To Tokyo, with inability to realize own promises

To Tokyo, with inability to realize own promises

Kornelius Purba, Staff Writer, The Jakarta Post, Jakarta,
korpur@yahoo.com

During her three-day state visit to Tokyo, where she will stay
at the Akasaka Palace, President Megawati Soekarnoputri will
clearly feel a rather different atmosphere from her previous
visit to Japan in 2001, and the Japanese media will likely pay
more attention to her second visit to the country. Japanese
investors were ready to listen to her speak about the progress of
her own reforms promise on the economy and good governance when
they met with her in Tokyo in September 2001.

For the President, an official assurance from Tokyo that it
will continue to keep financial loans flowing to Indonesia,
including those to fill the financial gap in the state budget, is
very important as part of her exit strategy from the
International Monetary Fund (IMF) six-year rescue program for
Indonesia. Without the IMF program, Indonesia will find it very
difficult to go to the Paris Club for rescheduling of her foreign
debts, while Tokyo, as largest moneylender to Indonesia, has
voiced its inclination to go to Paris without IMF backup.

However, deep concern over the ongoing war in Aceh will
clearly attract the most attention from her Japanese counterpart,
Prime Minister Junichiro Koizumi, when they meet next Tuesday. In
a very carefully worded statement, given the domestically
sensitive issue for his guest, the Prime Minister will indicate
his government's deep concern at the ongoing war in Aceh and
Japan's readiness to help Indonesia end violence and chaos in the
rebellious province.

Koizumi is expected to be able to persuade Megawati, through
peaceful means, to resolve the Aceh problem by using the vigorous
power of the yen, without irritating the President, who firmly
believes the military option is the only solution for the
province.

Koizumi's government has a strong interest in the restoration
of peace in Aceh because it has now assumed the new role of
peacemaker or negotiator, helping conflict-torn countries to
settle peacefully their domestic problems, while sticking to
noninterference principles. This is a departure from its
traditional diplomatic approaches, which focus attention merely
on economic interests. Japan has also been trying to help the Sri
Lankan government in its negotiations with the Liberation Tigers
of Tamil Eelam (LTTE).

Along with the U.S. and the World Bank, Japan, in December,
hosted an international conference to discuss the reconstruction
of Aceh, just six days before Indonesia signed the Cessation of
Hostilities Agreement (COHA) with the Free Aceh Movement (GAM) on
Dec. 9 last year. And just a few days before Indonesia declared
war against GAM last month, Tokyo again tried in vain to prevent
the war by hosting negotiations between Indonesia and GAM.

It will be difficult for Koizumi to accommodate Megawati's
economic needs if the President is perceived to have failed to
allow more effective opportunity for Japan's Aceh diplomacy to
work, because Japanese taxpayers have now become more critical
about expenditure of their money on Indonesia.

On the economy, a Japanese finance ministry official recently
pointed out that it would not be very difficult for Indonesia to
return to economic growth -- even without the IMF program --
although the country's microeconomic situation is still far from
the norm it was before the economic crisis in 1997. For him, the
government's own ability to be disciplined in carrying out
economic reforms is the most important requirement after the IMF
program is over.

Conversations with Japanese private investors operating in
Indonesia indicate a more gloomy picture, because, according to
them, they have not seen any significant progress in attracting
foreign investment. Their concerns over increasing corruption
within the government, chaotic law enforcement, worsening
infrastructure like ports and power supply, and rising labor
disputes, are effectively unanswered, despite the President's
promises to meet their demands.

Megawati has chaired an investment task force, but some
Japanese businessmen have said with frustration that she has
failed to achieve any progress because the investment climate has
continued to worsen.

A senior Japanese banker pointed out that investors would not
wait until next year's presidential election to pour in their
money, provided they could see convincing progress in the
government. They do not worry much about who will govern
Indonesia next year, because they do not believe a totally
surprising candidate will win the elections.

The construction of infrastructure projects has practically
stopped in the last six years. Japan has expressed her readiness
to finance more big projects, like Tanjung Priok port, as part of
the official development assistance (ODA) to Indonesia, but
Indonesia is reluctant as it will create new burdens and because
it also has to provide rupiah financing for the projects. Liberal
Democratic Party (LDP) Secretary-General Taku Yamasaki --
regarded as the strongest lobbyist for Indonesia-- will surely
raise the issue when he meets her next Tuesday.

For the President, getting fresh loans and economic
commitments from Japan is easier than convincing Japanese
companies that it is the best time now for them to expand or
bring new investment to Indonesia. She will be a little bit
surprised when Japanese top executives bluntly tell her that they
have lost patience, if not confidence, in her government's
investment commitment. For some, investing in Cambodia is seen as
better than here.

Just a small item of advice for the President: It would be
very advisable not to repeat her mistake in 2001 when she did not
feel it necessary to exchange business cards with Japanese
businessmen. At that time, many of them were upset because she
simply left after delivering a brief speech at the Imperial
Hotel.

For Japan, Indonesia is only one of her global partners --
regardless of the strategic importance of Indonesia -- while for
Indonesia, Japan is her most important partner. Many Indonesians,
including politicians, still believe, erroneously, that their
country's position is so important to Japan that she will not
have the guts to say "no" to Indonesia.

By the way, this is a golden opportunity for Indonesian
Ambassador to Japan Abdul Irsan Gani to prove that the House of
Representatives was totally wrong in its "objection" to his
candidacy for the post, by showing his ability to ensure the
President does not take the bilateral ties for granted.