CLEARING HURDLES, KEEPING ROADBLOCKS

                               This bus isn’t moving fast

It’s not too difficult for outsiders to get the gist of Indonesian economics.  That’s because terms, like ‘administrasi, deficit, bangkrut, fiskal’ and others have been pinched from English and tweaked.

The latest is ‘omnibus law’, a favourite with President Joko Widodo in a bid to slash and compost the vines of red tape that strangle the business landscape.  The problem is few understand the meaning so use their default setting – suspicion.  

Labour unions are opposing government reforms designed to make investors feel easier about leaving their deposits in Southeast Asia’s biggest economy.  Consolidating legislation would certainly help, though only if the public servants agree to implement.

As changes could lead to a reduction of stamping and photocopying tasks among the Republic’s almost five million bureaucrats, Widodo’s enthusiasm isn’t widely shared.

He reportedly said it would take half a century to revise each law individually, so why not make a bundle, call it an omnibus and drive it through the Parliament? 

There are more than 1,200 articles in 80 laws the President thinks need to be bashed aside by the bullbar. “Start now,’ he said. ‘It could all be done in 100 working days.’

He’s about the only person who thinks that timetable practical.   Workers fearing lower wages and loss of entitlements have been protesting, disbelieving government claims of more jobs through foreign investments. 

 Around 70 per cent of the nation’s workforce is informal; insecurity is widespread along with its twin, distrust.

The big end of town is being offered cut price tickets to jump on the omnibus.  In exchange for a comfy seat business tax will drop from 25 per cent to 20 per cent within three years.

That sounds fair enough – though only till it’s remembered that many entrepreneurs have refined the art of keeping their duties, fiscal and moral, to a minimum by sending profits overseas.  A lower rate on next to nothing is not a big inducement. 

According to the OECD ‘tax revenues are low relative to other emerging economies … (and) compliance remains a major challenge.’  Indonesia’s tax-to-GDP ratio is 12 per cent, less than half that of Australia’s.

VAT is applied where a business keeps records.  For a meal in McDonald’s, or any chrome and plastic eatery with a till, expect a tax and service charge of 21 per cent.  Use a streetfood stall or local café and there are no additions.  Cash still reigns - many shops won’t accept credit cards.

The omnibus bill is the latest bid to boost the tax take while reducing costs.  An earlier attempt thumped the nationalism drum, appealing to the megarich to repatriate the earnings they’d parked abroad in return for dropping tax avoidance prosecutions.

As patriotism is not a relative of capitalism the results were unimpressive. At the time (2017) it was reported that only 32 million were registered taxpayers and less than nine million submitted returns.  The Republic’s population is 270 million.

The government reckoned it could collect about one thousand trillion rupiah (US$ 74 billion) from two million rich listers, but got run down by reality.  Less than 150 trillion rupiah was recovered from just one million citizens.

These measures, though fine in intent, don’t tackle the key issue that’s wounding the nation’s economy and international reputation.

Last year Phil Turtle, National President of the Australia-Indonesia Business Council, had the courage to be blunt.  He told the Australian Parliamentary Joint Standing Committee on Treaties:  

“When I'm talking to Australian businesses about contemplating Indonesia, it's a bit like the real estate saying —location, location, location — it's corruption, corruption, corruption.”

Indonesia ranks 89 in Transparency International’s corruption perception index.  Australia is in 13^th place.

Despite these flaws there’s no outward evidence of a looming financial crisis.   Widodo’s first five-year term (2014-2019) was marked by huge infrastructure projects largely funded by loans from China and Japan.

Toll roads, railways, ports and airports have been built at astonishing speed. A new US $31 billion capital in Kalimantan, the Indonesian province on Borneo Island, is being planned to replace polluted, overcrowded and sinking Jakarta.  Almost 70 people have died in city floods this wet season. 

Last year the nation owed US $383 billion in foreign debt, a rise of 7.2 percent on the previous year. Bank Indonesia appeared unworried, claiming the increase came from government borrowings.
This year the United Arab Emirates offered US $23 billion for more infrastructure and energy projects.  The money will go into a new sovereign wealth fund, also part of the proposed omnibus laws.

Inflation seems to be under control.  The government forecast three per cent last year but the figure was 2.72.  Sudden food and fuel price jumps have triggered mass protests in the past so keeping the economy stable is a political necessity.

While the Anglosphere has been obsessed with the trivial doings of the regal Brits, Indonesians have been gripped by tales of oligarchs steering luxury cars around taxation roadblocks.

They’ve allegedly been hiding their Mercedes and BMWs ownerships by registering them in the names of lowly employees.  Most couldn’t raise the down payment on a motor scooter yet on paper they’re proud owners of Ferraris.

Bemused foreigners might ask how these vehicles could get into the country without owners paying duty, and then escape detection when driven around Jakarta.  One who didn’t was Ari Askhara, president director of the government-owned airline Garuda Indonesia.

He was sacked after allegedly smuggling a disassembled Harley Davidson motorcycle and Brompton folding bicycles on a new Airbus A330-900 being delivered to the airline.  The manifest apparently listed the parts in the names of employees, but someone dobbed in the boss.  

Revenge or conscience?  If the latter then things are looking up.

First published in Pearls and Irritations, 27 January 2020:
https://johnmenadue.com/duncan-graham-this-bus-isnt-moving-fast/

ZERO HOUR? LATER, THANKS

Coming to naught – someday   

Roadside seller of new banknotes for Idul Fitri celebrations.
The price is ten per cent above face value.

                                                     

It was clearly a bargain – and the alert shopper was shouldering her bag into the ready-to-buy position; an elegant batik blouse for Rp 499 in Indonesia’s popular Matahari shop. The well-established outlet is known for discounting but this was too good to miss.

The target moment was brief. One step closer and another symbol became clear – the letter ‘k’, short for ‘kilo’.

The middle-class department store and other big retailers can use this pricing because the clientele is financially literate.  Buyers understand that the basic monetary unit in Southeast Asia’s largest economy is not one rupiah – but a thousand rupiah and has been for many years.

So why not stop playing around and officially scissor the last three zeroes?  It’s called redenomination and the term is as awkward to say as the currency is to handle.  So Bank Indonesia and the Government are yet again pushing the idea into the nation’s conversation as a way into its wallets.

With the exchange rate stubbornly stuck above Rp 13,000 to the US dollar, a thousand rupiah equals between seven and eight US cents.  That’s enough to buy one cigarette.

Rp 1,000, 500, 200 and 100 coins are getting rare. The smaller ones are more likely to be pocketed in taped bundles to make Rp 1,000.  

The largest note is Rp 100,000 (US $7.50).  Carrying rupiah is burdensome compared to the Malaysian ringgit (4.3 to one greenback) and the Singapore dollar (72 cents). Western holidaymakers in Bali filling their bags at ATMs dub the rupiah ‘funny money’ and assume it means the economy is in strife.

It’s less amusing in Vietnam where carrying away 2.3 million dong after exchanging one Benjamin (US $100 note) needs a backpack.

“We’re not there yet but the arguments for redenomination of the rupiah are compelling,” Professor Candra Fajri Ananda (right)  told Strategic Review.

“I think it would be good for the country and the economy. It will stimulate growth and lift our international status. But I also know it will take time and a massive public awareness campaign.

“Redenomination is hard to say and often confused with devaluation (imposing an exchange rate) which is entirely different.  Indonesia is still a largely cash economy and most people don’t use banks.”  Surveys show there are only 60 million accounts in Indonesia.

Ananda, 43, Dean of Economics and Business at Malang’s Brawijaya University has been appointed to work with the National Parliament’s Committee 11.  This handles Finance, the National Development Planning Board, banks and other financial institutions. He takes up his three-year posting this month [June].

 

The need for redenomination is widely accepted by professionals in business.   Though the logic for change is clear, the execution could be catastrophic if mishandled.

India has given skittish politicians a sobering example of how good ideas crumble when governments meddle with money: Last year PM Narendra Modi ordered banks to exchange 500 (US $7.50) and 1,000-rupee notes (US $15) for new bills in a bid to stop hoarding and tax evasion.

 The New York Times reported the decision threw ‘the economy into turmoil, with many millions of people forced to line up at banks to deposit or exchange their old bills’.

In two years Indonesia will elect a new leader through popular vote. If he nominates the last thing incumbent President Joko ‘Jokowi’ Widodo wants is a loss of confidence from electors who might think juggling the rupiah a trick to clip their salaries and savings.

Jokowi has publicly endorsed the latest plan to delete zeroes and says he wants it to be a priority in this year’s Prolegnas (National Legislation Program).

However should he win in 2019 he’s built in a personal escape hatch by suggesting a seven year education campaign.

This will take the nation up to 2024 – an election year when the impact of redenomination will be someone else’s hurdle.  Indonesian presidents are restricted to two five-year terms.

US political scientist Professor Layna Mosley has studied redenomination and found ‘government concerns about credibility and the effect of currencies on national identity’ strong factors in deciding whether to cut the zeros. In brief it’s politics and emotion rather than economics.

About 40 million (15 per cent) of the Indonesian population is considered poor by the World Bank. Numeracy levels are low. According to UNICEF ‘a significant number of children stop their education after completing primary school. One in ten children who should be in classes at junior secondary level are not enrolled.’

Distrust of authority is widespread along with conspiracy theories.  Persuading all citizens to understand and accept currency changes would require a massive investment in building community acceptance.

The present enthusiasm for change is an echo from past calls. In 2010 and again three years later Bank Indonesia was assertive. So was Finance Minister Agus Marto Martowardojo.  He was reported as saying:

"We have now achieved a good level of national economic development but it is not yet supported by an efficient currency. The rupiah must now be redenominated as it has become inefficient.”

The inefficiency remains. Nothing happened because the economy was suddenly said to be unstable.  Ananda claims that’s not an issue now as inflation (currently 4.17 per cent) has been steady for several years.

“Financial illiteracy is a problem though the situation is improving,” said Ananda. “As part of the change we’d need an authority where people could complain and get action if traders tried to exploit confusion.”

As no budget has been announced to run an awareness program Indonesian shoppers will continue putting up with spending half a million rupiah for a batik blouse – though still a good buy at US $37.50.

##

First published in Strategic Review 6 June 2017: http://www.sr-indonesia.com/web-exclusives/view/coming-to-naught-someday

LIVING TO WORK AND WORKING TO LIVE

Trapped under the yellow yoke   

                            

The mountain landscape is curvaceous and feminine, but Kawah Ijen is male.  No female could be so brutal to her children, nor belch so rudely.

You can smell his acrid breath from far away, even when filtered through plantations of coffee and forests of cloves.  It’s an odor so noxious it should repel, yet it lures toilers who sacrifice their health in his service.

What they seek is colored gold, but it’s not the precious metal.

Most days, starting long before dawn, men jog down the mountain carrying raw sulphur slabs in baskets across their backs. Each load equals the weight of four full water-cooler barrels.

The baskets flex and creak and squeak in pain. The men work in silence; the bamboo groans for them.

The story of the Kawah (crater) Ijen sulfur miners of Banyuwangi, East Java is well known overseas as an example of a hazardous job in an appalling work environment. 

It’s been featured on BBC television and in the mainstream press.  A new documentary Where Heaven meets Hell by American cinematographer Sasha Friedlander has already won several international awards.

Consequently thousands of tourists, mainly from Europe, (though few from Australia and Indonesia) come to wonder at the magnificent scenery– and be shocked by the men’s lot.  Some give money to the miners, or buy sulfur souvenirs.

The men work in conditions that mirror 18^th century Europe before industrial relations reforms and the rise of organized labor. Another view is that they are Indonesian Luddites, fearing change and resisting available improvements.

The issue is far more complex than workers’ health and safety, though these are critical.  Also in the same basket is the shake-up of government responsibilities following decentralization.

Failure by authorities to enforce proper working conditions and care for its citizens are other factors in a business that’s allowed to continue despite the obvious dangers.

Sudden spurts of gas can kill. A slip into the hot water, said to be the world’s largest acid lake, could cause a ghastly death.  In 1976 11 people reportedly died when a giant gas bubble blew out of the lake.

Every kilogram of the yellow mineral spewed from the volcano’s stinking bowels and lugged down the twisting, slippery mountain tracks earns a miner Rp 780 (US$ 0.67). The men say they want a minimum of Rp 1,000 - about ten US cents more.

The world price varies, but averages more than ten times the men’s current pay. With a load of 80 kilos twice a day a man can earn 124,800 rupiah (US $11.50).

That’s far better than the East Java base monthly wage of around Rp 1 million (US $88) – though not all employers pay even this. The men say they have no welfare benefits, no continuity of work or accident insurance, though this has been promised.

The 300 workers have families to support so more than 1,000 people depend on the mine, making the average individual income just above the UN poverty line of US$2 a day.  So this is also about the state of the economy in faraway places. The much boosted ‘emerging middle class’ isn’t surfacing here.

Technically the miners are freelance contractors paid in cash on the spot.  The buyer, PT Candi Ngrimbi has a monopoly on the trade.

Budi Wahono, head of mining in Banyuwangi Regency denied the government was indifferent to the workers’ plight.  He said they’d been issued with helmets, masks and boots, but many didn’t want to use them.

Responsibility for licensing the mine was being moved from the province to the regency.  “The company’s six-year permit expires this year and new local regulations will be introduced,” he said.

“Royalties aren’t paid by the company but it’s taxed 25 per cent on earnings and has to pay for surveys and mapping.

“If it’s true that sick miners are still paying hospital fees then we’ll investigate and try to improve communications.”

(

SAMSURI’S STORY

Samsuri (left) with  Kholik from the Banyuwangi People's Association

”For almost 15 years my father, Arifin, worked as a sulfur miner at Kawah Ijen.  Every day he’d tramp up the three kilometer dirt path to the 2,380 meter summit, then a further 200 meters down a narrow track between boulders to get to the source.

“Ceramic pipes have been rammed into a volcanic vent.  Molten sulfur flows out onto the rocks and hardens.  The men break it into slabs and then become porters, carrying it in baskets up a slope of around 50 degrees.

“They can only labor in the morning. After noon the gas clouds get too thick. The turquoise crater lake looks lovely but the water is more corrosive than battery acid.

“I hated my father’s job. I first saw him working when I was 14, and it was awful. Now I’m almost 30 and nothing has changed in the men’s work conditions.

“Dad was always exhausted and seldom had enough money for his children. Although many sons follow their fathers into the mine I was determined not to – and so was my Dad. He pushed me to stay at school and somehow found the rupiah.

“My father quit about ten years ago to become a farmer.  He’s fitter and happier.

“I went to university in Malang to study Indonesian language and literature.   I had to do this to show other young people in my village that there’s a way out.

“Now I teach at an Islamic school.  So does my wife.  I also act as a tour guide and activist. I want a better deal for the men.

“Their job could be easier. A mechanical pulley could be used to bring the sulfur slabs to the crater rim and then taken in wooden carts down the mountain where the track is wide enough.

“But the government won’t allow any machines in the park so it condemns the men to do everything by hand.”

(This was denied by the regency’s Budi Wahono.  “The men don’t want to use machines because they think that would reduce the number of jobs,” he said. “So they stick to traditional methods.”)

“Some foreigners in Bali have organized handouts of second-hand clothing for the men.  They say this is ‘to bring a little sunshine into their dull lives’.  It’s a well meaning gesture, but wrong.

“The men have dignity and pride.  They work together and enjoy the companionship that goes with team work. They are cheerful.  They don’t want pity. They need better conditions and a fair return on their labor to buy what they want.

“We invited the Banyuwangi Bupati (regent) Abdullah Azwar Anas to support us.  He came to the parking area (where trucks collect the sulfur) but didn’t go up the mountain.

“Unfortunately the men haven’t formed a union or cooperative to fight for their rights. The buyer has a stockpile of many tonnes while the men earn and spend the same day.

“They have no ability to save.  There are few other jobs available, particular for those with limited education.  The men are too afraid of losing work, though eventually that will happen.

“Most miners are middle aged to elderly. Young people don’t want to do this dreadful job, whatever the wage, so the mine will close –probably within ten years.  That’s because not enough people care for the men’s welfare.”

YELLOW PERIL

The Old Testament, revered by Muslims, Jews and Christians, talks of a hell of fire and brimstone reserved for sinners.

Brimstone is sulfur.

There are only two sulfur mines in Indonesia.  The other is on Mount Welirang, also in East Java, but the trade is smaller.  Most sulfur is now produced as a by-product in oil refineries.

After sorting and partially crushing, the sulfur mined at Kawah Ijen is used for sugar refining. 

Sulfur is used in a vast range of products from medicine to food to fertilizer and cosmetics.  It was once a popular cure for rashes.  The men say they don’t have skin diseases but most have grown large fleshy lumps on their shoulders where the bamboo yoke rid.

Many miners are toothless or have blackened teeth.  The acidic lake is seeping into the ground water used by villagers on the foothills, killing rice fields and damaging gums, though heavy smoking is also a factor.

Last year a 1.5 kilometer exclusion zone imposed when the mountain seemed ready to erupt.  But the miners kept working.

CLASSICAL DILEMMA

Yudi Santoso, 23, thinks he’s the youngest miner on Kawah Ijen. Although strong and sturdy he has yet to develop the stamina and stoicism of his older colleagues.  When he spoke to The Sunday Post he was carrying 72 kilos and settled for one trip.

“I don’t like the work, but what can I do?” he said. “If I could get a job in a restaurant the work would be easier but the pay less, around Rp 900,000  (US $78) a month.  I have a wife and child to support.

“I only completed primary school so don’t have a high school certificate that most employers want. Though not to be a miner.”

About Rp 35 million (US $4,000) raised overseas from showings of Ms Friedlander’s film has been used by Ikawangi (the association of Banyuwangi people) to pay for the education of miners’ children and start a library.

If there is a leader of the men it’s Madrusin, 43, who said the price of sulphur was high and the workers wanted their fair share. However discussions with the government and PT Candi Ngrimbi concentrated on medical care.

He said the miners were afraid of upsetting the company and the government because they might lose their jobs.

(First published in The Sunday Post 6 October 2013) 

##

SIGNS OF ECONOMIC PROGRESS

Who’d want to marry an economist?

Breakfast conversation would be a diet of fiscal responsibility, lunch the balance of trade and supper a downturn in the marginal rate.

You’d ask for pie and get a pie chart.  Every analysis would be based on aged and elastic figures.  Particularly those with PhDs.

Better to live with a soothsayer.  You get to eat the goat so there’s a skull for the rituals and all those candles come in handy when there’s another PLN blackout.

Former President Megawati Soekarnoputri once revealed that she didn’t trust the statistics served up by her ministers.  So why should we ordinary folk believe the boosters now claiming Indonesia is booming and that more investors than surfers are heading for the archipelago?

Better to have faith in what we see. We may not know how to roll over a bill on maturity (unless the ageing spouse is called William) but we know when things are looking up in our suburb, and not just because the sidewalk potholes have been sealed.

The becak driver who used to park his pedicab under the mango tree at the intersection waiting for residents to clap for service now sits with his mates, a block away in a fancy shelter.

If you want him you need to know his mobile number or Blackberry PIN.

It’s the same with the baker and milkman.  Once breakfast might have been put off an hour or more, deliveries delayed by gossiping and indecisive customers.  Now we just jump the queue by phoning for a loaf or a liter.

How can homeowners enhance their status in society when even drab folk carry smart phones? How to distinguish between the refined rice and the husks? The new way to show off is to have the house tarted up.

Traditionally this happened only in early August ahead of Independence Day celebrations.  Then street-facing walls were given a wash and maybe even a tickle with the paintbrush.
Now the renovations are 7 / 31 as neighbors try to keep up with the Johannes. Even casual laborers shovelling out the rubble after knocking down last year’s feature wall  arrive on motorbikes.  For lunch they expect chocolate pastries from the new bakery rather than instant noodles.
Builders’ supplies, blokes’ sheds where nails are bought by the kilo and you have to know the difference between a centimetre and a centipede to shout an order, are yielding to airy home improvement stores.
Here knowledgeable staff don’t sneer at your ignorance (well, not to your face) just as long as they can polish your plastic.
Many stock quality goods from Europe and the US, competing against lower price but shoddy materials from China.
Consumer protection laws may be a joke, but customers who have seen how responsible retailing works overseas are starting to set the pace in demanding accountability
Want a hot water system?  Your choice, Italian or German, three-year guarantee.  If this goes on the refreshing routine of splashing buckets of cold water scooped from a concrete tank will soon be a pastime of the past.
I’ve even seen costly Australian solar panels on the roofs of homes where the owners wear khaki and drive red-plated cars.  Maybe they work in ‘wet’ departments like the police, immigration or taxation.  They’d need hot water to wash the stickiness off their fingers.
No cash, no worries. Interest rates have tumbled and the banks hustle to lend.  Price tags seldom promote the real cost, only the monthly payments. 
If the 6.3 per cent growth rate does a U turn it could be 1998 all over again.  But this is Sunday morning, so let’s be positive
Economists could explain it all in historical terms, blame Keynes or the rise in the rimbali,  and fit the spending into a graph.  Not having their dexterity with data we’ll just report that things seem to be looking good where we live, and to search for an appropriate metaphor.
A car wash has just been installed.  So a bubble perhaps?


(First published in The Sunday Post 6 January 2012)

FREE TRADE AGREEMENT AT LAST. WORTH WAITING FOR?

CHEAP SHEEP: Primary produce is NZ's principal export industry - but lamb and beef is still out of reach for most Indonesians

Tariffs tumble – will prices follow?

On Tuesday 10 January the long awaited Free Trade Agreement between Indonesia, Australia and New Zealand comes into effect, slashing tariffs, the contentious taxes added to imports.

Tariffs delight local industries, particularly the sloppy and inefficient wanting protection against smarter overseas manufacturers. But they anger consumers seeking lower prices.

This FTA is hardly racing ahead of the pack. The original documents were signed in February 2009, part of an overall agreement embracing the ten-member Association of Southeast Asian Nations (ASEAN). The changes were expected to come into force on 1 January 2010.

However a further 18 months passed before Indonesia ratified the agreement – the last cab off the rank. Even then the engine may have been running but the gears weren’t engaged.

Last July the director general for international trade cooperation Gusmardi Bustami said he hoped the FTA paperwork could be completed and the deal finalised that year.

His optimism was misplaced, but in the labyrinthine world of trade diplomacy getting real results would test the most skilled and patient. If trade negotiators were developing cellphones we’d still be using housebricks.

Fortunately for NZ its trade minister had an insider’s understanding of Indonesia’s arcane bureaucracy. Before entering Parliament Tim Groser was a diplomat heavily involved in the World Trade Organization. In the mid 1990s he was the NZ ambassador in Jakarta and speaks Indonesian.

Domestic politics, largely driven by the meat industry fearing competition from Australian and NZ beef exporters, are believed to have been behind the delays.

The RI milk industry was also reported to be opposing the FTA. However the rising demand in the archipelago for dairy products seems to have placated local producers who are hard pressed to quench the thirst.

Will Indonesians now be licking ice cream made with milk from cows, not coconuts, and grilling prime Angus T-bones fresh from the lush pastures of the South Pacific? Some, maybe, but even with tariffs down costly steaks will still be off the menu for the majority. They’ll continue to get their protein from locally produced chicken, fish and tempe (soy bean cake).

And will Kiwis be enjoying barbecues lounging on outdoor furniture made in Indonesia? That’s already happening, though business has been constricted by buyers insisting only plantation timber is used.

There’ll be no snappy changes with the FTA. About 11 per cent of NZ goods currently have duty free access to the Republic. That figure will slowly rise to more than 90 per cent by 2015.

Nor will improvements be dramatic. Most tariffs on NZ imports are around five per cent, though ‘prepared foods’ are burdened with a whopping 25 per cent. Which is why your favorite processed cheddar might be handy on the supermarket shelf but still out of reach.

Will prices fall? Only if traders pass on the cuts. The more unscrupulous will argue higher costs absorb the savings.

Although politicians are trumpeting the agreement as a major advance (Mr Groser described it as “a high-quality, regional trade agreement that provides benefits to all of its parties”) Australasia will be the prime beneficiary getting easier access to ASEAN markets – around 625 million people.

Business between the nations currently favors sellers to the Republic. Indonesia is NZ’s ninth largest export market and not surprisingly the biggest in Southeast Asia. Kiwi meat and milk products – worth NZ$ 865 million (US$ 670 million) go to Indonesia. The ships return with goods like petroleum and paper products worth NZ$ 628 million (US$ 490 million.)

Australia’s trade in the region, boosted by mineral sales, is already worth about US$ 100 billion.

Kiwis shopping for archipelagic products need ample time and comfortable shoes, preferably made in Indonesia. A major retailer is importing, but shoes and sandals are seldom promoted by the country of origin. (The exception is Italy.)

Instead they are mixed with footwear from Malaysia, Vietnam and China, the major supplier of consumer products.

Unlike Chinese imports on sale in Indonesia the goods found in stores from Darwin to Invercargill are generally well made and guaranteed for a year or more. Tough consumer protection laws, backed by government departments and the courts, mean customers can return duds and get a rapid refund or smiling exchange.

In Indonesia buyers usually insist boxes are unpacked and devices tested before their eyes prior to purchase. Guarantees, if offered, last only weeks. Retailers in Australia and NZ demand their overseas suppliers maintain strict quality control.

That issue needs to be addressed by Indonesian companies seeking to sell in markets where consumers are kings and queens – and knaves rapidly routed. Slapping thick black varnish on cracked green-timber furniture will give Indonesia the shoddy goods image once held by China.

The Indonesian Embassy in NZ is planning a trade and culture fair later this year to boost business. In the past it has backed displays of batik, a material almost universally associated with Indonesia and widely admired.

However follow-up merchandising hasn’t been effective, raising the question: Are Indonesian exporters serious about building markets in the south?

The problem is that many manufacturers seem happy supplying the domestic market, expanding in number and wallet size, particularly the cashed-up middle classes. NZ has only 4.4 million people, about the number living in Surabaya. Australia’s 22 million is much less than Jabotabek’s 28 million.

By contrast Australasians have to export or perish. That’s made us aggressive sellers and innovative marketers. Tariffs haven’t been the only problem. Although Indonesia is NZ’s nearest Asian neighbor it’s a long haul getting goods to the Republic. In the way is the big southern continent, its major competitor.

Glaciers have melted and species become extinct since free trade talks began, but the agreement removes barriers that for too long have been used as excuses by tardy traders. This should be good news for the public.

Governments have unlocked the gates. Now it’s up to business to push them open.

(First published in The Jakarta Post 10 January 2012)

##

FACING INDONESIA'S PROBLEMS CLEARLY

Indonesia has changed in the past decade and so must our attitudes, according to Andrew MacIntyre from the ANU and Douglas Ramage from the Asia Foundation writing in The Age (27 May). Duncan Graham has a different take:
………………………………………………………………………………

Indonesia is changing – but MacIntyre and Ramage are jumping the gun by saying the country is a stable democracy.

Better to wait till after next year’s general election before commenting on the future of our over-populated and under-employed neighbor.

Apologists urge us to overlook the street protests, the outrageous statements by Muslim preachers and the government’s inability to cope with natural disasters as growing pains. If so they’ve been going on for far too long. Adolescence is overdue.

Jakarta’s chattering classes condemn President Susilo Bambang Yudhoyono for vacillating – a strange response for a former military man trained to be decisive. But they are not alone; disappointment with the man and his nation’s current experiment with democracy is widespread. It’s not all SBY’s fault. He heads a tiny party and has to juggle the labyrinthine politics of a parliament with a gaggle of opponents running multiple agendas.

Like Canadians he has to live alongside a giant and temper his policies accordingly. In this case it’s Golkar, the allegedly reformed political vehicle set up by the late dictator Suharto.

Vice president and millionaire businessman Jusuf Kalla chairs Golkar and is expected to be opposing his boss in next year’s election, handicapping decision making in the run up to voting.

Former president Megawati who heads the PDI-P party will probably try again for the top job. She’s been invisible since loosing power in 2004. Democracy requires a vibrant opposition offering credible comment and alternative policies, something Indonesia hasn’t experienced. There’s a dearth of bright young altruists seeking office so the same old names from the past get recycled.

In the vacuum rampant nationalism is breeding fast. No problem if it’s kept to culture but a real issue when opposing foreign investment and aid, demanding state controls, subsidies and other simplistic solutions to complex economic issues.

Xenophobia is on the rise and a challenge to Indonesia’s relations with the West. Religious intolerance is destroying places of worship and putting dissidents in jail. For most pluralism is a myth.

Australia has moved on since John Howard infuriated South-East Asia by being portrayed as the regional US deputy sheriff; Indonesia has not, and Kevin Rudd will have to work hard to change our image.

Indonesia has more than 40 million unemployed and under-employed, double the population of Australia. The middle-income class is growing, but not at the same rate as the poor. The gap between the haves and have-nots is obvious, ugly and an awful threat to internal stability.

The government continues to ignore its constitutional duty to spend 20 per cent of income on education. An estimated six million kids don’t go to school and 1.5 million teachers are said to be unqualified. Indonesian education is way behind other Asian countries and slipping fast.

Indonesia has not recovered from the Asian financial crisis of a decade ago. Her neighbors have bounced back. The US dollar continues to sit well above 9,000 rupiah and no improvement is in sight.

Short-term visitors think things are looking up because a few cranes have returned to city skylines. Most are building shopping malls, not improving the nation’s infrastructure. Badly run and poorly maintained transport systems along with an unreformed bureaucracy and a corroded legal system make doing business a continuous struggle. Claims for economic growth need to be considered sceptically: Indonesian statistics are notoriously elastic.

A mud volcano that started erupting in East Java two years ago has turned into a huge environmental and social disaster that has been handled appallingly by the central government.

Corruption has grown since Suharto fell, largely because decentralisation has opened further opportunities for graft conducted openly and brazenly. As the US-funded Freedom House report says: ‘… corrupt relationships between powerful private actors, government bureaucrats, politicians, and security officials infuse the political system and undermine it from within’.

There have been many changes, and some positive. The Indonesian press is the most vigorous in the region, though that doesn’t mean it’s professional, unbiased or widely read. There’s been a book-publishing explosion, but much is low-quality religious tracts and translated Japanese comics. Indonesian literature and film is still decades behind the rest of the world.

Australia has been doing well with training programs in education and administration. These need to be enlarged and expanded to have any impact.

Ensuring Indonesian language and culture are properly funded in our schools and universities is critical. Unless we understand our neighbors, their history and the problems they’re facing, misunderstandings are inevitable.

Australia’s military engagement with Indonesia should be viewed with caution. The Indonesian army has long been used as a political police force suppressing internal separatists; if stories from closed West Papua are true the force is being applied with brutality and demands exposure.

All this is not cause for despair; it should help prod Australia and Australians to work harder using fresh ways to improve relationships. That won’t happen if we think all is well and getting better.

Let’s retain the mystery and magic of Indonesia while deleting the suspicion and fear that affects so many Australians and aggravates relationships. But lets do this from a foundation underpinned by a clear understanding of present reality. The turmoil continues; this is a nation in transition.

(First published in OnLine Opinion 11 June 08)
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