[Senate Hearing 109-407]
[From the U.S. Government Publishing Office]
S. Hrg. 109-407
U.S.-INDONESIA RELATIONS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON EAST ASIAN
AND PACIFIC AFFAIRS
OF THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 15, 2005
__________
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COMMITTEE ON FOREIGN RELATIONS
RICHARD G. LUGAR, Indiana, Chairman
CHUCK HAGEL, Nebraska JOSEPH R. BIDEN, Jr., Delaware
LINCOLN CHAFEE, Rhode Island PAUL S. SARBANES, Maryland
GEORGE ALLEN, Virginia CHRISTOPHER J. DODD, Connecticut
NORM COLEMAN, Minnesota JOHN F. KERRY, Massachusetts
GEORGE V. VOINOVICH, Ohio RUSSELL D. FEINGOLD, Wisconsin
LAMAR ALEXANDER, Tennessee BARBARA BOXER, California
JOHN E. SUNUNU, New Hampshire BILL NELSON, Florida
LISA MURKOWSKI, Alaska BARACK OBAMA, Illinois
MEL MARTINEZ, Florida
Kenneth A. Myers, Jr., Staff Director
Antony J. Blinken, Democratic Staff Director
------
SUBCOMMITTEE ON EAST ASIAN AND PACIFIC AFFAIRS
LISA MURKOWSKI, Alaska, Chairman
LAMAR ALEXANDER, Tennessee JOHN F. KERRY, Massachusetts
CHUCK HAGEL, Nebraska JOSEPH R. BIDEN, Jr., Delaware
LINCOLN CHAFEE, Rhode Island RUSSELL D. FEINGOLD, Wisconsin
GEORGE ALLEN, Virginia BARACK OBAMA, Illinois
(ii)
C O N T E N T S
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Page
Cleveland, Hon. Paul, Ambassador (Ret.), Arlington, VA........... 25
Prepared statement........................................... 27
Responses to questions submitted by Senator Lisa Murkowski... 54
John, Eric G., Deputy Assistant Secretary, Bureau of East Asian
and Pacific Affairs, Department of State, Washington, DC....... 4
Prepared statement........................................... 7
Responses to questions submitted by Senator Russ Feingold.... 62
Responses to questions submitted by Senator Barack Obama..... 67
Kunder, Hon. James R., Assistant Administrator, Bureau for Asia
and the Near East, U.S. Agency for International Development,
Washington, DC................................................. 11
Prepared statement........................................... 14
Responses to questions submitted by Senator Russ Feingold.... 65
Martin, Randy, Director, Global Emergency Operations, Mercy
Corps, Washington, DC.......................................... 47
Prepared statement........................................... 50
Responses to questions submitted by Senator Lisa Murkowski... 61
Murkowski, Hon. Lisa, U.S. Senator from Alaska................... 1
Obama, Hon. Barack, U.S. Senator from Illinois................... 3
Soesastro, Hadi, Executive Director, Centre for Strategic and
International Studies, Jakarta, Indonesia...................... 35
Prepared statement........................................... 37
Responses to questions submitted by Senator Lisa Murkowski... 58
(iii)
U.S.-INDONESIA RELATIONS
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THURSDAY, SEPTEMBER 15, 2005
U.S. Senate,
Subcommittee on East Asian and Pacific Affairs,
Committee on Foreign Relations,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:03 p.m., in
room SD-419, Dirksen Senate Office Building, Hon. Lisa
Murkowski (chairman of the subcommittee) presiding.
Present: Senators Murkowski and Obama.
OPENING STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM
ALASKA
Senator Murkowski. We will bring to order the Subcommittee
on East Asian and Pacific Affairs. Good afternoon and welcome
to today's hearing on United States-Indonesia relations. I
appreciate the witnesses' acceptance of the invitation to
appear before this subcommittee here this afternoon.
And before we get going, I would like to express my
appreciation and the gratitude to the people and the Government
of Indonesia for their generous offer of assistance to our
recovery efforts in the wake of Hurricane Katrina. And this
offer is even more impressive given that Indonesia is, itself,
still recovering from the devastating December tsunami.
In 2001, Congressman Jim Leach noted that, ``There is no
country in the world of such vital importance that is less
understood than Indonesia.'' And he made that comment in 2001,
and I believe that this statement still applies when it comes
to the United States-Indonesia relationship.
Shortly before we went on break in August, I had an
opportunity to meet with some members of the Australian
Parliament, and they urged me and the United States, as a
whole, to pay more attention to Indonesia. And, I think, for
some very good reasons. In our efforts in the war on terrorism,
we are also, unfortunately, battling the misperception of many
in Islamic nations that our actions target all Muslims. And,
while Indonesia's perception of the war on terror has changed
as a result of terrorist bombings in Bali and the Jakarta
Marriott, many Indonesians point to the repression of Muslims
around the world as the root cause of terrorism.
Indonesia, as the world's fourth most populous nation, is
home to, by far, the largest Muslim population of any nation
and provides a moderating influence among Islamic states. So,
if we want to improve our standing with the Muslim community
outside of the United States, Indonesia is, appropriately, a
good starting point. Accordingly, it is in the United States
interest to have a strong bilateral relationship with
Indonesia.
Following the destruction of the December tsunami, U.S.
efforts to assist the affected areas brought us tremendous
goodwill. And, rather than sit on our laurels, we must work to
build on that goodwill.
I'm pleased that Mr. Kunder, with USAID, is here today to
provide an overview of our continued work in Indonesia. The
people of Indonesia know who is working with them side by side
as they rebuild their communities. And, while media attention
of the tsunami aftermath has faded in the background, our
assistance efforts must remain strong.
Likewise, the United States must continue our efforts
against the avian influenza, or the bird flu. As part of the
supplemental appropriations bill passed in May, Congress
provided $25 million to help contain and prevent the spread of
the bird flu in the Asia region. The United States also
sponsored the attendance of four Indonesian officials from the
Ministries of Health and Agriculture to the APEC Health Task
Force Symposium held in July.
And the impacts of the bird flu are not limited to just the
health of the people, but the health of the economy, as well.
In the past year, Indonesia's rate of inflation was 7.84
percent, in part because the destruction of chickens due to the
avian influenza, which had led to an increase in the price of
eggs and chickens. According to Indonesia's Central Bureau of
Statistics, the increase in food prices was the major
contributing factor in inflation growth. Continued cooperation
on this issue is a win for United States-Indonesian relations
and a win for the people of both our nations.
Looking at other economic factors coming from a state whose
economy is heavily dependent on natural resources, it should
come as no surprise that I tend to pay attention to the energy
sector. Of course, right now we've got plenty of company from
those who are also looking at the high oil prices around the
globe.
Indonesia, however, continues a policy of energy
subsidization, and the high price of oil and gas on the
worldwide market is having a significant impact on Indonesia's
economy. The subsidies are expected to cost $13-$14 billion
this year, which I understand is about one-third of Indonesia's
federal budget.
The fuel subsidies distort economic development by
encouraging the inefficient use of energy sources. As an
example, Japan, which does not have price subsidies, is five
times more efficient with its energy uses than China, which
does subsidize its energy costs.
Indonesia's fuel subsidies have increased domestic demand
to the point that even with its vast reserves, Indonesia is a
net importer of oil. The increased demand for foreign monetary
reserves to purchase the oil has led to a 10-percent decrease
in the value of the rupiah. Combine this with the inflation
rate's nearly 8-percent increase, and the average Indonesian's
domestic buying power is considerably impacted, causing
potential harm to economic stability.
While the issue of domestic fuel subsidies is one for
Indonesia's Government to address, I, for one, remain very
interested in international energy policy. In a world that is
more and more interdependent on global oil supplies, we need to
be encouraging greater energy efficiencies, not just here at
home, but overseas, as well.
I'm pleased that at their meeting in May, President Bush
and President Yudhoyono announced the resumption of bilateral
energy consultations. Delegations met in Jakarta on August 29
for the first working-group meetings on mutual energy security
issues and production and capacity capabilities, and I look
forward to what progress can come from this effort.
The last several years have also brought a spotlight to the
various separatist groups within Indonesia. East Timor's
independence in 2002 continues to resonate as Congress
considers whether to lift restrictions to military aid. I
compliment the Government of Indonesia and the Free Aceh
Movement for reaching a peace agreement this past August. And
the issue of West Papua has been raised in the context of the
House-passed Foreign Relations Authorization bill.
Now, without going into it too much further, I would note
that the joint statement between the United States and
Indonesia following the President's meeting in May emphasized
the administration's support for Indonesia's territorial
integrity and reiterated that the United States opposed
secessionist movements in any part of Indonesia.
It is clear that Indonesia's importance to the United
States is not fully recognized on a general level, but its
geographic location cannot be ignored. Strategically positioned
along some of the key shipping lanes in the world, and
centrally located within the Asian region, with 224 million
people, Indonesia is ready to grow.
So, I look forward to hearing from each of the witnesses to
get their thoughts on what steps we, in Congress, can take to
further our relationship, while not sidestepping our
responsibilities to ensure international standards are upheld.
I want to welcome to the committee Senator Obama and would
ask if you have any opening remarks or comments you would like
to make.
STATEMENT OF HON. BARACK OBAMA, U.S. SENATOR FROM ILLINOIS
Senator Obama. Well, thank you very much, Madam Chairman.
I appreciate the witnesses being here today. As usual with
these very informative hearings on important topics, we end up
having to split our time with votes. But I did want to make
sure that I took the time to hear the testimony, in part
because I suspect I'm the only U.S. Senator who ever spent time
in Indonesia as a child. And not only did I develop a great
love for the people and the country, but also as a consequence,
I have a deep appreciation for the absolutely critical role
that Southeast Asia, in general, and Indonesia, in particular,
can play in U.S. foreign policy.
I'm glad to see that we have some capable people involved
in helping to craft policy in that part of the world. I think
that the trends that have taken place with respect to democracy
in Indonesia are extraordinarily encouraging. One of the
memories that I have from growing up is of a deeply faithful
brand of Islam that also existed side by side with
Christianity, with other cultures, and of an extraordinary
tolerance for diversity that existed in Indonesia. In that
sense, Indonesia provides a potential model for how a modern
developing country can reconcile the demands of a modern world
with traditional faith.
I think it's absolutely critical that we spend more time
and pay more attention to thinking about this region at the
highest levels of our Government, to strengthen the linkages
between our two countries.
Obviously, there are still some problems that remain,
dating back to 1967, 1968, and the early 1970s, when I was
there. Corruption was always a problem. I would expect that it
continues to be a problem, in terms of hampering the
development of the country. The extraordinary breadth and power
of the military and in the ability for civilian officials to
control the military process was a problem then. It is still a
problem today. And the vast differences in wealth and
opportunity between a small elite and the majority of the
people who continue to struggle to survive in Indonesia was a
problem, and continues to be a problem. Issues surrounding the
free press have also remained a constant theme.
I don't want to gloss over some of the issues that the
country faces, but, given the enormous size and strategic
importance of the country, and given the extraordinary quality
of the people in Indonesia, I hope that this committee, as well
as the administration, will be devoting more and more attention
to the country as time goes by.
So, with that, I would look forward to hearing from these
witnesses. And I apologize in advance if I end up having to
leave a little bit early.
Senator Murkowski. Thank you, Senator. Appreciate the
comments. I didn't realize that you had spent growing-up years
there. That's----
Senator Obama. Oh, if the testimony was in Indonesian, I
could actually understand some of it. [Laughter.]
Senator Murkowski. There you go. Well, we'll call on you
for interpretation, if necessary. Thank you. Appreciate that.
[Laughter.]
With that, let's go to the first panel that we have with us
this afternoon: Mr. Eric John, who's the Deputy Assistant
Secretary, Bureau of East Asian and Pacific Affairs, here with
the Department of State.
Mr. John.
STATEMENT OF ERIC G. JOHN, DEPUTY ASSISTANT SECRETARY, BUREAU
OF EAST ASIAN AND PACIFIC AFFAIRS, DEPARTMENT OF STATE,
WASHINGTON, DC
Mr. John. Thank you, Madam Chairman.
I appreciate the fact that you're taking time for this
hearing, not just in a busy Senate Calendar, but also in the
context of the suffering of hundreds of thousands of fellow
citizens in the South in the wake of Hurricane Katrina.
I think you'll find a lot of my statement matches, or is
actually redundant, with what the chairman and Senator Obama
have said, and that is that we see very great potential in the
relationship with Indonesia and positive trends in the
direction that it's going.
In his inaugural address this year, President Bush spoke of
the spread of democracy throughout the world and our Nation's
need to support that. And Secretary Rice, in her confirmations
here, again spoke of the compatibility of the support for
democracy and the spread of peace and prosperity, and how those
two work together. And I think you won't find any nation that
exhibits that better than Indonesia, with its democratic
transformation over the past year and the implications for
United States policy and our strategic interests in the region.
Indonesia is clearly, by virtue of its size, its location,
and status as a democracy, one of the most important countries
to the United States in Asia or, indeed, I would say, the
world. If you look at such facts as, since the fall of--since
the fall of Suharto in 1998, Indonesia has become the world's
third-largest democracy. It has more people of Muslim faith
than Iran, Iraq, Egypt, and Saudi Arabia, combined. The
strategic sealanes that pass through and along Indonesian
territory carry one-third of the world's sea trade. And the
Malacca Straits have over half the world's oil trade.
Finally, but perhaps most importantly, Indonesia is a key
player in the dominant ideological struggle of our time, and
that is the competition between democratic modernization and
the rise of extremist Islam. And I think Senator Obama put it
very well when he said that we have this problem of reconciling
the demands of a modern world with the demands of faith and the
diversity of faith in a nation. And I think Indonesia sets the
example of democracy being able to accommodate that diversity
and support for that faith. Indeed, when I was back in--when I
was visiting Jakarta in July, I met with several members of
Islamic parties in the Congress, and they pointed out that not
only is Islam compatible with democracy, but, indeed, it
thrives under democracy, because the two match well together
and they can spread the word of Islam and there is no threat to
it. It's the perfect case for how democracy supports Islam.
I would like to look at three things briefly, and that is
the opportunity that we have in Indonesia, the trends that we
see going on in Indonesia, and the implications for United
States foreign policy there.
The trends in Indonesia today are very positive with
respect to democracy, countering terrorism and extremism,
economic reforms, security-service reform, and peaceful
resolution of conflicts.
The success of the 2004 national elections and the joint
United States-Indonesian response to the tragic earthquake and
tsunami of December 26 have opened a window of opportunity for
our relationship with Jakarta. We now have the opportunity to
forge close long-term ties with this nation that composes 14
percent of the Islamic world. We have the chance to achieve a
breakthrough in our relations with the largest Muslim-majority
nation and third-largest democracy in the world. And if we
succeed, it will have far-reaching effects on our common
interests.
Secretary Rice noted to President Yudhoyono in their--
during the last meeting that the United States has pulled back
at times in its relationship with Indonesia, but she added that
this will not be the way it is in the future. Madam Chairman,
we must be both a good and a reliable friend to Indonesia, and
we must act now to make this a reality. We must do everything
we can to develop our relationship to its full potential and
allow Indonesia to succeed as a modern democratic power, and
one that acts as a positive force on the global stage and
ensures prosperity for its people at home.
The positive trends we've seen: Democracy, we've noted--the
national elections were free, fair, peaceful in 2004; and, in
2005, they have their first-ever democratic local elections.
For countering terrorism, extremist Islam, the Indonesian
Government has done an admirable job of pursuing, arresting,
and prosecuting terrorists and also shown that Islam in
Indonesia is tolerant and open.
In terms of economic reform, the government has announced
an ambitious reform program, boosted investor confidence,
attacked corruption, and made a push for infrastructure
development. It's a very long road to countering corruption,
but it's one that the President of Indonesia is committed to.
And, in terms of your comments on fuel subsidies, I don't
think I could agree more. It is not only a question of energy
production and an impact on the energy markets, but the budget
impact that you noted has a significant deleterious effect on
the ability of discretionary spending for infrastructure, for
the health system, and for the education system in Indonesia.
And I don't think Indonesia will be able to tackle those until
it tackles the problems of its fuel-subsidy program. President
Yudhoyono is doing so now, and we fully support him in those
efforts.
In terms of security-service reform, in May President
Yudhoyono and President Bush jointly stated that normal
military relations would be of interest to both countries, and
they undertook to continue working toward that objective. The
reforms that we have in Indonesia to date include the
establishment of a police force that's separate from the
military, the end of the military dual-function system that
placed military officers in civilian government positions, the
end of military- and police-appointed seats in Parliament in
2004, and the passage of legislation, that same year, to ensure
that Parliament begins to exert control over the military's
business interests.
And also we've seen a positive trend in resolving political
differences through dialog. In Aceh, which you mentioned, the
implementation of a peace accord is underway. In fact, it was
today that the Aceh rebels, GAM, began turn their weapons in.
And the Indonesian military has begun its first stage of
withdrawal from Aceh.
President Yudhoyono has publicly pledged to fully implement
the special autonomy law in Papua, and the Indonesian and East
Timor Governments created, in August, the Bilateral Truth and
Friendship Commission to promote reconciliation and bring
closure to the gross human rights violations that were
committed there in 1999.
Briefly, the implications for how we should approach
Indonesia now. I've stated that Indonesia's democratic
transition and reformist government present a window of
opportunity. I would also like to underline the importance of
seizing this opportunity.
The world's fourth most populous country, a potentially
very strong partner in Southeast Asia, a partner in the war on
terrorism, and a major open economy in a critical region--
together these factors make a strong case for upgrading and
deepening our relationship with Indonesia. In this light, we
should aim to develop a more mature multifaceted relationship
between our two major democracies; continue United States
assistance, as described by Mr. Kunder, for tsunami
reconstruction, education, the justice sector, and police;
increase exchanges between our two countries; support President
Yudhoyono's reformist program; and support further development;
support military reform; and bolster Indonesia as a leader in
ASEAN and as a stable democracy in this critical region.
Thank you.
[The prepared statement of Mr. John follows:]
Prepared Statement of Eric G. John, Deputy Assistant Secretary, Bureau
of East Asian and Pacific Affairs, Department of State, Washington, DC
I. STRATEGIC OVERVIEW
I am pleased to appear before you to talk about a compelling
success story--Indonesia's democratic transformation--and its
implications for U.S. policy and our strategic interests. Although it
is no surprise to members of the committee, Indonesia is clearly, by
virtue of its size, location, and status as a democracy, one of the
most important countries to the United States in Asia. Consider these
facts:
Since the fall of Suharto in 1998, Indonesia has become the
world's third-largest democracy.
Indonesia has more people of Muslim faith than Iran, Iraq,
Egypt, and Saudi Arabia combined.
The strategic sealanes that pass through and along
Indonesian territory carry one-third of the world's sea-borne
trade.
Half the world's oil passes through the Malacca Strait.
Finally, and perhaps most importantly, Indonesia is a key player in
the dominant ideological struggle of our time: The competition between
democratic modernization and the rise of extremist Islam. Indonesia is
aggressively combating the tiny minority of terrorists. It is also
working to promote religious tolerance among the population at large,
while demonstrating to the world that Islam and democracy are fully
compatible.
II. OPPORTUNITY
The success of Indonesia's 2004 national elections, and the joint
Indonesian-United States response to the tragic earthquake and tsunami
of December 26 have opened a window of opportunity for United States-
Indonesian relations. The positive trends in Indonesia today with
regard to democracy, countering terrorism and extremism, economic
reform, security service reform, and peaceful resolution of conflicts,
strengthen this opportunity. We have the chance to achieve a
breakthrough in our relations with the world's largest Muslim-majority
nation and third-largest democracy. If we succeed, it will have far-
reaching effects on our common interests with Indonesia and throughout
the world.
Indonesia's national elections proceeded in an exceedingly peaceful
and democratic manner, and gave Indonesians for the first time the
right to directly elect their President. President Yudhoyono emerged
from the elections with a mandate from the Indonesian people, receiving
over 60 percent of the votes in the Presidential runoff in September of
last year. With Indonesian voters demanding change, President Yudhoyono
is pursuing a bold reformist agenda. Furthermore, as a U.S. university
and military college graduate, he has firsthand knowledge of the United
States and its people. President Yudhoyono is keenly aware of
Indonesia's status as a role model to the Islamic world and seeks a
greater international profile that accords with this status. The
example he sets is a positive one.
President Yudhoyono demonstrated his statesmanship in the aftermath
of the tsunami, and he opened up the previously closed Aceh Province to
international assistance, particularly from the United States. Our
joint efforts in relief and reconstruction for the victims of the
tsunami saved the lives and lessened the suffering for tens of
thousands of victims, helping to bridge the distance between our
countries. The USS Lincoln off the coast of Aceh made a strong positive
impression on the people and Government of Indonesia--no other country
was able to match our response. Scenes of U.S. relief workers and
soldiers working side by side with their Indonesian counterparts showed
Indonesians that the United States is a friend. Public opinion toward
the United States has since improved.
With Indonesia we have the opportunity now to forge close, long-
term ties with a developing democracy that is home to 14 percent of the
Islamic world. Indonesia has a history that includes serious human
rights abuses, separatist conflict, ethnic and interreligious strife,
and other problems and challenges that have affected our relations.
Many of these problems and challenges remain today. However, it is
essential that we address these issues not in isolation but in the
context of a mature relationship that keeps in focus the broad,
positive trends in today's Indonesia.
In the context of a mature and robust relationship with a fellow
democracy, we have an opportunity to resolve--not ignore--our
differences with Indonesia, while strengthening our partnership with
this tremendously important and dynamic country. The dominant trends in
Indonesia today are positive ones for U.S. strategic interests.
Secretary Rice noted to President Yudhoyono during their last meeting
that the United States has pulled back at times in its relationship
with Indonesia. But she added that this is not the way it will be in
the future. We must be both a good and reliable friend to Indonesia,
and we must act now to make this a reality. We must do everything we
can to develop our relationship to its full potential, and help
Indonesia succeed as a modem, democratic power, one that acts as a
positive force on the global stage and ensures prosperity for its
people at home.
III. POSITIVE TRENDS
Democracy
Indonesia is a frontline state in a trend we see all over the
world: People want to rule themselves, and they want their governments
to be accountable. It has been only 7 years since the fall of Suharto
and the end of three decades of authoritarian rule. In this short span,
Indonesia has emerged as the world's third-largest democracy and a
leading global example of a democratic, Muslim-majority nation.
The successful series of national democratic elections in Indonesia
last year produced a sea change in the country's domestic politics.
More than 75 percent of eligible voters cast their ballots in last
year's Presidential election. To put those numbers in context, just as
many Indonesians voted in their Presidential election as did Americans
last fall--about 118 million in each case. This year Indonesia is
conducting 8 gubernatorial and 157 local elections; reports so far have
been similarly positive.
The direct Presidential election itself was a product of sweeping
constitutional reforms aimed at strengthening democratic institutions,
accountability and transparency, and separation of powers. A free press
and an increasingly active civil society have become important agents
of change. People are debating the abuses and excesses of the Suharto
years and are demanding real accountability for what happened. Citizens
are demanding justice from the judicial sector. Finally, the country is
going through one of the most ambitious decentralization efforts ever.
That process is empowering Indonesia's farflung 33 provinces and
introducing unprecedented levels of transparency and accountability
into local governance.
Looking forward, we envision an Indonesia that is democratic in the
full sense of that term, with an educated electorate, a government that
is transparent and accountable to its people, respects the rule of law,
and protects the human rights of its citizens. Indonesia has many
difficult obstacles, both past and present, which it must strive to
overcome. As our 2004 Human Rights Report indicates, Indonesia's human
rights record has been poor, and there is much to be done,
particularity in the area of accountability for abuses committed by
members of the security services. But we cannot overlook the
flourishing of democracy in Indonesia. We will continue to encourage
and assist the positive democratic trend in Indonesia, while working
with the country to achieve needed progress on education,
accountability, the rule of law, transparency, and respect for human
rights, to realize the vision of a modern, fully democratic Indonesia.
Countering terrorism and extremism
Indonesia is a key player in the dominant ideological struggle of
our time: The competition between democratic modernization and
extremist Islam. As the world's largest Muslim-majority nation,
Indonesia is buffeted by the same radical strains of Islamic thought
and hate-preaching firebrands that afflict much of the Islamic world.
Related to this, we face a challenge in convincing countries like
Indonesia of the truth that the Global War in Terror is not anti-
Islamic.
Indonesia is in the midst of this ideological struggle, but the
overall trend is positive. Indonesia stands as a democratic example to
the Islamic world. Islam in Indonesia has always been and remains
predominantly tolerant and open to combining Islamic beliefs with
modernization and free speech. Indonesia has maintained its pluralistic
Constitution and proven that Islam and democracy are compatible and
complementary. The ability of such a diverse nation to pursue a
democratic, just agenda respectful of other faiths serves as a powerful
reminder of what a successful, tolerant society can look like.
Indonesians know better than most the devastating effects of
terrorist attacks that are the product of extremist Islam, such as
those that have occurred in Bali and Jakarta over the last 3 years. The
Indonesian Government has done an admirable job of pursuing, arresting,
and prosecuting terrorists. Since the Bali bombings in October 2002,
Indonesia's police and prosecutors have arrested and convicted more
than 130 terrorists. Indonesia has established an effective
counterterrorism police force that is working hard to bring terrorists
to justice. Despite progress, the threat of future attacks remains
grave. Our two countries thus share an interest in addressing the
causes of terrorism and protecting our people from further terrorist
violence. President Yudhoyono is committed to this cause.
Economic reform
President Yudhoyono places priority on economic growth and poverty
reduction, recognizing that Indonesia has just recovered from the 1997-
1998 financial and economic crisis. The Government of Indonesia has
announced an ambitious reform program, boosted investor confidence,
attacked corruption and made a push for infrastructure development.
President Yudhoyono remains committed to this program. Real GDP growth
increased to 5.1 percent in 2004, and the Indonesian economy has been
resilient in spite of the tsunami, avian influenza, polio, and high
world oil prices. American investors continue to show interest in
Indonesia. More than 300 U.S. companies have investments in Indonesia
valued at a total of more than $10 billion, and an estimated 3,500 U.S.
business people work in Indonesia. The combination of high-level
commitment, pressing economic issues, and American investor interest
poses a special opportunity for us to make progress with Indonesia on
economic reforms.
We have moved to take advantage of this special opportunity to help
Indonesia address economic reforms. We have already had two rounds of
Trade and Investment Framework Agreement (TIFA) talks this year and
have started a dialogue with Indonesia on conducting a full review of
all trade-related policies. We have restarted our Energy Policy
Dialogue after an 8-year gap, and are working closely with the
government on strategies for boosting Indonesia's crude oil production.
We are also supporting the Yudhoyono government's crucial effort to
change the culture of corruption in Indonesia, in part through his
launch of several corruption cases against high-level officials. To
support this important effort, we are putting in place a major USAID
project to help the Government of Indonesia set up an anticorruption
court and reform the commercial courts. We want to see an Indonesia
that is open for investment and trade, and open to American investors
playing a prominent role in the country's economic development.
American investors continue to push for investment climate and legal
system reform and fair resolution of investment disputes, signaling
their long-term commitment to Indonesia's economic growth.
Indonesia's economy faces concerns over fluctuating exchange rates
and high fuel subsidies. Oil prices have posed a challenge as highly
subsidized domestic fuel prices and subsidies have increased to over
one-fourth of the government's budget in 2005. In a bold but necessary
move, Yudhoyono reduced fuel subsidies in March, and in a recent
speech, stated that the government will raise fuel prices again soon
after compensation programs for the poor are in place. Subsidies and
additional policy decisions by Bank Indonesia have increased pressure
on the rupiah and shaken market sentiment. While investors on the
ground remain bullish, we still plan to pay close attention to currency
concerns and will continue to urge Indonesia to once again reduce fuel
subsidies. We are pleased with the government's ability to address
major reforms right away and encouraged by their plans to promote
growth and stability.
Security service reform
A central element of the transformation of Indonesia into a stable
and prosperous democracy is the continuing evolution of the Indonesian
military, or TNI, into a modern, professional, civilian-controlled
force focused on external security. The Indonesian public has rejected
a formal role for the military in politics, and the TNI has remained
professional and out of politics during Indonesia's democratic
transition. Major reforms of the security forces include:
The establishment of a police force separate from the
military.
The end of the military ``dual function'' system that placed
military officers in civilian government positions.
The end of military and police appointed seats in Parliament
in 2004.
The passage of legislation in 2004 to ensure that the
Parliament begins to exert control over the military's business
interests.
President Yudhoyono and Defense Minister Juwono Sudarsono are
committed to implementing and consolidating these reforms. Sudarsono is
Indonesia's first civilian Defense Minister and is working to
strengthen civilian control over the budgetary and procurement process.
The Indonesian legislature in 2004 passed an armed forces law that
makes clear the importance of democratic values, civilian supremacy,
and respect for human rights. The TNI has also supported the Aceh peace
process.
When President Yudhoyono visited Washington in May, he and
President Bush jointly stated that normal military relations would be
in the interest of both countries and undertook to continue working
toward that objective. President Yudhoyono also reaffirmed his
commitment to further strengthen military reform, civilian control, and
accountability. President Bush pledged his full support in these
efforts. Secretary Rice's February decision to resume International
Military Education and Training will reestablish professional links
between our militaries and result in increased professionalism of
Indonesian military officers with respect to transparency, human
rights, and public accountability. We also think that Foreign Military
Financing (FMF) is in the interests of both countries. We see TNI
reform as a long-term project, and we trust that President Yudhoyono is
committed to take the necessary steps for enhanced military-to-military
relations. We are committed to supporting Indonesia in that effort.
Resolving political differences through dialogue
The capacity to resolve political differences through dialogue,
rather than violence, is a hallmark of a functioning democracy.
Although Indonesia has experienced political violence in places like
Aceh, Papua, and East Timor, President Yudhoyono is leading a new era
in Indonesia, which promises to separate Indonesia from its repressive
past. While we have raised concerns over abuses by security forces in
areas of separatist conflict, and we have urged closer attention to the
implementation of Special Autonomy in places like Papua, it is
incorrect and, in fact, detrimental to U.S. interests to, in any way,
imply that the United States does not support the territorial integrity
of Indonesia. The United States firmly supports Indonesia's territorial
integrity, and does not support, nor condone, any effort to promote
secession of any region from the Republic of Indonesia.
The Yudhoyono government conducted a series of peace talks this
year with the separatist Free Aceh Movement, known by the Indonesian
acronym ``GAM.'' These talks proceeded rapidly and culminated in a
peace agreement signed on August 15 in Helsinki. If implemented
successfully, this will end a three-decades long conflict that has
claimed thousands of lives, and will put the people of Aceh on a path
to economic recovery and political integration. Early signs have been
positive, with the Indonesian Government granting amnesty to
noncriminal GAM prisoners and beginning to withdraw military troops
from the Province. United States and other donors' support for
implementation will play an important role in promoting peaceful
reconciliation and addressing key elements of the Peace Agreement, such
as professional training for Aceh police and assistance for the
reintegration of excombatants.
Like Aceh, Papua has suffered from separatist conflict and serious
human rights abuses. The Indonesian Government has not fully
implemented the 2001 Special Autonomy law that was designed to address
political and economic grievances. However, there have been two recent
positive developments. First, last month a series of large
demonstrations in Papua proceeded without violence, due to good
communication between separatists and local officials. Second,
President Yudhoyono met with Papuan leaders in Jakarta and pledged to
fully implement Special Autonomy. President Yudhoyono has vowed to
peacefully resolve the longstanding conflict in Papua.
With respect to East Timor, the Governments of Indonesia and East
Timor have created a bilateral Truth and Friendship Commission (TFC) to
promote reconciliation and achieve credible accountability for the
crimes against humanity committed in 1999. There has been no credible
accountability for the crimes. The Jakarta-based Ad Hoc Tribunal and
Dili-based Serious Crimes Unit failed for different reasons. The
Indonesian Government is cognizant of the need for the TFC process to
be genuinely credible. The members recently selected by the GOI to the
TFC appear to be committed to pursuing genuine truth and
reconciliation. We will continue to remind and work with both Indonesia
and East Timor on the importance of achieving credible accountability.
IV. IMPLICATIONS
How should we approach Indonesia now? Indonesia's democratic
transition and reformist government present a window of opportunity.
The importance of seizing this opportunity cannot be overstated. The
world's fourth most populous country, the third largest democracy, a
country undergoing rapid modernization, the largest majority-Muslim
country, a partner in the war on terrorism, a major open economy in a
critical region--together those factors make a strong case for
upgrading and deepening our relationship with Indonesia. In this light,
we should:
Aim to develop a mature, multifaceted relationship between
two major democracies.
Continue U.S. assistance, as described by my colleague from
USAID, for tsunami reconstruction, education, the justice
sector and for the police.
Increase exchanges between our two countries, through more
congressional/parliamentary delegations in both directions,
through more contact between senior officials, and through
increased student exchanges.
Support President Yudhoyono's reformist program and support
further development of democracy, respect for human rights and
freedom of the press in Indonesia.
Support military reform in Indonesia by constructively
engaging with its military. This will require lifting existing
legislative restrictions.
Bolster Indonesia as a leader of ASEAN and as a stable
democracy in a critical region.
Senator Murkowski. We will next turn to the Honorable James
Kunder, who is the Assistant Administrator in the Bureau for
Asia and the Near East in the U.S. Agency for International
Development.
STATEMENT OF HON. JAMES R. KUNDER, ASSISTANT ADMINISTRATOR,
BUREAU FOR ASIA AND THE NEAR EAST, U.S. AGENCY FOR
INTERNATIONAL DEVELOPMENT, WASHINGTON, DC
Mr. Kunder. Thank you, Madam Chairman.
I would just like to echo Eric's comments about the
Hurricane Katrina situation. We're aware of the fact,
obviously, that while we're focusing on these issues halfway
around the world, as Eric said, many of our own citizens are
suffering. The Administrator of USAID, Andrew Natsios, did
offer the assistance of our technical experts from the Office
of Foreign Disaster Assistance. And, in fact, these folks are
working along the gulf coast right now. And we've opened some
of our warehouses for international disaster assistance
supplies to make those available to FEMA, just as FEMA has, in
the past, made some of those supplies available to us. So, I
think there's been pretty good cooperation on that score.
Let me just echo what's been said thus far. I think we,
also, look at Indonesia in terms of enormous opportunities, but
also risks. And what our programs have been trying to do is
seize the opportunities and try to minimize the risks.
Indonesia is the largest single United States foreign
assistance program in East Asia. In 2005, we've obligated $143
million. And in fiscal 2006, we've asked to spend $164 million.
These are obviously very sizeable figures. But, of course, with
the populations we're looking at, these amount to less than a
dollar per Indonesia citizen. So, in a nation of this size and
strung out across the archipelago, the operational question for
us is: How do we make an impact? How do we use these U.S.
taxpayer dollars that the Congress has generously provided to
have an impact across this country?
What we have done is focused in on four areas:
One is democracy, to take advantage of the opportunities
that the Indonesians themselves have made available through
last year's elections and also through their own attempts to
decentralize government and move away from a more authoritarian
model to a model closer to the citizenry. For that to work,
local government has to be effective in delivering social
services and being accountable to the population. So, while we
continue to support democracy in the electoral process, and
while we continue to support the improvement of central
Indonesian institutions, like the Parliament and like the
Supreme Court, and the elimination of endemic problems like
corruption, we're also focusing on making local government more
responsive across Indonesia.
Second, we're focusing on the economic-growth issues. The
challenge that President Yudhoyono faces and which, of course,
is directly relevant to the international war on terrorism is:
How do you find jobs for 2\1/2\ million new entrants into the
workforce every year? Historically, education has not been job-
relevant in Indonesia, so we're focusing on creating the
economic reforms, addressing issues like improper subsidies in
the Indonesian budget, so that this economy will be investor-
friendly and will create those 2\1/2\ million new jobs each
year.
Third, we are focusing specifically on education. The
educational statistics in Indonesia indicate that it is an
education system in some crisis. Indonesian students do not
score well on international tests. And, in fact, their
performance has been declining in recent years. The
decentralization of the education system provides us with new
opportunities to address the critical problems facing education
in Indonesia. These include better teacher training, more
community participation, and a more participatory, engaged
method of teaching that gets students doing creative thinking
on their own, rather than just rote recitation. We also believe
this is critically important to providing the kind of citizens
that the new democratic Indonesia will need.
So, we're focusing on 200 model school districts around the
country, and we've had success in getting parental involvement
and community involvement, better teacher training. And we've
seen signs that the Indonesians are grabbing this opportunity,
because the teacher-training and community-participation
techniques we've piloted in those 200 schools have already been
adopted in an additional 900 schools voluntarily by the
Indonesian Government. We hope that kind of replication will
continue.
We're also working on basic healthcare. Indonesia continues
to have high infant mortality and maternal mortality rates,
continues to suffer from lack of safe drinking water and other
endemic health and social problems. We're trying to address
those, as well.
Let me turn my attention briefly to the avian flu issue. We
very much appreciated the $25 million that was made available
in the appropriations bill this year. That is going to be a
complex and challenging problem for us to take on. As the
chairman indicated, the nature of the poultry industry, not
just in Indonesia, but across East Asia, tends to be a backyard
poultry industry. And, given the inefficiency of compensation
programs for birds that are culled out of the population to
stymie outbreaks, and the lack of faith of many of these small
farmers that they will receive compensation for their birds,
enforcement of regulations when there are outbreaks is a
challenge across the region. I can certainly answer more
detailed questions about that. We're focusing that money as
effectively as we can, but it is a very challenging
environment. Also, given the transmission between the
commercial poultry industry and the migratory birds that fly
through the region, you have a particularly challenging
environment to keep these vectors from spreading.
Let me just turn very briefly to the tsunami, if I could.
On the principle that a picture is worth a thousand words, let
me just show a couple of brief slides. This shows the epicenter
of the earthquake, the red dot there. And, naturally, it's
right next to Sumatra. Indonesia did, of course, bear the brunt
of the tsunami--both the earthquake damage and the tidal wave.
The thing that we did immediately after the tidal wave hit
was to meet the emergency needs of the population in Sumatra.
U.S. food assistance went in immediately. And, also, these are
portable chlorination bottles that were widely distributed
among the population. One of the almost miraculous successes of
this is, despite the horrific loss of life, there was no
follow-on widespread starvation, there was no follow-on
widespread outbreak of endemic disease. We applaud the quick
response by the United States military, United States civilian
agencies, the international community, the NGOs that were on
the ground, and the United Nations, not to mention the
Indonesians themselves, who, despite the institutional
weaknesses of some of their crisis response agencies, did a
very credible job of getting on the ground and starting to work
closely. All of those things headed off the epidemic diseases
that might have raised those death tolls even higher.
The other thing we did was to immediately try to get some
cash into that economy and start rebuilding people's lives.
This is a typical cash-for-work program, where we provided some
resources in wages so that people could get back to work
rebuilding their own communities. And the other aspect of that,
of course, is that there's a psychological benefit if people
immediately can reengage in the reconstruction process.
An important part of what we tried to do in Aceh and across
Sumatra was to get community involvement--this slide is a
community meeting, a townhall meeting, if you will--so that we
heard from the local citizens what they thought the priorities
are for reconstruction, so that it wasn't outsiders coming in
telling the local folks what we thought should be done, but,
rather, hearing what their priorities were so that they would
sustain the effort.
And, finally, we are now transitioned from the relief and
rehabilitation phase into the reconstruction phase. This is the
charge at the U.S. Embassy and our USAID mission director
cutting the ribbon to start the reconstruction of the Banda
Aceh-Meulaboh Road. This is a sign of the initial work. The
trucks are literally out dropping gravel along the road right
now. What we've done is to get the project up and running and
to show visible signs of reconstruction--we're focusing on the
first 80 kilometers out of Banda Aceh--while we look at the
much larger reconstruction program that's going to rebuild the
entire 240-kilometer road between Banda Aceh and Meulaboh.
So, my report here would be that I view this, despite the
horrific loss of life, to be a reasonably successful
international relief effort led by the Indonesians themselves.
Because of the money generously provided by the Congress, we've
tried to launch, as quickly as possible, into the
reconstruction effort that'll be necessary. I just spoke, this
morning, with our rep who's on the ground in Banda Aceh. He
reports that things are moving along quickly. But we still
anticipate a very substantial reconstruction effort, probably
extending out 2 to 4 years before we have the kind of major
reconstruction that we'll need in that region.
The final issue I just want to touch on, Madam Chairman,
because you raised it in the last hearing, was that a
significant part of our tsunami response is the building of a
tsunami early-warning system. Again, Congress generously
provided resources so that we could launch this effort as part
of an international attempt to prevent this kind of tragedy in
the future. That effort is underway. It, also, is a complex
effort because of the more than 20 nations that border the
Indian Ocean. There are a number of technical and political
approaches to how this should be done. And, naturally, each of
those governments feels some responsibility for warning its own
citizens. So, building a system that we can do quickly, but
also building a system in which we have buy-in from all the
nations of the region, is a complex technical and political
task. But we are actively engaged with the United Nations,
International Oceanographic Commission, and a number of other
bilateral donors on that effort right now.
Thank you.
[The prepared statement of Mr. Kunder follows:]
Prepared Statement of Hon. James R. Kunder, Assistant Administrator,
Bureau for Asia and the Near East, U.S. Agency for International
Development, Washington, DC
Madame Chairman, members of the subcommittee, thank you for
inviting us to testify today on United States-Indonesia relations and,
more specifically, on U.S. Agency for International Development (USAID)
programs there and in other tsunami-affected countries. I will address
why Indonesia is important to U.S. foreign policy, its major
development challenges, and what the USAID is doing to help the
Government of Indonesia (GOI) meet these challenges. Among those
challenges is, of course, the havoc wrought by the tsunami of December
2004 which affected several countries within the region. I will
summarize the broader USAID tsunami response and its impact.
Indonesia is strategically important to the United States. With the
world's fourth largest population and the largest Muslim population, it
is also the third largest democracy. Last year, Susilo Bambang
Yudhoyono, the democratically elected President, successfully
campaigned on a pro-jobs and anticorruption platform. This year, local
elections continue throughout the archipelago with local government
leaders directly elected by their constituents for the first time in
Indonesian history. Indonesia has embarked on major changes in
democratic governance and decentralization. It has vast energy and
mineral resources, a location astride some of the globe's most
important ocean routes, and large expanses of rainforest and coral
reef. It is in U.S. interests to support Indonesia's future as an
independent, stable democracy, prosperous and at peace with its
neighbors. And U.S. interests support an Indonesia with diminished
potential as a source and victim of terrorism, crime, fewer internally
displaced persons, less disease prevalence, fewer trafficked persons,
and less narcotics trafficking.
Indonesia's challenges are immense. Lack of a democratic tradition
has meant a lack of experienced political leadership in democratic
governance. Despite progress, economic growth remains too low to
accommodate the growing labor force. Serious rule of law deficiencies
and widespread corruption and bureaucratic obstacles discourage job-
generating foreign investment. High levels of poverty, foreign radical
religious influences, and a poor education system work against our goal
of Indonesia as a stable, democratic state and foster conditions that
potentially create an operating and recruiting environment for violent
Islamic groups.
There are also encouraging signs. The GOI has taken bold steps to
improve governance including transferring about 2 million employees,
approximately two-thirds of the central government workforce to local
governments. Since 1998, GOI efforts have reduced inflation from 80
percent to below 6 percent and growth is set to expand by approximately
5.7 percent this year. There are substantial challenges that could
derail this transition. The education system is in crisis. Democratic
reforms are fragile after years of authoritarian government and most
local governments are ill-equipped to assume planning, budgeting, and
management responsibilities. The current rate of GDP growth, while much
improved, will still not absorb the 2.5 million new entrants into the
job market each year. Net foreign investment has declined over the last
5 years, although there is some hope that it is turning around.
Sectarian and separatist conflicts continue.
USAID programs are an integral part of an integrated USG strategy
to combat terrorism, promote democracy and good governance, provide
education reform, assure a better life for the people of Indonesia, and
support Indonesia's economic prosperity. Another key component is post-
tsunami reconstruction.
The USAID 5-year strategy in Indonesia (FY 2004-2008), focuses on
five key strategic directions, with crosscutting themes that focus on
working at the local level, fighting corruption, and developing public-
private partnerships that support all of our program objectives. These
five strategic directions are: (1) Improving the quality of
decentralized basic education; (2) improving the delivery of basic
human services such as health care and clean water; (3) advancing
democratic, decentralized governance; (4) strengthening economic growth
and promoting job creation; and of course, (5) providing critical post-
Tsunami reconstruction assistance.
BASIC EDUCATION
To improve the quality of decentralized basic education, this
administration committed to provide at least $157 million (from FY
2004-2009) to improve management and governance in the education
system, improve teaching and learning in public and private schools,
and provide relevant life and work skills to students. This program is
coordinated closely with the Embassy public affairs section, which
provides scholarships, exchange programs, English teacher development,
and university exchanges. Our education programs contribute to
countering extremism and terrorism. Education is the foundation for
effective citizen participation in a democracy. Education helps secure
economic opportunities for disadvantaged or marginalized populations.
Increased quality of teaching and learning in public and private
schools provides an alternative to the more extremist, radical schools.
Livelihood programs help out-of-school youth learn essential skills for
jobs. Education programs diminish the underlying conditions that
terrorists seek to exploit. We are promoting moderation, tolerance, and
support for pluralism by developing critical thinking skills. These
same skills are also essential to finding and keeping good jobs and
effectively participating in Indonesia's democratic system, modern
society, and the world economy. We are also increasing access to
education opportunities for vulnerable or marginalized populations.
USAID basic education programs are already working in 200 schools,
including 40 madrassahs, and are reaching 70,000 students. New and
expanded programs are expected to directly reach 4,500 public and
private schools, 4 million students, 55,000 educators and 1 million
out-of-school youth over the life of the programs. Concrete results are
already being achieved. Active learning methodologies are being
effectively applied and community and parental involvement is on the
rise. School committees are actively managing 80 percent of the schools
currently involved in our programs. Local governments in other parts of
Indonesia have introduced best practices developed in USAID partner
schools to 900 additional schools using their own resources. Most
importantly, student performance in key subjects such as math and
science is improving.
HEALTHCARE, CLEAN WATER, AND ENVIRONMENT
To improve basic human services, the USG is providing assistance to
improve access to higher quality basic human services, using an
integrated approach that combines support for health care at the
community level, food and nutrition, and access to clean water and
sanitation. Health care programs are focusing on maternal and neonatal
health; reproductive health; child health and nutrition; prevention of
HIV/AIDS, tuberculosis and malaria; decentralization of health care
service delivery; and improved hygiene to prevent diarrhea. In fiscal
years 2004 and 2005, the USG provided $64.7 million for these
activities. USAID food assistance programs will target poor communities
and directly impact women and children. Environmental services programs
will support better health through improved water resources management
and expanded access to clean water and sanitation services. These
integrated programs will also promote biodiversity conservation, forest
management, land-use planning, and reforestation activities, which
provide a sustainable source of clean water. Activities will introduce
sustainable approaches to providing safe drinking water at the point of
use.
HIV/AIDS prevention activities have directly reached over 1 million
members of high-risk groups. USAID has worked with 300 private sector
midwives from six provinces to improve the quality of the services they
provide. We have worked with the GOI and international agencies to plan
and implement essential National Immunization Days to halt the spread
of the life-threatening wild polio virus, which has recently been
reintroduced to Indonesia, and are working with the GOI and other USG
agencies on response programs to control the risk of avian influenza in
Indonesia. Progams have enabled local authorities to provide 18 million
preschool children with Vitamin A capsules to strengthen their immune
systems and prevent blindness. USAID assistance has helped local
authorities to place an additional 2.2 million hectares of forest and
coastal areas under better management and protection.
ECONOMIC GROWTH
To strengthen economic growth and employment creation, and in a
direct response to one of President Yudhoyono's highest priorities, the
USG is providing assistance to assist both the government and the
private sector in improving the business and investment climate,
combating corruption, increasing competitiveness in key sectors, and
improving the safety and soundness of the financial system. Efforts to
promote a transparent and predictable legal and regulatory climate for
business will reduce the hidden costs of doing business, reduce
business uncertainty and promote trade, investment, and job creation.
USAID support will help the GOI to improve the oversight of bank and
nonbank financial intermediaries in assuring safety and soundness in
the financial system and to improve transparency and governance.
Programs in this area will assist in the detection and prevention of
financial crimes and terrorist financing. Anticorruption efforts will
include support to the Commercial Court and the Anti-Corruption Court.
As a result of GOI commitment and USAID technical assistance, Indonesia
was removed from the international watch list of Non-Cooperating
Countries and Territories on February 11, 2005.
USAID successfully advised the GOI on Indonesia's Deposit Insurance
Law, and is now assisting in the creation of a new deposit insurance
agency that will better protect depositors and the banking system. In
an important public-private alliance, USAID launched the ``Success
Alliance'' to promote and improve the quality of Indonesia's cocoa,
under which more than 60,000 farmers have been trained. Our industry
partners have invested several million dollars in research and
marketing and have committed to purchasing more than $150 million in
Indonesian cocoa.
DEMOCRACY AND GOVERNANCE
To advance democratic decentralized governance, the USG is
providing assistance to help Indonesia build effective and accountable
local governance, to address conflict and improve pluralism, and to
consolidate the democratic reform agenda. USAID will work with 100
local governments to strengthen the local legislative process, to
engage citizens in planning and strategic decisionmaking, and to link
participatory planning, performance budgeting, and improved financial
management support to improve local government ability to effectively
deliver basic services. Programs will advance and safeguard key
democratic reforms, including the rule of law, freedom of information,
justice sector reform, free and fair elections and decentralization.
USAID support will help local organizations address violent conflict
across Indonesia, promote pluralism, reach out to Islamic mass-based
and other civil society organizations, and will provide immediate
support to the implementation of the peace accord agreed to by the GOI
and the Free Aceh Movement (GAM).
In 2004, USAID was the largest bilateral donor to the nationwide
legislative elections and to the first ever direct Presidential
elections. With 155 million registered voters and more than 575,000
polling stations, the Indonesia elections were the largest single-day
elections in the world. USAID assistance helped the Supreme Court
establish and implement its blueprint for comprehensive reforms, which
includes reducing the backlog of cases, improving the quality and
integrity of judges, publishing court decisions, and modernizing the
court information systems. In support of Indonesia's decentralization
process, USAID has been a leading donor, providing direct capacity-
building support to local governments. USAID helped the GOI develop and
implement revenue-sharing formulas and techniques that have assured
funding continuity for local governments. With USAID assistance, local
governments are implementing measures to address corruption at the
local level.
USAID in a partnership with The Asia Foundation (TAF) successfully
administers the Islam and Civil Society Program (ICS). Over the past 7
years, The Asia Foundation's ICS program has played a crucial role in
fostering, consolidating, and strengthening the prodemocracy movement
in Indonesia by engaging mass-based organizations that have strong
nationwide networks, as well as on-the-ground credibility and
legitimacy. USAID and TAF have created a network of over 30
prodemocracy and mass-based organizations addressing issues such as
women's human rights, the integration of democracy themes into
mainstream media, and cooperation among civic education providers at
higher education institutions.
USAID and TAF have supported innovative civic education curriculum
development programs in three Islamic education systems nationwide,
providing teacher training and textbooks on democracy education and
active learning pedagogy to over 550 education providers and 120,000
students in 2004 alone. TAF support has enabled Indonesian partner
organizations to provide training on human rights and gender issues
within over 1,000 pesantren (Islamic boarding schools) and introduce
civic education and active learning methods to pesantren and madras
(Islamic day schools), the sector of Indonesia's education system in
most need of reform. The People's Voter Education Network (JPPR) was
established by TAF, with USAID financing, in 1998 and has provided
large-scale voter education and election-day monitoring in the 1999 and
2004 elections. The JPPR, composed of long-term ICS partners, mass-
based Muslim organizations, combined with mass-based Christian and
interfaith groups, deployed over 140,000 community-based voter
education and election day monitoring volunteers, and produced and
distributed over a million pieces of voter education materials in 350
districts. USAID and TAF have supported the creation and continued
production of one of the largest radio talk shows in Asia, reaching 3
million listeners, called ``Religion and Tolerance.'' In addition to
the above-mentioned media programs, TAF has opened a dialogue with more
than 20 Islamic youth groups (including hardline groups) on university
campuses in 4 cities.
TSUNAMI RELIEF--INDONESIA
The Indian Ocean tsunami struck on December 26, 2004. The Provinces
of Aceh and North Sumatra, on the island of Sumatra, were the closest
bodies of land in the direct path of the killer tsunami waves. American
individuals, families, nonprofit organizations, and private
corporations donated hundreds of millions of dollars to help relieve
the suffering and begin the reconstruction. The U.S. Congess responded
to the President's request with a supplemental budget package that is
currently providing approximately $400 million for relief and
reconstruction in Indonesia.
The funding provided by the Federal Government enabled USAID/
Indonesia to immediately assist over 580,000 people. USAID supplied
food, water, and hygiene kits, and provided cash for work to clean up
and rebuild damaged infrastructure. In the aftermath, USAID is building
roads, supporting reconstruction programs that are identified by the
affected communities themselves, strengthening the community governance
and political infrastructure, and helping to establish early warning
prevention systems for future catastrophes. USAID has also partnered
with the private sector to help channel resources to assist with the
reconstruction. We have developed five Global Development Alliances, or
public/private partnerships, providing tangible assistance to Acehnese
citizens.
The compassion of ordinary American citizens and the private
sector, combined with prompt government action, has significantly
changed the way Indonesians view the United States of America.
According to post-tsunami polls conducted by Terror Free Tomorrow, a
nonprofit/nonpartisan organization represented by Senator John McCain,
Lee H. Hamilton, and many other distinguished professionals, 65 percent
of Indonesians are now ``more favorable'' to the United States because
of the American response to the tsunami, with the highest percentage
among people under 30. A separate poll conducted by the Pew Global
Attitudes Project in Indonesia reports that nearly 80 percent of
Indonesians say that the donations gave them a more favorable view of
the United States. This measurable progress on ``winning hearts and
minds'' and gaining allies in the Global War on Terrorism is a major
blow to al-Qaeda and other terrorists.
After only 2 months in office, President Yudhoyono was faced with
the tsunami disaster. Dealing with the immediate aftermath was far
beyond the capability of any single government. While the massive
damage resulting from the tsunami cannot be undone overnight, the GOI,
in partnership with international donors such as the U.S. Government,
has taken several important steps forward over the past 9 months. USAID
has played a vital role in that process.
USAID moved quickly to put to good use the funds that were provided
by the U.S. Congress--$48 million was immediately obligated for
emergency relief and recovery programs. USAID cooperated closely with
both civilian and military authorities. Our Office of Foreign Disaster
Assistance (OFDA) and the Asia Near East Bureau worked closely with the
military, planning the initial relief effort. The USAID tsunami point
person traveled to the region with Deputy Secretary of Defense
Wolfowitz to ensure a seamless transition from initial relief to
reconstruction. As the Navy sailed away from Aceh, we were already
announcing new grants to rebuild lives and communities. In June, the
USG and the GOI signed an agreement to defer and reschedule debt
payments falling due to the USG this year in order to free GOI
resources for tsunami victims. Approximately $21 million was obligated
for the budget subsidy cost of this rescheduling consistent with the
Federal Credit Reform Act.
On July 7, 2005, USAID signed a new agreement with the GOI,
committing $332 million (of FY 2005 tsunami supplemental funding) for
reconstruction programs. On August 25, USAID launched a $13.5 million
contract with an Indonesian construction company and started work on
the first phase of road reconstruction in Aceh. USAID has committed to
reconstructing the 240-kilometer road from Banda Aceh to Meulaboh in
its entirety. The road is the economic backbone of the region,
connecting Aceh Province with the rest of North Sumatra and Indonesia.
The overall road project, which will total $245 million, will provide
mobility, improve communication, create local jobs, and serve as the
lifeline for economic growth in the tsunami-devastated region. The
first (or ``phase one'' contract) phase will repair enough of the road
surface and bridges to reopen the first 80 kilometers of the road
leading from Banda Aceh to Lamno. A second contract will be awarded for
Architecture and Engineering (A&E) services for the design of the
remaining road sections and overall construction supervision. A third
contract will be awarded to resurface, rehabilitate, and reconstruct
the road from Lamno to Meulaboh as these sections are not covered by
the first contract.
I should mention that USAID is assuring that our contractors hire
employees from all parts of Aceh and North Sumatra. Young men from
diverse communities and backgrounds will have the opportunity to work
together rebuilding their nation, and develop respect for each other at
the same time. A significant factor in evaluating the phase one road
project proposals was the quality of plans to ``utilize local resources
both personnel and material,'' and the demonstrated ability of the
contractor to ``integrate local Acehnese subcontractors.'' The
contractor has a management plan in place and estimates that between
300 and 400 full-time Acehnese personnel will be hired to support the
project. Tenders for the large road project will also include a plan
for recruiting, training, and hiring Indonesian personnel for all other
phases of the construction project.
Second, to ensure proper oversight and success of this project and
all of our projects in Aceh, we have established a USAID satellite
office in the city of Banda Aceh. From there our staff continues to
monitor the successful culmination of relief and recovery activities,
such as water and sanitation and cash-for-work programs, as well as
manage implementation of our reconstruction work. Over 580,000 people
have already benefited from these efforts.
The GOI has established its Aceh Rehabilitation and Reconstruction
Agency, referred to as the BRR. Its director, Dr. Kuntoro, has
requested technical assistance and USAID has been able to quickly
provide the necessary expertise in the areas of audit and financial
management, spatial planning, information and communications
technology.
We are particularly proud of the communities participating in our
Community Based Recovery Initiative. They have moved from temporary
employment activities, such as debris cleanup, to implementation of
small-scale reconstruction projects, such as meeting houses and health
posts. Community members work together democratically to set their
priorities. In order to rebuild, residents need to agree on land
boundaries. USAID is providing important expertise on community mapping
to help families establish proper land claims and to help communities
map out the proper locations of schools, commercial areas, parks, and
other public infrastructure.
In the wake of the tsunami, there is new hope in Indonesia. After
30 years of conflict, the Free Aceh Movement has signed peace accords
with the Government of Indonesia. This unprecedented progress deserves
U.S. Government support. USAID has already started funding public
information campaigns to assure that all excombatants and communities
understand the terms of the peace agreement, including their roles.
These efforts may be followed by longer term reintegration support in
areas such as vocational training and microfinance support. Such
programs are crucial to solidifying the early months of peace and to
the long-term success of our larger reconstruction programs in Aceh and
North Sumatra.
TSUNAMI RELIEF--REGIONAL
In Sri Lanka, where over 30,000 people lost their lives and over
half a million were rendered homeless, the USAID team moved quickly to
reestablish a means of livelihood for the victims. Over 300,000 people
were put to work on construction activities, and we are pleased to
report that over 1,500 businesses have been started or restarted. Some
24,230 people have received grants and training to start up new
employment. We have paid special attention to restoring and rebuilding
critical services, and to date have rebuilt 74 schools (benefiting over
181,000 students), 21 clinics and 3 hospitals, and other community
structures such as market places, bathing enclosures, and small roads.
In keeping with our desire to improve disaster preparedness at the
local level, 37 communities have received equipment to enable them to
join the national emergency alert system. Also in Sri Lanka, USAID has
built vocational education centers to help diversify a workforce that
was overly reliant on fishing. Another effort was the construction of
playgrounds, to try to help children cope with returning to communities
near the sea.
I am pleased to note that the Sri Lanka mission has just signed a
contract with a U.S. firm for several major construction projects in
the east and south of the country. Over the coming 2 to 3 years, USAID
will rebuild a major bridge washed away in the southeast, repair three
fishing harbors, and construct or repair up to 14 vocational and
technical centers where people can go to learn a marketable skill. Work
on these important projects is beginning this month. You are aware of
the tragic civil war that has gripped the island for decades. Wherever
possible, our USAID mission uses such projects to bring together people
from diverse communities to work together for the common good. We are
proud of the collaborative work among Mission Teams and with the Office
of Foreign Disaster Assistance to provide not only immediate relief,
but early on to incorporate longer term options for rehabilitation and
reconstruction. We believe Sri Lanka can serve as a model for future
collaboration and programming.
In India, state and municipal governments responded well and are
coordinating a number of vital reconstruction activities, such as
moving people into permanent housing. Soon after the tsunami hit, USAID
provided temporary employment to 17,280 people. We are now moving to
help provide longer term employment opportunities, and have given out
over $100,000 in microcredit to over 86 self-help groups, serving a
total of about 1,500 people. Further to getting people back to work, we
have repaired over 200 boats. Over the next 2 years USAID will finance
skills training and job placement services for thousands of vulnerable
women and youth. USAID financed the construction of 1,500 temporary
shelters, established or restored 1,300 water points, and built over
5,500 latrines. To ensure that villagers are better prepared for any
further disasters, USAID trained over 400 communities in disaster
preparedness, including actual drills simulating an emergency. By
September 2007, USAID will have financed such training in over 22,000
Indian villages.
In Thailand, USAID is working with communities to diversify
livelihood opportunities, better manage community-based resources and
effective disaster management systems. The targeted communities
encompass five rural fishing communities in Ranong Province on the
Andaman Sea that were severely affected by the tsunami. USAID's
implementing partners, the University of Rhode Island's Coastal
Resources Center and Thailand's Asian Institute of Technology, have
helped villagers to identify and prioritize their needs for assistance,
fostering participatory decisionmaking processes. The $3 million
project has replaced fishing boats, provided microcredit and small
business training to 21 microenterprises, started 20 new businesses,
and provided 941 person days of cash-for-work in mangrove
rehabilitation for tsunami affected families. The integrated coastal
management strategies of this demonstration will provide lessons and
good practices for the nation and other tsunami affected countries.
In the Maldives, USAID provided three airlifts. These provided 250
rolls of plastic sheeting which provided temporary shelter for 750
people. Three water bladders, 9,600 water containers which provided
safe drinking water for approximately 24,000 people, and 2,000 hygiene
kits that served 10,000 people. USAID also provided $1,200,000 for
health, nutrition, water, and sanitation. Combined humanitarian
assistance from the U.S. Government to the Maldives totaled $1,363,000
with a possible $8.7 million in additional funding being negotiated by
the Department of State. Currently, all USG funds allocated for the
Maldives are managed by the U.S. Embassy in Sri Lanka.
In an effort to mitigate the effects of further disasters, USAID is
coordinating the U.S. Goverment's Indian Ocean Tsunami Warning System
(IOTWS) program. This $16.6 million, multiagency effort to develop
early warning capabilities for tsunamis and other hazards will monitor
changes in the ocean floor and also connect local communities to a
warning system. USAID is working together with U.S. technical agencies
such as the National Oceanic and Atmospheric Association, the U.S.
Geological Survey, the U.S. Forest Service, and the U.S. Trade and
Development Agency to bring targeted expertise to both national and
regional efforts. USG funding will also support the International
Oceanographic Commission as it takes the lead role in developing an
international warning system with data-sharing for over 26 countries.
The USAID Global Development Alliance (GDA) works to enhance
development impact by mobilizing the ideas, efforts, and resources of
the public sector with those of the private sector and nongovernmental
organizations. USAID, through the GDA, has formed 18 partnerships with
the private sector in tsunami-affected countries leveraged more than
$17,200,000 in private sector funds for the tsunami. USAID current and
prospective partners in post-tsunami reconstruction include: Mars,
Chevron, Microsoft, Coca-Cola, Prudential, Deutsche Bank, IBM, Hilton,
3M, Conoco-Phillips, and the Mellon Foundation.
In conclusion, I would like to thank the committee for this
opportunity to report on tangible progress in achieving USG foreign
policy goals in Indonesia as well as the early results of USAID
programs addressing the tsunami. Our USAID staff at the missions in Sri
Lanka, Indonesia, India, and Thailand have made a tremendous effort to
get things moving quickly, using existing contracts and grants and
expedited procedures wherever possible, to restore living conditions
and economic security to the victims of this disaster. As we have moved
out of the relief effort and into longer term reconstruction, USAID
continues to place emphasis on helping people get back to work,
training men and women for new types of employment, and providing the
infrastructure they need for better living conditions, as well as
economic security.
Senator Murkowski. Thank you, Mr. Kunder. I appreciate it,
and I appreciate that last comment there about the early-
warning alarm system, because we're curious about how that is
going to be implemented and wanted to know if, in fact, we're
achieving the success that we're hoping for in educating the
people about what the system is all about. It's one thing to
put it in place, it's another thing to actually know what to do
with the information once you get there. So, it sounds like
there is some progress on educating the communities in that.
Mr. Kunder. As you pointed out the last time, Madam
Chairman, it is a segmented approach. The technical part of it,
the getting the buoys out there in the water, determining what
the locations will be, getting the transmission of the signals
to land, and then having each nation distribute that
information out to the local community in such a way that it'll
be received in, in some cases, what are rural areas, and then
educating the local public both on how to respond and what kind
of mitigation efforts they should take, it's a very complex
undertaking across the region. I'm not here to report success
yet, but I'm here to report that the effort is well underway.
Senator Murkowski. Senator Obama, may I just mention, I got
a note that we're supposedly going to have a vote here in about
10 or 15 minutes. It's my hope that we will be able to ask the
questions that we have of these two gentlemen and then take a
break to do the votes. I understand there's a couple of them,
at least. And then we would come back for that second panel.
Senator Obama. Yes. Madam Chairman, unfortunately, before
we go vote I've got to return to my office.
Senator Murkowski. OK.
Senator Obama. I just want to thank the witnesses. We'll
probably submit some questions in writing to the witnesses, and
hopefully that can open up a dialog between our office and both
State Department and AID on this. But thank you very much for
the informative testimony.
Senator Murkowski. Thank you for being here.
Let me go ahead and ask a couple of questions--of you,
first, Mr. John. Talking about, you know, the spread of
democracy and the opportunity that we have with this
relationship, growing and positive relationship, with
Indonesia. And both of you have mentioned a little bit about
the education aspect. And you, Mr. Kunder, have indicated that
there's a need for education reform, that we need to do more to
help in that area.
The question to you, Mr. John, is, in terms of the
exchanges that we might have between Indonesia and the United
States, are there many Indonesians who look to the United
States as a place to come for higher education? And are we
doing anything to seek Indonesian students in any way?
Mr. John. There aren't enough Indonesian students who are
looking at the United States as a place to study. I think it's
a function of many things, and it's hard to describe all of the
factors. I think the financial crisis of many years ago, of
1997, impacted them. And I think the new visa regulations and
restrictions that we have in the United States are, perhaps,
misunderstood by the general public in Indonesia as being much
more restrictive than they really are. And we have to get out
the word--and the Embassy is working to get out the word--that
we do welcome Indonesian visitors, and particularly Indonesian
students. That's in a general perspective.
Specifically, Indonesia has, compared to a lot of its
neighbors in the region, a woefully inadequate number of
graduate degrees--and, specifically, Ph.D.s. I believe they
only have 7,000 or so in the entire nation of 230 million,
which is far short of what they need.
One of the aspects of our engagement with Indonesia in the
years ahead--in the next 3 years, specifically--is to invite
a--I don't have the number, exactly, but several dozen
Indonesians per year to the United States for master's degrees
in areas that are applicable and quite necessary in Indonesia
right now.
We also are working with universities on a regular basis in
Indonesia to enhance their American studies programs, to
enhance other areas that would enable Indonesia to develop more
rapidly. So, it's a key concern of ours, and it's one that
we're working closely with the Indonesian Government on.
Senator Murkowski. Recognizing, then, that you--at least at
the higher-education level--you really have a real discrepancy,
or you're not able to find the Indonesians that you would
think--I would want to think that you want at the higher
levels, what does this do to those efforts to make sure that we
are hiring and training the local people in the efforts for
reconstruction? For instance, you know, it's one thing to be
out there moving the dirt. It's another thing to be out there
heading up the company that's making the decisions to move the
dirt. How are--are we able to assist at all with the training,
with the education, to make sure that it is the Indonesian
population that is making things happen at the higher levels?
Either one of you.
Mr. Kunder. Certainly capacity-building of Indonesian
institutions is a high priority for us and is embedded in all
of the programs. Specifically on moving dirt, in fact, an
Indonesian construction firm is building that first 80
kilometers of the road. The way the system is structured, we
anticipate an American firm coming in behind that to do the
larger-scale reconstruction, but we've gotten the Indonesians
immediately involved.
The reconstruction agency, the rehabilitation and
reconstruction agency of the Indonesian Government that is
leading the effort in Aceh, is receiving technical assistance
from us and support in its internal procedures. Approximately
one-third of our total program supports what we would consider
democracy and governance interventions. We are putting programs
into the Supreme Court, into the Indonesian Parliament, and
into the Indonesian Ministries to build their oversight
systems, their inspector general capacity, so that we're very
much aware of the fact, because we are spending less than a
dollar per person, it's not going to be United States taxpayer
dollars that are either going to rebuild Aceh or are going to
make the transition to a vibrant, prosperous democracy in
Indonesia; it's going to be the Indonesians, themselves. So, we
are investing in building up Indonesian institutions. It's not
something we have to convince them to do. I mean, they are very
eager to take the lead on these issues.
So, we have been providing technical assistance
specifically on the scholarships issue. This is a fundamental
problem. We have done analysis within our USAID programs, and,
because of a number of policy decisions and budgetary
constraints, we are not supporting as many scholarships
worldwide as we were 10 years ago or 15 years ago. We have
asked for additional funds in the 2007 budget to get these
numbers back up again, because of all the reasons Mr. John was
mentioning.
It's ironic that the gentleman who leads the reconstruction
effort for the Indonesian Government in Aceh, Dr. Kuntoro, who
has been universally praised for his leadership and
organization, was a beneficiary of a U.S. Government
scholarship for study in the United States, a graduate
scholarship. And now he's back, leading that agency, and doing
an excellent job. And, of course, we're able to interface
effectively with him. So, he's a living, breathing example of
the kind of thing we're talking about here.
Senator Murkowski. Mr. John, let me go back to the
discussion about energy issues. And we've both raised the issue
of the subsidization. There's actually an article in today's
Financial Times indicating that there's this discussion in--not
a debate--it doesn't sound like it's a debate anymore--that
Indonesia is going to move to reduce the subsidy. And there's
some discussion about a date as early as the 1st of October,
but it--nobody seems to be willing to commit to a timetable,
but it seems clear from this article that there is a move afoot
to do that. But it makes reference to the fact that these
subsidies have caused a distortion in price. They use terms
``causing a massive misallocation of budget resources.'' But
they also speak to the disincentive to businesses in terms of
viewing this as an--viewing Indonesia as an investment
opportunity when we have the subsidization as it is and just a
level of uncertainty.
What actions, if any, is Indonesia currently taking to
improve their energy efficiency, to help with their capacity
development to meet the demand--what's going on that will help
this picture and, hopefully, provide a little bit more
stability?
Mr. John. I guess it's, sort of, two components--one on
reducing the subsidies. You know, the very good news is that
Indonesia is a democracy, which means it has a lot of
politicians. And, you know, they run into a political wall on
reducing subsidies that have been very popular when they were
affordable and became just ingrained in the system. So, it's--
you know, there's a commitment by the leadership. And they have
to reconcile the very difficult political demands that are
placed on them, though, when they actually reduce the subsidies
because the people it adversely impacts in the very short run
are the ones that Senator Obama was referring to as the least
wealthy of society. President Yudhoyono is working on a program
to assist the poor at the same time as reducing subsidies.
The second component of increasing capacity, I think, in
terms of relationship with the United States, one key part of
that is getting increased foreign investment into Indonesia.
Today, for example, President Yudhoyono is in New York meeting
with a large investor forum to attract foreign investment. But
what foreign investors have stated is that Indonesia--well,
they would spend more on exploration in Indonesia if the
government there would modify its investment tax and business
rules to make them more clear and to apply them consistently.
The business people--foreign business people are worrying
less about the tax rates, but more about fair and transparent
tax administration. I think there is a commitment by the
administration in Jakarta to work on that, that's key to having
more investment. And more investment is key to having a better
energy sector. I mean, if you look at U.S. investment, most of
the $10 billion that we have invested there is in energy and
mining, so it has a very direct impact on that.
Senator Murkowski. I am told we've got about 8 minutes left
into the vote, so I've got a couple of more before we're going
to have to take a break here.
Very quickly, Mr. John, Secretary Rice did not go--did not
attend the ASEAN Ministry Conference at the end of July, and I
think it was--there were a lot of raised eyebrows, or, ``What's
going on?'' How was that--how was that viewed or taken by
Indonesia, her lack--or her not being in attendance at that--
those meetings? Was that--did that cause some consternation?
Mr. John. I think--well, throughout ASEAN, as a whole,
there was--certainly a lot of the leaders voiced consternation
about her inability to appear at the ASEAN Regional Forum. I
think, to look at it from a broader perspective, though--and I
believe that most nations, including Indonesia, in Southeast
Asia are--is that bilaterally the United States has committed
to enhancing our relationships with most of the nations in
Southeast Asia. And if you look at all the steps that we've
done, which I think all of us have spoken to today, the
Indonesian Government sees that we are very committed to a
strong bilateral relationship. And Secretary Rice, on Monday,
at the U.N. General Assembly, met with all of the ASEAN Foreign
Ministers. She met with them in June, in Washington, with--not
with the Foreign Ministers, but with ASEAN representatives who
were visiting Washington. I think she's made very clear, on a
variety of instances, our willingness to, and very strong
desire to, remain deeply engaged with ASEAN, make it a very
strong organization, and build that in the future. And, indeed,
I think on Monday she looked forward to continuing her
cooperation and work with ASEAN.
Senator Murkowski. Good. Good.
Let me ask you, Mr. Kunder--you mentioned the
reconstruction efforts--has the funding for the tsunami
response been adequate, in your opinion?
Mr. Kunder. The money that the Congress made available, we
think, allows us to do the absolutely critical elements, which
were to do some of the emergency relief, to at least jumpstart
the reconstruction effort, to launch the early-warning system
across the region. In the business we're in, we could always
use a few more dollars, and, given the scale of the
devastation, there's a lot more work that needs to be done, but
we have no complaints. We appreciated the money that was made
available. And I think it will get the critical issues
underway.
Senator Murkowski. Good. Good. That's important.
The bird flu that we've discussed relatively briefly here,
I understand that there has been a working group that has been
established. And I'm curious to know whether or not the working
group has proven itself effective. What's the level of
cooperation with Indonesian officials?
Mr. Kunder. You're talking about the U.S. Government
working group or the international group? Within the U.S.
Government, the President just announced the need to have an
international group working on this, and that idea is just
launched at this point. Within the U.S. Government, we do have,
I think, excellent interagency coordination. There was a State
Department coordinator named earlier. The NSC is heavily
involved. Our military colleagues are working, as are the
Centers for Disease Control at HHS, and many other U.S.
Government agencies. As I mentioned earlier, it is a complex
multifaceted problem we're taking on, but I'm very satisfied
with the level of interagency cooperation, thus far.
Senator Murkowski. Good. And then, as that expands to the
international group, hopefully you're just drawing in a bigger
network, then.
Mr. Kunder. There is already a fair amount of cooperation
among the nations of the region and the international donors.
And with the President's new initiative, I think that's going
to be enhanced.
Senator Murkowski. Good. Good. I was pleased to see the
picture that you had there--you described it as a town
meeting--because I think we want to know that there is a level
of input at the very local level in terms of what is happening
with the reconstruction and how priorities are set. And it
appears, from what you have said here this afternoon, that
there is a great deal of input at that very local level. Is
that correct?
Mr. Kunder. Yes, ma'am. You'll have NGO panelists later who
also have folks on the ground, and I believe they'll confirm
that same thing. That's been one of the hallmarks of the
effort. First of all, in any disaster, it is the local people
who save most of the people who were saved initially. As much
as outside help is appreciated, the Indonesians got this thing
started on their own, and we've tried to make sure that they
continue to have a strong voice, not only in doing the work,
but setting the direction and setting the priorities locally.
Yes, ma'am.
Senator Murkowski. Good. Good. Thank you.
I'm going to have to excuse myself. We will take a break
and commence with the next panel when we get done. I'm not
certain how many votes we have. I guess we've just got one
vote, so it should be a pretty quick break.
So, I appreciate the testimony from both of you this
afternoon, and the time that you've spent with us.
Thank you.
[Recess.]
Senator Murkowski. OK. Well, thank you for indulging us in
a little bit of a stretch break and an opportunity to go vote.
We will next turn to our second panel this afternoon. And
welcome to all three of you, gentlemen. We will lead off the
testimony this afternoon, the Honorable Paul Cleveland. He will
be followed by Dr. Hadi Soesastro, the executive director for
the Center for Strategic and International Studies. And, upon
his conclusion, Dr. Randy Martin, who is the director of Global
Emergency Operations for Mercy Corps, will speak to us.
So, with that, Ambassador Cleveland, thank you for joining
us this afternoon.
STATEMENT OF HON. PAUL CLEVELAND, AMBASSADOR (RET.), ARLINGTON,
VA
Ambassador Cleveland. Good afternoon. All right, thank you.
Does that do better?
Senator Murkowski. There you go.
Ambassador Cleveland. I appreciate the opportunity, Madam
Chairman, to come before this committee today. May I say that
my views don't necessarily represent the views of the United
States Indonesia Society, nor its board. I want to say that at
the outset. They're my own, so I'll be a little more direct,
maybe, than otherwise.
I'm particularly pleased, Senator, to be here before you
and to note that you've picked up the long-term abiding
interest that your father had in East Asia. I met and worked
with him on many occasions, and I know from my personal
experience, that he made major contributions to the improvement
of relations with East Asia and the Pacific, and we're all very
grateful to him, and grateful to you for picking up the baton.
Also, all of us at USINDO are delighted that you've chosen
to focus on Indonesia, as previous panelists have said. This
nation has always been of major importance, but it's
increasingly so these days, because it's a counterweight to
China's and India's--and I don't think we should forget
India's--growing influence in Southeast Asia--and because
democracy is flourishing there in the largest Muslim nation in
the world.
It is our interest to pay commensurately greater attention
to Indonesia. These hearings clearly are moving us in that
direction.
Democracy is, indeed, flourishing in Indonesia today, and
that is the major point I would make here, along with the
corollary that it is, therefore, in our interest, more than
ever, to support Indonesia as much as we possibly can.
One year after the exceptionally well-run, transparent, and
clean elections of 2004, the year of voting frequently,
President Susilo Bambang Yudhoyono (SBY), is emerging as the
best President Indonesia has ever had, in my view. While he's
sometimes criticized as hesitant and indecisive, it's
increasingly clear to me that's not really the case. He's a
deliberate, politically astute man who focuses on developing
consensus. That's true. But that's a virtue in a democracy,
particularly one that's as diverse and as large and as
difficult to manage as Indonesia's. His decisions have been
largely wise and courageous. They're moving the country
forward--if not as fast as everybody would like, they're
certainly moving in the right directions. And, moreover, he is,
for the most part, bringing the people with him.
He's moved with great speed and under great pressure when
called on. One day following the terrible tsunami that wrecked
Aceh and killed over 130,000 people, Yudhoyono flew from the
opposite end of the country to be onsite, began immediately to
organize the greatest disaster-relief effort--one of the
greatest, I would say, probably in his nation's history. One
that, after some organizational bumps, is now proving
reasonably effective.
He set aside the military state of emergency in Aceh, and
opened the province to outside assistance, which immediately
began pouring in. That was not necessarily an easy decision to
make. Indonesians are very sensitive to outside involvement,
interference as they may see it, but, in fact, our assistance
following the tsunami became a tremendous plus for the United
States, because we did very well, and I think that's been
recognized by the Indonesian people.
But, not only that, with a major assist from his aggressive
Vice President, Jusuf Kalla, SBY recognized and exploited the
deep desire of the Acehenese in the depth of the tragedy to
rebuild better lives, and he fashioned a deal with the
separatist movement, the GAM (Gerakan Aceh Merdeka), that was
signed on August 15. In the view of a large number of
observers, it has a very good chance of succeeding after 30
years of fighting and the loss of 15,000 or more lives. The
first major surrender--as Erik John mentioned--the first major
surrender of weapons and the extraction of TNI and police
forces begin today, as we speak here.
There are a lot of other successes. To list just a few, I
think SBY has struck out against the nation's greatest scourge,
which has been corruption. A substantial number of leading
officials have gone to jail, and there are a lot more under
indictment. This is a very difficult, hard job for him. There
are, and will always be, more big fish to be indicted.
Moreover, the criminal code needs clarifying, judges need
higher salaries. We always used to say, ``If you put a man that
makes $30 a week opposite a man who makes $3,000, the latter is
obviously going to buy off the former.'' Sentencing needs to be
more commensurate with crimes committed.
There's widespread amazement among Indonesians and
foreigners, both, at how seriously SBY has pursued this goal of
going after corruption, and, also, I think the progress he's
made.
With the help of a great Minister of Defense and reformist,
Juwono Sudarsono, plus several generals and admirals whom he
has placed at the head of the TNI who are reformists
themselves, SBY has continued the extraction of the military
from politics and has begun to budget more for the TNI so he
can persuade the military to give up the businesses that enable
them to remain independent of civilian control. I think that's
a critical and important move. It will take quite a long time
to accomplish, but they're moving in that direction, and they
have already increased the Defense Department's official
budget.
SBY has declared continuing war on terrorism. He's reached
out effectively to the United States and to the world to build
confidence in his leadership and to encourage foreign direct
investment vital to the success of Indonesia's economy. He has
also attacked tough problems confronting the domestic economy.
For example, he decreased budget-busting fuel subsidies, and he
looks like he's on the verge of doing some more of that. And I
think your emphasis on that, Senator, is exactly right. It is
probably the single greatest problem in the domestic economy
that he faces. It's very difficult politically, as has been
stated, but he is proceeding.
His government is also continuing the complex, but
essential, job of decentralizing government. If he didn't have
any of these other things to do and he was just doing that,
that would be plenty. Indonesia has been the largest
undecentralized government in the world, so I think it's very
important.
Madam Chairman, there are a lot of things that still have
to be done, and I will be happy to address some of those in
questions. But a great mentor of mine, and many others of my
generation in the Foreign Service, Marshall Green, coined a
phrase when he was our Ambassador in Indonesia in the late
sixties, ``We must help the Indonesians help themselves.''
Indonesians are proud, enduring people, determined to succeed.
With so many truly effective younger Indonesians now emerging
in Indonesia's new democracy, the time has never been more
opportune to help the Indonesians help themselves. I'm sure
whatever we do, they will prevail. If we help them seriously,
however, they will prevail that much sooner and we'll both
benefit greatly from the progress and partnership that results.
Thank you.
[The prepared statement of Ambassador Cleveland follows:]
Prepared Statement of Hon. Paul M. Cleveland, Ambassador (Ret.),
Immediate Past President and Trustee, the United States-Indonesia
Society, (USINDO)
INTRODUCTION
It is an honor and pleasure, Madam Chairman, to appear before this
committee today. May I begin by saying that the views expressed in my
testimony are my own and not necessarily those of USINDO or its board.
The United States-Indonesia Society welcomes the focus this hearing
brings to developments in the fourth largest nation in the world and to
relations between the United States and Indonesia, the world's third
and fourth largest democracies. Not only is Indonesia's democracy
flourishing, it is flourishing in the world's most populous Muslim
nation.
Indonesia has always been important to us and to the world in
strategic, political, and economic-cum-commercial terms, but that
importance has risen substantially in the past several years as
Indonesia has become an increasingly important counterweight to China's
spreading influence in the region. Also Indonesia has become a
democratic pacesetter for the Islamic world and for the Southeast Asian
region.
Indisputably, the United States has a very high level of interest
in Indonesia's success. To ensure fulfillment of that interest, our
Government needs to devote more time, energy, and assistance to
Indonesia's development.
I am pleased to appear on today's panel with Dr. Hadi Soesastro,
executive director of the Center for Strategic and International
Studies in Jakarta. CSIS is Indonesia's oldest think tank and with
which USINDO has had a long and productive relationship. Dr. Soesastro
is his country's leading authority on economic, trade, and business
relations with ASEAN and the larger Asian community.
REMARKABLE PROGRESS
Relatively secure against outside encroachment, resource and
culturally rich, Indonesia was governed for centuries under
authoritarian and colonial rulers in such a way that political growth
was stunted and the country's full potential never came near being met.
While progress toward establishing democracy along with economic
recovery was substantial in some areas during the first 6 years after
President Suharto's fall in 1998, it was marked by halting leadership,
continuing high levels of corruption, only modest economic growth, and
failure to grapple comprehensively and effectively with such major
problems as separatism, military and police reform, environmental
degradation, judicial and public prosecutorial reform, plus tax and
other commercial and trade related changes necessary to attract
essential foreign investment. Advances were made on self-sustaining
political/economic development, but relapse into authoritarian control
remained a widely considered possibility.
Progress made in the last year contrasts sharply.
In 2004 Indonesia held a series of remarkably clean elections with
high voter turnout, including the largest one day election in the
history of the world when it voted for Parliament in April of that
year. Moreover, the electorate proved sophisticated and sought honest,
progressive leadership, voting in the government of President Susilo.
Bambang Yudhoyono (SBY) with a 61-percent margin in Indonesia's first
direct election of a President last September. Among other things,
SBY's campaign featured a promise to eradicate corruption that
decidedly appealed to the Indonesian people. To satisfy the high level
of voter confidence, in its first year SBY's administration has:
Undertaken widespread change and reform for better
governance including critical military and police reform;
Required his Cabinet appointees to sign an anticorruption
pledge and taken on a substantial number of corruption cases,
including several high profile ones;
Struggled to maintain fiscal balance by reducing politically
explosive fuel subsidies in early 2005--now it clearly must
repeat that move against the background of ever mounting
international oil prices;
Addressed tax, investment, and microbusiness climate reforms
to attract urgently needed foreign investment;
Effectively managed the tsunami relief effort despite the
magnitude of the task and bureaucratic shortcomings;
Reached a peace agreement with Acehnese rebels (the GAM),
initiated serious political dialogue on Papua, and sought
common ground with East Timor on a reconciliation process;
Worked closely with the United States in restoring
cooperative military relations and pursuing the investigation
into the Timika incident of August 2003;
Undertaken an impressive set of overseas visits including
one to the United States to reestablish key relationships and
made distinct strides in improving relations with Australia,
Japan, China, India, and others; and
Reinvigorated regional dialogue on trade, investment,
terrorism, security cooperation, and maritime security.
By any measure it has been a remarkably active beginning and has
gone far toward locking in effective, sustainable, democratic
development.
CHALLENGES AHEAD
As impressive as this beginning has been, the long-term challenges
ahead are larger still. To illustrate:
Improved organization and management in the administration,
including creation of Presidential Palace coordinating
mechanisms (such as national security and domestic councils)
will be a must if any President of Indonesia is to govern more
effectively;
Along with better political party organization and improved
staffing and organization within the Parliament itself, as well
as better performance by the parliamentarians, there must be
increased coordination with and lobbying of the Parliament by
the administration in order to pass difficult legislation and
cease reliance on overuse of Presidential decrees--the
President has done well personally in persuading the DPR to
raise fuel subsidies and in winning approval of the Aceh peace
accord, but he cannot devote all his energy to the DPR and a
large number of bills are currently languishing in the DPR's
inbox;
Other reforms within the administration such as increased
tax collection, especially from large tax payers, new tax law
revision and strengthening of the commercial court will be
crucial to ensure fiscal viability;
Continued heavy emphasis needs to be placed on
decentralizing and balancing the distribution of power,
responsibility, and fiscal capability from Jakarta to local
government--an immensely complicated task;
Capacity-building among government civil servants at
provincial and local government levels is needed so officials
will be closer to the people and take responsibility for their
actions; and
Local elections in 2005 and 2006 must be clean and well run.
These problems would be formidable enough for any new democracy to
manage. But there is much more, and I would now like to turn to several
major issues discussed below in greater detail, in which both the U.S.
Government and the Society are involved: Corruption and judicial
reform; security; separatism (Aceh and Papua); society and religion;
and education.
CORRUPTION AND JUDICIAL REFORM
Corruption is endemic in Indonesia--the country ranks at the bottom
of Transparency International's corruption pile--and it is universally
seen at home as well as abroad as the number one problem Indonesia must
overcome if it is to restore confidence in both government and
business.
Obviously closely related, judicial reform along the lines of the
Indonesian Supreme Court's ``blueprint'' has to be implemented. Apart
from the courts, reform has yet to take hold in the Justice Ministry
and public prosecutor's office, and upgrading and reform of Indonesia's
legal fraternity also still lies ahead.
SBY has made initial inroads into this problem. As noted, he
required all Cabinet Ministers to take a pledge to conduct their
affairs with integrity and to avoid corruption, collusion, and nepotism
(KKN). He sent special messages to key targets where corruption has
been most rampant: The Attorney General's Office, Customs and Taxation,
and the Bank of Indonesia.
The Supreme Audit Agency which has had a good reputation in the
past was given sweeping powers to gather facts regarding the operations
of the state-owned enterprises. He gave the Corruption Eradication
Commission both autonomy and special security protection in addition to
which he formed a special interdepartmental corruption eradication
team.
Getting down to cases the administration's prosecutions are
beginning to produce results. The former governor of Aceh, Abdullah
Puteh, was given a 10-year sentence for misuse of state funds; the Bank
Mandiri's former president was fired and has been indicted for a major
loan scandal. New investigations are being mounted regularly into
state-owned companies as well as the activities of some 57 state
officials, including governors, mayors, and legislators. The former
Minister of Religion is being investigated for filching $71 million
from Haj funds.
In some areas SBY has fallen short. While he retains impeccable
credentials personally, his administration in the view of some failed
to go after some high-level people it should have, leading to the
accusation that he has not come down hard enough on ``the big fish.''
He has basically proven courageous against the scourge of corruption
and he has accumulated political capital that he should put to use in
this most vital cause. But follow-through will be the watchword of
observers and critics in the future.
The Judiciary: All the ``follow-through'' in the world, however,
cannot correct the corruption problem if cases can be bought off and
come to naught in the courts or the prosecutors' offices. It has been
said that judges have gathered to bid on cases that they believe hold
potential for large payoffs. More than any other of the three sectors
of government, the judiciary is in need of reform. Indonesia's
economic, political, and social strengths cannot be upgraded in the
last analysis unless the courts uphold the law of the land. There are a
number of reform needs:
Judicial incompetence is both legend and intact. One reason:
Personnel selection is often corruption, but there is
encouragement in the recent appointment of the Judicial
Commission that will oversee the performance of the country's
6,000 judges and recommend appointments.
Case outcomes vary widely. An Australian girl allegedly
dealing in marijuana received 20 years; Abu Bakar Basyir got
less than 3 for his leading role in terrorism in Indonesia.
Some big businessmen have gotten off scot-free even when open-
and-shut cases are brought against them, or in some cases as
some foreign investors have found big business miscreants are
able to turn the tables on their accusers.
Judges salaries are too low, and they are therefore more
susceptible to bribery.
Administration of the judiciary branch is poor. It no longer
depends administratively or legally on the executive as it once
did and that is certainly a step forward. Nor, however, has it
been closely monitored and held accountable. There is
considerable irony not to mention danger in the fact that it
has become a law unto itself. Much is done behind the scenes,
out of sight of potential exposure and correction. Lack of
transparency, low pay, and an overall budget that is three-
tenths of 1 percent of the entire government's budget lie at
the heart of the problem. Mismanagement abounds.
A new criminal code (some 20 years in the making) has been
widely criticized for its vagueness and repressive nature with
regard to press freedom. Vague definitions of crimes,
procedures, and jurisdictions complicate an already overly
complicated and inefficient system based to a considerable
extent on old colonial laws.
The Supreme Court has a ``blueprint,'' a widely anticipated
Judicial Commission is underway, and NGOs and outside assistance are
all over the place. Yet the overall reform process promises to continue
slowly at best. The way ahead is clear enough. A start has been made.
But the need for more rapid implementation cries out.
The United States has a substantial role to play. First of all it
is useful for the U.S. Government and its legal profession to apply
diplomatic pressure on the Indonesians when it is clear that individual
Americans or corporations have been hard done by in the Indonesian
courts. To avoid nationalistic backfires, it is important that to the
extent possible, this be in the form of respectful assistance to those
in Indonesia who are even more concerned than we about the need for
corrections. Our approach should be to help Indonesians help
themselves.
Apart from the diplomatic pressure in some cases that clearly go
off the rails, we need to help with the reform process. Through USAID
we are supporting NGOs that are providing valuable advice and inputs
into the reform process. A code of legal ethics is being developed with
the assistance of the American Bar Association. Importantly, a joint
working group on legal reform was announced during President
Yudhoyono's visit to Washington in May and this should bring new
impetus to the overall effort. The involvement of a senior judicial
official, perhaps a Supreme Court Justice, would be a welcome spur to
progress.
DEFENSE AND SECURITY
The United States-Indonesia Society has recently produced three
publications on Indonesia's defense and security:
``Towards a Stronger U.S.-Indonesia Security Relationship''
by John Haseman and Eduardo Lachica;
``Indonesia's War on Terror'' by William Wise; and
``Indonesia and the United States, Shared Interests in
Maritime Security'' by Bronson Percival.
These studies point to three major conclusions:
More effective measures to promote regional and maritime
security and counter terrorism in Southeast Asia require closer
United States cooperation with the armed forces and law
enforcement authorities of Indonesia;
Promoting defense reform in Indonesia requires cooperation
with the Yudhoyono government, not sanctions and withholding
assistance;
There are important--indeed essential--opportunities to
further cooperation and constructive relations with Indonesia
to achieve human rights, professional and other reforms within
the Indonesian military that many outside the Indonesian Armed
Forces would like to see.
Supporting these conclusions is the important progress that has
already been made to overcome the shortcomings and in some cases the
abuses of the past.
The military has essentially taken itself out of formal
politics, although no one would deny that it still wields
substantial informal political clout;
Members of the armed forces no longer sit in Parliament as
part of a special faction and active duty military officers can
no longer serve in civilian government positions;
The police (Polri) have been separated from the armed forces
(TNI) and are separately under the command of the President;
The military justice system has been placed under the
civilian oversight of the Supreme Court as in the United
States;
Of great importance a recent law requires that military-run
businesses be brought under full government control, a working
group headed by the Defense Ministry is to recommend
implementation measures to go to the President soon;
Treasury expenditures for the TNI are now subject to prior
approval by the Defense and Finance Ministries; if the TNI
gives up its businesses the TNI budget will need to be doubled
to $5.6 billion;
And consideration is being given to a long-term plan for
repositioning and realigning the structure; roles and missions
of the armed forces.
While reform is the focus of discussion when the subject of the
military comes up, it is important to keep in mind that the military is
vital not just for external defense but for the time being at least to
the security and stability of the domestic scene as well. The
shortcomings of democracy remain widespread. The military should be in
the background and ease or be eased out gradually to avoid violence
during the present institution-building phase. The TNI has a long proud
history; it cannot be cast over the side. Reform should zero in on a
careful transition to civilian control, adequate budgets and capacity-
building to enable the military to play the professional, nonmilitary
role many of its best officers see in its future.
Co-equal with reform of the TNI and closely linked to the reform in
the judiciary branch is capacity-building for the police. Necessary
measures identified in the USINDO studies include:
At least a doubling of police forces close to U.N. standards
to perform community policing and basic local security
functions;
Improvements in salaries, training, and living conditions as
a disincentive for corruption--a major problem in the police;
Emphasis on upper level management; and
Improvements in police intelligence and coordination with
other law enforcement authorities, particularly relating to
counterterrorism and internal security.
To help ensure success in this area, Indonesia is blessed with
moderate reform-minded leaders. First, SBY, himself, a former general
who has been known as a reformer and who has placed other moderates at
the top levels of the armed forces, while supporting the General
Endriartono Sutarto, who has taken a strong nonpolitical stance, as his
senior military commander. Then there is Defense Minister Juwono
Sudarsono who is the best possible leader to begin to assert the
necessary civilian leadership in the defense sector.
Reform of the military and the police will take a long time as the
military's presumption of power in domestic terms has existed for a
long time, moreover it will take time to bring the police up to
standard, ready to take over. But we should not wait for some ideal to
emerge. Now is the time that U.S. assistance will have the most impact
on the reform process.
Against this background there are many opportunities for the United
States and other donors to assist with professional training, defense
management, improvements in command and control, and establishment of a
national security or defense council and staffing in the office of the
President. Through IMET and FMF and police assistance we can help the
trustworthy defense leadership of Indonesia to make the changes we
would like to see. By continuing to stiff them we will only frustrate
and eventually alienate them.
Juwono Sudarsono had good bilateral defense talks with our
administration in early August. Congress should join the effort to
further cooperation, not impose further restrictions.
SEPARATISM: ACEH
Indonesia has long been bedeviled by threats of separatism and
separatist forces in Aceh and Papua. While prepared to make concessions
in the form of greater autonomy, the national goverment has always seen
a united Indonesia as vital to its interests. Fearful not only of
losing control of these important provinces but of the centrifugal
effect the losses would have elsewhere in the country, Indonesia has
resisted the separatist movements zealously, and the United States
instructed by its own history, along with many other nations, has
supported this position.
An insurgency was underway for many years in Aceh where tens of
thousands of people have been killed. The TNI has been in the vanguard
of the effort to quell rebellion and has among other things developed
major vested interests in illegal logging and other ventures in the
province. Many among the resistance have had vested interests of their
own, so the antagonists became locked in struggle despite central
government efforts to reach accord.
Ironically, it took disaster to engender peace. The tsunami that
struck Aceh and killed well over 100,000 people has had a beneficial
effect on the conflict in that province and an agreement has been
reached that will call for careful monitoring and nurturing but holds
genuine promise. Under a balanced set of compromises, the GAM gives up
its guns and the TNI leaves the province, while the province achieves
autonomous status but remains a province within Indonesia. The
agreement will take careful monitoring. The government will face
challenges from nationalists who believe it was too generous with the
GAM and from the Acehnese people who do not yet fully understand the
terms. The popular view favors peace. But implementation will be as
large a determinant of success as the initial agreement. We should
strongly encourage positive resolution of problems and a lasting peace
settlement wherever appropriate.
The challenge now to use the phrase of Sidney Jones is ``to shift
from bullet to ballot.''
The tsunami has opened the way to unprecedented public and private
assistance from the United States, other nations, and world
organizations. The outpouring of our aid, particularly our military's
emergency role in the early post-disaster period, has helped repair the
United States tarnished image throughout Indonesia.
Acehnese reconstruction in general is encouraging. While it got off
to a slow start, USINDO President Al La Porta just back from the
province reports major progress. Housing construction is now rapid,
most people are out of tents, local mosques, and schools are being
rehabilitated, land issues are being sorted out, commercial activity is
on the rebound.
The task now is twofold: To reconstruct Aceh's settlements and
livelihoods and consistent with the new agreement and prospects for
economic growth to reorient the province from south to north,
rebuilding the entrepots in Banda Aceh and on Sabang Island. There is
also a need to upgrade the east coast highway, as well as an internal
road networks and many other infrastructure components. GAM fighters
and victims of the past fighting need resettlement assistance.
According to political observers, GAM candidates are unlikely to
capture a single county-level government, but the elections rightly
should involve ex-GAM fighters to give them a political outlet for
their needs and demands.
USINDO has played a small but, we believe, effective role directing
its own assistance efforts to rebuilding a small component of the Aceh
educational system. Agreements have just been concluded for USINDO to
build a new model high school on the campus of Syiah Kuala University
in Banda Aceh to meet local community need as well as provide a
training facility for new teachers. We are cooperating with the
Sampoerna Foundation of Jakarta as well as USAID and hope that the
model school buildings will be opened a year from now. We have received
generous donations from the corporate sector as well as private
individuals and school children. An elementary school walkathon in New
York raised $10,000.
On the larger front the continuing assistance of the United States
as well as other donors will be needed for years to come. We have done
well so far. The new west coast road will make a major contribution as
will community development, teacher training, and schools management.
United States help in police training will help replace the roughly
2,000 police lost in the disaster, and further avenues of U.S.
assistance should be considered to support the Asean Monitoring
Mission, or AMM, that is led by the European Union (EU) and ASEAN
countries. Consideration should also be given to resettlement
assistance, perhaps through the International Organization of Migration
(IOM), which is working closely with the Aceh Reconstruction Authority
(BRR).
Beyond these efforts we need to continue to work closely with other
donors, principally including the World Bank, which is in charge of
donor coordination as well as the Consultative Group for Indonesia to
ensure there is long-term support in that quarter for Aceh.
SEPARATISM: PAPUA
The conflict in Aceh and more recently the peace accord with the
GAM have won more publicity in recent years in the West than the
challenge Indonesia faces with Papua, nevertheless the Papuan problem
could in the end prove more difficult to resolve if it is not managed
correctly.
A key fact underlying this conclusion, all too little understood
outside Indonesia, is that there are more Melanesians in the eastern
islands of Indonesia than in Melanesia itself. Multiethnicity
exacerbates the separatist tension that Indonesia is bound and
determined to overcome.
The history of Papua's incorporation into Indonesia is unique. A
resource rich area with a population of 2.3 million, roughly 40 percent
of whom come from other parts of Indonesia. Papua originally remained
under the Dutch after Indonesia won its sovereignty in 1949. However,
in 1902, partly in response to heavy United States pressure, the Dutch
gave up control, the United Nations took over briefly, then Papua
became part of Indonesia, with the caveat that there be a confirming
act of free choice.
In the event, the act of free choice involved selected tribal
leaders who voted unanimously for incorporation, and it has always been
controversial. The origins of Papua's incorporation, unfair return of
the income from Papuan natural resources and repression of the Papuan
people have fueled a separatist movement involving a small number of
rag-tag militants, (the OPM), but a far larger group of
proindependence, nationalist, and opportunistic supporters. The fact
that rival groups claim to speak for all of the people will make final
settlement more difficult.
A special autonomy law was passed in 2003 but because of deep-
seated mistrust and lack of Papuan capacity, progress toward this
sensible goal has been halting at best. Subsequently, the government in
Jakarta announced its intention to divide Papua into three parts, but
this transparent effort to weaken separatist strength was strongly
opposed by the local population, and President Megawati's decree was
suspended.
Most recently in June the House of Representatives International
Relations Committee inserted language in a State Department
authorization bill questioning the circumstances of Papua's integration
into Indonesia and this has angered many Indonesians. In a pointed
rejoinder, one Indonesian colleague suggested to Stanley Weiss, a long-
time observer of Indonesian affairs, that the Indonesian ``Parliament
revisit the Cherokee Indian Nation's `integration' with the United
States.''
The United States has played an important role in the past in
trying to help resolve difference over Papua's relationship with
Indonesia. As in the case of Aceh, the centerpiece of our position has
been to firmly support continued integration of the province within
Indonesia. We should just as firmly reiterate that position.
In addition, we should help SBY to move forward toward his
announced pledge to negotiate implementation of the existing special
autonomy law, with additional provisions as necessary. The United
States should provide assistance for development, local government
capacity-building and civil society in Papua. Assistance to education
should be high on our agenda in Papua as elsewhere in Indonesia. We
also need to improve explanations of U.S. administration and
congressional positions vis-a-vis Papua in Indonesia where the policy
distinctions are not so apparent. The formation of a new United States-
Indonesian working party in the Indonesian Parliament (DPR) on
September 5, which a USINDO officer attended, as well as a high-level
Papua Forum in Indonesia may also provide opportunities for improving
mutual understanding on this crucial issue of importance to Indonesian
national integrity.
INDONESIA'S MODERATE ISLAM
Despite expressed concerns in some quarters, the weight of evidence
supports the conclusion that Islam in Indonesia continues the
historical trend and in the main remains moderate. Surveys conducted by
the Center for the Study of Islam and Society show a rising level of
Islamic consciousness and piety; they do not confirm a concomitant rise
in radicalism, according to leading Australian Islamic scholar, Greg
Fealy, as well as a large number of other scholars both inside and
outside Indonesia.
It is true that substantial percentages of survey respondent appear
to support various aspects of shariah law, however, there is little
actual practice of extreme forms of shariah in Indonesia and only a
small percentage continue to favor shariah police which would be
necessary to enforce the law. The PPIM results, says Fealy, are
significant in that they show a rising Islamic consciousness and
shariah-mindedness. They indicate a continuing Islamisation within
society and culture. But they do not necessarily show growing or
increasingly radical Islamic politics.
Some read disturbing signs in the increased vote for Islamist
parties, e.g., the more radical Islamic-oriented parties favoring the
introduction of shariah law. The Islamist vote in 1999 was 16 percent
and increased in 2004 to 21 percent. But this rise was very largely due
to a 5-percent increase in votes for the Justice and Prosperity Party
(PKS). And it is generally agreed that the PKS success was largely due
in turn to the party's clean image and organizational ability. Most
believe it will be very difficult for the PKS to expand its reach
further without moderating the more radical religious elements of its
platform.
It is useful also to recall that a radical Islamist bloc in the
Parliament tried in 2002 to pass legislation to make it compulsory to
follow shariah, but found so little support they withdrew it.
In the immediate post-Suharto era there was a rapid spread of
radical Islamist groups, but since then the trend has really been in
reverse. Violent extremist groups such as Laskar Jihad are now largely
defunct, but the Islamic Defenders Front (FPI) and the Indonesian
Mujahidin Council (MMI) still attract hardline fringe support.
Furthermore, Jemaah Islamiyah, the extremist group linked to al-Qaeda
which is responsible for the bombings in Indonesia, continues to exist
and its members can be expected to attempt future terrorist acts. No
question they are dangerous. It is notable, however, that the bombings
that occurred in Bali and at the Marriott Hotel and in front of the
Australian Embassy in Jakarta have turned the population at large away
from violent extremism.
In sum, the continuing overall moderate nature of Indonesian Islam
supports the conclusion that it is and will continue to prove to be
fully compatible with Indonesia's nascent democracy. That is decidedly
good news. Debate on Islam will continue but that is to be encouraged
so that new ideas and political organizations compatible with the view
of the diverse Indonesian people can emerge.
To be sure, intra communal conflict caused by political, economic,
ethnic, as well as religious differences, will continue and will have
to be contained. SBY's government is dedicated, however, to resolving
conflict wherever it springs up and to furtherance of a moderate,
multireligious, and multiethnic society. These are goals which the
United States with its own diverse heritage is in a unique position to
understand and to encourage. We should do all we reasonable can to do
so.
EDUCATION
USINDO officers have previously testified before Congress about the
importance of human resource development to strengthen United States-
Indonesian relations. As Indonesian universities undergo the transition
toward greater self-sufficiency and less government control, many
needs, but also many opportunities for assistance and beneficial
relationships, are becoming apparent. In the report of the commission
on strengthening United States-Indonesian relations led by George
Shultz and Lee Hamilton observed in late 2003, there is a pressing need
to restore the close relationships that existed between the educational
institutions of our two countries as existed in the 1970s and 1980s
when U.S. assistance programs were better funded and centered on a web
of university-level collaborations. Reductions in U.S. development
assistance, public diplomacy initiatives, and other programs in the
1990s have taken their toll. President Bush's initiative to channel
$157 million into basic education over the next 6 years is an excellent
start, but U.S. assistance should be expanded to the university level.
It is in tertiary education that our country can make strong
contributions to Indonesia's continued development.
For the past 2 years, USINDO has been working with the Indonesian
Embassy in Washington, the Directorate General of Higher Education of
the Ministry of National Education, and a broad spectrum of Indonesian
public and private universities on a package of proposals to meet the
expressed needs of the tertiary institutions themselves. A conference
held in Jakarta in March of this year identified four main initiatives
which we are pursuing:
The creation of up to 40 new Centers of Excellence and 400
new Ph.D.s to improve first-class academic research and
teaching capabilities. The U.S. Department of State has
committed to train 100 new Ph.D.s in 10 Centers of Excellence
under the Fulbright program as part of this Presidential
Scholars Initiative. These initial Centers of Excellence,
moreover, would be linked with United States counterpart
universities to promote faculty and other exchanges. We are
also working with the World Bank to enlist other national
contributions toward these same objectives, coordinate the
program, and sponsor prematriculation training in English and
academic skills.
A new teachers training project, being formulated by joint
Indonesian-American consortium led by Ohio State University, is
identifying pressing needs to upgrade the skills, including
English teaching, of Indonesian university instructors. Current
thinking is to point this skills modernization toward the
certification of university level teachers.
A similar project aimed at improving university management
is to be developed under a joint consortium arrangement led by
the University of Pittsburgh.
Three initiatives in the educational technology field:
Creation of a nationwide and affordable Internet system
open to public and private universities to expand research
and other capabilities. This project is to be developed
under a public-private enterprise umbrella by U.S. and
Indonesian technology providers.
The development of Indonesia-specific software in the
national language by U.S. companies in partnership with
Indonesian universities.
The establishment of an interactive Web site, hosted by
USINDO in cooperation with the University of Indonesia, to
facilitate communication and knowledge sharing between
researchers and universities on both sides of the Pacific.
USINDO is not a development assistance provider, nor are we highly
expert educators, but we are trying to play a project incubation role
in order to focus the university communities in both countries on
common goals, supported by their respective private sectors. The World
Bank and other multilateral institutions, along with U.S. foundations,
are potential facilitators of these projects. We are pleased that there
is excellent support for these innovative approaches on the Indonesian
side, aimed especially at improving the commitment of tertiary
institutions to move ahead in highly selective areas.
In conclusion, Madam Chairman, we believe that the advancement of
Indonesian higher education and reforging linkages with American
colleges and universities offer an excellent opportunity to strengthen
the modernist and moderate interests of the coming generations of
Indonesians. As a small organization, we, in USINDO, cannot claim too
much, but we hope to work with the U.S. Government through Fulbright
and USAID programs, as well as with multilateral institutions and other
donors to help Indonesian academic institutions to increase their
capabilities.
Senator Murkowski. Thank you.
Now we'll move to Dr. Soesastro.
STATEMENT OF HADI SOESASTRO, EXECUTIVE DIRECTOR, CENTRE FOR
STRATEGIC AND INTERNATIONAL STUDIES, JAKARTA, INDONESIA
Dr. Soesastro. Thank you very much, Madam Chairman. It is
certainly a great honor for me to be invited to this hearing.
I would like to focus my remarks on Indonesia's role in
ASEAN, the Association of Southeast Asian Nations, and the
impact on Indonesia-United States economic relations.
ASEAN, the Association of Southeast Asian Nations, now has
10 members. And it will include all Southeast Asian nations
when the newest younger nation in the world, Timor Leste, is
ready to join ASEAN, hopefully in the not-too-distant future.
In 1967, ASEAN had only five members, but it was a historic
beginning, as it signifies the major change in the foreign
policy and international outlook of Indonesia, the region's
largest nation. It also signifies the beginning of Southeast
Asia as a region of cooperation, peace, and prosperity.
Economic cooperation has been ASEAN's main agenda. But, to
be honest, the various cooperation schemes and programs that
were introduced in the first 25 years of its existence were
quite disappointing. The region's remarkable economic progress
was largely due to the adoption of sound and open economic
policies by the individual members.
Having said this, however, I do need to add that stability
and regional peace that ASEAN helped create in the region have
allowed countries in the region to pursue international
development efforts. And this, perhaps, has been the greatest
contribution that ASEAN has made to the region.
A significant change happened in 1992, when members agreed
to achieve greater regional economic integration by forming the
so-called AFTA, the ASEAN Free Trade Area, largely in response
to increased challenges of globalization.
Indonesia has not exercised economic leadership in ASEAN,
as it does not regard itself as a regional economic power. Its
leadership was mainly in the political field. Its active
involvement in ASEAN in the first place, I believe,
demonstrates its willingness to work in the regional structure.
And some of us even said that Indonesia had voluntarily put
itself within a regional structure. And that, I think, was a
main contribution that Indonesia has made politically to
regional community-building.
Its leadership has also not been exercised through an
assertive posture. It did not attempt to dictate the region's
policies, although it had de facto veto power. Instead, its
leadership has been exercised in terms of crafting a regional
consensus on many important policies for the region.
The financial crisis of 1997 and 1998 virtually put an end
to Indonesia's active regional involvement. It was only in
2003, when hosting the ASEAN Summit, that Indonesia again
raised its profile. This was done with the encouragement of its
neighbors, and it played an active role in formulating new
efforts to achieve an ASEAN community, a community with a
capital ``C,'' by 2020.
Strengthening of ASEAN was seen as a necessity, since ASEAN
was seriously losing its diplomatic clout in the international
arena and its effectiveness to global investors. And Indonesia
today, having recovered from the crisis and has a government
with overwhelming political legitimacy, is in a better position
to take a lead.
An important component of the ASEAN community is the ASEAN
economic community, which envisages a single market and
production base that is internationally competitive and where
there is free flow of capital, of goods and services, as well
as skilled labor. To realize the ASEAN economic community,
members have agreed to accelerate the integration of 11
priority sectors. These efforts will create real opportunities
for the expansion of trade and investment between ASEAN and the
United States.
In the year 2004, two-way merchandise trade amounted to
$136 billion, and the stock of U.S. investments in the region
has reached close to 90 billion U.S. dollars. There are still
huge untapped opportunities for further promotion of this
economic relationship.
At the same time that ASEAN undertakes this ASEAN economic
community project, it is also engaged in forming Free Trade
Agreements with a number of its main trading partners.
The first agreement that it has concluded is with China,
and it is an agreement that involves all ASEAN countries, as a
group. The United States and several ASEAN countries have
either concluded a Free Trade Agreement, such as Singapore, or
are in the process of, or will be negotiating, an FTA under the
so-called Enterprise for the ASEAN Initiative. This initiative
will help strengthen overall U.S./ASEAN relations, as well as
United States/Indonesia economic relations.
Indonesia's efforts to strengthen ASEAN, specifically to
realizing the ASEAN community, will also strengthen U.S./ASEAN
relations, and this will, in turn, have a positive impact on
bilateral relations between the United States and Indonesia,
particularly in the economic field.
I believe that, in the not-too-distant future, Indonesia
will be ready to enter into a Free Trade Agreement with the
United States. This is, of course, a major challenge for an
economy like Indonesia, but, if designed well, this agreement
will be beneficial to both sides.
The impact for Indonesia will not only be in terms of
enhancing its market access, but more so, I believe, in terms
of improving its competitiveness, because it will continue to
undertake economic reforms at home that it will have to
undertake under, you know, more or less a binding agreement. It
will also make Indonesia more attractive to United States
investors.
Finally, Madam Chairman, the United States side, I believe,
could assist Indonesia in developing capacity to implement
economic reforms and economic institution-building in this
globalized world. It is, to me, a major challenge that a nation
like Indonesia is facing. And this--today we also heard, from
USAID person, that this particular agenda of capacity-building
is also being given attention, too.
An Indonesia that is economically stronger and more
competitive will be able to provide economic leadership in
ASEAN. And this should be in the interest of the United States.
Thank you.
[The prepared statement of Dr. Soesastro follows:]
Prepared Statement of Dr. Hadi Soesastro, Executive Director, Centre
for Strategic and International Studies, Jakarta, Indonesia, and
Visiting Professor, Columbia University, NY
INTRODUCTION
In the latest U.S.-ASEAN Dialogue held in Washington, DC, on 28
June 2005, two major proposals were aired. First, that the idea of a
``strategic partnership'' between the United States and ASEAN be
developed. Second, that an ASEAN-U.S. Summit be held in 2007 to
commemorate the 30th anniversary of the dialogue relationship.
U.S.-ASEAN relations have reached a stage of maturity. In 1977, at
the first U.S.-ASEAN Dialogue the focus of the meeting was on such
functional cooperation areas as commodities, market access, development
assistance, operations of multinational corporations, transfer of
technology, shipping, energy resources development, and food security.
Over the years the nature and direction of the dialogue relationship
have changed. In 1988, it was agreed that cooperation projects would be
developed on the basis of mutual interests, comparative advantage in
the project area and project sustainability. The private sector was
drawn in to play a key role in the development of cooperation and
networks to facilitate market-driven economic activities.
In 2002, two major initiatives were launched. The first was the so-
called ASEAN Cooperation Plan (ACP) to promote cooperation in such
areas as information technology, agricultural biotechnology, health,
and disaster response. The second was the Enterprise for ASEAN
Initiative (EAI) to form a set of bilateral free trade agreements
(FTAs) between the United States and interested ASEAN member countries.
In the same year, a Joint Declaration for Cooperation to Combat
International Terrorism was signed, which subsequently led to the
formulation in 2004 of an ASEAN-U.S. Work Plan to Counter Terrorism.
The broadening of the dialogue relationship to political and
security issues followed the ending of the cold war. The dialogue
addressed the role of the United States in maintaining stability in the
region, as well as nuclear nonproliferation and regional security
issues, developments in the Korean Peninsula and the South China Sea.
The United States is increasingly engaged with ASEAN in the political
and security fields through its active involvement in the ASEAN
Regional Forum (ARF). In addition to the so-called ASEAN Post
Ministerial Meeting (PMC), which is attended by the U.S. Secretary of
State, there are periodic meetings between ASEAN SOM (Senior Officials
Meeting) leaders and the U.S. Assistant Secretary of State for East
Asia and the Pacific Affairs.
In the economic field, there are regular meetings between ASEAN
Economic Ministers and the U.S. Trade Representative, as well as at the
level of senior officials. Interactions amongst the private sectors
have also increased through the U.S.-ASEAN Business Council.
Economic relations between the United States and ASEAN continue to
be vibrant. In 2004, two-way merchandise trade reached $136 billion,
and the stock of U.S. investments in the region amounted to $88
billion. There are huge untapped opportunities to further promote this
economic relationship. For its part, ASEAN has launched the ASEAN
Economic Community (AEC) project that would make the region a single
market and production base by 2020. Efforts are being undertaken to
accelerate the integration of priority sectors. These will create real
opportunities for the expansion of trade and investment between ASEAN
and the United States. The U.S. side has pledged to help in the
implementation of the Vientiane Action Plan toward the realization of
the AEC.
All these seem to suggest that there is a great deal of substance
in the relationship between the United States and ASEAN that is worthy
of being elevated to becoming a ``strategic partnership.'' The
commemoration summit in 2007 could put a seal on the establishment of
that elevated partnership between the United States and ASEAN.
INDONESIA'S ROLE IN ASEAN
Strengthening U.S.-ASEAN relations could help strengthen United
States-Indonesia relations. But in fact, this also works in the reverse
direction. In essence the two relationships tend to reinforce each
other. Indonesia's efforts to strengthen ASEAN will in turn help
strengthen U.S.-ASEAN relations and this will have a positive impact on
the bilateral relationship between the United States and Indonesia,
particularly in the economic field.
The regional dimension of bilateral Indonesia-United States
economic relations provides an opening for further improvement of that
bilateral relationship. For its part, the United States has launched
the Enterprise for ASEAN Initiative (EAI) as a vehicle for
strengthening trade and investment relations with Southeast Asian
nations. This initiative involves the development of TIFAs (Trade and
Investment Framework Agreements) and FTAs (Free Trade Agreements) with
individual ASEAN countries. The significance of the initiative could go
beyond trade and economic relations to strengthen political and
strategic relations with the region.
On the ASEAN side it is believed that efforts to promote regional
economic cooperation in the wider East Asian and Asia Pacific region
are critical to engaging the United States. The APEC (Asia Pacific
Economic Cooperation) and East Asian regionalism (ASEAN+3, namely ASEAN
plus China, Japan, and South Korea) indeed should be designed to
strengthen trans-Pacific economic relations, specifically between the
East Asian countries and the United States.
In each of these regional arrangements (or processes), ASEAN has
played an important role, in large part as a result of the prevailing
political configuration in the region, which is the rivalry between
China and Japan. As has often been stated, ASEAN is the least
objectionable party in the region to take up a leadership role in
regional community building. In APEC, since its inception, ASEAN was to
act as a copilot. It has also occupied the driver's seat in the ASEAN+3
process.
ASEAN's future is important to regional arrangements in the East
Asian and Pacific region, and critical to promoting the region's
relations with the United States.
The prevailing wisdom is that Indonesia is the natural leader of
ASEAN. Being the largest country in the region, in terms of its
geographic extent and population size, gives Indonesia a predominant
position in relation to its neighbors. However, perhaps it is the
historical factor that has an equally great significance to Indonesia's
position in the Southeast Asian region.
The initiative to form ASEAN was part of a package to end
Indonesia's policy of Konfrontasi (confrontation) against Malaysia, its
immediate neighbor. The creation of ASEAN was to symbolize a radical
change in Indonesia's foreign policy orientation, from being a
revolutionary force to becoming a responsible member of a regional
community. This change in foreign policy orientation had strong
domestic source.
Suharto took over the helm of a country that was virtually
bankrupt. Rebuilding the economy required a stable and peaceful
regional environment. Resources and energies have to be directed to the
huge task of national development. The first step was to end the policy
of confrontation and to seek ways to improve relations with its
neighbors. Beyond this was the idea of creating a stable and peaceful
regional order.
The five founding members of ASEAN (Indonesia, Malaysia,
Philippines, Singapore, and Thailand in 1967, later joined by Brunei
Darussalam in the mid-1980s, and in the late 1990s by Cambodia, Laos,
Myanmar/Burma, and Vietnam, known as the newer members) recognized the
strategic challenges they faced from within and outside the region.
However, it was not easy for countries in the region to adjust to the
new developments. Indonesia under Suharto was no longer seen as a
threat to its neighbors. Yet, some of the neighbors maintain their
military alliances with the major powers, originally as an insurance
against possible adventurous acts by Indonesia. Since the establishment
of ASEAN, the existing military alliances gradually diminished in their
importance, while they were accommodated by Indonesia.
In fact, the region was not free from potential insurgencies as
some other Southeast Asian countries, North Vietnam then, were still in
a revolutionary mode. The perceived threat posed by another
revolutionary force, namely China's Communist Party, was another reason
for strengthening the region through a comprehensive security approach.
Indonesia introduced its concept of national resilience to the region,
and proposed that ASEAN strives to build its regional resilience.
That comprehensive security approach rests on the idea of enhancing
regional peace and security through cooperation in the economic and
social fields. ASEAN was not meant to be a military pact. In fact, its
members refrained from engaging in regional cooperation in matters of
defense, so as not to create opposing military and ideological blocs in
Southeast Asia. Although the original ASEAN members were anti-Communist
in their domestic orientation, they projected to the outside world a
nonaligned posture as advocated strongly by Indonesia.
The fall of South Vietnam led to heightened security concerns in
ASEAN. Indonesia's Suharto underlined the importance of regional
resilience. This meant strengthening regional cooperation and greater
efforts to build the national economy. Indonesia maintained open
charnels with Hanoi during the Indochina wars. When Vietnam invaded
Cambodia, and thereby posed a direct threat to Thailand, ASEAN's policy
to support Thailand in opposing Vietnam was adhered to by Indonesia.
However, Indonesia believed that it should continue to keep its
channels to Hanoi open. This policy was misunderstood in many quarters
in ASEAN, but in the end proved to be useful in resolving the conflict
politically.
Indonesia's leadership in ASEAN has been mainly in the political
field. Its efforts to develop ASEAN have clearly demonstrated its
willingness to be involved in a regional structure. Indonesia sees this
as the most credible way to gain the confidence of its neighbors. In
fact, within this regional structure Indonesia has never thrown its
weight around. Its political leadership has not been exercised through
an assertive posture, dictating the region's policies. It was exercised
in terms of crafting regional consensus on many important issues for
the region.
Indonesia has not exercised economic leadership in ASEAN as it does
not regard itself as a regional economic power. In the first 25 years
of its existence, ASEAN's many economic cooperation programs have been
disappointing. It was the changed external environment of the early
1990s that brought about significant change in ASEAN economic
cooperation. ASEAN leaders agreed to pursue regional economic
integration through the ASEAN Free Trade Area (AFTA). Indonesia's
agreement was critical, but Thailand's diplomatic efforts made that
possible. Indonesia, until then dubbed ``Mr. No'' for always tending to
say ``no'' to various economic integration plans, suddenly changed its
policy and became ``Mr. Go'' when agreeing to ``go ahead'' with AFTA in
1992.
Two years later, when chairing and hosting APEC, Suharto further
strengthened this policy by crafting the so-called APEC Bogor goals of
``free and open trade and investment in the region'' in 2010 for
developed APEC members and 2020 for developing APEC members. In an
interview, Suharto proposed that the end goal for APEC should be
similar to that of AFTA, namely removal of barriers to trade, including
reduction of tariffs to 0-5 percent.
This was followed in 1997 by an ASEAN Vision 2020, which envisaged
the creation of ``a stable, prosperous, and highly competitive ASEAN
Economic Region in which there is a free flow of goods, services, and
investment, [and] a freer flow of capital. . . .'' As the Indonesian
economy was growing rapidly in the first half of the 1990s, Indonesia
began to participate actively in economic cooperation activities in
ASEAN and APEC.
The financial crisis of 1997/1998 virtually put an end to
Indonesia's active regional involvement. Indonesia was the hardest hit
by the crisis. It experienced not only an economic and financial
crisis, but it came under multiple crises. ASEAN Economic Ministers
rightly decided that the ASEAN economies must continue with their open
economic policies in order to be able to overcome the crisis. Yet,
political leadership in the region turned inward. The Suharto
government, having been in place for 32 years, fell. It was replaced by
a transition government under Habibie, who was not interested in ASEAN.
His successor, Abdurrahman Wahid, wanted to promote a Western Pacific
Forum, involving Indonesia, the Philippines, Papua New Guinea, Timor
Leste, and Australia, instead of ASEAN.
Megawati was initially also not interested in ASEAN. However, since
Indonesia was to host the ASEAN Summit in 2003, she accepted the
suggestion that Indonesia should again provide leadership in ASEAN.
ASEAN was seriously losing its diplomatic clout in the international
arena and it had lost its attractiveness to global investors. The
foreign policy community in Indonesia thought that Indonesia's
``comparative advantage'' lies in providing political rather than
economic leadership. It began to air the idea of an ASEAN Security
Community to strengthen the region's cohesion. This was aimed at both
enhancing regional peace and security and restoring ASEAN's diplomatic
power.
In 2002, Singapore Prime Minister Goh Chok Tong, aired the idea of
an ASEAN Economic Community. Singapore knew that without active
involvement by Indonesia this idea would not fly. Its skillful
diplomatic efforts led to the adoption of the idea by Indonesia.
Megawati, in her Inaugural ASEAN Lecture in 2003, proposed that ASEAN
be built on two pillars, the ASEAN Security Community (ASC) and the
ASEAN Economic Community (AEC), which will reinforce each other. In
October of that year, when Indonesia organized the ASEAN Summit, it
crafted an even more ambitious goal for ASEAN, namely an ASEAN
Community in 2020. The ASEAN Community now consists of three pillars,
to include an additional one proposed by the Philippines, namely the
ASEAN Social and Cultural Community (ASCC).
At the same time, ASEAN embarked on a number of bilateral trade and
economic initiatives with China, Japan, India, as well as Australia and
New Zealand, which involve the formation of FTAs.
Indonesia's challenge today is to provide leadership to realize the
ASEAN Community. The new President, Susilo Bambang Yudhoyono, has been
encouraged by many in the region to take this up as Indonesia's
responsibility.
Indonesia's leadership will again have to be expressed in terms of
building regional consensus. This type of leadership should be
distinguished from the kind that is aspired by Singapore or Thailand.
Their approach is to move faster than the others and in doing so they
hope to force others to follow them. This is the essence of the ``2+X''
formula that they have introduced in ASEAN. This approach could weaken
ASEAN's solidarity that, in fact, is ASEAN's greatest asset. There is
also the danger that ASEAN will be pulled into many directions because
of its engagement in a number of FTA initiatives, seemingly without a
clear strategy of how it will manage this web of FTAs.
ASEAN AND FREE TRADE AGREEMENTS
It all began with the approaches by China. ASEAN on its part
initially did not regard free trade areas (FTAs) as a major element in
its international economic diplomacy. ASEAN's own economic integration
has been the priority since the decision in 1992 to form an ASEAN Free
Trade Area (AFTA), which was followed by initiatives in the fields of
investment (AIA) and services (AFAS), and a few other measures. Beyond
ASEAN, its trade liberalization efforts are directed at the
multilateral level, the WTO's Doha Development Agenda. At the regional
level, ASEAN members of APEC attempt to continuously improve their
Individual Actions Plans (IAPs) under the region's modality of
concerted unilateral liberalization toward free and open trade and
investment in the region in 2010/2020. The proposal for an East Asia
Free Trade Agreement (EAFTA) was presented by an East Asian Vision
Group to the ASEAN+3 leaders as a means to realize an East Asian
community, but EAFTA is seen as a long-term effort.
In 2001, at the ASEAN-China Summit in Bandar Seri Begawan, China
came up with a proposal to establish an ASEAN-China Free Trade Area
within 10 years. Within 1 year, at the Summit meeting in Phnom Penh in
November 2002, the Heads of State of ASEAN and China were ready to sign
a Framework Agreement on Comprehensive Economic Cooperation (CEC),
which included an FTA.
There is no doubt that China's proposal essentially was politically
motivated, but China and ASEAN both saw the economic significance of
the initiative. However, the process appeared to have been driven
largely by China. Having participated in a lengthy and difficult
process of WTO accession, China has acquired sufficient expertise to
negotiate a trade deal. The deal was made attractive for ASEAN with the
introduction of an Early Harvest program. China's initiative was
immediately followed by a proposal from Japan. This was to be expected
as Japan naturally did not want to be left out. Since then ASEAN has
been courted by other countries and have entered into an agreement with
a few other countries. However, to date there is as yet no ASEAN
document that clearly spells out ASEAN's strategy of engagement in FTAs
with its trading partners.
ASEAN-China
The ASEAN-China Framework Agreement on CEC contains three elements:
Liberalization, facilitation, and economic cooperation. In addition it
has a provision on the mechanism to implement the agreement, including
a dispute settlement mechanism. The liberalization element covers trade
in goods, trade in services, and investment. In the context of
liberalization, the agreement provides for special and differential
(S&D) treatment and flexibility to the newer ASEAN members as well as
flexibility to address sensitive areas.
The Framework Agreement contains an Early Harvest program that
covers all products in chapters 01 to 08 at the 8/9 digit level (HS
Code): Live animals; meat; fish; diary produce; other animals products;
live trees; edible vegetables; and edible fruits and nuts. Products
under this program are divided into three categories for tariff
reduction and elimination, but tariffs will have to be brought to zero
for all three categories within 3 years. However, the program allows
for an Exclusion List and different timeframes between the ASEAN-6
(Brunei, Indonesia, Malaysia, Philippines, Singapore, and Thailand) and
the CLMV (newer members--Cambodia, Laos, Myanmar, and Vietnam), for
whom zero tariffs will be reached in 2010. Initially it was thought
that China would offer the Early Harvest program on a nonreciprocal
basis, but this turned out not to be the case. Moreover, some
agricultural commodities of great interest to ASEAN, such as rice and
palm oil, were excluded from the program. Some ASEAN countries (e.g.,
the Philippines) did not immediately join the program.
Beyond the Early Harvest, tariff reduction and elimination will be
pursued along two tracks, the normal track and the sensitive track.
Applied MFN tariffs of products listed in the normal track should be
gradually reduced or eliminated in accordance with specified schedules
and rates over a period from 2005 to 2010 for ASEAN-6 and China, and to
2015 for CLMV. Reduction of tariffs of products in the Sensitive List
will be in accordance with mutually agreed end rates and end dates. The
number of products in the Sensitive List is subject to a maximum
ceiling, also to be mutually agreed upon.
The Framework Agreement was later amended to incorporate the Rules
of Origin (ROO) applicable to the products covered under the Early
Harvest program. It also included subsequent Early Harvest agreements
between some ASEAN members and China, and it clarified the
implementation of the provision of the program as well as the terms and
conditions for the acceleration of the tariff reduction and elimination
through bilateral or multilateral agreements.
The negotiation on the FTA for goods was concluded within a short
time. This was a rather ambitious undertaking. Initially the parties
could not agree on the maximum number of tariff lines in the sensitive
list. However, as political leaders were determined to begin the
process of tariff reduction and elimination in 2005, a compromise was
struck, and Ministers were able to sign an agreement at the ASEAN
Summit in Vientiane in November 2004. This does suggest the importance
of setting target dates.
The Agreement on Trade in Goods of the Framework Agreement on CEC,
or for short, the ASEAN-China FTA (ACFTA), is only the first portion of
a series of agreements to implement the Framework Agreement. At the
Vientiane Summit, Ministers also signed an Agreement on Dispute
Settlement Mechanism of the Framework Agreement on CEC. They will be
followed by an agreement on services, an agreement of investment, and
other agreements. It is indeed rather surprising that ASEAN and China
were able to produce those two agreements within a short time.
The ACFTA contained the modality for tariff reduction and
elimination for tariff lines both in the normal track and the sensitive
track. In the normal track there are three sets of schedules. The first
applies to ASEAN-6 and China. The implementation will begin on 1 July
2005, when applied MFN tariff rates will be brought down to 20 percent,
15 percent, 10 percent, and 5 percent for tariffs still above 5
percent. By 2007 they will be reduced to 12 percent, 8 percent, and 5
percent, and by 2009 to 5 percent and 0 percent, and finally by 2010
all rates will become zero. The second schedule applies only to
Vietnam, where all tariffs will be brought down to 0 percent in 2015.
The third schedule applies to Cambodia, Laos, and Myanmar, where some
tariffs will still be higher than in Vietnam's schedule, but from 2011
onward they will be the same.
In addition, agreement was also reached to bring as many tariff
lines to the 0-5 percent range. For instance, for ASEAN-6 and China, by
1 January 2007 at least 60 percent of tariff lines placed in the normal
track must be reduced to 0-5 percent. However, some ``flexibility'' is
allowed in 2010, whereby up to 150 tariff lines could still have
tariffs but should be eliminated not later than 1 January 2012. For the
CLMV countries, this flexibility allows for having tariffs on up to 250
tariff lines to be eliminated not later than 1 January 2018.
In terms of tariff lines in the sensitive track, the agreement
subjects the number of tariff lines to a maximum ceiling. Tariff lines
in the sensitive track are further classified into Sensitive List and
Highly Sensitive List. For ASEAN-6 and China, the maximum ceiling is
400 tariff lines at the HS 6-digit level and 10 percent of total import
value, based on 2001 statistics. The Highly Sensitive List should have
not more than 40 percent of the total number of tariff lines in the
sensitive track or 100 tariff lines at the HS 6-digit level, whichever
is lower. For CLMV, the maximum ceiling is 500 tariff lines. To note,
tariff lines at the HS 6-digit level for the ASEAN-6 countries varies
between 5,600 (Philippines) and 10,400 (Malaysia). The number of tariff
lines in the Sensitive and Highly Sensitive Lists is shown in Table 1.
Applied MFN tariff rates in the Sensitive List must be reduced to 20
percent not later than 1 January 2012 and to 0-5 percent not later than
1 January 2018. For CLMV countries, the target dates are 1 January 2015
and 1 January 2020, respectively. In any case, the sensitive track will
be reviewed in 2008.
TABLE 1.--ASEAN-CHINA FTA: TARIFF LINES IN SENSITIVE AND HIGHLY
SENSITIVE LISTS
[HS 6-digit]
------------------------------------------------------------------------
Highly
Country Sensitive sensitive
------------------------------------------------------------------------
Brunei........................................ 66 34
Cambodia...................................... 350 150
Indonesia..................................... 349 50
Lao PR........................................ 88 30
Malaysia...................................... 272 96
Myanmar....................................... 271 0
Philippines................................... 267 77
Singapore..................................... 1 1
Thailand...................................... 242 100
Vietnam....................................... -- --
China......................................... 161 100
------------------------------------------------------------------------
The modality for tariff reduction and elimination in this agreement
resembles AFTA's CEPT (Common Effective Preferential Tariff) reduction
scheme. Experience in AFTA suggests that this modality does result in
reductions in accordance with the schedule and, in fact, also brings
about acceleration in the reduction and the progressive transfer of
tariff lines from the sensitive track to the normal track.
The Rules of Origin (ROO) for the ACFTA as stipulated in the
Agreement (Annex 3) are as follows: ``A product shall be deemed to be
originating if: (i) Not less than 40 percent of its content originates
from any Party; or (ii) if the total value of the materials, parts or
produce originating from outside of the territory of a Party (i.e.,
non-ACFTA) does not exceed 60 percent of the FOB value of the product
so produced or obtained provided that the final process of the
manufacture is performed within the territory of the Party.'' In
addition the Cumulative Rule of Origin applies provided that the
aggregate ACFTA content, i.e., full accumulation, applicable among all
Parties, on the final product is not less than 40 percent. Also,
products that satisfy the Product Specific Rules, i.e., products that
have undergone sufficient transformation in a Party, will be treated as
originating goods of that Party. The ROO in the ACFTA is also similar
to that in AFTA. It is relatively simple and quite liberal. In fact,
ACFTA should be commended for this, and perhaps is an example of ``best
practice'' in this regard.
It is also to be noted that the ACFTA explicitly adopts GATT 1994
provisions on national treatment on internal taxation and regulation,
transparency, BOP safeguard measures. It also abides to the provisions
of the WTO disciplines on, among other things, nontariff measures,
technical barriers to trade, sanitary and phyto-sanitary measures,
subsidies and countervailing measures, antidumping measures and
intellectual property rights.
The Agreement on Dispute Settlement centers on arbitral proceedings
in case consultations fail to settle a dispute. The agreement
stipulates the appointment, composition, functions, and proceedings of
Arbitral Tribunals. It enters into force on 1 January 2005. How well
this mechanism will function will be known only when it is being used.
This mechanism is perhaps more straightforward than the one recently
adopted by ASEAN as part of its efforts to realize the ASEAN Economic
Community. The ASEAN mechanism is yet to be tested as well.
The ACFTA might become a model for other ASEAN FTAs, particularly
if the partner country is a developing country. It should be noted that
while tariff reduction and elimination are scheduled to be completed in
2010 for the ASEAN-6 and China, and 2015 for the CLMV countries, in the
case of the normal track, reduction of tariff lines in the sensitive
list (to 0-5 percent) could be extended to 2018 and 2020, respectively.
It should be in interest of ASEAN and China to try to accelerate this
process. The modality adopted in the agreement can accommodate this.
However, political will has to be there for this to happen. It also
should be noted that the ACFTA is only the first step in the
implementation of the Framework Agreement. Negotiating an agreement in
services and investment may prove to be more difficult.
To conclude on a more optimistic note, it may well be that ASEAN's
engagement in FTAs with other trading partners could create a kind of
competition amongst the various FTAs that might lead to acceleration of
their completion.
ASEAN-Japan
In January 2002, during his visit to Singapore, Prime Minister
Koizumi of Japan announced Japan's interest to form an Economic
Partnership agreement with ASEAN, which might have an FTA component.
Japan has completed a bilateral FTA with Singapore, the Japan Singapore
Economic Partnership Agreement (JSEPA), which is the first FTA for
Japan. Japan also wants to develop FTAs with individual ASEAN countries
on a bilateral basis. It was immediately obvious that Japan was
reacting to the earlier move by China toward ASEAN that led to the
decision in November 2001 to develop an ASEAN-China Comprehensive
Economic Cooperation Agreement.
At the ASEAN-Japan Summit in November 2002, in their Joint
Declaration the Heads of State/Governments agreed to implement measures
for the realization of a Comprehensive Economic Partnership (CEP),
including ``elements of a possible FTA,'' which should be completed as
soon as possible within 10 years. A committee was established to draft
a framework for the realization of an ASEAN-Japan CEP.
In October 2003 in Bali, ASEAN and Japan signed a Framework for
Comprehensive Economic Partnership (CEP). Both sides agreed to adhere
to the following principles:
(a) The ASEAN-Japan CEP should involve all ASEAN members and
include a broad range of sectors focusing on liberalization,
facilitation, and cooperation activities;
(b) The integrity, solidarity, and integration of ASEAN will
be given consideration in the realization of the ASEAN-Japan
CEP;
(c) The agreement should be consistent with the rules and
disciplines of the WTO Agreement;
(d) Special and differential treatment should be provided to
ASEAN members in recognition of their different levels of
economic development, and additional flexibility should be
accorded to the newer ASEAN members;
(e) Flexibility should be given to address the sensitive
sectors in each ASEAN member and Japan; and
(f) Technical cooperation and capacity-building programs
should also be considered.
The above suggests that an ASEAN-Japan CEP will not be too
different from ACFTA, except that there will be no Early Harvest
program. The Japanese side has insisted that the agreement should be a
``single undertaking.'' The negotiations were scheduled to begin in
2005. It remains to be seen whether such a single undertaking could be
negotiated within a reasonable timeframe. Both sides want to realize
the agreement by 2012.
An agreement with Japan, being a developed economy, must strictly
adhere to Article XXIV of the WTO to cover substantially all trade.
There cannot be a long Exclusion List of sensitive items. In contrast,
ASEAN and China could avail themselves of the WTO ``enabling clause.''
Nonetheless, they agreed on limiting the so-called sensitive track to
10 percent of total import value. The Japanese side has made it known
that in their understanding ``substantially all trade'' also could mean
at least 90 percent of the value of trade. It should also be closely
observed whether the ASEAN-Japan CEP will adopt an equally simple and
liberal Rules of Origin (ROO) as in AFTA and ACFTA.
The problem is that Japan already has a bilateral agreement with an
ASEAN country, Singapore, which has adopted a ROO that is less liberal
than AFTA and ACFTA, and Japan has completed similar agreements with
Thailand, the Philippines, and Malaysia. The CEP between ASEAN and
Japan signed in Bali stipulated that schedules of liberalization
concessions between Japan and individual ASEAN countries that have
concluded a bilateral FTA or EPA (Economic Partnership Agreement) will
not be renegotiated and will be annexed to the ASEAN-Japan CEP
Ageement. Nothing has been said about the ROO.
Japan has adopted a dual strategy in regard to negotiating free
trade agreements with ASEAN, namely with ASEAN as a group and
selectively with certain ASEAN countries. The strategy is to move
faster on the latter. It has been said that the origin of this dual
strategy was bureaucratic, in that METI was championing for an
agreement with ASEAN while Gaimusho (Ministry of Foreign Affairs)
preferred bilateral agreements. MOFA thought that it would be very
difficult for Japan to have FTAs with the CLMV countries.
How Japan will handle this problem in the ASEAN-Japan CEP is
unclear. It can make use of the S&D principle to provide a longer
timeframe for the CLMV countries as in the case of ACFTA. However,
since Japan is negotiating bilateral FTAs with most of ASEAN-6, it is
likely that the liberalization schedules will be different even amongst
ASEAN-6, and that similar agreements with CLMV will be postponed to a
later date. The focus of the agreement with CLMV will be initially on
facilitation and cooperation. This could suggest that the ASEAN-Japan
CEP will essentially be an umbrella agreement for separate FTAs. It is
unclear whether this is consistent with the principle of a single
undertaking.
In this sense, the agreement with Japan could be different from the
agreement with China. In the ACFTA, ASEAN can act as a ``hub,'' but in
relation to Japan, ASEAN countries could become ``spokes.''
ASEAN-India
In 2002 ASEAN and India agreed to enhance economic cooperation and
to work toward an ASEAN-India Regional Trade and Investment Area
(RTIA). Amongst the ASEAN countries Singapore has been the main
promoter of increased economic and trade relations with India.
In October 2003 in Bali the ASEAN and India Heads of State/
Governments signed a Framework Agreement on Comprehensive Economic
Cooperation (CEO). It entered into force on 1 July 2004. This Framework
Agreement is very similar to, and appeared to have been largely
inspired by, the ASEAN-China Framework Agreement. It also introduced an
Early Harvest program. The Early Harvest program commenced from 1
November 2004, with tariff elimination to be completed by 31 October
2007 for ASEAN-6 and India, and 31 October 2010 for the CLMV countries.
The schedule to liberalization in the normal track will be over a
period from: (i) 1 January 2006 to 31 December 2011 for Brunei
Darussalam, Indonesia, Malaysia, Singapore and Thailand, and India;
(ii) 1 January 2006 to 31 December 2016 for the Philippines and India;
and (iii) 1 January 2006 to 31 December 2016 for the CLMV countries.
The timeframes for liberalization in the sensitive track have not been
specified in the Framework Agreement and will be mutually agreed upon
among the Parties.
The ROO negotiation was to be concluded by 31 July 2004, but the
deadline has been missed. In fact, the negotiation has been difficult
and becomes the main obstacle in the entire process, including the
implementation of the Early Harvest. The Indian side has not agreed to
adopt ASEAN's simple and liberal ROO, as applied also in the agreement
with China, and the ASEAN side has not been willing to compromise on
this.
ASEAN-Republic of Korea (ROK)
Until recently, Korea resisted to take part in the bilateral FTA
game with ASEAN. Former President Kim Dae-jung was more interested in
promoting the East Asia Community idea. His successor, President Roh,
also focuses his attention to initiatives in Northeast Asia, where
Korea is to be developed as a business hub. In the end, however, Korea
felt that it cannot afford to be left behind by the other Northeast
Asian (+3) countries.
A Joint Declaration on Comprehensive Cooperation Partnership (CCP)
was signed at the summit in Vientiane in November 2004. The
establishment of an ASEAN Korea FTA (AKFTA) is seen as ``a natural
extension of the existing relations as well as a stepping stone to
elevate the ASEAN-ROK relationship to a higher and more comprehensive
level.''
AKFTA will be similar to other ASEAN FTAs in terms of its
comprehensive scope and provision for flexibility to deal with the CLMV
countries. The possibility of achieving Early Results will be
considered in developing a Framework Agreement. However, the kind of
Early Harvest program to be included will not be confined to
agricultural products as in the case of the ASEAN-China CEC, but will
include manufactured products that are not sensitive to either side. In
fact, it might exclude many agricultural products.
The negotiations on AKFTA will commence in early 2005 and be
completed within 2 years. While AKFTA was conceived at a much later
date than the other FTAs, the intention is to realize it at an earlier
date, with a goal of achieving as high a level of liberalization as
possible, whereby at least 80 percent of products will have zero
tariffs in 2009, and with consideration for S&D treatment and
additional flexibility for the CLMV countries.
AKFTA may well be the agreement that will drive other FTAs to
accelerate their implementation. This could substantiate the point that
was made earlier.
AFTA-CER
A linkage between AFTA and CER (Closer Economic Relations between
Australia and New Zealand) was established as early as September 1995.
This led to the establishment of a High Level Task Force on an AFTA-CER
FTA. The Task Force report, ``The Angkor Agenda,'' was presented to
Ministers from ASEAN, Australia, and New Zealand on 6 October 2000 in
Chiang Mai (Thailand).
It should be noted that the idea of an AFTA-CER FTA was proposed at
an earlier date than the ASEAN-China FTA. The AFTA-CER FTA discussions
failed to lead to an agreement. The ASEAN side was not ready to embark
on this initiative. It was also not launched at a summit level. Perhaps
it was an idea whose time had not arrived. There were sensitivities on
the part of ASEAN to engage in a narrow FTA. The ASEAN side demanded
that Australia and New Zealand undertake some facilitation and
development cooperation efforts as a prerequisite for the negotiation.
In September 2001 the two sides revisited the idea of promoting
closer economic relations and endorsed a new Framework for AFTA-CER
Closer Economic Partnership (CEP). In September 2002, a Ministerial
Declaration on the AFTA-CER CEP was signed. The CEP is regarded as a
building block for greater economic integration. The fields of
cooperation under the CEP will be broadened to include, but not limited
to, promoting and facilitating trade and investment, capacity-building,
new economy issues, and other areas of cooperation.
However, since relations between Australia and some ASEAN countries
were rather cool, not much was happening in terms of implementing the
CEP agreement. It was only in Vientiane in November 2004 at the ASEAN-
Australia and New Zealand Commemorative Summit that the Leaders revived
the idea of an FTA between ASEAN and Australia and New Zealand. The
Joint Declaration of the Leaders announced the launching of
negotiations on an FTA, to commence in early 2005 and to be completed
within 2 years, as is the case of the ASEAN-Korea FTA.
The Annex to the Joint Declaration stipulates the guiding
principles for negotiating an FTA. The FTA will be comprehensive in
scope. All barriers to trade in goods, services, and investment will be
progressively eliminated. It should build on members' commitments in
the WTO. It also will have a provision of flexibility as in the other
ASEAN FTAs. The hope is that the FTA will be fully implemented within
10 years.
The U.S. ``Enterprise for ASEAN Initiative''
During the APEC meeting in Mexico in 2002, President Bush announced
the Enterprise for ASEAN Initiative (EAI). This initiative is aimed at
strengthening U.S. economic and politico-security relations with
Southeast Asia. It has often been interpreted as an initiative to
support the U.S. fight against global terrorism.
The initiative is to develop FTAs between the United States and
selective ASEAN countries. The United States already concluded an FTA
with Singapore. ASEAN countries that have concluded a TIFA (trade and
investment facilitation agreement) with the United States are eligible.
Brunei Darussalam, Indonesia, Malaysia, the Philippines, Thailand, and
Vietnam now have such agreements with the United States.
Thailand is already negotiating with the United States, and
approaches have been made with Indonesia, the Philippines, and
Malaysia. The United States is also negotiating FTAs with other
countries and subregional groupings in other parts of the world. It
will only negotiate with a country that it regards ready to make
significant commitments. In the case of Indonesia, for instance, the
United States has put some conditionalities, which include the
resolution of current trade disputes involving chicken legs exports
from the United States and the strengthening of intellectual property
protection in Indonesia, especially in relation to optical disks.
It remains to be seen in how far the second Bush administration,
and the new USTR, will put their priority on ASEAN. An agreement with
the United States will bring about more wide-ranging reforms
domestically in the ASEAN countries. The United States will also put
greater emphasis on services liberalization. However, U.S. ROO tends to
be rather restrictive, especially in such areas as textiles and
clothing.
Implications for ASEAN and East Asia
ASEAN has a huge agenda. Its priority is to deepen economic
integration amongst its 10 members. This is a major undertaking in view
of the big differences in levels of economic development and economic
openness. In 2003, at the summit in Bali, ASEAN leaders agreed to
establish an ASEAN Economic Community (AEC) by 2020. In line with the
ASEAN Vision 2020, it is envisaged that the AEC will be a single market
and production base with free flow of goods, services, investments,
capital, and skilled labor. The AEC remains vaguely defined. ASEAN
officials have opted for a pragmatic approach, essentially moving on a
sectoral basis. Eleven priority sectors have been selected for fast-
track integration. The 11 sectors are: Wood-based products,
automotives, rubber-based products, textiles and apparels, agro-based
products, fisheries, electronics, e-ASEAN, healthcare, air travel, and
tourism. A roadmap has been drawn for each sector.
At the same time that ASEAN undertakes its AEC project, it is
engaged in forming FTAs with a number of trading partners as briefly
described above. Two immediate issues confront ASEAN. First, can these
FTAs be completed before ASEAN realizes the AEC? In terms of the plan
(intention), ASEAN-Korea FTA will be completed in 2009, ASEAN-China in
2010, ASEAN-India in 2011, and ASEAN-Japan in 2012, all with some
built-in ``flexibility,'' allowing for some countries or some sectors
to move slower. However, the AEC is scheduled for completion by 2020.
This means that ASEAN members must try to accelerate the implementation
of their AEC initiatives. At least the fast-track sectors should be
fully liberalized by 2010.
The second issue regards the need for ASEAN to develop a common
framework for its extra regional cooperation, particularly in forming
FTAs. A common framework would make it easier for the various FTAs (or
RTAs--regional trading arrangements) to become building blocks for, or
to be amalgamated into, wider regional arrangements. More importantly,
in so doing ASEAN can become a ``hub'' to drive the process in East
Asia through the ASEAN+1 agreements. In addition, a common framework
can help reduce tensions between ASEAN members. As some ASEAN members
(e.g., Singapore) have moved faster in developing FTAs, there is an
additional, practical reason for having a common framework. The
Singapore-New Zealand FTA has been referred to as a model for
nonrestrictive ROO. Bilateral FTAs involving ASEAN members should have
harmonized ROOs along lines of Singapore-New Zealand.
Finally, for ASEAN to become a production base, it also needs to
minimize business transaction costs by having similar rules and
schedules of tariff reduction to ensure use of most efficient supplier.
Most important in this regard is the Rules of Origin (ROO), which
constitute one of the elements of a common framework. Restrictive ROO
constrains sourcing of inputs. New ROO can also change sourcing
decisions away from use of inputs from existing partners. In essence, a
common ROO can facilitate the spread of full cumulation and the
development of regional production networks. In its FTA with the United
States, Singapore has introduced two new approaches in calculating ROO
that takes into account regional production networks. The first is the
principle of outward processing that recognizes manufacturing chains
and outsourcing. The second is the so-called Integrated Sourcing
Initiative (ISI), allowing parts and components produced in Singapore's
neighboring countries as coming from Singapore, but this is limited to
certain nonsensitive items only (IT components and medical devices).
Beyond trade in goods, a common framework also needs to be
developed for services and investment, and perhaps also competition
policy and IPR. Many of these elements form an integral part of the AEC
project. This is a tall order, and ASEAN needs leadership in realizing
this objective.
INDONESIA-UNITED STATES RELATIONS
In assuming a leadership role in ASEAN, should Indonesia be
actively engaged in forming bilateral FTAs with ASEAN's main trading
partners? This issue might have become less relevant now as ASEAN as a
group has formed FTAs or is negotiating FTAs with a number of
countries, China, Korea, India, and with the CER countries (Australia
and New Zealand). In regard to Japan and the United States, Indonesia
has no other option than to go bilaterally.
Indonesia has extensive economic and trade relations with these two
countries. An FTA with these countries would have a major impact, not
only in terms of enhancing Indonesia's market access but also in terms
of improving its competitiveness due to the economic reforms that it
will have to undertake in implementing such binding agreement. The
other objective is to increase the country's attractiveness to
international investors, especially from the countries with which it
has formed an FTA. Furthermore, the agreement could strengthen
political and overall relationship with the partner country.
Concluding an FTA with Japan, and especially with the United
States, will be more difficult than with other countries as the
coverage will likely be wider and the commitments will have to be
deeper since it will encompass not only cross-border issues but many
``behind the border'' issues, including domestic regulations.
In the domestic arena, efforts need to be made to gain better
understanding of which sectors will benefit most from the FTAs and
which ones will be adversely affected by them. The latter will help the
government devise necessary measures to lessen the negative impacts of
the FTAs. Equally important are efforts to build capacity, especially
of the bureaucracy that will be involved in implementing the
agreements. The United States can provide valuable assistance here,
perhaps to be undertaken under the United States-Indonesia Trade and
Investment Framework Agreement (TIFA) signed in 1997. Domestic
adjustments and reforms will have to be undertaken continuously, and
perhaps they need to be properly sequenced. It is often the case that
bilateral or regional FTAs help promote domestic reforms.
An agreement with the United States could have the greatest effect
on Indonesia's reform agenda. If properly designed, this will be highly
valuable for Indonesia. An Indonesia that is economically stronger and
more competitive will be able to provide economic leadership in ASEAN
in the efforts to create a single market and a production base in 2020,
if not earlier. It should be in the interest of the United States to
see the emergence of a strong and economically integrated ASEAN region.
Senator Murkowski. Thank you.
And we will now go to Mr. Randy Martin, with the Mercy
Corps.
STATEMENT OF RANDY MARTIN, DIRECTOR, GLOBAL EMERGENCY
OPERATIONS, MERCY CORPS, WASHINGTON, DC
Mr. Martin. Madam Chairman, thank you very much for the
invitation and the opportunity to share Mercy Corps'
perceptions and impressions on our progress on recovery in
Indonesia.
I think we all remember very vividly the impact of the
tsunami last December 26, which wrought incredible devastation
to a broad swath of South Asia. The world responded very
quickly and very generously with life-saving assistance on an
unprecedented scale. InterAction, which I think you know is an
American consortium of 160 American NGOs, put out a report last
June indicating that 60 American nongovernmental organizations
responded to the tsunami. Together, they raised $1.5 billion in
funds and spent a quarter of a billion dollars in the first 90
days, alone. So, it was just an incredible response from the
NGO community and from the American people.
The Indonesian Province of Aceh was particularly
devastated, and which was compounded there by not just the
tsunami, but the earthquake, of course, which preceded it.
In Aceh, there were 128,000 deaths and displacement of over
half a million people. There were 7 militaries and roughly 300
national and international NGOs that responded, some 2,000
expatriates flooded into Aceh to provide assistance to the
Indonesian Government and to the people of Aceh.
Eight months later, we are well past the emergency needs of
those early days and weeks. We are now embarked on the very
challenging work of reconstruction, though without the benefit
of the world's focused attention, which has now moved on to new
crises here and abroad. Therefore, from the very onset, I want
to applaud this committee for its commitment to monitoring this
critical process and encourage you to keep doing so.
I'll talk a bit about the NGOs' response in Aceh. But, as
Mr. Kunder, before me--from USAID, before me--pointed out, it's
really important to underscore that the progress in Indonesia
has really been led by Indonesian--by the Acehenese
communities. It's--when we are doing our best work as NGOs, we
are catalyzing, we are supporting, the work of those
communities. And we are very, very impressed by the leadership
and the courage that we've seen coming out of those
communities.
A visitor to Banda Aceh, right now and for the first time,
may be struck by the amount of work that's still left to be
done. There are still tens of thousands of people living in
temporary shelters and in plywood barracks, which are really
horrendous. There are still--although children are in school,
the schools are temporary, health facilities are temporary and
of poor quality. There is a lot of work left to be done.
Rapid-onset disasters--I think we're finding from our own
experience in the gulf--rapid-onset disasters of this
proportion destroy not only lots and lots of property and
displace thousands of people, but they also destroy the very
institutions and structure that are put in place to respond to
emergencies.
Militaries--the military did, really, an outstanding job in
its initial response in Aceh. They have substantial logistics
capacity, but they are enormously expensive and don't have the
expertise or time horizons necessarily--necessary to mobilize
communities for long-term reconstruction.
Private contractors, likewise, are unlikely to bring
community-development expertise, multiple funding sources, or
the long-term commitment needed to sustain reconstruction.
Thus, the role of humanitarian NGOs, with our experience,
our broad base of resources, and our commitment to the long
term, it's very important to fill the gap.
The problem is, as I described, the local institutions to
coordinate a response are not there. And I'm here to tell you,
in the early days in Aceh, it was a real circus. It was a very,
very difficult time to coordinate. If you can imagine 300 NGOs,
2,000 expatriates, NGOs with different funding bases, with
different objectives, with staff who had never been there
before, all arriving at the same time, without a coordinating
mechanism in place. It was a real challenge.
But, despite that, I think we've done really well to put
one together. And, for that, my hat's off to the United Nations
Office for Coordination of Humanitarian Assistance, OCHA. They,
in the early days, assembled a Humanitarian Information Center,
which, in turn, registered these NGOs, took records on where
they were working, what their resources were, mapped that out,
and handed it back out to the NGO community so that we could
coordinate our activities better together.
The United Nations also put together the Interagency
Standing Committee, which actually existed before the tsunami.
It coordinates the activities of the various U.N.-family
organizations with the activities of the NGOs and the
government.
So, I think, with these instruments in place, our efforts
became far more coordinated as time has moved on.
So, despite the extraordinary level of destruction wrought
by the tsunami and the challenges of mobilizing NGOs and
coordinating them, I think we've made an awful lot of progress.
Over half a million people have received monthly food
rations. Over 90 percent of students have returned to schools.
Moreover, despite the dire predictions that we heard, there has
not been a major outbreak of disease.
NGOs and international organizations have slated over
60,000 houses for reconstruction, and now we're working with
the authorities on land-ownership issues and construction
designs, which will help mitigate the kind of damage that we
saw, should there be another tsunami.
Almost a hundred agencies are working to rehabilitate 1,500
damaged schools. Over 100,000 individuals supporting family
members, totaling over 500,000, have received assistance to
restart livelihoods.
For Mercy Corps' part, we, alone, have injected over $10
million into Aceh over the last 8 months through our programs.
We provided cash-for-work opportunities for over 26,000 people
in 93 villages. We supported the return of over 46,000
individuals, through cash grants, to communities for quick-
impact projects restoring basic infrastructure. In 66 villages,
we have funded the restoration of cultural and social
institutions, benefiting another 77,000 people.
I think right now we're in the process of shifting gears,
of moving away from the immediate cash-for-work direct-cash
programs that we saw in the relief phase, and we're focusing
more on economic development and in restarting local markets.
Already out of time.
Clearly, I think you've seen--you can see, a lot has been
accomplished. We still have a long way to go. If I may,
quickly, four very brief recommendations:
First, as Mr.--as the presentation from USAID, before,
indicated, we think it's very, very important to support local
government and to work through local government institutions.
Second, we think it's very important to support community-
led initiatives. Communities must be leading the recovery. Not
NGOs. And it's not that they just participate in it. They must
be at the head of it. We can't just count houses as a measure
of our success. The process is very, very important.
Third, it's very important that we support the peace
agreement between the Government of Indonesia and the Free Aceh
Movement. Disasters create opportunities, and one of the ones
that came out of this disaster was the silver lining of the
peace agreement with the Free Aceh Movement. Fifty percent of
peace agreements fail on the implementation. It's very, very
important that we look at implementation of tsunami recovery as
part and parcel of this peace process. We have to look at them
together.
Finally, it's very important that we remain mindful of
long-term recoveries--recovery needs. That means that we have
to be developmental in our approach. It feels great to hand
things out, but it's very, very important that we see that
communities are engaged in the process of their own
reconstruction.
And I think part of that, also, is doing exactly what this
committee is doing, and that's to continue to insist on
excellence and to continue to monitor progress well into the
future.
So, in closing, I just want to say I think it's essential
that we sustain our commitment to recovery in an area of the
world impacted not only by a devastating natural disaster, but
also by years of civil war. We encourage you to keep checking
in with us on progress. Mercy Corps greatly appreciates the
continuing interest of this community in the work of
nongovernmental organizations in this effort, even as our
interest is drawn away to respond to new crises here and
overseas.
Thank you very much.
[The prepared statement of Mr. Martin follows:]
Prepared Statement of Randy Martin, Director, Global Emergency
Operations, Mercy Corps, Washington, DC
Mr. Chairman and committee members, thank you very much for
inviting Mercy Corps to share our impressions and thoughts on the
current recovery activities in Indonesia. As we remember all too
vividly, the tsunami of December 26, 2004, was horribly destructive to
a broad swathe of South Asia. Stunned by the images, the world quickly
responded with immediate life-saving assistance on an unprecedented
scale. An InterAction study released in June found that 60 American
InterAction-member NGOs responded to the Asian tsunami, raising nearly
$1.5 billion and spending a quarter of a billion dollars in the first
90 days alone.\1\
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\1\ For detailed information on the tsunami-related activities of
American NGOs during the first 90 days of the response, see
``InterAction Member Tsunami Response Accountability Report; A Guide to
Humanitarian and Development Efforts of InterAction Members in Tsunami-
Affect Areas'': InterAction; June, 2005.
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The Indonesian province of Aceh was particularly devastated with
the compounded impact of the earthquake and resulting tsunami. The
Acehnese suffered 128,000 deaths and the displacement of over 500,000
people. Seven militaries and roughly 300 national and international
nongovernmental organizations--including 2,000 expatriates--have worked
alongside the Indonesian Government and people to respond to this
humanitarian crisis of extraordinary proportions.
Eight months later, we are well past the emergency needs of those
early days and weeks. We are now embarked on the very challenging work
of reconstruction, though without the benefit of the world's focused
attention--which has moved on to new crises here and abroad. Therefore,
from the onset, I want to applaud this committee for its commitment, to
monitoring this critical process of rebuilding--and encourage you to
keep doing so.
THE NGO RESPONSE IN ACEH
I've been asked to comment on, summarize, and provide an update on
United States-based NGO activity in Indonesia, including Mercy Corps'
work, which I am pleased to address. However, I would also note that in
our experience the primary accomplishments are the result of
communities coming together to chart their recovery. When we are most
effective as an INGO \2\, we are primarily catalyzing and supporting
the great strength and resiliency of these communities. Our teams on
the ground continue to be inspired and moved by the great courage,
dedication, and problem-solving approach of the many community leaders
with whom we have worked.
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\2\ INGO: International Non-Governmental Organizations.
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To visitors arriving in Banda Aceh now and for the first time, one
may be struck by the amount of work still to be done. However, I submit
that there has indeed been substantial progress in Aceh over these past
8 months. Significant challenges remain, but many of the toughest
hurdles have been surmounted and we are collectively now poised for the
long and hard work of rebuilding. Let me speak to some of the
challenges we have overcome.
In rapid-onset disasters of this proportion, communities suffer not
only from the massive destruction of property and loss of lives, but
they also lose the very institutions and structures that were put in
place to respond to emergencies. Militaries have substantial logistics
capacity, but are enormously expensive and do not have the expertise or
time horizons necessary to mobilize communities for long-term
reconstruction. Private contractors, likewise, are unlikely to bring
community development expertise, multiple funding sources, or the long-
term commitment needed to sustain reconstruction. The role of
humanitarian NGOs--our experience, our broad base of resources, and our
commitment to the long term--is thus essential to fill the gap.
However, in the aftermath of such destruction, indigenous capacity
to coordinate the outside assistance being offered is dramatically
undermined. Despite this challenge, the humanitarian community managed
to construct serviceable coordination functions early on in the crisis.
Taking the lead in coordination, the United Nations Office for
Coordination of Humanitarian Affairs set up a Humanitarian Information
Center (HIC) in Banda Aceh at which NGOs registered, indicating their
intervention plans and resources, which were in turn mapped by the HIC.
A variety of general and sector specific coordination meetings were
established. The United Nations ran regular meetings of the Inter-
Agency Standing Committee (IASC) to coordinate the efforts of the
various U.N. agencies with the efforts of the NGOs and governments.\3\
These efforts were instrumental to bringing the aid effort together in
the early days.
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\3\ For more information on NGO coordination in Aceh, see ``A
Review of NGO Coordination in Aceh Post Earthquake/Tsunami'';
International Council of Voluntary Agencies (ICVA); April 8, 2005.
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Given the extraordinary level of devastation wrought by the
tsunami, the progress has been substantial: Over 500,000 people have
received monthly food rations and over 90 percent of students have
returned to local schools. Moreover, despite dire predictions, there
have been no major outbreaks of disease. NGOs and international
organizations have slated over 60,000 houses for reconstruction and,
working with local authorities, have begun the arduous of task of
clarifying land ownership, developing appropriate designs to ``build
back better'' and have initiated the long process of rebuilding. Almost
100 agencies are working to rebuild or rehabilitate 1,500 damaged
schools. Over 100,000 individuals, supporting family members totaling
over 500,000 persons, have received assistance to restart their
livelihoods.
Mercy Corps alone has injected over $10 million into the local
economy through our programming. We have provided cash-for-work
opportunities to over 26,000 people in 93 villages. We have supported
the return of over 46,000 individuals through cash grants to
communities for quick impact projects and by restoring basic
infrastructure. In 66 villages we have funded the restoration of
cultural, social, and religious institutions benefiting over 77,000
individuals. This support has been critical in restoring the social
fabric of local communities that is so critical to recovery after such
a disaster.
On February 10, 2005, Mercy Corps President Nancy Lindborg--having
recently returned from Banda Aceh--testified before this committee
about ``Tsunami Response: Lessons Learned.'' In mid-August, Ms.
Lindborg returned to Banda Aceh to observe firsthand the progress made
in restoring peoples' lives, livelihoods, and hope. In January, she had
reported that survivors of the crises still appeared ashen in shock;
that over 2 miles of the coastal belt were nothing but the remains of
debris-strewn villages and roads, and that economic activity had all
but ground to a halt. By August, she witnessed that most of the debris
had been cleared and new houses were being built; children had returned
to school; normal village social life was returning and local markets
were again thriving. Unless someone had visited Aceh in January they
could not put into perspective how much progress has actually been
made.
During her trip in August, Ms. Lindborg revisited the village of
Tibang, which she had gone to during her January trip. In January, the
village was waist-high in debris, most houses and buildings were
destroyed and the village was devastated not only by the destruction of
its infrastructure, but at the loss of several hundred residents killed
and the remainder displaced. Since then the debris and rubble have been
cleared, new houses are being built, regular community meetings are
held to discuss local issues and priorities, and the village has
erected a bulletin board providing detailed plans and commitments from
various international and local NGOs. Mercy Corps is working with the
local community to restore shrimp ponds, which was their primary source
of income prior to the tsunami, and we are working with Habit for
Humanity to rebuild 300 houses by December.
More recently, as Mercy Corps has been phasing out of cash-for-work
and direct cash projects, we have begun focusing on economic
development and restarting local markets. Mercy Corps has assisted over
5,200 people, including fishermen and farmers, to restore their
livelihoods and we are working with local banks on a loan guarantee
program to allow entrepreneurs to access credit to restart their
businesses. The first client of this program has been able to restart a
fiberglass production facility that employs eight people and whose main
work is in replacing destroyed fishing boats.
It is a tribute to the people of Banda Aceh and to the
international community that so much has been done to restore the sense
of vitality, purpose, and hope among the local population. However,
given the enormity of the destruction there remain serious challenges
in the months and years ahead. Though rebuilding communities never
happens as fast as we would like, those of us in the thick of it--those
of us who witnessed ground zero on day one--are very proud of what we
have managed to accomplish in just 8 months.
As we look ahead, I would like to leave you with four
recommendations:
1. We must support government capacity for rebuilding
The Badan Rehabilitasi dan Reconstruksi \4\ (BRR)--the lead
Indonesian body overseeing rehabilitation and reconstruction--is now
well established and beginning implementation of its formidable task.
The BRR provides a vehicle to cut through bureaucratic redtape and move
reconstruction forward. Of particular importance is that the highly
regarded director of the BRR is based in Banda Aceh and reports
directly to Indonesian President Yudhoyono. However, attention must
remain on ensuring that BRR has sufficient resources--both human and
financial--to fulfill its mandate.
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\4\ Badan Rehabilitasi dan Reconstruksi translates as ``body for
rehabilitation and reconstruction.''
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Under the Government Implementation Plan for Aceh Development--
rebuilding and improving government capacity is a critical goal. There
are many challenges in working with the local government--weaknesses
both on the part of the government and on the part of INGOs. The
goverment has limited capacity to assess, implement, and monitor
projects of the size and scope that are required. It lacks knowledge of
humanitarian principles and the working practices of the international
humanitarian response community, which hampers partnering and
coordination with these important actors. Finally, the government is
too often challenged by internal corruption and bureaucratic
inefficiency. NGOs, for their part, often fail to coordinate and
communicate effectively with the government, or to channel their
resources to support government guidelines and priorities.
The local government needs to be supported through initiatives that
build the skills and facilities of the local government. For their
part, the INGOs need to be encouraged to partner with and support local
government initiatives--encouragement which could be provided by the
donor community. We are seeing a more proactive government emerge as it
gains the experience and expertise to address the challenges.
One specific area that the BRR needs focused support and capacity-
building in is in determining land ownership, resolving land conflict
issues, and developing a system for arbitrating conflicting claims to
parcels of land. This has emerged as a key issue due to the loss of
government records during the tsunami. It is one of the primary
impediments to more timely reconstruction of housing.
2. We must continue support for community-led initiatives
In Mercy Corps' experience throughout the world, local communities
can and should be leading their own recovery and reconstruction
efforts--not merely participating or, even worse, standing by as
outsiders do the planning and implementation. Leadership and engagement
of local communities in the design and implementation of recovery
programs are essential not only to achieve the desired impact of
recovery efforts and their sustainability, but also to strengthen
capacities and role in civil society. Rebuilding infrastructure such as
houses, schools, and clinics is important, but by encouraging active
local leadership in these efforts we will ensure that these facilities
are maintained far beyond the presence of international NGOs and donors
and that the impact moves beyond the physical infrastructure to
building a better society.
While a considerable amount of resources have gone toward the
physical rehabilitation requirements, it is still critical to emphasize
the development of the knowledge, skills, and abilities of local
communities to fully engage in the reconstruction process. This
requires developing community capacity to link and work with local
government actors, improving availability of services and empowering
communities to demand access to them, and improving community access to
information for decisionmaking.
A clear example of supporting community-led initiatives is Mercy
Corps' work providing cash grants to villages that allow village
councils to use these financial resources to best address local issues
which they themselves have identified. In one village outside of Banda
Aceh, the village voted to use their cash grant to create a small scale
brick factory that not only contributed to reconstruction needs, but
also generated local employment.
3. We must strongly support the peace agreement between the Government
of Indonesia and the Free Aceh Movement
Disasters often create opportunities. Prior to the tsunami, Aceh
had been locked in a civil conflict between the Government of Indonesia
and the Free Aceh Movement (GAM) which remained seemingly insoluble
after nearly 30 years of struggle which has taken thousands of lives.
The tsunami's silver lining is that it brought the international
attention that motivated a political solution to the conflict. An
agreement has been signed, and the initial stages of implementation
have moved forward in an encouraging manner, but as with all such
accords, continued international attention and support of this peace
agreement are essential. It is essential that the tsunami recovery
reflect the needs for peace dividends and reconciliation. I urge that
progress on the implementation of the peace agreement be looked at as
part and parcel of recovery in Aceh.
4. Remain mindful of the long-term recovery needs
Eight months after the tsunami, efforts to rebuild and rehabilitate
the affected areas in Aceh are still in their early stages, and a
satisfactory physical and economic recovery may take five additional
years or more to complete. Indeed, even though the dire emergency
created by the tsunami has largely stabilized, much of the affected
population is still in need of basic necessities like adequate shelter,
food, clean water, and access to medical care.
The importance and urgency of this work can overshadow the need for
long-term strategies to strengthen civic structures and civil society
values and practices that are indispensable to making reconstruction
efforts sustainable. This can be true even when the need for long-term
programming that addresses the roots of the problems facing Acehnese
society is generally agreed on. One of the reasons for this is a lack
of resources and a natural reluctance to allocate funds and energy
toward activities that do not produce rapid, tangible results while
more urgent and salient needs abound. It is essential, however, that
despite these pressures we remain cognizant that long-term development
requires a different approach than emergency relief in recovery. Relief
and recovery strategies made in an environment of severe and acute need
may not always lead to effective plans for sustainability years down
the road. Furthermore, transitioning to a long-term mindset can be
difficult. The daily gratifications that come from tangibles like
clearing debris, fixing schools, and planting acres of rice are not
easily traded in for the long, complicated, and often delicate tasks of
strengthening the civic values and institutions that ensure sustainable
solutions.
In closing, let me reiterate the importance of a long-term
commitment to recovery in an area of the world impacted not only by a
devastating natural disaster, but also by years of civil strife. We
encourage you to keep checking in with us on progress. Mercy Corps
greatly appreciates the continuing interest of this committee in the
work of Non-Governmental Organizations in this effort--even as we are
drawn to respond to new crises in our own country and around the world.
Senator Murkowski. Thank you. And I appreciate the very
specific recommendations that you have given and would
certainly agree that every effort that we make to make sure
that we are working from the bottom up, working with the people
in the communities, those--the residents, the local folks, we
can be assured of greater success.
I'm told that I now have 2 minutes remaining until our next
vote, and we do have two votes. So, I am going to bring this
hearing to a close.
I do have some questions that I had intended to direct to
all three of you, and, as I am going to have to excuse myself,
I would like to just be able to present them to you, in
writing, and would await your response.
Senator Murkowski. Ambassador Cleveland, one--the one that
I wanted to ask you--and I'll just give you a heads-up--is--
given where you've been and what you've seen and your comments
about the new president and what we are seeing out of this
administration is, What's Indonesia going to look like in the
year 2020? Where are we going to be?
And, you know, right now we're talking, Mr. Martin, about
the very--responding to the very immediate needs after a huge
catastrophe, but we recognize that we've had a very
distinguished panel, immediately preceding you, talking about
some very significant opportunities in the future, the
relationship between Indonesia and this country and how we can
really see some positive and good things coming.
So, I'd be curious to know your response. And certainly if
either one of you would like to jump in on that question, even
though it might be not directed to you, we'd appreciate that,
as well.
With that, gentlemen, thank you for your time. Thank you
for your insight and for all you do for us. We appreciate it a
great deal.
Thank you.
[Whereupon, at 3:40 p.m., the hearing was adjourned.]
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Additional Questions and Answers Submitted for the Record
Responses of Hon. Paul M. Cleveland to Questions Submitted by Senator
Lisa Murkowski
Question. Ambassador Cleveland, given the events over the past few
years, where do you see Indonesia in 2020?
Answer. Indonesia has made extraordinary strides in locking in
democracy. It would have been hard to envision a decade ago that the
Suharto regime would have been ousted, pretty much peacefully; there
would have been peaceful transitions of power to three administrations;
fully democratic elections could have been held in 1999 and 2004; the
military (TNI) would have been removed from civil positions and the
legislature; the devolution of power to local governments would occur;
and a new, democratic constitution would be implemented. Indonesia's
progress has been exceptional. All observers should give major credit
to the resilience and intrinsically democratic instincts of the
Indonesian people.
Looking ahead, there are trouble spots, mainly relating to extreme
Islam and religious confrontation, but the future mainly is positive:
Democracy, fundamental freedoms and respect for human rights
should be fully entrenched by 2020. Popular expression through
local governmental institutions, combined with greater social
equity and civic responsibility, should be well developed.
With the wise application of government policy and power,
religious tolerance as provided for under Indonesia's
Constitution likewise should be firmly established.
Accomplishing this, however, will require enormous efforts to
improve Indonesia's educational system, as well as bolster
mainstream religious organizations of all faiths and stop
violent extremism when it appears.
Indonesian national integrity, and the continued
incorporation of the critical regions of Aceh and Papua, will
be maintained as an important element of regional harmony and
stability. Increased respect for human rights in the
performance of government, stronger civil society, and an
effective, though culturally appropriate, accounting for past
abuses should occur, but there will be a need for more
progress.
Indonesia should be more deeply integrated into the ASEAN
regional economy as a web of free trade agreements (FTAs),
including with the United States, promotes market
harmonization, access, and trade-related investment flows. If
the United States shows leadership in promoting trade and
economic integration in the Asia-Pacific region as a whole,
Indonesia can be expected to be the most dynamic player in
Southeast Asia.
Indonesia has maintained a good record in macroeconomic
management. Given current modest population growth, substantial
inroads into poverty and unemployment can be made.
Unfortunately, corruption and bureaucratic inefficiency will
continue to stunt overall growth rates, although on a declining
scale.
With increased investment and participation by U.S. energy
companies, Indonesia can reassume its position as a net energy
exporter and substantial provider of mineral resources to the
global economy.
In foreign relations, Indonesia should again be an effective
contributor in regional political, security, and economic
affairs; interlocking functionally based ``communities'' in
Southeast Asia and East Asia will recognize Indonesia as the
natural, constructive leader and force for regional
cooperation.
There are other aspects of Indonesia's role in the Asia region
which should be congenial to United States interests. Above all, the
United States at this point of time should give Indonesia the emphasis
it deserves as an important regional actor, the world's third largest
democracy and the world's most populous Muslim nation.
Question. In your testimony, you state that Indonesia has become an
increasingly important counterweight to China's spreading influence in
the region. Yet we are also seeing China and Indonesia sign investment
agreements worth tens of billions of dollars. Could you elaborate on
where Indonesia has been a moderating force on China's influence?
Answer. First of all, if as we believe, Indonesia continues the
substantial political and economic progress described above, it will
avoid becoming a soft, potentially disintegrating nation where China
and possibly India could ``fish in troubled waters.''
To the extent that Indonesia has had a historical record of seeking
to blunt Chinese chauvinism in Southeast Asia, it has been a brake on
Chinese political aspirations. Our assessment is that a strong
Indonesia will maintain its skepticism of PRC political objectives in
the region and would react strongly to any inappropriate behavior,
especially toward exploitation of its overseas Chinese population.
Since the fall of Suharto, Indonesia has made great strides to fully
dignify the role of its ethnic Chinese citizens. Special identification
cards, tax regulations, limitations on the use of the Chinese language,
restrictions on Chinese language education and other discriminatory
measures have been eliminated since President Habibie's time. These
have been positive measures to deprive the PRC of a base of sympathy
and support among Indonesia's ethnic Chinese population.
The ultimate total value of Chinese projects in Indonesia cannot be
predicted as it is well known that trade and investment agreements with
Beijing are rarely realized to the full extent. Nevertheless, the
Yudhoyono government is canvassing strenuously for additional foreign
investment, particularly in infrastructure, as an essential element of
its economic growth and job creation strategy. China has been included
in this effort to attract greater investment, along with the United
States, Japan, Australia, and Europe. PRC interest has been shown in
energy resource development and power generation. Jakarta also has made
an effort to attract Indonesian Chinese capital that moved offshore
during the Asian financial crisis of 1997, some of which is in the PRC
and Hong Kong. If Chinese investment is transparent and Chinese
companies play by accepted international rules, their participation in
the Indonesian economy can be constructive and complementary.
Question. Ambassador Cleveland, you spent some time in Indonesia,
but you also served as Ambassador to Malaysia. What has been the
traditional relationship between Indonesia and Malaysia, especially
given the need for cooperation for security maintenance in the Strait
of Malacca?
Answer. Indonesia had a troubled cross-strait relationship with the
Federation of Malaya under Confrontation (Konfrontasi) during the time
of President Sukarno; there also was an active cross-border insurgency
in Kalimantan that exacerbated political tensions. Under Suharto,
confrontation gave way to cooperation and ASEAN has served over the
years to harmonize Indonesian and Malaysian interests as well as to
build a habit of working together, including in law enforcement,
traffic separation, and other matters relating to the Malacca Strait.
At the same time, the relationship has not been trouble free. In recent
years, the forced repatriation of Indonesian laborers in Malaysia has
created difficulties and mistrust between the two neighbors. This year
competing claims for territorial waters in the resource-rich Ambalat
area off East Kalimantan and Sabah resulted in saber-rattling and
public outbursts of jingoism. Malaysia also has strongly defended its
sovereign rights vis-a-vis international cooperation in Southeast Asian
maritime security.
Yet the outlook is more positive as a good dialogue, with more
frequent personal contact, is emerging between Prime Minister Abdullah
Badawi and President Yudhoyono. However, totally satisfactory
accommodations have not been reached on the labor and territorial
disputes. Malaysia has come forward with an international technological
monitoring proposal for the Southeast Asian sealanes which is somewhat
analogous to Singapore's ``horizon scanning'' concept and which
promises to upgrade regional cooperation and joint operations with
Indonesia in maritime patrolling and enforcement. According to reports,
Malaysia welcomes U.S. assistance to Indonesia to improve Indonesian
navy and police maritime patrolling capabilities, as well as
immigration and law enforcement. Overall we see a modest pattern of
cooperation developing, one that the United States can support with the
cooperation of other regional partners such as Japan and South Korea.
Question. For American businesses looking to invest in Indonesia,
how would you assess the country's resources, including its human
resources--literacy and public access to schools?
Answer. Indonesia continues to have strong potential for major
development of natural resources, especially oil, natural gas and
mining, which can serve to attract near-term investment and serve as an
engine of growth and job creation. As part of its proinvestment
outlook, the Yudhoyono administration is endeavoring to overhaul
government bureaucratic machinery and state-owned enterprises (SOEs) in
these sectors. Unquestionably, major U.S. investors would respond
positively to actions by the Yudhoyono government to open up new
opportunities for natural resource investment and to overcome
regulatory, tax, and other factors constraining new investment.
Education, both in cost and quality, unquestionably is a prime
national concern; together with basic health care, it is an important
determinant of Indonesian competitiveness as an investment venue.
Indonesia's literacy rate of 88 percent is high among developing
nations, but especially since the 1997 financial crisis national
expenditures on education have slipped badly to the point that, among
Southeast Asian nations, on a per capita basis Indonesia ranks above
only Myanmar (Burma) and Laos. While the Yudhoyono government is
addressing the growing educational gap by increasing budgetary
expenditures by 12 percent this year, there is a long way to go to meet
the constitutionally mandated target of 20 percent of the annual
national budget, much less to boost the quality of education up to
acceptable regional and world standards.
At the same time, experience has shown that the Indonesian
workforce is eminently trainable. For example, at the Batam Industrial
Zone near Singapore, Indonesian workers perform very well in highly
sophisticated industrial and high-tech operations. This is also true of
other industrial enclaves as Indonesia's white-collar workforce has
proven to be highly talented. Yet with the addition of an estimated 9
million new entrants into the workforce each year, the challenge of
meeting basic educational needs and providing higher level skills
training and academic experiences is tremendous.
For these reasons, as well as to support moderation, democracy, and
religious tolerance among the vast majority of the population, the
report of the U.S. National Commission on U.S.-Indonesian Relations,
chaired by George Shultz and Lee Hamilton, in late 2004 recommended the
creation of a bilateral ``Partnership for Human Resource Development''
to spur additional U.S. and other assistance in education, especially
to local schools (including Islamic educational institutions) and at
the university level aimed at producing new Ph.D.s and restoring
collaborative linkages with American universities.
Responding to basic education needs, USAID is providing $157
million in assistance over 6 years to improve the quality of teaching
in primary and secondary schools, schools management, computer
literacy, and school-to-work transition. USINDO, for its part, is
concentrating on four initiatives in higher education: Establishment of
a Presidential Scholars program, with a major U.S. Fulbright program
component and World Bank and other donor contributions, which would
turn out 400 new Ph.D.s in 5-7 years to teach and perform research in
40 centers of excellence; a joint consortium to improve teacher
education in public and private universities; another bilateral
consortium to focus on university management needs; and three
initiatives utilizing state-of-the-art educational technology to create
a nationwide university Internet system, develop Indonesia-specific
educational software, and establish an interactive Web site to
facilitate communications between United States and Indonesian
universities.
U.S. Government Public Diplomacy also has an important role in
terms of expansion of the regular Fulbright program and educational
exchanges, the promotion of new ideas through expanded International
Visitors programs, sending prominent educators, technologists, and
experts to Indonesia, and reaching out to elements of Indonesian
society, especially Muslim political, social, and educational
opinionmakers, to strengthen mainstream religious practice against the
small violent radical minority.
U.S. assistance in these key areas should be increased at least
two-fold above current levels, among other things to address urgent
public health requirements, most prominently the threat of an avian flu
pandemic. Clean water and HIV/AIDS campaigns also deserve increased
U.S. and donor support. Working together through the Consultative Group
for Indonesia (CGI) led by the World Bank, concerted donor efforts in
education and public health could within a decade create a healthier
and better educated workforce that would enable Indonesia to keep pace
with other countries in the region to develop its economic and
industrial base and attract major new foreign investment.
Question. Given the problems you note with corruption in Indonesia,
how is this impacting on foreign investment? We have seen China's
willingness to invest in places like Zimbabwe and Sudan while ignoring
concerns from the international community. Are Chinese companies
playing a role in helping to reduce corruption in Indonesia?
Answer. There is no indication that investment from the People's
Republic of China has an impact on the Yudhoyono government's
anticorruption campaign. Most Chinese investment is state supported, if
not directly from SOEs, hence it largely reflects Beijing's policy
interests encapsulated in the PRC's ``smiling diplomacy'' toward
Southeast Asia of the past 6 years or so. Furthermore, Chinese
investment is not constrained by national policies such as the U.S.
Foreign Corrupt Practices Act; ``rules of the road'' on transparency
and good conduct in OECD and other international agreements. Moreover,
Chinese investors know how to ``go along to get along'' in Indonesian
and Southeast Asian business circles.
It is unquestionable that Chinese investment in Indonesia is
increasing. Securing energy supplies is one clear interest, but also
Chinese manufacturers are opening up shop to produce consumer and other
goods. Open investment from China improves Indonesia's overall inflow
of foreign direct investment (FDI) and generates employment as it does
elsewhere in Southeast Asia. As with other investment partners, the
Yudhoyono government has sought to attract greater Chinese capital but
evidently there is a more cautious approach today than under the
government of former President Megawati Sukarnoputri when several
questionable transactions involving favoritism were concluded. The
recent appointment of a seasoned political military affairs veteran,
retired General Sudradjat, a former Defense Attache in Washington, as
Ambassador to China indicates a more careful approach in Jakarta's
dealings with Beijing.
Question. Sticking with corruption, up until the mid-1970s, Hong
Kong faced rampant corruption, permeating almost every area of people's
lives. In 1974, after widespread public discontent, the Independent
Commission Against Corruption was enacted--an event that is rated as
the sixth most important event in Hong Kong's 150-year history--and
Hong Kong has since turned into a model for anticorruption. Is the
public frustration in Indonesia regarding corruption at a high enough
level to support a similar government agency?
Answer. The Hong Kong model to countering corruption is certainly
to be emulated in international practice. But Hong Kong is small. The
Yudhoyono government faces a much more amorphous and geographically
wide-ranging problem. Nevertheless, it has breathed new life into
Indonesia's statutorily independent Anti-Corruption Commission (KPK),
legislatively authorized in 2002, and a new Anti-Corruption Court has
been established. The President was able to garner a better than 60
percent popular mandate in the Presidential runoff election in
September 2004 because of his strong stance against corruption and in
favor of improved government performance. Moreover, he underscored his
2004 election campaign pledge to contain corruption by issuing
Presidential Decree No. 11/2005 which authorized a new 51 member
ministerial-level Coordinating Team for Corruption Eradication. All
Ministers and senior officials in the Presidency had to sign
anticorruption pledges when the new government took office in late 2004
and an assets disclosure procedure is in place.
President Yudhoyono has given strong impetus to the anticorruption
campaign by sanctioning investigations into the National Election
Commission, Bank Mandiri, Bank Indonesia, and other financial
institutions, and he has given the Supreme Audit Agency (akin to the
U.S. GAO) sweeping powers to track nonbudgeted spending in state-owned
enterprises (SOEs), including the Garuda national airline, Telkom, and
the social security agency. President Yudhoyono has also supported
investigations into at least 57 high officials, including the former
governor of Aceh (now jailed), other governors, legislators, mayors,
and other officials for alleged misuses of public funds. As recently
observed by a respected consulting firm, Van Zorge and Heffernan, the
President ``is still seen to be clean and is widely viewed both
domestically and internationally as a leader with scrupulous ethics and
unassailable integrity.''
All this does not mean, however, that problems of malfeasance in
government have been solved. Far from it. It will be a long, tough slog
with setbacks. But, under the Yudhoyono administration, there is
promise that the situation is improving and that gains in transparency
and integrity in government will be achieved in the next few years.
Question. What can we in Congress be doing to help our fellow
legislators in the Indonesian Parliament increase their influence and
capabilities?
Answer. USINDO has supported efforts to promote closer relations
and understanding between the United States and Indonesian legislative
branches. For a number of years young Indonesians have served as
Congressional Fellows under international exchange programs but, with
the further development of Indonesian democracy and the important
issues before our two countries, enhanced interchange is recommended.
The U.S. Congress can provide support to moderate members of the
Indonesian Parliament (DPR) and enhance their influence by continuing
to bolster the bilateral relationship across a wide range of common
interests and programs: Restoration of a full and complete defense
relationship; conditions and incentives for U.S. investment in
Indonesia; promotion of a more open and robust bilateral trade; and
continuing U.S. Government support for assistance to the Indonesian
education system.
We would urge a continued expansion of the bicameral U.S. Congress
Indonesia Caucus which currently has 24 members: 22 from the House and
2 from the Senate. We would further suggest that the caucus develop a
close relationship with its new counterpart in the Indonesian
Parliament, the Indonesia-United States Working Group. Nineteen members
of the DPR have joined this group, which is led by strong supporters of
improved United States-Indonesian relations, and it is expected that
they will propose initiatives to establish a variety of ties with the
U.S. caucus.
Additionally, we suggest that the Congress organize periodic CODEL
visits to Indonesia and that members agree to appointment requests by
Indonesian parliamentarians during their visits to Washington. Meetings
with members of the DPR's Commission I (committee on foreign and
defense affairs) would be quite productive and appropriate to address
pressing issues, including military-to-military relations, Aceh and
Papua.
Finally, we applaud the initiative of the House International
Relations Committee to establish a Democratic Assistance Commission to
support the legislatures of emerging democracies. A House staff
delegation recently visited Jakarta and the DPR is reportedly under
serious consideration for inclusion in this new program. Specific
interests to be served through a closer relationship between the
Congress and the DPR are legislative research and drafting, constituent
services, budget and measures to reduce reliance of the DPR on the
executive for its routine operations and support, and strengthening DPR
relations with civil society organizations, including those concerned
with human rights.
______
Responses of Dr. Hadi Soesastro to Questions Submitted by Senator Lisa
Murkowski
Question. Dr. Soesastro, given the events over the past few years,
where do you see Indonesia in 2020?
Answer. Over the past few years Indonesia underwent a remarkable
process of democratic transition. It can be said that the process has
been successful because the people are ready for it. In 2004 the people
enthusiastically went to the voting booths to exercise their sovereign
right. They voted out a government that in their view did not deliver
and reduced their support for political parties that they regard as
being insensitive to their aspirations. If this enthusiasm can be
sustained, by 2020 Indonesia could indeed become the fourth largest,
consolidated democracy in the world. This is of great value to the
global community of democracies as Indonesia is a country with the
largest Muslim population.
It needs to be recognized, however, that the process of democratic
consolidation in the country is still rather fragile. People's
expectations are high, but the institutions to support the
democratization process are still weak. There is the risk of people's
disillusionment should not be ignored. The democratization process
cannot be taken for granted. Development and strengthening of political
institutions should be given priority in the country's agenda.
Education also plays a critical role in strengthening the
democratization process. The global community of democracies, including
the United States, could extend a helping hand.
Question. Your testimony indicates that Indonesia feels a sense of
commitment to ensure the success of ASEAN. Have the United States
efforts in signing bilateral FTAs with Singapore and Australia, along
with our current negotiations with Thailand helped or hindered ASEAN's
growth and what is the view of the FTAs in Indonesia?
Answer. To Indonesia, the success of ASEAN is important for
Indonesia's own development, because a peaceful and prosperous regional
environment will directly benefit Indonesia. Indonesia supports any
effort by ASEAN's partners, including the United States, to strengthen
relations and cooperation with ASEAN as a group and with individual
ASEAN countries. Strengthening relations and cooperation between the
United States and ASEAN can take many forms. Concluding bilateral free
trade agreements (FTAs) is only one initiative that could contribute to
deepening the overall relationship. However, in drafting such bilateral
FTAs, the United States should give duly consideration to their impacts
on the region as a whole because FTAs are by their nature
discriminatory. The U.S.-Singapore FTA has included some provisions,
albeit limited, that could bring some positive impact on Singapore's
neighbors, particularly Indonesia. The so-called Integrated Sourcing
Initiative, allowing some products that are produced in Singapore's
immediate neighbors to enter the U.S. market as if they were produced
in Singapore is an innovation and should be expanded in its
implementation.
In Indonesia's view, the United States should increase its efforts
to strengthen trade and economic relations with all ASEAN countries,
with some in the form of FTAs and with others perhaps mainly through
enhanced Trade and Investment Framework Agreements (TIFAs). All these
relations could contribute not only to increasing trade and economic
relations with the United States but in particular will help sustain
domestic economic reforms and the strengthening of markets in the ASEAN
countries.
Question. How is Indonesia managing the numerous ASEAN FTAs (China,
Japan, Korea, India) with its own domestic issues?
Answer. Indonesia's main challenge is to be able to manage the
development of a very few sectors that are seen as highly sensitive
politically. Since the introduction of the ASEAN Free Trade Area (AFTA)
in 1993, Indonesia has done away and greatly reduce many of its trade
barriers, tariffs in particular, but also a number of nontariff
barriers. It is important to note that in line with the reduction of
the AFTA preferential tariffs, the overall (MFN--most favored nation)
tariffs have also come down. Thus, the conclusion of the FTA with
China, a highly competitive economy, requires less painful adjustments,
although it remains challenging. If Indonesia can manage this rather
well, it is likely that it will also be able to do so with Japan,
Korea, and India.
Only a very few manufacturing sectors in Indonesia continue to
receive some protection, and they are also no longer excessive. The
more difficult area is agriculture because it affects the livelihood of
a large number of low-income people. This is not a major problem in
ASEAN's FTA with Japan and Korea that have very high-cost agricultural
production. It could be a major problem for Indonesia with the United
States, as already exemplified now in the U.S. exports of chicken legs
to Indonesia.
Question. Do you see a difference in the promotion of Indonesia's
interests regionally from the authoritarian rule of Suharto to a more
representative government today? Is Indonesia looking to expand its
influence in the region to promote its views?
Answer. During Suharto's rule, Indonesia played an active role in
ASEAN as a de facto leader. It is perhaps of interest to note that
while domestically the government was rather authoritarian, it was
quite democratic in the interaction with its ASEAN neighbors. In fact,
Indonesia has exercised a kind of leadership through building
consensus. This posture had a lot to do with the origin of, and
rationale for, the regional cooperation arrangement: Indonesia's
genuine intention to become part of a peaceful regional order.
Following the financial crisis of 1997/98 and Suharto's fall, the
succeeding governments were preoccupied with domestic problems and gave
little attention to ASEAN and regional cooperation. This began to
change since the end of 2003 when Indonesia hosted the ASEAN Summit and
was eager to craft a new agreement for ASEAN that would give it a new
stimulus and life: The realization of an ASEAN Community. The present
government of President Susilo Bambang Yudhoyono gives greater
attention to ASEAN and Indonesia's role in it. The government has
stressed the importance of political development, including
democratization in the region, and the role of civil society and the
people in regional community building. This has been stated explicitly
in the concept of the ASEAN Security Community that was originally
proposed by Indonesia, and was further stressed at the recent ASEAN
Lecture of President Susilo Bambang Yudhoyono on 8 August 2005.
Question. Dr. Soesatro, in my State of Alaska, there are 20
different types of languages spoken by Native Alaskans. In Indonesia,
there are more than 250, not to mention many religious, ethnicities,
and cultures. For Indonesia to move forward economically, what
considerations must it make with regard to this fact?
Answer. It is most fortunate that Indonesia's founding fathers were
enlightened to have adopted a common language for the very diverse
communities, the Indonesian language (Bahasa Indonesia) that is derived
from the Malay language, the language of a small ethnic group in the
country but has become the lingua franca since the beginning of the
20th century, rather than the language of the majority (Javanese). The
Indonesian language has become a strong uniting factor. The nation has
also adopted the wisdom of ``unity in diversity'' that values
inclusiveness, plurality, and tolerance.
It needs to be recognized, however, that these ideals have been--
and perhaps will be increasingly--under threat. The threat has come
from a growing sense of parochialism and primordial sentiments, and
especially religious fanatism and fundamentalism.
In regard to the former, the nation has tried to deal with and to
overcome it by introducing greater regional autonomy under a more just
and equitable decentralized system. This has been done in recognition
of the highly centralized system of government in the past. The
decentralization project, implemented since 2001, is also seen as part
and parcel of the democratization process. There are many challenges in
the implementation of decentralization but overall it has been a
success. In June 2005, a system of direct election of local governments
has been put in place, and the 200 or so local elections did proceed
without major problems.
On the latter, it is a much more complicated problem for the nation
to deal with. There cannot be a scheme to accommodate religious or
other extremism in the governance of the nation. Indonesians are
puzzled by the motivation of such groups to create so much damage to
the country. Home grown terrorists have also become susceptible to the
mobilization by international terrorist groups. Both national and
international efforts will be necessary to deal with this problem.
Overcoming these problems will be important for Indonesia to move
forward economically. Without a secure and stable environment Indonesia
cannot expect international investors to come.
Question. Could you comment on the oil subsidy issue in Indonesia?
What is the impact this has on economic growth and foreign direct
investment in Indonesia?
Answer. Fuel subsidies have been given for a long time. Over the
years there have been efforts to rationalize these subsidies. Until the
recent increases in international oil prices, gasoline was no longer
subsidized. On the other hand, kerosene--regarded as a fuel for the
poor--continues to be heavily subsidized. Some other types of fuel,
such as diesel oil, are also subsidized. These subsidies are paid from
the budget. With the recent increases in the price of oil, the burden
to the budget has increased dramatically. If prices are not adjusted,
the government will have to allocate about 30 percent of the budget for
fuel subsidies. This cannot be sustained and justified. However, it has
always been a politically difficult problem for the government to take
back what it has given to the people, and specifically since the people
regards it as their right to receive the subsidy.
While subsidies can be a legitimate instrument for social policy,
the problem with the fuel subsidies is that most of it has not been
received by the groups in the society--the low-income people--that are
the target of the policy. Differential pricing can never be
successfully administered. In addition, the low prices have also led to
smuggling of fuel to neighboring countries.
Despite protests, on 1 October 2005 the government has raised fuel
prices by an average of 130 percent. This has been the highest increase
ever. This was a brave decision, and aroused a lot of criticisms.
However, the government has justified it on the basis that the highly
distorted prices are economically unhealthy, and that one-shot increase
will be better than a series of price increases that could lead to
excessive price adjustments each time.
The immediate impact on the economy of this price shock will be an
increase in inflation. However, if managed well by the monetary
authority, the inflationary impact can be checked. In the medium and
longer term, fuel prices that are more aligned with international
prices will result in a healthier economy. International investors have
also welcomed this decision. This is immediately shown by the firming
up of the currency and increase in stock prices.
Question. How is the transportation infrastructure in Indonesia?
How does this hinder economic development?
Answer. The transportation infrastructure in Indonesia today has
become a major obstacle for economic development and growth. It is in a
condition that discourages investors. Since the financial crisis in
1997/98, there has been no major infrastructure development project in
the country.
The government is faced with a serious resource constraint to
undertake large infrastructure projects but the investment environment
has not been conducive to private, national, and international,
investment in infrastructure.
At the beginning of 2005, the new government organized an
infrastructure summit to offer a large number of infrastructure
projects to private investors. There was great interest on the part of
international investors, but the process has been slow. The government
needs to put in place regulations that would provide greater certainty.
Unless this is done, it will be difficult to expect great improvements
in the country's infrastructure, and in turn a return to higher
economic rates of growth that will be necessary to create sufficient
employment.
______
Responses of Randy Martin to Questions Submitted by Senator Lisa
Murkowski
Question. Mercy Corps has done a remarkable fundraising for tsunami
relief. What has the NGO/relief community learned from this incident in
terms of fundraising and gaining awareness of the issue? How has
Katrina affected the tsunami response?
Answer. I don't believe the tsunami has taught us any lessons, but
rather emphatically confirmed what we already knew.
First, that the American public is incredibly generous when
confronted with catastrophic disasters, particularly natural disasters
that receive overwhelming media coverage. The tsunami was the worst
natural disaster in recent times, and, not surprisingly, it elicited
the largest public response in terms of dollars donated. Mercy Corps
raised $31 million in private funds--more than ten times the previous
disaster record of $3.3 million for Kosovo in 1999. Katrina confirmed
this lesson when Mercy Corps raised $7.2 million (and counting) despite
our relative inexperience in domestic disaster response.
A second lesson of the tsunami is that donors tend to give very
quickly and usually to the largest, best-known agencies, not
necessarily the ones with ongoing on-the-ground operations in countries
affected by the tsunami. The American Red Cross dwarfed all other U.S.
charities in funds raised for the tsunami and indeed was the virtual
default charity for many donors, especially Fortune 500 corporations.
Many corporate donors, even large private donors do little to research
into the organizations that they are giving to. The desire to provide
help quickly--as well the need to publicly demonstrate this concern to
stakeholders--leads to impulsive decisions-based brand-name perceptions
rather than true needs on the ground and capacity to deliver results.
A key lesson for mid-sized groups like Mercy Corps is to
proactively engage large corporate and foundation donors before
disasters strike to make the case for diversifying funding among
several groups. Groups like the Bill & Melinda Gates Foundation have
long practiced this methodology during disasters, recognizing that
different groups bring different core skills to the table.
Another lesson is the rise of Internet commerce during disasters--
not only organization's own Web site, but also third party entities
like Network for Good, which collect funds on behalf of many charities,
and also e-commerce giants like Amazon, which collected tens of
millions of dollars on behalf of the Red Cross. The rise of e-commerce
during disasters is reducing the costs of fundraising, but even more
important, it is increasing the speed of response by giving disaster
response planners more money, more quickly, enabling more robust
initial responses. For example, in the first 5 days after the Pakistan
earthquake, Mercy Corps raised $525,000--funds that are immediately
available to spend. In the pre-Internet era, a direct mail piece would
just be dropping by Day 5, and the first gifts would be arriving days
after that. The faster flow of funds takes the ``how much money will we
raise'' guesswork out of the equation, leading to more aggressive
responses in the field.
As for the second part of the question--whether Hurricane Katrina
has affected the tsunami response--the answer for us is ``no.'' We have
raised $2.2 million for tsunami relief in FY06 (that is, since July 1),
but most of it was from large donors who had funds remaining. The
general public response has tapered off well before Hurricane Katrina
came on the scene. Beyond fundraising, the response to Hurricane
Katrina also has not affected our programs or operations in Indonesia
or the 34 other countries we work in around the world. We found the
existing systems and staff we had in place for international response
were well positioned to deal with the issues in responding to Hurricane
Katrina.
Question. How has the transition from relief to reconstruction
been? Has the threat of terrorism been an issue in your experience?
Answer. In Mercy Corps' experience the transition from relief to
development is not a linear process easily captured on a timeline. That
being said, reconstruction is moving forward in Banda Aceh with
significant accomplishments in terms of meeting people's basic needs,
restoring livelihoods and markets, and in general creating a better
economic atmosphere.
One area that needs continued attention and support is in the
physical reconstruction, particularly of the estimated 120,000 houses
that were damaged or destroyed by the earthquake and subsequent
tsunami. The current rainy season in Indonesia is posing great
difficulties for some families who are living in temporary quarters or
in inadequate shelters. The United Nations and the International
Federation of the Red Cross and Red Crescent Societies have recently
taken on the need in increasing support for these families.
In terms of the threat of terrorism, Mercy Corps like many
organizations were concerned by initial press reports in the post-
tsunami period about the influx of radical or violent groups moving
into Aceh. However, Mercy Corps' team on the ground has not reported
any concerns or issues regarding these groups. In fact, Mercy Corps,
through its work in over 40 local religious and social institutions
including mosques, boarding schools, and orphanages, has received an
overwhelmingly warm welcome by local religious and social leaders.
Question. In Alaska fishing is a way of life and plays an important
part in our communities and our economy. Hurricane Katrina has caused
major damage to those fishing communities on the gulf coast. Has Mercy
Corps focused on fishing communities in Indonesia?
Answer. Mercy Corps believes that economic revitalization is key in
achieving a long-term, sustainable recovery of Aceh. Realizing the
importance of fishing as a source of income for many tsunami-affected
communities, Mercy Corps started supporting the recovery of this sector
in early January 2005. Mercy Corps is working in more than 21 fishing
communities on the west coast of Aceh, in the area of Meulaboh in the
district of Aceh Barat.
The fishing program is holistic in focusing on the complete fishing
market chain:
In the boat repair program, 142 damaged boats have been
transported back to sea in cash-for-work projects since January
2005. Of these 142 boats, 138 have been fully repaired and 135
are back at sea with a full complement of fishing kits and
engines.
213 cash grants have been provided to sampan (canoe)
fishermen to commission local production of canoes and nets, a
further 253 sampan grants are being processed, along with
grants to fish vendors and processors (dryers, salters) to
support the restart of their businesses. Further projects focus
on supporting cage fishing and fish pond revitalization.
Mercy Corps has provided a mobile ice machine to make ice
available locally to preserve catch.
Future projects will include: Building docks, landing
stations (jetty), fish markets, auction houses, and workshops.
For all fishing activities, Mercy Corps closely collaborates with
the DKP (Indonesian Ministry of Fisheries) and the Panglima Laut
(Acehnese Fishermen's Association). Capacity-building and institutional
support is provided and given to both of these institutions and several
smaller local fishermen associations, and further training for
fishermen and technical support is provided through coordination with
the Center for Research for Coastal and Marine Management (CRCMM) of
the Bogor Agricultural University (IPB).
______
Responses of Deputy Assistant Secretary Eric G. John to Questions
Submitted by Senator Russ Feingold
Question. As you know, I have worked for several years now to
ensure that justice is done in the case of the ambush that occurred in
Timika in August 2002, killing one Indonesian citizen, two Americans,
and wounding several others. Please provide an update on the status of
the case. Do you have a sense of why Indonesia has issued no
indictments and made no arrests?
Answer. The Indonesian Government continues to support achieving
justice in this case, as does our Government. When President Yudhoyono
visited the United States in May 2005, he personally met with Mrs.
Patsy Spier, widow of one of the murdered Americans, to convey his
concern. The Indonesian National Police (INP) and the Indonesian
military (TNI) also continue to work closely with the FBI in pursuing
the investigation. With INP and TNI support, the FBI deployed to Papua
in August. The FBI is currently evaluating further investigative
options, and plans on returning to Papua again in the near future.
The Indonesians have not yet issued an indictment because the
procedures of their legal system dictate that an indictment is not
prepared until after a suspect is arrested and the police transfers
his/her case to prosecutors. For a charge of murder, the police have 60
days after making an arrest to prepare a dossier on the accused and
present it to the prosecutors. The prosecutors then have 50 days to
prepare the indictment and present it to a court of law. The act of
presenting the case before the court constitutes an indictment under
Indonesian law. No arrests have been made because the main suspect,
Antonius Wamang, is in hiding, and investigators are still working to
identify other possible accomplices. We continue to make Wamang, and
any other suspects' apprehension, a priority and closely monitor the
investigation's progress.
Question. What steps have been taken thus far by the Indonesian
Government to alter longstanding arrangements whereby the TNI engages
in its own, sometimes quite lucrative, private sector interests? What
are the major barriers to eliminating this practice, which is clearly
an obstacle to professionalization of the military?
Answer. In September 2004, the Indonesian Parliament passed a law
requiring the government to take over the military's business interests
over a 5-year period. During this time, the defense budget is to be
increased to make up for the lost business revenue. The Indonesian
Defense Ministry has begun the transfer process, and the military's
Supreme Commander has publicly stated that he supports the divestment.
In addition, the government and the legislature are exploring the
future adoption of legislation to place the TNI under the authority of
the Minister of Defense.
The single most significant barrier to eliminating this practice is
the present inability of the Indonesian Government to provide a defense
budget, which makes up for the lost revenue and is adequate for
Indonesia's legitimate defense needs. Nonetheless, President Yudhoyono
has publicly called for the need to increase the defense budget. The
recent Government of Indonesia decision to substantially reduce fuel
subsidies removes some pressure from the government budget and could
allow increased expenditures on defense, education, and health.
Question. As you know, Munir Said Thaib, a prominent Indonesian
human rights activist, was murdered last year, and his killers have not
been held accountable for their crime. A Presidential Fact-Finding Team
was established to look into this case and this team reportedly
implicated senior intelligence officers in the Munir murder. But the
team's key recommendations and findings have been ignored by the
Indonesian police and attorney general's office, the team's final
report has not been made public, and the Indonesian Government has gone
so far as to investigate members of the Fact Finding Team for
defamation. This case calls the Indonesian commitment to the rule of
law into serious question. What steps have been taken by the
administration to encourage a transparent, law-governed investigation
and prosecution of the Munir murder case?
Answer. I share your concern about this case. For that reason, when
I first visited Indonesia this summer, I met with NGO representatives
who had worked with Munir to hear their views and assure them of U.S.
Government attention to this murder. During meetings with Indonesian
Government officials on that trip, I impressed them that we view the
pursuit of justice in this case as a critical issue.
The administration has followed this case closely from the
beginning. Upon news of his death last year, we released a press
statement expressing our shock and sadness, acknowledging Munir's
status as an internationally respected human rights activist, and
stating our hope that the investigation would reveal the facts about
the circumstances surrounding his death.
As the investigation began, our Embassy met quickly with the
Indonesian police investigating the case and communicated our interest
in seeing justice for Munir's death to the highest levels in the
Indonesian Government, including to President Yudhoyono. Ambassador
Pascoe met early on with Munir's widow, Suciwati, and members of the
fact finding team established by President Yudhoyono. Embassy officials
have followed closely developments in both the police investigation and
fact finding team, and Embassy efforts continue. Under Secretary
Dobrianksy met earlier this summer with Suciwati in Washington, and
other State Department officials have met with NGOs to discuss the
ongoing case.
We believe that it is essential for the Indonesian Government to
pursue a thorough investigation and seek justice in this case. A
credible investigation and related prosecutions would demonstrate to
the world that Indonesia seeks accountability for this horrendous
crime. We noted the President's appointment and support for the fact
finding team as a positive step. It would not be appropriate for me to
comment on the details of the current trial of one suspect,
Pollycarpus, or the ongoing police investigation, but we continue to
closely monitor both.
Question. I applaud the peace accord for Aceh, and commend the
negotiators on this important achievement. Certainly, the United States
and the rest of the international community should be strong partners
in supporting this peace, and carefully and fairly monitoring the
implementation of the accord. But this agreement does not address the
disarmament of government-backed militias in the regions. This seems a
rather glaring omission. How should this issue be addressed?
Answer. The ultimate aims of the Aceh peace agreement Memorandum of
Understanding (MOU) are to end the longstanding conflict between the
Indonesian Government and the separatist Free Aceh Movement (GAM) and
to create the circumstances for successful political and economic
development that will tie Aceh in more closely with the rest of the
country. The MOU is comprehensive, and contains provisions to address
security, political, and economic issues. The success of the security
provisions of the MOU is essential for the political and economic
provisions of the agreement to be implemented.
As stipulated in the MOU, GAM has already begun to turn in weapons
in parallel with TNI troop withdrawals. This process is to occur in
four stages and conclude by December 31, 2005. Initial progress has
been excellent and, although incidents have occurred, the overall level
of violence in the province has decreased. I observed a constructive
attitude of engagement on the part of the Indonesian Armed Forces and
GAM during my just-completed trip to Aceh. The Aceh Monitoring
Mission's role is commendable. Although weapons will no doubt remain in
the hands of some individuals and groups, violence in Aceh is
increasingly being delegitimized.
We intend to support several key aspects of MOU implementation with
U.S. funding, including public information campaigns, public dialogues,
technical assistance and capacity-building for key provincial/local
government offices charged with MOU implementation, and assistance
related to the reintegration of GAM excombatants into mainstream
society. In coordination with other key donors and partners, USAID
plans to support community-based development programs in villages that
are accepting the reintegration of amnestied political prisoners and
demobilized GAM fighters, and those villages which have been identified
as a highly conflict-affected community. In addition, at the Indonesian
Government's request, during the first week in October 2005, we plan to
broaden our existing International Narcotics and Law Enforcement (INL)
Indonesian police reform assistance program to include civil
disturbance management and human rights police training in Aceh. The
police are in the process of taking over security duties in the
province from the military, and this training will help to ensure that
in doing so they are properly trained and sensitized to human rights
issues. Finally, USAID is now disbursing $700,000 for public
information campaigns and a further $125,000 for technical assistance
and capacity-building.
Question. When I met with Indonesia's Defense Minister earlier this
year, I was shocked to hear him assert that Jemaah Islamiya is not a
terrorist organization, and that to think otherwise was to be
misinformed. Is this the official position of the Indonesian
Government? How can Indonesia be a strong partner in combating
terrorism if its most senior officials fail to acknowledge the problem
in the first place?
Answer. While the Government of Indonesia has not officially banned
Jemaah Islamiya (JI), it has exhibited regional leadership in
counterterrorism by arresting and prosecuting al-Qaeda linked members
of JI. Furthermore, it continues to strengthen its law enforcement and
judiciary personnel to bring terrorists to justice. Most recently, two
JI terrorists were sentenced to death for their participation in the
bombing of the Australian Embassy in Jakarta. President Yudhoyono
continues to make public statements on the importance of a strong
counterterrorism agenda. The Government of Indonesia is currently in
the process of establishing a coordinating agency to focus on its
counterterrorism agenda. President Yudhoyono is also committed to
rejecting any links between terrorism and religion and does so by
promoting an interfaith dialogue and engaging in outreach to religious
moderates. We will keep working with the Government of Indonesia to
address the threat of JI in the region and within Indonesia's borders.
In order to work with us on this important goal, Indonesia must also
continue focusing on strengthening its capacity to pursue and bring
terrorists to justice.
Question. Overall, what is your sense of how the Indonesian people
view U.S. efforts to fight terrorism around the world? Do the
Indonesian people have the impression that the United States is hostile
to Islam?
Answer. Under the leadership of President Yudhoyono, Indonesia is
making substantial progress in its democratic transition. While the
majority of Indonesia's people are Muslims, it is a multireligious
society that strives to maintain religious freedom and promote
interfaith dialogue. During President Yudhoyono's May visit to
Washington, he and President Bush underscored their strong commitment
to fight terrorism and agreed that it threatens the people of both
nations and undermines international peace and security. The two
leaders rejected any link between terrorism and religion and pledged to
continue to work closely at the bilateral, regional, and global levels
to combat terror. While some groups in Indonesia have been critical of
U.S. efforts to fight terrorism around the world, the views of the
Indonesian people are changing as our relationship with Indonesia
becomes stronger. Following the tsunami disaster, the compassion of
ordinary American citizens and the private sector, combined with prompt
government action and cooperation, has significantly changed the way
Indonesians view the United States. The President's Education
Initiative and our diverse assistance also help to change Indonesians'
perceptions.
According to post-tsunami polls conducted by the nonprofit/
nonpartisan organization Terror Free Tomorrow, 65 percent of
Indonesians are now ``more favorable'' to the United States because of
the American response to the tsunami, with the highest percentage among
people under 30. A separate poll conducted by the Pew Global Attitudes
Project in Indonesia reports that nearly 80 percent of Indonesians say
that donations gave them a more favorable view of the United States. We
hope that our continued cooperation on tsunami-reconstruction efforts
and other shared goals will strengthen these favorable views and help
us in our efforts to combat terrorism.
______
Responses of Hon. James R. Kunder to Questions Submitted by Senator
Russ Feingold
Question. It seems to be that the emergence of a strong civil
society that demands good governance is vital to the success of the
peace agreement in Aceh. What kind of assistance is the United States
providing to strengthen civil society in Aceh? What about other
international donors?
Answer. USAID has a long history of supporting civil society
organizations (CSOs) in Indonesia. The USAID Civil Society
Strengthening Project (CSSP) provided capacity-building assistance to
more than 100 CSOs in Indonesia, including at least 6 that are Aceh-
based. Under CSSP, USAID's assistance strengthened the ability of CSOs
to analyze and advocate for policy reforms and their implementation;
improved CSOs' management, administration, and planning capabilities;
and enhanced CSOs' financial self-reliance.
USAID has utilized a small grants program to support a number of
CSOs in Aceh since 2000 through its Support for Peaceful
Democratization program and its predecessor. Prior to the tsunami, this
assistance was mainly to CSOs advocating for human rights, transparency
and accountability, and peace and reconciliation. Since the tsunami,
USAID has provided small grants to CSOs to become involved in
humanitarian response, recovery, and now peace-building.
In support of the peace process, many CSOs will be involved in
public information campaigns, peace-building initiatives and support to
the local elections in Aceh. USAID also supports CSOs that are
advocating for transparency and accountability in Aceh.
More generally, USAID's support for Tsunami Recovery and
Reconstruction programs in Aceh will include targeted assistance to
women-led nongovernmental organizations or CSOs, community mapping
programs being implemented by an Indonesian CSO (an essential first
step toward shelter reconstruction), and antitrafficking programs that
will directly support CSO activities. USAID's livelihood restoration
programs will include participation by producer cooperatives, another
form of Acehnese CSO.
USAID is also providing critical support to strengthen local
governance in Aceh, building on our successes with these types of
programs throughout Indonesia. In addition to direct technical
assistance and training for city and district governments in Aceh (kota
and kabupaten), our local governance programs emphasize transparency
and public participation in government decisionmaking. CSOs play a
critical role by demanding good governance and are important partners
for USAID in all of our local governance programs.
In these programs USAID is collaborating with a number of
international donors. The European Union, acting through the European
Commission, is directly engaged in supporting the implementation of the
peace agreement, first through support for the Aceh Monitoring Mission
and then through planned assistance for reintegration of former Free
Aceh Movement combatants and political prisoners. The World Bank-
managed Multi-donor Trust Fund for Aceh and Nias is considering support
to a United Nations Development Program activity that will provide over
$10 million for capacity-building and small grant support for CSOs in
Aceh.
Question. I have been struck by how often some of the most alarming
and militant forces in Indonesian society point to official corruption
as a primary grievance. Please describe the scope and scale of
anticorruption assistance the United States currently provides to
Indonesia.
Answer. Corruption is a serious obstacle to Indonesia's continued
economic, democratic, and social development. A lack of transparency
and consistency in the interpretation and application of laws and
regulations raises concerns about corrupt practices and discourages
investment necessary to create jobs and stimulate economic growth.
In the day-to-day lives of the Indonesian people, an informal
``envelope'' system of payoffs to government employees undermines the
rule of law and makes government services much more expensive to
secure. A lack of adequate controls over public procurement, although
now beginning to be addressed by the Government and international
lending institutions, robs the public purse of funding desperately
needed for public goods and services.
President Susilo Bambang Yudhoyono's willingness to undertake
difficult reforms provides the U.S. Government with a unique window of
opportunity to support his efforts at tackling corruption, instituting
justice sector reforms, and continuing with the overall democratic
reform process. USAID is viewed as a leader in supporting Indonesia's
democratic reform process and strengthening national and local
democratic institutions.
Given the breadth and depth of these problems in Indonesia, USAID's
program addresses issues of corruption in the economy, the political
and judicial systems; in the control of natural resources; and in the
operations of government by focusing on the specific challenges of
governance that must be addressed in each of these areas.
Through our Economic Growth work, USAID promotes economic
governance, including combating corruption and financial crime.
Streamlining business registration by consolidating the required
permits and licenses within a single office reduces the opportunity and
incidence of corruption at local levels. USAID is also assisting local,
provincial, and national governments to evaluate regulatory impacts.
This helps separate those levies that have fiscal merit from those that
are introduced for ``rent-seeking'' and corrupt purposes. Other USAID
activities target the enterprise and agriculture sectors.
Because the adjudication and enforcement of law has been fraught
with inefficiency and corruption, USAID's Economic Growth Program has
designed a major Judicial Reform initiative that targets the Commercial
Court and the Anti-corruption Court. The Commercial Court currently
adjudicates Bankruptcy and Intellectual Property Rights cases only. In
addition to bolstering judicial capacity to adjudicate such cases and
improving court management and administration, USAID will work with the
Supreme Court to expand the authorities of the Commercial Court to hear
a broader range of the increasingly complex commercial cases.
Otherwise, cases related to sophisticated financial and contract law
are heard by District Courts that are ill-equipped to adjudicate such
matters.
Assistance in establishing and strengthening the Anti-corruption
Court is among the several initiatives designed to combat corruption
and financial crime directly. Strengthening the processes, practices,
and competencies of the Anti-corruption Court will result in improved
adjudication of such cases.
USAID is also implementing a major ``Financial Crimes Prevention
Project'' (FCPP) that targets major Government of Indonesia (GOI)
institutions associated with anticorruption/antifinancial crimes
activities. Under FCPP, USAID helped the GOI establish the Financial
Intelligence Unit, the primary unit that tracks financial transactions
to detect and prevent financial crime. In less than 1 year, compliance,
cooperation, and convictions have all increased. In February 2005,
Indonesia was removed from the Financial Action Task Force
international blacklist that it had been on since 2001. Going forward,
USAID will also provide capacity-building assistance to the Corruption
Eradication Commission, the Supreme Audit Commission, the Attorney
General's Office, and the Inspector General in the Ministry of Finance.
Together, these institutions comprise the front line of Indonesia's
efforts to combat corruption and financial crime.
USAID's Democratic and Decentralized Governance Program works with
both governmental institutions and nongovernmental actors on preventing
corruption, creating a more accountable and transparent governance
environment, and increasing public oversight of government. For
example, USAID is (a) working with national, regional, and local-level
Parliaments to address transparency in governance and to equip these
legislative bodies with the appropriate tools to develop sound policies
and regulations; (b) training local governments in participatory
planning, performance-based budgeting, civil service reform and
improved access to services; and (c) strengthening civil society
organizations including universities, political parties, NGOs, business
associations, labor organizations, and the media to advocate for
transparency and accountability in government and legislative
procedures, as well as to provide public oversight to governmental
operations.
Building on the first direct Presidential election in 2004, the
expansion of direct elections to the provincial and local levels in
2005 was a critical next step in increasing accountability in
government. USAID's programs have provided training to regional
election commissions in eight provinces, including Aceh, on adopting a
model code for local elections, formulating voter information
strategies, and addressing problems of voter registration. USAID is
also working on key legislative issues such as the Draft Freedom of
Information Act, the Draft Criminal Code, the Codification of Election
Laws, and other important anticorruption legislation. Finally, USAID is
finalizing the design of a new long-term Rule of Law/Justice Sector
Reform activity which will provide direct assistance to the Supreme
Court, the Commission on Anti-Corruption, and the Attorney General's
Office in their efforts to strengthen the public's trust in these
governmental bodies. The program will work with these institutions to
improve transparency, efficiency, and access to justice.
Other USAID programs, such as Basic Education, Basic Human Services
and Healthy Ecosystems include important good governance components
that contribute to anticorruption efforts at the district level.
______
Responses of Deputy Assistant Secretary of State Eric G. John to
Questions Submitted by Senator Barack Obama
Question. We all know that the Indonesian military is the pivotal
institution in the country. In short, it really is the only truly
national institution that is capable of holding the far-flung
archipelago nation together.
The history of the TNI is checkered, to say the least--full of
corruption, human rights abuses and so forth. Many of these problems
exist today, and I believe the Indonesian military simply must make
progress in reforming if Indonesia is to move to the next stage of
development and modernization.
Credible estimates suggest that somewhere between 50 to 70 percent
of the Indonesian military budget is self-generated, which is a huge
problem for obvious reasons concerning corruption, transparency, and
civilian control.
Has the Indonesian Government recognized this problem? What steps
are they taking to deal with this issue? Do they have the resources to
fund the Indonesian military at appropriate levels--if outside funds
are cut off?
Answer. The Indonesian Government recognizes the problems
associated with having its military procure much if not the majority of
its own fimding. In September 2004, the Indonesian Parliament passed a
law requiring the government to take over the military's business
interests over a 5-year period. During this time, the defense budget is
to increase to make up for the lost revenue. The Indonesian Defense
Ministry has begun the transfer process, and the military's Supreme
Commander has publicly stated that he supports the divestment.
As part of this process, the Indonesian Government needs to
determine how it will provide the resources to fund the military at
appropriate levels. This will require prioritization of the national
budget, a difficult task given that the country has only recently
recovered from the Asian economic and financial crisis, has not yet
achieved economic growth rates sufficient to accommodate its burgeoning
population, and has many other pressing demands for budget resources,
including tsunami reconstruction, improving education, maintaining
public health programs, and decreasing fuel subsidies. Nonetheless,
President Yudhoyono has spoken publicly about the need to increase
government financing of the military.
Question. The strategic location of Indonesia is critical. One of
the major reasons why, is that an estimated 30 percent of the world's
shipping and 50 percent of the world's oil pass through the Strait of
Malacca--this is a critical chokepoint.
In the past, there have been concerns about piracy, as well as
terrorist activity, in this area. As a result, Indonesia is working
with Malaysia, Singapore, and Thailand to enhance the security of the
strait.
What is the U.S. assessment of these efforts? What else can be done
to bolster security in this key area?
Followup: I understand that there are regional sensitivities that
augur against an overly direct U.S. role in this issue, but is there
anything else we should be doing--either on a bilateral or multilateral
basis--to improve security?
Answer. The United States is pleased with the efforts of Indonesia,
Malaysia, Singapore, and Thailand to improve security in the Strait of
Malacca. The littoral states have increased and coordinated their
maritime patrolling efforts, and have launched new initiatives such as
the aerial surveillance ``Eyes in the Sky'' program of joint patrol
flights. On September 7-8, 2005, Indonesia hosted a meeting of the
International Maritime Organization (IMO) devoted to examining ways in
which the littoral and user states could further cooperate to enhance
safety, environmental protection, and maritime security in the strait.
Participants (including the United States) agreed to hold follow-on
meetings designed to further clarify requirements of the littoral
states and opportunities for user states to donate maritime security
assistance. Possible contributions might include and aerial patrol
platforms, surveillance equipment, and command and control systems.
The United States respects the sovereignty of the littoral nations,
and is committed to working together bilaterally, multilaterally, and
through the appropriate international organizations to achieve our
mutual objective of improved maritime security in this key area.
Question. There is no question that Chinese influence is on the
rise in Southeast Asia, and the relationship between China and
Indonesia is no exception. One concrete example of this is that the two
nations just signed of a series of agreements worth $20 billion in an
effort to triple bilateral trade to $30 billion over the next few
years.
In my view, it does not have to be a zero-sum game between U.S. and
Chinese influence in the region. And, I don't think that we want to get
into a situation--certainly not at this point--where we are forcing
nations to pick sides.
Having said that, believe that we have to effectively manage this
issue with focused diplomacy, senior level attention, and other
instruments of U.S. power.
What is the United States doing to deal with this emerging issue in
the region?
Answer. China's emergence in Southeast Asia is an important issue
for the United States and the world. As China's influence grows, we are
taking a multifaceted approach to deepening and strengthening our
relationships in the region, while working to ensure that China's
growing influence does not come at the expense of our national
interests. We do this through bilateral and multilateral engagement
with the countries in the region as well as through direct dialogue
with Chinese officials.
The United States is using multilateral fora such as the
Association of Southeast Asian Nations (ASEAN), the Asia-Pacific
Economic Cooperation (APEC), and the ASEAN Regional Forum, to open
markets and deepen our political and economic linkages with the
countries in Southeast Asia. These activities demonstrate our
commitment to the region and also help create opportunities for
American business. One example of this is the development of the ASEAN
Enhanced Partnership. This arrangement will ensure that our relations
with the region are on par with those of other Asian countries such as
Japan and China. ASEAN's eagerness to develop the Enhanced Partnership
is evidence of the value the region places on its relationship with the
United States. We are also working through APEC to promote free trade
and through the ASEAN Regional Forum to enhance our security
relationships with countries in the region.
In parallel with our multilateral engagement efforts, we are
advancing our bilateral ties with the countries in the region. We have
concluded a bilateral free trade agreement with Singapore and are
currently negotiating a free trade agreement with Thailand. The United
States is also seeking other partners with whom we may establish
similar agreements. Free trade areas help enhance our economic
relationships in the region and create opportunities for U.S.
commercial interests.
We are also seeking ways to work with China to ensure that its
increased involvement in the region does not come at the expense of
open markets and transparency. Deputy Secretary Zoellick has addressed
these issues with Chinese officials during the ongoing Senior Dialogue
and Under Secretary for Global Affairs Dobriansky has sought to enhance
cooperation with Chinese officials via the Global Issues Forum.
Finally, it is important to note that America's role in the
Southeast Asia is increasing at the same time China is deepening its
involvement in the region. Through our alliance relationships, our
participation in regional fora, and the access we provide to markets,
the United States plays and will continue to play an essential role in
the Southeast Asian region.
Question. I have been following the situation in Aceh quite closely
and actually offered an amendment to the Foreign Assistance
Authorization Act, which was accepted by Chairman Lugar, concerning the
situation in that part of Indonesia.
The recent progress between the GAM and the Indonesian Government
has certainly been encouraging in recent weeks. There was more good
news today as the BBC reported that the GAM has started to give up some
of its weapons, deepening the peace process.
Don't get me wrong: There is still a long way to go and the peace
deal could fall apart with little or no warning.
However, suppose for a moment the deal holds and is implemented. Is
this model--cessation of hostilities, disarmament, a pullback of
Indonesian troops, Aceh-based political parties, and certain forms of
amnesty--a model that can be replicated in other parts of Indonesia?
Answer. In early October, I traveled to Aceh and met with the Aceh
Monitoring Mission, the Indonesian Armed Forces, and representatives of
the Free Aceh Movement (GAM), and I agree with you that the situation
is encouraging. The first phase of weapons turnover and Armed Forces
withdrawal went well, and I noted a constructive spirit of engagement
in Aceh. I also agree with you that the peace agreement could face
difficulties. Our intent is to support the reintegration process and
remain engaged to help support this hopeful and historic process.
The conflict in Aceh is similar to conflict in other regions of
Indonesia but also differs in some important respects. Consequently,
aspects of the Aceh agreement may not apply to other regions. In Papua,
for example, unlike the GAM, the separatist group Free West Papua
Movement (OPM) consists of various tribal groups with distinct
languages from different areas of that vast region and is a smaller and
less organized group of poorly armed independence fighters.
Additionally, the concept of locally based political parties is still
very controversial in Indonesia and will need to be discussed further
within the context of the country's burgeoning democracy, civil
society, and free press. Nevertheless, the agreement's overall shape
and comprehensiveness, in that it covers security, political, economic,
and human rights issues, is something that could be useful elsewhere.
Grievances in both Aceh and Papua raise similar issues of economic
development, political participation, and serious human rights abuses.
To address these issues, President Yudhoyono has vowed to implement
fully the 2001 Special Autonomy Law in Papua and has begun an effort to
do so. We support him in this effort and have long encouraged the
Indonesian Government to fully implement this law.
One factor that has influenced the early success of the peace
agreement in Aceh is the opening up of the province to journalists, aid
workers, and human rights organizations. This has led to increased
international attention on Aceh, and both the Indonesian Government and
the GAM now better understand that the international community supports
Indonesia's territorial integrity and a peaceful end to the
longstanding conflict there. In addition to fully implementing Special
Autonomy, we believe the Indonesian Government should open Papua in the
same manner and we continue to urge them to do so.
Question. In my view, one of the things that we need more in
Southeast Asia is time, attention, and visits from senior U.S.
officials. More time is something of which senior U.S. policymakers
don't have vast amounts.
I was pleased to see that one of Deputy Secretary Zoellick's first
foreign trips was to Southeast Asia, including a stop in Indonesia.
But, I don't believe that Secretary Rice has yet traveled to the
region, and more needs to be done.
It is understandable that the senior policymakers in Washington are
often consumed with other parts of Asia--Japan, North Korea, China.
But, how do we address this problem of trying to get this part of the
world higher up on the agenda?
Answer. I agree with you that it is important that Southeast Asia
receive sustained attention from our government. We are engaging with
the governments in the region on both a bilateral and multilateral
basis. The latter is important because of the increasing importance of
ASEAN for governments in South East Asia. We discuss a range of issues
with Southeast Asian countries, including economic development,
regional security, and counterterrorism, and, most recently, combating
Avian Influenza.
On the bilateral side, we work for close relations with Southeast
Asian nations. To that end, Indonesian President Susilo Bambang
Yudhoyono paid an official visit to Washington in May and met with
President Bush, Secretary Rice, and several other Cabinet members.
President Yudhoyono was also seated next to President Bush at the U.N.
Secretary General's luncheon in New York recently. In addition, the
Secretary visited Thailand on July 11, in part to review our tsunami
recovery assistance. I have taken two trips to the region since June to
establish working relations with a range of senior officials, most
recently in Vietnam, Malaysia, and Indonesia.
On the multilateral side, Deputy Secretary Zoellick participated in
the annual ASEAN Regional Forum Meetings in Vientiane in July. The
Secretary met with ASEAN senior officials in Washington this summer and
hosted a meeting in New York for ASEAN Foreign Ministers. Additionally,
in September we had discussions with several Southeast Asian Foreign
Ministers who traveled to Washington after the U.N. General Assembly
for meetings. Secretary Leavitt, Under Secretary of State Dobrianksy,
and Under Secretary of State Hughes are planning travel to Southeast
Asia this fall. This fall, the United States is hosting the main
working-level gathering of the ASEAN Regional Forum in Honolulu.
Congressional interest in Southeast Asia is also important. Here in
the State Department and at our Embassies and consulates in the region,
we encourage Members of Congress and staff to travel to Southeast Asia
to experience its dynamism firsthand, and we will assist such travel in
any way we can, including briefing Members or staff before they travel.