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.