RI refutes Taiwan threat to cut economic ties

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."