RI refutes Taiwan threat to cut economic ties

Fabiola Desy Unidjaja and Dadan Witjaksana, The Jakarta Post, Jakarta

Vice President Hamzah Haz and House of Representatives (DPR) Speaker Akbar Tandjung tried Thursday to contain Taiwan's threat to cut economic ties with Indonesia following Jakarta's rejection of President Chen Shu-bian's planned visit last week.

They both urged Taipei to respect Jakarta's adherence to the One-China policy, and to avoid creating tension between the two countries.

"Although we do not have diplomatic relations with Taiwan, we call on them not to go so far; and they should respect Indonesia's policy," Hamzah said.

"If there is an issue between Indonesia and Taiwan, let's deal with it in a reasonable manner and not by turning this into a conflict," he continued.

Endorsing Hamzah's view, Akbar underlined that accepting Chen's visit would have drawn the country into a diplomatic tangle with China and that Taiwan should understand Indonesia's position.

"We call on Taiwan not to make such a drastic decision, as we do agree that business should go as usual, even if we do not have diplomatic relations," Akbar said.

President Chen was scheduled to make a one-day informal visit to Yogyakarta last week in a private capacity to discuss various investment issues with Yogyakarta Governor Sri Sultan Hamengkubuwono X.

Citing the One-China policy, which does not recognize Taiwan as an independent state, Jakarta told Taipei that president Chen was not welcome here and that he would be denied entry were he to pursue the visit.

Indonesia does not have diplomatic relations with Taiwan, although Indonesia maintains an economic representative office in Taipei.

The rejection prompted Taipei to cancel the planned visit; however, Taipei threatened on Wednesday to cut economic ties with Indonesia unless it "atones for itself properly."

Taiwan is Indonesia's fifth largest investor, with its current investment value of US$17 billion.

Taiwan is also one of the main destination countries for overseas Indonesian workers, with approximately 100,000 Indonesians working in Taiwan at present. Moreover, Indonesia is also one of the major tourist destinations for Taiwan holidaymakers.

However, Indonesia has more at stake in its relationship with Beijing, which has turned into one of the major economic powers in Asia, especially within the past five years.

China, the world's most populous country, entered the World Trade Organization (WTO) in 2001 and continues to expand its economic influence in Southeast Asia.

However, analysts have warned that Indonesia should be more gentle towards Taiwan, as Indonesia is in dire need of investment from any country, including Taiwan.

Chatib Basri, an economist at the Institute for Economic and Social Research at the University of Indonesia, said that if Taiwan's threat materialized, it would be a great blow to the country.

"We're going to lose potential investors we badly need at the moment, that's for sure, not to mention all the employment opportunities that Taiwan businesses have created so far," Chatib told The Jakarta Post.

Chatib, however, downplayed fears that Indonesia would suffer a severe economic setback should Taiwan carry out its threat.

"Although investors from Taiwan are currently ranked fifth in the country, over the last two years or so, investment had contributed only but a little to our economic growth. So, I do not think the impact would be so very damaging to the economy," he said.

He was referring to the fact that Indonesia's economy has been relying heavily on robust domestic consumption in the last two years, as investment and exports have yet to pick up to full swing.

Nevertheless, Chatib added that he was unsure that investors would really pull out of the country only because of a matter of diplomacy, as it runs counter to the nature of business.

"Business will come to where the money is. If they (Taiwan businessmen) still find Indonesia profitable, they would resist even their own government's policy," he said, "because at the end of the day, it's always the industry that has the final say on whether to quit or to continue to do business."