion.

Indonesia's imports from Malaysia totaled $1.04 billion in
2002, an increase of 3.2 percent from 2001.

Jakarta expects that its exports to Malaysia will increase
this year. Indonesia's exports to Malaysia during the first five
months in 2003 already reached $886.77 million, while imports
stood at $416.35 million during the same period.

The bilateral trade balance with Malaysia has always been in
Indonesia's favor. For example, Indonesia enjoyed a trade surplus
of $992.5 million in 2002, $600 million in 2001 and $540 million
in 2000.

On the investment side, Malaysian investors -- whose total
investments in Indonesia cumulatively amount to $10.25 billion
since 1967 -- have shown a desire to buy more stakes in crisis-
hit Indonesia given the availability of land here for palm oil
plantations, and cheap assets and labor.

From January to June 2003, Malaysia -- the 11th largest
investor in Indonesia -- pumped $77 million into 23 projects.

Confusion and uncertainty arising from the newly introduced
regional autonomy laws as well as exorbitant land claims and high
compensation sought by the Indonesian villagers have forced a
number of Malaysian investors to raise their eyebrows and adopt a
cautious stance.

A few of them, however, had no intention of postponing their
plans, as in the case of the Palmerah oil and gas concession in
South Sumatra.

Malaysian oil contractor Tately & NV won the bidding for the
lucrative onshore Palmerah block, outbidding Indonesia's state-
owned oil and gas company Pertamina.

Malaysia's Commerce Asset Holding Berhad, one of the country's
leading financial conglomerates, also purchased a majority stake
in 2002 in Indonesia's Bank Niaga for Rp 1.05 trillion (US$114
million) from the Indonesian Bank Restructuring Agency.

Malaysian investors also invested Rp 1 trillion ($110 million)
in the palm oil, cold storage and timber sectors in West
Kalimantan. Oil and gas company Petronas is also tapping
investment opportunities in Indonesia's oil and gas sector.

Not withstanding the uncertain situation in Indonesia, current
conditions and geo-strategic interests mean Malaysia will likely
invest more in its neighbor, at least in the lucrative energy,
telecommunications, mining and infrastructure sectors. This would
be to the mutual advantage of both countries.

On the terrorism front, both countries have been cooperating
with each other by exchanging intelligence on religious militants
since the Bomb blasts on Bali island in October 2002. Defense
cooperation between the two Southeast Asian neighbors remain
close and friendly. Joint military exercises are also held
regularly.

With a visit to Jakarta next month by new Malaysian Prime
Minister Badawi on the cards, officials and business leaders must
make the most of the opportunities to further boost relations
between these two countries in 2004 and beyond.