Taiwan threatens to cut economic ties with RI

Agencies, Jakarta

Taiwanese parliamentarians angrily urged the Taipei government on Wednesday to halt all investment in Indonesia in response to Jakarta's decision to refuse a visit by President Chen Shui-bian.

"If the Indonesian government does not atone for itself properly, we should immediately stop our economic aid and procurement programs," opposition People First Party MP Sun Ta- chien was quoted by AFP as saying.

"We have invested US$17 billion in Indonesia and have provided some 100,000 job opportunities to their workers here in our country," said Sun Kuo-hua, a parliamentarian from the leading opposition party Kuomintang.

"How can we tolerate such humiliation?" he asked.

Taiwan is the fifth-largest foreign investor in Indonesia.

Deputy Economic Minister Yin Chi-ming suggested to reporters that Taipei could exclude Indonesia from its list of countries receiving investment from Taiwan as it reassessed its "go south" investment policy.

He said the economic ministry planned to suspend a project to develop an export-processing zone in Yogyakarta. Details were not available.

Yin, when asked if, following the spat, Indonesia would be on the list of countries to which investment would be reviewed, said: "We will make a proper assessment."

As of October 2002, Taiwanese businesses had over 800 investment projects in Indonesia valued at US$17.68 billion, according to government statistics.

President Chen was forced to scrap his planned one-day visit to Yogyakarta on Sunday after a media leak prompted a strong protest from China.

Bowing to pressure from Beijing, Minister of Foreign Affairs Hassan Wirayuda said on Monday that Indonesia had made it very clear that "we do not expect to facilitate his (Chen's) visit to Indonesia".

Commenting on Taiwan's threats, Hassan said that "business, trade relationships, investment relationships are considered based on profit only".

"If they (investors) feel comfortable and there is hope of (making a profit), it doesn't take diplomatic ties to make it work."

There is, however, a risk of undoing the progress the two countries have made in economic ties.

Taiwanese Vice President Annette Lu said the Indonesian government actually helped plan President Chen's visit. She told the local media that Chen's visit had been arranged well in advance and that the two presidential offices had been in communication.

"Around 11:30 p.m. on the eve of Chen's departure (Dec. 14) everything was going well and Chen was still planning to go ahead with the visit. However, Indonesian President Megawati Soekarnoputri convened an emergency meeting around midnight and then the situation changed quickly," she was quoted as saying by the Taipei Times.

The deputy secretary-general of Taiwan's Presidential Office, Joseph Wu, said it took three months to prepare the visit.

"We were hoping to achieve two things during the visit. First, the administration wanted to express Taiwan's humanitarian concern about the terrorist strike in Bali. And Chen had intended to try to foster trade corporation in Yogyakarta province," Wu said.

He refused to identify the Indonesian officials who were in charge of helping to plan the visit, but he did say that Megawati's husband, Taufik Kiemas, played an important role in helping to facilitate the plan, the Taipei Times reported.

This diplomatic blunder is a sign of Indonesia's difficulty in adhering to the "One-China" policy while also fostering economic ties with Taiwan.

Indonesia is in dire need of foreign investment, and Taiwan has long been a vital investment partner. But in recent years, China's increasingly outward looking economy has made it a new force in the region that Indonesia must consider.

Against the backdrop of China's growing economic presence in Southeast Asia, Taiwan also stands to lose unless it strengthens its presence here.

In August this year, Vice President Lu was able to visit Bali and, on her way back through Jakarta, she met with Indonesian officials. The Indonesian government denied an official meeting had taken place and downplayed the significance of the visit.

The visit came just days before China announced the winner of a $10 billion tender to supply liquefied natural gas (LNG) to the country, in which Indonesia took part.

Although Taufik has no official capacity, he reportedly led a team of Indonesian ministers to China to promote its bid.

Indonesia lost the contract to Australia, and Taiwan, a long- time buyer of Indonesian LNG, immediately proposed buying the LNG.

In what now looks like a tit-for-tat strategy, China agreed on Tuesday to a $400 million loan agreement for Indonesia. It is the first ever loan deal between the two countries.

On Wednesday, a visiting Chinese government delegation, led by Vice Minister of Foreign Affairs Wang Yi, hailed Indonesia's decision to refuse Chen entry into the country.

Just as Chen had planned, the Chinese delegation also plans a visit to Yogyakarta, although the purpose of the visit is not clear.