Taiwan threatens to cut economic ties with RI

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.