Saturday, July 13, 2013

Geng Cewek

[batavia-news] The Parisian treasures of African tyrants: French government may seize mansions and luxury cars of corrupt regimes

 

 

The Parisian treasures of African tyrants: French government may seize mansions and luxury cars of corrupt regimes

Paris has traditionally been a haven for the ill-gotten gains of corrupt dictators. Now, the luxury apartments and  million-dollar car collections of three African leaders could be taken away

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In February last year, French magistrates led a two-week "raid" on an €80m (£68m) Paris mansion as part of a judicial investigation into the alleged "biens mal aquis" (ill-gotten gains) of the leaders of three African countries. This may have been the longest police raid in French history.

Two weeks were necessary, it was said, to make an inventory of the vast treasure-trove of property in the building, including jewellery, art, antique furniture and vintage wines. The magistrates also issued an international arrest warrant for Teodorin Obiang, 43, the son and heir apparent of President Teodoro Obiang of Equatorial Guinea.

The investigation – started in 2010 against the will of former President Nicolas Sarkozy's government – has received renewed impetus and legitimacy in recent weeks from a landmark ruling by the Paris appeal court.

Mr Obiang's lawyers had asked for his "property" to be returned and the arrest warrant torn up. They had claimed that the building on Avenue Foch was part of the Equatorial Guinea embassy and therefore covered by diplomatic immunity. They also claimed immunity from prosecution for Mr Obiang on the grounds that his father had made him a vice-president of Equatorial Guinea after the international warrant was issued.

Both claims were dismissed. The judges said – in a ruling of potentially ground-breaking international importance – that diplomatic immunity could not be presumed to extend to systematic theft of state property.

Because of that ruling, the investigation has begun to bear fruit.

This week, a hundred wealthy collectors and dealers of luxury cars from across the world gathered for a spectacular auction in Paris.

On sale were two Bugattis, two Bentleys, a Rolls-Royce, a Ferrari, a Porsche, a Maserati and a Maybach. All had the same careful owner. All had low mileage or virtually no mileage.

The nine cars had seldom left their giant garage beneath the mansion near the Arc de Triomphe before they were seized by French police last year. They were sold this week by the Drouot auction house for €2.8m or an average of €311,000 each.

The "one careful owner", of course,  was Mr Obiang. Teodorin Obiang loves cars. This was only a small part of his fleet. According to French judicial documents, in November 2009 Mr Obiang imported 26 luxury cars from the US to France for $12m (£7.4m). They included seven Ferraris, four Mercedes-Benz, five Bentleys, four Rolls-Royces, two Bugattis, an Aston Martin, a Porsche, a Lamborghini and a Maserati.

Most of them were re-exported to Equatorial Guinea, whose 1,800 miles of roads are largely unpaved and, in rainy weather, negotiable only by four-wheel-drive. Nine of the cars remained in the garage below Mr Obiang's seven storey mansion at 42 Avenue Foch, the exclusive Paris thoroughfare that is now largely foreign-owned. Mr Obiang – who denies having made his fortune by corrupt means – is appealing to France's highest court, the Cour de Cassation, to get his property back.

The French investigation extends to the alleged embezzlement of state funds on a heroic scale by the leaders of two other African nations: the President of Gabon, Ali Bongo Ondimba, and the President of Congo-Brazzaville, Denis Sassou Nguesso. The Paris appeal court ruling means that the two investigating magistrates, Roger Le Loire and René Grouman, can now proceed with renewed energy.

But to what end? How far can such an investigation go? Is it likely that any of the accused will ever appear in court in France? What happens to the money raised by sales of the seized property? Can it realistically be returned to the African people to whom it allegedly belongs?

Equatorial Guinea is one Africa's smallest countries and, in theory, one of the most prosperous. Oil revenues make it the wealthiest single country in Africa per capita, but 70 per cent of the population lives beneath the United Nations poverty threshold of €2 a day. In Congo-Brazzaville (a former French colony to the north of the much larger Democratic Republic of Congo), three quarters of the population lives below the UN poverty line. In Gabon, the population is a little better off: only 20 per cent survive below the line.

William Bourdon is a French human rights lawyer who instigated the investigation in 2007 by making a formal complaint on behalf of the pressure group Transparency International France (TIF). The French state prosecution service refused to take up the complaint, generating accusations that former President Sarkozy was "protecting" the leaders of three former French colonies.  In 2010, the Cour de Cassation overturned the state's objections and, in effect, ordered it to launch a judicial investigation.

Mr Bourdon told The Independent: "I have had so many threats and insults and libel actions that I sometimes wish that I had never brought this case. But my spirits revive when I recall the hundreds and hundreds of messages that we have received from African people saying, 'you have given us hope for the first time. Please continue, continue, continue'."

Mr Bourdon agrees that it is unlikely Mr Obiang or any African leader will ever appear in a French court. But the property seizures and international arrest warrant – making foreign travel difficult – amount to a punishment in themselves. Beyond that, he hopes that the exposure of the extent of the arrogance and greed of the ruling clans will help to force political change.

The money raised from sales of seized assets is a conundrum, he admits. "The French courts must decide but it is obviously unacceptable that the money should be returned to governments who would just steal it again," he says.

The former French possessions of the younger Mr Obiang are allegedly more than matched by the holdings of the Congolese and Gabonese first families (see graphic of major holdings in Paris). The family of President Bongo of Gabon is believed to own 39 luxury apartments or houses in the French capital. President Sassou Nguesso of Congo-Brazzaville has a modest 24 Parisian properties, according to documents leaked from the French investigation. Between them the two families are said to have 200 French bank accounts.

According to leaked French documents, President Bongo bought a Bentley Continental Flying Spur, worth €220,000, in France in 2009. Antoinette Nguesso, the president's wife, bought a Mercedes E Class and his nephew, Wilfrid, a Porsche Panamera Turbo (each worth more than €100,000).

The French investigation has yet to uncover clear evidence that these possessions have been bought with cash that belongs properly to the two African states, and none of the properties has, so far, been raided or any items seized. Documents from the investigation leaked this week to the newspaper Le Parisien suggest, however, that the investigation into the Nguesso family is gathering pace. A French trading company called Franck Export, based near Orly airport, is alleged to have directed €9m of Congolese state cash towards personal acquisitions of the Nguesso family in France between  2005 and 2011. Franco Cantafio, the boss of Franck Export, has been placed under formal investigation for "complicity in the laundering and embezzlement of public money".

In the case of Mr Obiang, the magistrates traced movements of money two years ago which suggested  that he had in fact been pillaging public funds – hence the seizure of his mansion, cars and other property.

The younger Mr Obiang is evidently an art-lover as well as a car-lover. Tracfin, the French government's anti-money laundering agency, has documented his purchase of more than €18m of objets d'art from the personal collection of the late fashion designer Yves Saint Laurent when they were auctioned in Paris in February 2009. The art is believed to have been distributed among his six homes abroad, including a seafront house in Malibu, California.

The bill for the 109 art works was settled by bank transfers from the Equatorial Guinea forestry board. At the time Mr Obiang was minister of agriculture and forests.

Of course corruption is not restricted to Africa, and the sleazy side of French public life has been exposed in recent months in a series of high-profile scandals. How does Mr Bourdon justify the use of stretched French judicial resources to investigate corruption abroad? "If we waited until we were above suspicion ourselves, nothing would ever be done," he says.

"Obviously, France's legitimacy as a champion of human rights and transparency might be greater than it is. But this investigation has been very important. A new anti-corruption wind is rising in France. Thanks in part to this investigation, a new wind is also rising in Africa."

Wealth of nations: The target families

Teodoro Obiang:

The 71-year-old President of Equatorial Guinea - Africa's  longest-serving leader - came to power in a military coup which ousted his uncle in August 1979. The discovery of oil has made Equatorial Guinea nominally the wealthiest per head of population in sub-Saharan Africa, yet most of his people do not even have access to clean drinking water. The Obiang family had a Parisian mansion worth €80m, below, and other property worth up to €20m seized by French investigators last year.

Teodorin Nguema Obiang:

Cars ordered by the son of Equatorial Guinea's President that were found in a garage at 42 Ave Foch were auctioned this week for €2.8m.

They were:

Bentley Arnage 2005

Rolls Royce Phantom 2005

Bentley Azur 2007

Ferrari 599 GTO 2010

Porsche Carrera 980 GT 2006

Bugatti Veyron 16.4e 2007

Maserati MC de 2005

Bugatti Veyron 16.4 Grand Sport 2010

Maybach 62 2004

Dennis Sassou Nguesso

The 70-year-old returned to power in Congo-Brazzaville after a civil war in 1997. He has since "won" two elections, both without any genuine, democratic opposition. Mr Nguesso claims to be influenced by socialism, but critics suggest he believes mostly in 'socialism in one family'. When he attended the UN in 2006, his entourage occupied 44 rooms, running up a bill of €150,000. His family are believed to own 24 homes in Paris, including the two apartments below, worth €2.47m and €1.6m respectively.

Ali Bongo Ondimba

The Gabon President, 54, succeeded his father Omar Bongo in October 2009. He was chosen as a candidate by the dominant party in dubious circumstances. Reports at  the time suggested that he was seen as an upstart – he was described as 'a spoilt child, born in Congo-Brazzaville, brought up in France, hardly able to speak indigenous languages and with the appearance of a hip-hop star'. His family are thought to own 39 Parisian homes. Those pictured are worth €18.9m and a whopping €100m respectively.

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[batavia-news] As Uncertainty Reigns Back Home, Many Afghan Envoys Decline to Return

 

 

As Uncertainty Reigns Back Home, Many Afghan Envoys Decline to Return

KABUL, Afghanistan — When it comes to expressing confidence in Afghanistan's future, many of the country's diplomats seem to be voting with their feet when their tours of duty end.

More than 60 percent of Afghan diplomats decide to remain abroad, a trend that has been increasing steadily, according to Omar Samad, a former ambassador to Paris. He went to the United States when he was replaced in 2011, and he is now a senior fellow at the New America Foundation.

"It's a huge brain drain," he said. "We have lost some of our best and most experienced diplomats over the years."

The Foreign Affairs Ministry says there is no significant problem. "If a small and limited number of Afghans do not return home for personal or family reasons, this must not be represented as a lack of commitment and patriotism on the part of Afghan diplomats as a whole," said Ershad Ahmadi, the deputy foreign minister.

"Publishing such reports is rooted in negative propaganda of those who are against the people of Afghanistan," he said.

Mr. Ahmadi was responding to a report on the Web site of the German magazine Der Spiegel that said that of 105 Afghan diplomats ordered back to Kabul by the end of June, only 5 had shown up. The report said most of those who had stayed on had applied for extensions in their assignments or had claimed asylum in their assigned countries.

The Foreign Affairs Ministry issued a clarification saying that the tenures of only 96 diplomats had ended, and that 32 of them had been granted "temporary extension of their assignment for work-related requirements." Although only 15 have returned, the ministry said, the rest intend to come back after "handing over their responsibilities to their successors."

The diplomatic drain parallels a broader effort by Afghans to make sure they have a foothold abroad in case things go badly after the Western military withdrawal, which is scheduled to be completed in 2014. Western countries have been barraged by visa applications from Afghans, and many who have been stymied by the slow visa process are resorting to seeking asylum.

Since 2011, according to the Office of the United Nations High Commissioner for Refugees, more asylum seekers have left Afghanistan than any other country, about 36,000 a year, and they have applied for permission to stay in nearly all of the world's industrialized countries. The previous time when Afghan asylum requests were that high was in 2001, when the Taliban were in power.

To claim asylum, though, they first have to reach the other country. Many go through people smugglers, across Asia and through Turkey, or by boat to places like Australia. But for the diplomatic corps, the problem of getting abroad has already been solved.

Mr. Samad said that when he was ambassador to Canada, only two of the seven diplomats posted in Ottawa returned between 2004 and 2009, and that in Toronto, even fewer did. While he was in Paris, from 2009 to 2011, two-thirds returned, he said.

Before 2006, however, diplomatic attrition rates were no more than 5 percent, he said.

The practice often begins at the top, with ambassadors who leave their posts and do not return. A former ambassador to Washington, Said Tayeb Jawad, joined a diplomacy project at Harvard after his tenure ended in 2010 and then went to Johns Hopkins. Jawed Ludin, a former ambassador to Canada, did return, to take up a post as deputy foreign minister, but he resigned from the ministry this year to become an executive for a Saudi firm, Anham, based in the United States.

Many ambassadors have dual citizenship, making it easy for them to stay away — Mr. Samad is also American, for example. Lower-level diplomatic staff members often have to resort to going underground or applying for asylum, as many emigrants from Afghanistan already do.

In Washington, the State Department has started turning down visa requests from Afghan diplomats to bring along their extended families, like brothers, sisters and parents.

Many of the Afghans still in the diplomatic service are lobbying to get extensions that would see them through until the end of 2014.

"It's the 2014 transition," said Mahmoud Saikal, a former ambassador to Australia, speaking from Canberra, the capital, where he is lecturing at a university (on a temporary contract, he said). "Things are not clear; nobody is sure there will be a free and fair election. Securitywise the last few months we have seen a rapid disintegration of security at all levels, so the picture to some of our diplomats is not very good."

Mr. Saikal said part of the attrition problem was a result of widespread nepotism in the Foreign Affairs Ministry — President Hamid Karzai's uncle Azizullah Karzai is the ambassador to Russia, for example — along with corruption and a decline in the quality of the diplomatic staff as more and more experienced diplomats stay away.

He himself returned after his posting in Australia and took up the job of deputy foreign minister. "I wanted to set an example," he said. He soon quit, and he has now joined the opposition National Coalition party.

"The Foreign Ministry is looked at as a place where brothers and sisters could come, like a holiday resort — that's what our embassies have turned into," Mr. Saikal said. "There is very little diplomacy involved."

Mr. Samad, the former envoy in Canada, said: "It has caused troubles in terms of host countries. Basically they see there is little authority or competence in embassies, so they bypass them and deal directly with Kabul."

Foreign service defections are mirrored in other areas as well. Many relief groups, international agencies and embassies say they are finding it increasingly difficult to get visas for Afghan staff members to travel to Europe or North America for training and educational programs, because so many fail to return when their visas expire.

The clamor for visas in Afghanistan has led many smaller embassies to close their visa operations in Kabul entirely. Dutch officials said they were forced to do so last year after the embassy officer in charge of visa processing, Mary Sarwary, an Afghan, went on a professional visit to the Netherlands and did not come back.

Habib Zahori contributed reporting.

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[batavia-news] Jokowi Kuda Troya PDIP

 

SABTU, 13 Juli 2013 | 2405 Hits

 
Jokowi Kuda Troya PDIP
Oleh Djoko Suud Sukahar
 
Suara Jokowi makin moncer. Daulat Jokowi calon presiden menyeruak. Itu disuarakan berbagai elemen. Rakyat dan lembaga survey. Jika PDIP mengusungnya, Jokowi ditaksir akan tampil 'tanpo tanding'. Menang mutlak. Tapi bagaimana jika 'dipaksa' mendampingi Mbak Mega?

Jokowi memang manusia pilihan. Sempat tersengal-sengal di awal mencalonkan diri sebagai Wali Kota Solo, akhirnya menang mutlak di jabatan kali kedua. Tak tanggung-tanggung, suara yang diperoleh mencapai 98%. Modal itu yang dipakai untuk meraih jabatan Gubernur DKI.

Nama Jokowi terus melejit. Belum genap setahun menjabat petinggi Jakarta, namanya kini disebut sebagai calon presiden terkuat. Berbagai lembaga survei menempatkan itu. Dan di berbagai kesempatan rakyat terus mengelu-elukannya untuk itu.

Kekuatan Jokowi adalah konsistensi. Dia konsisten. Punya konsep dan punya sikap, bahwa pemimpin itu melayani. Itu ditunjukkan sejak menjabat Walikota Solo sampai kini sebagai Gubernur DKI. Kebiasaan blusukan, merakyat, menyelesaikan persoalan dengan pendekatan kemanusiaan diutamakan. Dan dengan gaya 'merendah' khas Solo ternyata efektif meredam masalah.

Berkat sikap itu nama Jokowi bergema di mana-mana. Popularitas Prabowo yang unggul sebelumnya dibabat, juga Sang Ketum PDIP Megawati Soekarnoputri. Di Bandung dan Jawa Tengah terikrar Barisan Relawan Jokowi Presiden yang entah inisatif siapa. Malah mendekati konvensi Partai Demokrat, Jokowi juga dimintakan ikut diundang sebagai salah satu peserta.

Menyikapi tingginya 'permintaan' agar Jokowi maju sebagai capres itu tidak ditanggapi serius. Jokowi tetap merendah. Kalimat 'jangan memanas-manasi', 'yang mau jadi presiden itu siapa', atau 'terserah Bu Mega' adalah luncuran kata menjawab berbagai keinginan itu. Jokowi belum melontarkan jawaban 'ya' atau 'tidak'.

Tapi jangan dikira Jokowi tidak tahu potensinya itu. Jokowi juga jangan anggap tidak punya ambisi untuk melangkah ke RI-1. Sebab dia tahu posisinya yang ada di persimpangan jalan. Sebagai kader PDIP, karirnya tergantung partai. Maju-tidaknya dia nyapres ditentukan PDIP. Sisi lain, yang mbaurekso partai ini, Megawati Soekarnoputri, 'belum rela' merekomendasi. Ingat saat Jokowi disuruh membaca 'puisi' Mbak Mega, yang tersirat capres PDIP itu adalah tetap Megawati Soekarnoputri.

Suara Jokowi yang semakin kinclong itu sebenarnya bak pedang bermata dua untuk PDIP, terutama bagi ketua umumnya, Megawati Soekarnoputri. Jika ingin 'membunuh' Jokowi, Mbak Mega gampang melakukan itu. Tampilkan Jokowi sebagai cawapres mendampinginya, itu jaminan popularitas Jokowi akan 'mbleret', suram.

Saya bukan anti Mbak Mega. Tapi lihat fakta yang ada. Sejak habis memerintah, pendukung PDIP tidak kunjung menaik. Itu bukan faktor partainya, tapi lebih condong pada personifikasi ketua umumnya. Pendukung Mbak Mega terbanyak kalangan tua dengan kultus Bung Karno, ketika memerintah tidak banyak yang dilakukan, termasuk meluruskan kasus internal 'Kuda Tuli', adalah sebagian penyebab stagnasi partai ini. Selain, tentu, sikap tidak familiar Mbak Mega terhadap lawan-lawan politiknya.

Kini PDIP beruntung punya Jokowi. Dia gambaran riil partai ini, partainya wong cilik. Jika PDIP (Mbak Mega) cerdas, Jokowi akan menjadi Kuda Troya. Dia akan membawa PDIP meraih suara mayoritas. Jangan lagi hanya 20% sebagai syarat Presidential Treshold, 30% suara pun diyakini akan mampu diperoleh PDIP. Syaratnya, capreskan Jokowi, dan jaga jangan sampai sikap proletarnya itu luntur.

Menurut keyakinan saya, Capres Jokowi akan menang. Tidak berpengaruh siapa saja yang akan mendampinginya. Entah itu Puan Maharani, Pramono Anung, Dahlan Iskan, Mahfud MD, Djoko Santoso atau Akbar Tanjung. Suara pendukung Gubernur DKI ini akan tetap tinggi. Itu karena penantang yang lain terlalu transparan bopeng-bopengnya.

Tapi itu semua tergantung PDIP (Mbak Mega). Sebab dalam politik, tidak ada kawan atau lawan abadi. Dengan begitu, bisa saja dalam konteks ini berlaku asas homo homini lupus. Soal kuasa, semuanya adalah lawan. Adakah begitu di tubuh PDIP ini?

Kita tunggu PDIP cerdas atau 'kethul', melakukan blunder. Mengkubisasi kader, menurunkan elektabilitas partai, atau dengan brillian memanfaatkan potensi itu untuk kejayaan banteng moncong putih.
 

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[batavia-news] What will happen if Russia grants political asylum to Snowden?

 

 

What will happen if Russia grants political asylum to Snowden?

02.07.2013
 
What will happen if Russia grants political asylum to Snowden?. 50486.jpeg

The situation with the former CIA officer Edward Snowden remains confusing. He has been staying in the transit area of ​​the Sheremetyevo airport for over a week, or at least it seems to be this way. In fact, Snowden has not been seen in Russia since his arrival. The only people who saw him were the passengers of his Aeroflot flight, and a lady at the reception at the transit zone, where Snowden stopped for a few minutes to look at the prices.

Of course, the situation is somewhat phantasmagoric. Usually there are dozens of people ready to immediately declare "I am a witness! And what happened?" for far less significant incidents. The SVO transit area is a blind spot in this sense. There are thousands of people, and no one has any information about the fugitive.

While the former CIA is getting used to the image of the invisible man, his fate continues to be discussed at various levels. 

Snowden's U.S. passport has been revoked, and hence he cannot leave the transit area of ​​the airport and may stay there indefinitely. The Russian authorities have nothing against the ex-CIA officer because he has not broken any Russian laws. Russia does not have an extradition agreement with the U.S., so there is no reason to extradite him. Washington, despite the warnings of the "consequences," has not yet found time to send a formal request.

Ecuador rejected the trade preferences granted by the United States after Washington openly stated that it could take away Latin American state benefits if this country gives asylum to Snowden. However, Ecuador did not provide the fugitive with documents and it is unknown when it will consider granting him asylum. Snowden ignored a similar proposal by Venezuela. The ex-CIA operative is not interested in Cuba that would definetely not extradite him.  

What about Russia? Could Russia grant asylum to Edward Snowden? On Monday, the Public Chamber of Russia discussed the situation with the American during its session.

"If Snowden acted in the public interest, protected it, then the society has the duty to defend him," said head of the Presidential Council for Civil Society Institutions and Human Rights Mikhail Fedotov. "The practice of the European Council on Human Rights emphasizes this duty of the society and the state," the adviser said. "It is important to take into account the fact that Russia is a member of the Geneva Convention on Refugees and other European human rights instruments," ITAR-TASS quoted Fedotov. "It requires us not to extradite a refugee while in the process of the application for political asylum."

Diplomats from Venezuela and Ecuador were invited to the meeting, but both ignored the invite. It should be noted that Ecuador President, Rafael Correa Delgado, stated that Snowden's fate would be decided by the Russian authorities, because for consideration of a request for asylum he must be present on the territory of the country. Presidential spokesman Dmitry Peskov replied that the fate of the ex-CIA employee is not on the Kremlin's agenda. 

Meanwhile, Deputy Secretary of the Public Chamber of the Russian Federation Vladislav Grib believes that Russia may grant political asylum to Snowden, if he asks.

"It meets all the standards of the international law, and we have no agreement with the U.S. on mutual extradition. Russia will not break any rules; on the contrary, it will comply with the provisions of the Refugee Convention. From a legal point of view, we have the right to give him political asylum. We have legal, ethical and the moral right to do so," Vladislav Grib told Pravda.Ru.

The fact that Snowden must first request asylum was stressed by a chief researcher at the Institute for International Economic and Political Studies of the Russian Academy of Sciences Alexander Tsipko. If this happens, he said, there would be no consequences for Russia. "No worries, Americans do this. Who would recon with us if we fear the Americans? That would be the end of Russia," he told Pravda.Ru.

However, the political scientist is skeptical that Snowden would seek asylum in Russia. "I have a feeling that he does not want to stay here, (otherwise) he would have already asked. As an American citizen, he does not want to look like a traitor; he wants to look like a fighter for the rights of an individual. We do not consider his psychology, I think," said Alexander Tsipko.

Oleg Artyukov

Pravda.Ru

Read the original in Russian 

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[batavia-news] China Souring on Indonesia?

 

 
 
China Souring on Indonesia? Print E-mail
Written by Gavin Bowring   
Wednesday, 10 July 2013
 

More than just coal
More than just coal

Java Jive is losing its fizz

Gandaria City is the largest retail mall amid the growing high rises of south Jakarta, but for many years it stood as a half-finished skeleton. Its Indonesian-Chinese developer, Pakuwon Group, racked up huge debts during the Asian Financial Crisis of 1997 and was unable to complete the project.

Yet soon after making forays into China during the mid-2000s, the firm suddenly found itself in a position to finish the massive complex—supported, it is widely believed, by deep-pocketed Chinese investors.

Such informal flows of money into Indonesian property, as well as natural resources, agriculture, retail and trading businesses, underpin China's economic clout in Southeast Asia's largest economy.

Gandaria City shows how Chinese investment has benefited Indonesia. But at a more macro level, many ambitious Chinese investment promises never materialize or disappoint in delivery. In part this is due to the two countries' sharply contrasting legal frameworks and a mutual lack of familiarity: having only re-established diplomatic relations in 1990, distrust still lingers below the surface. More important, the relationship lacks strong foundations.

There is little integration of manufacturing supply chains and, apart from oil and gas, most Chinese investment is limited to short-term resource deals or equipment contracting. Unless Chinese companies establish deeper roots in Indonesia, China's influence there is likely to wane as international competition heats up, notably from a rejuvenated Japan.

The lure of the tropics
When the Asian financial crisis brought economic turmoil to Indonesia in 1997, most foreign investors fled—except for Chinese companies, which won infrastructure tenders on a wave of cheap financing. Under Indonesia's chaotic transition from dictatorship to democracy, independence was granted to nearly 500 sub-regional governments.

Local governors sought to exploit resource-rich lands by issuing lucrative mining and land-use licenses to Chinese investors. As commodity demand started to take off, Chinese companies entered in droves. The numbers mushroomed in 2009-10, when laws on foreign ownership were relaxed. By 2011, Indonesia had issued over 10,000 mining licenses, compared to 500 just a decade earlier.

Since the late 1990s, Chinese investments have grown in both size and scope. They run the gamut from transport to finance, shipping to light manufacturing (mainly textiles and air-conditioners). There have been some genuine success stories—notably Huawei, which manages a large chunk of Indonesia's telecoms market in a partnership with mobile operator XL Axiata; Haier, which acquired Sanyo's Indonesian household goods businesses in 2012; and China Harbour Engineering, which built Indonesia's longest bridge, linking the islands of Java and Madura.

Still, the focus of China's economic interest in Indonesia remains skewed heavily towards raw materials extraction and power-plant contracting. Over the past decade, state-owned power companies China Huadian, Dongfang Electric and Sinohydro won major contracts to build coal-fired power stations and hydro plants. China Power International (CPI) and China International Corporation (CIC), China's sovereign wealth fund, were given significant stakes in coal mines in turn.

Yet many investments have disappointed. Take the Cilacap plant in south Java, built by China Huadian and Shanghai Electric, which opened two years late, operates at 60%-70% capacity, and requires frequent maintenance. Critics accuse Chinese companies of importing thousands of Chinese workers to build plants, and blame their poor management for faulty machinery.

Tensions over Chinese resource acquisitions and have spilled over into central government, notably over China's reluctance to revise a major natural gas delivery contract. In 2002, BPMigas, Indonesia's oil and gas regulator, signed a deal with China National Offshore Oil Corp (Cnooc) to deliver an annual 2.6 mt of liquefied natural gas from Papua's Tangguh field to Fujian. The deal was based on a global oil price of US$25 a barrel, but when delivery began in 2009 the oil price had risen above US$100. Cnooc refused to renegotiate the price with BPMigas, partly in a tit-for-tat response to Indonesian complaints about faulty Chinese machinery in other projects. This was a major contributing factor to the decision by Indonesia's Constitutional Court to dissolve BPMigas and hand over its responsibilities to the energy ministry.

Greasing oily palms
Opposition to the infrastructure-for-resources model extends far beyond minerals. In 2005, President Yudhoyono announced the "Kalimantan Border Palm Oil Megaproject," an 1.8m hectare plan that would destroy extensive areas of forest along the Malaysian border. Under the plan, several Chinese companies including state-owned investment company Citic Group would acquire one-third of the area in return for building roads and railways.

But critics viewed Kalimantan as a crony deal to clear land for lucrative timber, and popular opposition forced the government to scrap the project. The Chinese companies involved became tarred with the brush of corruption. Since then, a number of other investments in Indonesian agriculture have never materialized, including Cnooc's US$5.5 bn plan to convert 1m hectares of land in West Kalimantan into palm oil and biodiesel facilities.

Other firms have had to scale down their ambition. One is China Sonangol, a controversial Hong Kong-Angolan oil dealer with murky links to the Chinese state. Seeking new markets outside Africa, it tried—and failed—to use its political connections to get a foothold in large integrated mining and infrastructure projects in Sumatra. Instead it settled for a modest stake in the Cepu oil block, one of Indonesia's most prom\ ising recent oil discoveries, and a chunk of Jakarta real estate. This was not such a bad outcome, but it was much less than China Sonangal had hoped for.

In addition, many ambitious Chinese railway investments in Sumatra and Kalimantan have failed to materialize. Many resource-based investments by China's state-owned enterprises (SOEs) have been scuppered by unrealistic targets or political backlash. Yet an even bigger obstacle for all Chinese firms is their inability to get to grips with Indonesia's institutions. Indonesia's legal framework is highly arbitrary and convoluted—allowing contrasting interpretations at central, provincial and sub-provincial levels, and between Dutch civil, Islamic shariah and traditional adat law. Social, ethnic and religious tensions add further complexity in Indonesia's resource-rich hinterlands.

Chinese companies have found that investment security is not guaranteed, and that contracts are often renegotiated or canceled whenever a governor is replaced. Under Indonesian law, a regional authority can revoke a mining license even if it is at fault for any mismanagement!

Legal uncertainties are responsible for a long list of failed investment pledges. Constant changes to regulations in mining and other resource industries have deterred would-be investors. Between 2005 and 2010, scores of Chinese provincial government delegations signed agreements directly with local governments, yet they have little to show for it. "Part of the problem is that, because China's investments in Indonesia are often highly opportunistic, many companies rely on brokering deals with the government through their links with Indonesian Chinese businessmen," says Julian Hill, a consultant at Deloitte. "Chinese companies often believe these middlemen can help them weave through Indonesia's bureaucratic web, but in fact they wield much less real political power than counterparts elsewhere in Southeast Asia."

Where's the cash?
Yet a handful of other companies have had more success. Petrochemicals conglomerate Sinochem—which claims to be the largest direct supplier of Indonesian rubber to China—owns huge plantations across the country. Even smaller Chinese agribusinesses such as Mazhongdu International and Hainan Baisha own tens of thousands of hectares. Nor have Chinese SOEs scaled back their ambitions to win infrastructure tenders.

Sinohydro is repowering dams in West Java; Gezhouba Group, China Huadian and its subsidiaries are still pushing ahead with various coal and hydro power plants; and Shanghai Construction and China Harbour Engineering are building toll roads in Java with financing from state policy lender China Eximbank.

There is no shortage of ambitious infrastructure plans. China Harbour Engineering and China Railway Construction want to build railway systems, including a Jakarta airport express train and a double track railway from Jakarta to Solo. Chinese companies are still actively bidding for a US$3bn Central Kalimantan coal railway. In Sumatra, China Development Bank (CDB) wants to finance a US$1.3 bn, 300-km coal railway line and a US$1.5 bn, 1,200MW coal-powered plant. Most ambitious of all is China Railway Construction's plan to build a US$11 bn suspension bridge connecting the main islands of Java and Sumatra.

The biggest issue for these projects is financing. The cost of capital in China is rising, and most Chinese lenders now refuse to lend to Indonesian projects that do not come with some form of sovereign guarantee.

Yet a large chunk of Indonesia's US$100 bn of foreign exchange reserves is already being used as collateral for existing projects. And neither Chinese lenders nor Indonesia's Ministry of Finance are willing to assume increased levels of financial risk.

As Chinese lenders reduce their exposure to non-sovereign-backed projects, opportunities are growing for international competitors. Japanese and South Korean companies have re-entered Indonesia, competing in a wide range of construction tenders under the Indonesian government's "Master plan for Economic Development."

Japan has embarked on a multi-pronged charm offensive, in part to secure crucial gas supplies to replace its shuttered nuclear facilities.

Japanese and Korean companies are often more willing than their Chinese competitors to assume operational risks in project finance schemes such as build-operate-transfer deals. And they enjoy easy access to record low costs of capital—an advantage traditionally enjoyed by Chinese state-owned players.

Japan's five biggest trading houses—Mitsui, Mitsubishi, Sumitomo, Marubeni and Itochu—already have over US$9 bn in current Indonesian lending exposure. This is continuing to grow rapidly, with Itochu developing major geothermal and coal power plants in Java and Sumatra, while Mitsui recently bagged a contract to expand Indonesia's largest port. Japanese lending institutions are committed to financing a wide range of projects, such as the Jakarta monorail and a Jakarta-Bandung express train. And small Japanese manufacturers are flocking to Jakarta's industrial estates.

Uncertain times ahead
Looking ahead, Chinese investment in Indonesia will shift away from coal mining and palm oil. Sinochem and ZTE Energy, an agribusiness arm of the Shenzhen-based telecoms manufacturer, both bid for 150,000 hectares of palm-oil plantations in 2012, but were promptly rejected. Indonesia plans to restrict new plantations to a maximum 100,000 hectares and extend forest moratoriums. Oil and gas look a better bet. China is a significant player in Indonesia: CNPC is its seventh largest oil producer, Cnooc has several major oilfield stakes, and Sinopec has various exploration contracts and storage facilities. Indonesia's existing oilfields are maturing and urgently need new investment.

Finally, there is considerable potential to boost investment in agriculture beyond palm oil. Indonesia has huge swathes of uncultivated arable land and sorely needs to increase rice production and productivity, while China is keen to supplement its own diminishing reserve of farmland.

If Indonesia's leaders have their way, they will steer foreign investment away from resources and into manufacturing. Unfortunately for them, most Chinese companies view Indonesia as an export market rather than as a competitive production base. Passengers on planes from China to Indonesia are filled with small traders from Guangdong and Anhui carrying boxes of basic consumer goods destined for markets in Jakarta or Surabaya. There are few integrated supply chains between China and Indonesia to compare to those with Malaysia and Singapore. Indonesia's trade deficit exceeded US$1bn during 2012, and remains at risk of widening. That would not be good for increased economic engagement.

For the moment, Chinese investors are also nervously awaiting 2014's presidential elections. Some worry that potential frontrunner Prabowo Subianto—a son-in-law of President Suharto, who is known for his strong nationalist sentiments—harbors a deep anti-Chinese grudge. Rumor has that he was complicit in 1997's riots which targeted the local Chinese community, killing hundreds.

These fears may well be exaggerated, as Prabowo has begun to fade, but it would not be hard for politicians to exploit Indonesia's undercurrent of economic nationalism and sensitivity over the trade balance. Until these political uncertainties are resolved, many Chinese investments will remain off the table.

(Reprinted from China Economic Quarterly, published by GaveKal Dragonomics)

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[batavia-news] Falling through growing cracks

 

 

Falling through growing cracks

DateJuly 13, 2013
Michael Bachelard

Michael Bachelard

Indonesia correspondent for Fairfax Media

 

  • Suherti and her family are low-income residents of a central Jakarta neighbourhood who purchase rice at a subsidised price as part of the Raskin program.

    Suherti and her family are low-income residents of a central Jakarta neighbourhood who purchase rice at a subsidised price as part of the Raskin program. Photo: Alex Ellinghausen

    Suherti waddles with surprising speed down a narrow Jakarta street, her 62-year-old legs bowed under the weight of a huge bag of rice.

    Suddenly she disappears, ducking into a gap between two buildings that's less than a metre wide, little more than a crevice. A short walk further and an impossibly small courtyard opens out, laundry hanging thick on lines overhead, ringed by three tiny houses.

    The house where Suherti has lived for 40 years is all concrete blocks, rotting wood and rusty corrugated iron roof. Inside it's about the size of a one-bedroom child's room in Australia, but six people live here, and the thin mattresses on the floor suggest the generations pile up together at night to sleep.

    Cargiah and her family are low-income residents of a central Jakarta neighbourhood who purchase rice at a subsidised price as part of the Raskin program, in Indonesia on Wednesday 10 July 2013.
Photo: Alex Ellinghausen

    ''Exclusion area'': Cargiah's family are among the poor who receive a monthly distribution of subsidised rice. Photo: Alex Ellinghausen

    Suherti's friend and neighbour, Cargiah, also 62, apologises for the dirt on the ground outside.

    On Kevin Rudd's recent visit he recited Indonesia's macroeconomic virtues - ''an economic powerhouse of south-east Asia; GDP of $US1 trillion … the 15th largest economy in the world''.

    But just five kilometres from the presidential palace, in this cul-de-sac in central Jakarta, three families, perhaps 15 people, live on about $1 each a day.

    Half of Indonesia's population - 120 million people - live below the World Bank's moderate poverty line of $2 a day. People in outlying regions still starve to death.

    Between them, Suherti and Cargiah have raised 10 young Indonesians and are now helping raise their grandchildren.

    Both husbands are dead, and they rely on their children to provide. But while some have good jobs - this area is slowly growing more affluent - poor education means social mobility is still difficult. Other children are itinerant labourers or ''do what they can'' to get by.

    So Cargiah and Suherti survive on rice, vegetable soup, tempe, tofu and eggs for protein. Meat?

    ''Absolutely not,'' says Cargiah, except perhaps once a year on the Muslim festival of sacrifice, Eid al-Adha, when the local mosque slaughters a cow and distributes the meat.

    Sometimes they go to bed hungry. Today, though, is Raskin day - the monthly distribution by the government of 15-kilogram bags of subsidised rice to the poor.

    This simple program makes up more than half the Indonesian government's total social welfare spending.

    ''The rice is very helpful,'' Suherti says.

    Programs here, though, are patchy. While both women receive the Raskin rice, only Suherti was sent a more recent temporary cash package paid by the Indonesian government to compensate the poor for rising food prices, the result of a decision to cut fuel subsidies.

    ''Everything in the kitchen went up,'' the local women say. ''Eggs particularly, and rice.''

    Cargiah does not know why she missed out on the four monthly payments of 150,000 rupiah (about $17), nor how to get her name on the list.

    In the jargon, her family is known as an ''exclusion area''. Perhaps the person doing the local survey of the poor simply missed the path to her house.

    Australia's development program, AusAID, plays a part here, helping the Indonesian government build better databases of the people who actually need help, and streamlining its distribution.

    Nobody in these tiny houses knows that, of course. But it's important work nonetheless.

     
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