First Public Caning in Aceh Friday

Friday, June 24 will be the first time for Indonesian province of Aceh Sharia Council to execute 26 gamblers with 6 to 12 strokes of the rattan cane to be delivered in public. It draws controversy, even in Aceh, but visitors started to flock into Bireun, 200 kilometers east of Banda Aceh, worst hit by recent tsunami.

Sharia Court in Bireun, one of Aceh’s districts, 200 kilometers east of Banda Aceh, had convicted those 26 gamblers. They have been detained for almost 52 days before their punishment day. While some tried to get freedom with money, all of them will face the rattan cane which has one meter long and diameter of 0.75 centimeter.

The Bireuen government has prepared a 9 square meters stage, where the caning takes place, presumably so interested members of the public can get a better view. Not all gamblers will be punished here. Only five of them will face public caning here, while the rest in other places. The ‘show’ will be started after Friday prayer.

Acehkita.com reported from Bireun that the executors, known as Wilayatul Hisbah, are unpaid for months already. So the online publication run an article titled Bila Algojo Hukum Cambuk Belum Terima Honor (When Executors of Public Caning Unpaid Yet). Wilayatul Hisbah are moral police officers appointed by Aceh governor with 500 thousands of rupiah salary per month which is equal to US$ 50.

In the past months they only gave advise for wrongdoers. “We never saw their faces and never gave them advise as our main job. But now, we are about to do this (caning),” said one of the executors as quoted by AcehKita.com.

He admitted ever since their appointment many uninvited guests came to meet Wilayatul Hisbah “and give us nightmares.” “But we are not afraid to do this glorious job,” he continued as saying even though since April no salaries paid.

The caning sentence, the first such corporal punishment verdict in Aceh's modern history, is a product of the autonomy law, which gives the traditional and conservative province the right to enact its own bylaws. Its announcement caused controversy on Wednesday when it was made public. Detik.com reported Thursday (June 23) that people flocked in Bireun to watch the caning.

While some have opposed the caning, others questioned why the painful and humiliating punishment did not apply to the big-time thieves, politicians and public officials convicted of stealing billions of rupiah (millions of US dollars) in public money.

"Why is the caning sentence only targeting the gamblers, drinkers and those who have committed adultery? It should apply also to the graft convicts," said Maisarah, 45, a resident of Jambo Tape, Banda Aceh as quoted by The Jakarta Post Thursday.

Abdullah Puteh, Aceh former governor is lucky to be punished by criminal law with 10 years in jail due to corruption. Early this year, 72 civilian, 5 military officers, and one police officer caught in a cockfight, a popular sport in Aceh, but all them released after a peace agreement even though some argues the sport is classified as gambling.

The Post reported Muhammad Ali, a convicted gambler facing a public caning, gave a weary look when asked about his punishment. The man in his 40s confessed that he had left his fate to God.

"If they insist on punishing me in this way, then they can go ahead. But they have should have punished the (big-time) graft convicts first," Ali said.

Ali, a construction worker, was arrested on April 30 this year when police found him and his six of his friends involved in illegal gambling in Pulo Kitca, Bireuen.

After being jailed for 15 days, he once freed by the police but now he has to answer to the province's Islamic court, which will punish him under a new bylaw inspired by Sharia Law.

Shortly after his release, Ali was summoned by the Bireuen Sharia Office, which passed his sentence -- 10 strokes of the rattan cane to be delivered in public.

But if the provincial leaders have their way, those found guilty of graft offences could face a much tougher punishment than caning.

In Aceh, there are currently only three bylaws passed that relate to sharia law -- those that prohibit gambling, adultery, and the consumption of alcohol drinks. Corruption, meanwhile, is being included in a new law encompassing theft.

"The bylaw on theft, including corruption offences, is being deliberated by the Sharia Office," said Raihan Iskandar, the deputy speaker of the Aceh provincial council.

Once the office completes its work, the new law will be proposed to the Aceh provincial council for approval.

According to Raihan, the office was proposing convicted thieves would have their hands amputated, a tradition still practiced in Saudi Arabia. This tough punishment would help establish order in the province and be an effective deterrent, he said.

Acehkita.com reported seven convicted gamblers were offered by someone to release them with payment of US$50 each. Later on, the officer asked another US$30 each. They admitted to have paid US$560. But Friday Showdown Will Go On.

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Iwan Pontjowinoto and our money

My office normally cut Rp85,000 per month from my salary (which is already low) and send the money to PT Jamsostek. I can’t argue with accounting guys since it is a must, dictated by law. Otherwise, my office could be prosecuted of being against the law. Every six months, normally, I get status report of how much principal and accrued interests or yield, whatever is the name, had accumulated in my account at Jamsostek.

Frankly, I never really take a look at the report. First, the principal amount is just too small even though I’ve been Jamsostek member for more than a decade. Second, my colleges said don’t ever think to get the money easily back.

But when I think of number of co-workers, 400 staffs, that pay the bills to Jamsostek, I started to seriously reconsider my carelessness. My first question was, whether my fellow workers, and so millions of Indonesian workers, get better yields from their investment in Jamsostek.

So I decided to look at the yield column in my account statement. With simple math, I found that yield for 2004 was 8.5%, lot better than interest rates in my bank account.

My curiosity went further with an article published by The Jakarta Post (June 16, 2005) titled Jamsostek to invest more in stocks. The reporter quoted Iwan Pontjowinoto, newly appointed president director of the company. Mr Pontjo said Jamsostek is about to invest at least 15% of its total investment portfolio in stocks this year. How much is the total? Rp40 trillion or equals to US$4.2 billion. It means that Mr Pontjo will invest Rp6 trillion in stocks, increased dramatically from Rp3.44 trillion last year’s.

“Yields from investment in stocks are higher than any other investment portfolio,” he argued.

In the last paragraph, The Post quoted Mr Pontjo saying Jamsostek will invest more on government bonds this year though to help plug the state budget deficit. What? I hope Mr Pontjo as investment manager for all workers in Indonesia reconsider his motive. Jamsostek is not a political venture. By law, Jamsostek should put worker’s interest as an ultimate motive on its investment decision, not to serve political interests like state budget.

Good news is Mr Pontjo promised to give higher yields for my investment at Jamsostek this year onwards. Besides, he also pledged to simplify procedures, including implementation of IT system (he worked for IBM many years) so I could check my account easily.

History is important though. I don’t want to be skeptic on Mr Pontjo. He is an investment banker, former director of PT Danareksa (Persero), the state-owned investment bank. Even though we have to remember that he left the company in 2001 with Rp2.65 trillion debts and productive assets of Rp1.5 trillion only.

In addition to that, Supreme Audit Agency (BPK) found 10 irregularities in Danareksa with potential loss of hundreds billion rupiah. One of BPK’s findings was cross currency swap facility given to PT Jakarta International Hotel and Development (JIHD) which end up with Rp70.8 billion loss for Danareksa.

Unfortunately, none of Danareksa’s board of directors being prosecuted, in contrast with recent investigation on Bank Mandiri loan irregularities.

Now, we have Mr Pontjo at the helm of an important fund management company in the country. Sources at the ministry of state-owned enterprise (SOE) said his appointment was mainly minister Sugiharto’s decision, supported by Aries Mufti (expert staff at SOE ministry). Sugiharto and Muftie were board members of Sharia Economic Society (Masyarakat Ekonomi Syariah, MES) where Mr Pontjo is the chairman.

Well, my friend told me nothing wrong with that as long as he could give better yields for workers who pay regularly and as long as he will not lead Jamsostek to debt-ridden company like Danareksa simply because of misallocation of funds under management. So, watch your investment.

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Cepu Deal: Mediocre mentality

People hate a loss more than they value an equal gain. This is a quotation from Richard Layard’s best selling book Happiness, Lessons from A New Science (2004).

Cepu, Central Java and Bojonegoro, East Java are peaceful neighbors. But it could be ruined by the current clash on oil and gas resources overlapping both areas.

It’s all about money and politics. With potential output of 200,000 barrels per day, we are talking about US$10 million per day business or US$3.5 billion per year and US$100 billion for 30 years of contract.

The fields have proven reserves of 600 million barrels of oil (some say 1 billion barrels) and 8 trillion cubic feet of natural gas. With such enormous reserves, Cepu and its surroundings could be Indonesia’s Texas.

Central government confirmed yesterday through energy minister Purnomo Yusgiantoro that local administration will get 10% participating interest in the block. Yet it’s not clear which one, Cepu or Bojonegoro. The working interest is located in Bojonegoro, but the oil and gad deposits actually underneath Cepu.

Even though both regencies are offered to get equal share of, say, 5%, no guarantee either sides could agree. Both autonomy and oil and gas laws failed to address such grueling issues. Imagine that drilling wells are located in Bojonegoro while oil beds are in Cepu. Which regency is fall into category as producing area that deserved to get participating interest as dictated by 2001 Oil and Gas Law?

Should they share the fortune?

How Partai Kebangkitan Bangsa (PKB) with strong influence in East Java and Partai Demokrasi Indonesia Perjuangan (PDI-P) with overwhelming power in Central Java will tackle this issue?

Political switch

Indonesia’s position regarding Cepu has been switched along political changes. Baihaki Hakim, a former president of PT Caltex Pacific Indonesia (wholly-owned subsidiary of Chevron Texaco), rejected the idea of contract extension to Exxon Mobil when he was the president of Pertamina. Baihaki was appointed by then President Abdurrahman Wahid, founder and key figure of PKB.

His successor, Arifi Nawawi (appointed by president Megawati Soekarnoputri, chairwoman of PDI-P), meanwhile resume talks with Exxon. The results were that Pertamina and Exxon as contractor will get 40% of output, while 60% for government. With participating interest 50% respectively, both companies will get 20% output. Such deal sparked criticism as other contractors only get 15% output while government 85%. This is the standard contract.

What a shame for Megawati. His closest ally and key economic minister, Kwik Kian Gie, was a staunch critic for Cepu settlement and rejected such arrangement. Kwik maintain his stance until now and demanding Exxon completely out of the project.

It was Widya Purnama (appointed during Megawati presidency’s last days), the current president of Pertamina, who also publicly opposed the idea of resume talks with Exxon. His first statement after appointment as Pertamina CEO was, “I will leave this post if government give Cepu block to Exxon,” Widya said in August 2004. He said Pertamina more than able to operate the block without Exxon Mobil. Pertamina even planned bond issuance up to US$2 billion to finance the project. But that’s already history.

Widya is counting his days. He is a lame duck CEO. President Susilo Bambang Yudhoyono had stepped in Cepu affair right after his inauguration in October 2004, especially after his first meeting with US President George Bush in Santiago, Chile November 2004. Both reiterated Cepu resolution in their second meeting in Washington DC last month.

SBY then asked Chief Economic Minister Aburizal Bakrie to establish a negotiation team. The team is led by Martiono Hadianto (Pertamina chairman and former CEO during BJ Habibie presidency), with members Lin Che Wei (expert staff of SOE ministry), Rizal Malarangeng (former political analyst), Muhammad Abduh (Pertamina commissioner), Umar Said (former secretary general of energy department under Ginandjar Kartasasmita), Mustiko Saleh (vice president of Pertamina), and Muhammad Ikhsan (economist, expert staff for Aburizal Bakrie’s office).

Some political parties, namely PDI-P, PKB, and recently Partai Amanat Nasional (PAN, once led by reformist Amien Rais, strongly rejected the negotiation team. But government moves on.

The result, this is preliminary and subject to President SBY’s approval, is 70% output for government and 30% for contractors. The contractors are Exxon Mobil with 45% participating interest, Pertamina also 45%, and the remaining 10% for local administration.

It is a better deal if we compare to 60%:40% arrangement under Nawawi, but it is worse than standard contract of 85%:15% between government and other oil contractors.

Well, government argues such deal is a win-win solution. Indonesia could resume its position as OPEC member and reduce fuel subsidy, while Exxon will surely make money out of it. But it shows, once again, how weak we are in dealing with high-level intervention as Bush and SBY did and mediocre mentality.

Who could gain the most?

Exxon: Will get 45% of participating interest of the block. Let say the block will produce 200,000 barrel oil per day, Exxon will get 45% by 30% (as 70% of output is government’s share) which is equal to 13.5% or 27,000 bpd. At US$50 per barrel, Exxon could generate US$1.35 million per day or around US$492 million per year. The contract expires in 30 years meaning Exxon could make US$15 billion for the contract period. Sure, Exxon is promising investment up to US$2 billion to develop the block. But anybody would dare to invest such amount to get big chunks of US$15 billion, right?

Pertamina: Without any significant efforts, Pertamina will make the same amount with Exxon over 30 years period. The company is lucky to inherit the state’s rights over oil and gas resources, even though new oil and gas law deliberated in 2001 had lifted that.

Suppliers: Companies like Seamless Pipe (subsidiary of Bakrie & Brothers) has opportunity to supply huge amount of pipes to support Cepu operation.

Partners for local government: Like in many cases, most likely that local administration (both in Cepu and Bojonegoro) is preparing to establish a joint venture company as a vehicle in the block’s participating interest.

Losers

Indonesian, the rest of us, lost the opportunity to get better deal which is 85%:15%. This is a huge difference, which is 15% of 200,000 bpd (equals to 30,000 bpd) and at US$50 per barrel Indonesian government lost US$1.5 million per day or US$500 million per year and US$15 billion in 30 years.

Extra happiness provided by extra income is greatest when we are poor and declines steadily as we get richer. In reverse, any lost of income (opportunity) for the poor (Indonesian) brings a lot more misery than the rich (Exxon and USA).

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Political economy of SBY's SMS PR strategy

I was so naïve in praising president Abdurrahman Wahid when he announced publicly his email address in 2000. I wrote in an article published by Bisnis Indonesia that it could be good start in fighting over-bureaucracy in our communication to high-level government officers. No one knows whether Gus Dur ever open his email though.

So I decided not to repeat that when president Susilo Bambang Yudhoyono let public know his mobile phone number of 62-811-109949. All of a sudden, everybody send short message (SMS) to the number hoping the president will address issues they raised.

Off-course it is a good public relations strategy. Even when the number was crashed due to thousands of incoming messages, the president’s spoke person Andi Malarangeng blamed on limited capacity of the technology. But when reporters asked Andi on SBY’s reaction on the crashing cellular, this former political analyst said SBY was simply smiling.

What’s funny Mr President? This is not a joke, isn’t it?

Knowing such PR strategy could be a backfire, SBY then asked for apology. Urban Poor Consortium, upset for failing to send SBY their message, decided to give new SIM card to the president.

But that’s not going to help. Sudi Silalahi, cabinet secretary, went further with enlarge capacity with a new server and five different numbers. This is not technology problem, right?

As commented by parliament member, it’s almost impossible to SBY to read all the messages despite his good intention.

“So I urge the president to give the job to open those messages to minister of state secretary and then report them to SBY,” the honorary parliament member said.

Well, just imagine, millions of messages per day.

Oh, don’t be so skeptical! Off course the new server will able to receive millions of SMS. And the minister will surely be able to read those SMS and report them to the president. But don’t we have too many reports already without decent respond? All of us know what problems are. What we need is solution!

By the way, apart from debate of its effectiveness, it should be better if SBY ask telecommunication providers to donate all the money they raised from people’s SBS to him, say to the eradication of acute malnutrition in some areas in the country.

Let’s count. We have more than 20 million cellular customers. If all of them send messages to SBY, with average cost of Rp300 per message, providers could get Rp6 billion per day. Do it in 300 days, they could get Rp1.8 trillion. Well, Mr President. Ask telecommunication providers to donate big slice of it to support families with severe malnutrition. How about problems raised by folks who send SMS? Well, just give them promise as usual!

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Oily road for rupiah

Indonesia, by definition, is no longer eligible as member of Organization of Petroleum Export Countries (OPEC) due to its reverse status as net oil importer country since last year.

Currently ranks seventeenth in world oil production, the country produced a gross average of 1.146 million barrels of oil per day (bopd) in 2003, down eight percent from the previous year's average of 1.251 million bopd.

The Energy Ministry reported that crude oil accounted for 1.013 million bopd of the total, while condensate production averaged 133,800 bopd. On a monthly basis, crude and condensate production declined from 1.187 million bopd in January to 1.106 million bopd in December 2003. This marks the tenth straight year of production declines, down from 1.528 million bopd produced in 1993.

Indonesia's oil production had continued to slip last year. Statistics shown last year Indonesia’s crude oil and condensate production dropped by 4.5% to 1.095 million bopd.

Centre for Global Energy Studies in its Global Oil Report Market Watch for September-October estimated Indonesia’s oil output in September 2004 at 963,000 b/d, 436,000 b/d below the country's OPEC quota. The country became a net oil importer during the second quarter, and production capacity shows little sign of recovering any time soon.

CGES said that Indonesia's oil production capacity looks set to continue to decline this year. At the same time, domestic oil consumption is set to increase even higher than economic growth meaning that Indonesia needs more hard currency to import fuel oil and put more pressures on Indonesian rupiah.

Rupiah is hovering around 9600 against US dollar, well below government target of 8800 for 2005 year. Central Bank governor Burhanuddin Abdullah stated this week his hope that Indonesia could resume its position as net oil exporter to strengthen rupiah. Why?

Look at our balance on oil export and import. Yes we booked net surplus on crude oil in the period of January-April 2005. But deficit on refined oil products increased dramatically.

Indonesia exported US$511 million of refined products but imported US$2.72 billion at the same time resulting in net import of US$2.09 billion of oil and its refined products in the period, jumped from US$897 million in the same period last year.

This deficit is keep increasing as Indonesia's oil production will continue to decline for at least the near-term. Even if new investment poured in tomorrow, it would take several years for greenfield projects to begin production. The age of the vast majority of the country's existing fields means that their production will continue to drop without greater investment in oil recovery.

It is within the government's capacity to turn things around - clear and fair regulations, less bureaucracy and improved fiscal incentives are some attainable goals that would generate the investment necessary to increase oil production, not just crude oil but especially refined products with new investment in refineries. So, for the time being, it is an oily road for rupiah.

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Privatization collide

Earlier this week, Bisnis Indonesia reported that finance minister Yusuf Anwar had asked minister of SOE Sugiharto to fulfill privatization commitment for the fiscal year 2005 which is Rp3.5 trillion (around US$380 million). Mr Anwar also reminded Sugiharto of government’s commitment to issue decree on privatization as prerequisite to disbursement of US$250 million loans by Asia Development Bank (ADB).

Responding that demand, Sugiharto then announced his plan to increase dividend payment from SOE instead of doing privatization. Several noted economists, such as Didik J Rachbini (now a member of parliament) and Faisal Basri (University of Indonesia economist) also supported Sugiharto’s stance to put aside privatization, favoring boosts in dividend payment from SOEs.

Today, Bisnis Indonesia reported chief economic minister Aburizal Bakrie also ask Sugiharto to implement privatization as scheduled to secure 2005 budget. Mr Bakrie even went further asking Sugiharto to communicate government’s policy on privatization. Economist M Iksan who also expert staff at Mr Bakrie’s office said under the law (budget 2005 law), the Rp3.5 trillion target should be reached.

Mr Bakrie’s letter also endorse minister of finance’s stance that issuance of government decree on privatization should be done as disbursement prerequisite of ABD’s loan.

These letters from Mr Anwar and Mr Bakrie is a big contrast with previous statement made by Mr Sugiharto. In December 6, 2004, minister Sugiharto told legislators (DPR) ADB has decided against pushing the government for the privatization of state companies as a condition of a US$400 million loan.

The ADB originally wanted Indonesia to privatize 15 state companies as a condition of the loan. Mr Anwar was director of ADB when previous government signed the loan agreement.

Sugiharto told legislators that ADB agreed to overlook the condition. It is true that ADB had softened the prerequisite for loan disbursement from privatization of SOEs with deliberation of government decree on privatization. But what’s the difference anyway?

Arief Mufti, expert staff of SOE ministry, said that personally, Sugiharto prefer to buy assets than to sell assets (privatization). “But if privatization is a must, as an aide for the president, SOE minister would surely do that (privatization),” Mufti quoted by Bisnis Indonesia today.

The problem is, state budget is not a personal matter. A commitment is a commitment unless this administration could amend the 2005 budget law. It is not about agree or disagree with privatization as well. It is a matter of how this administration could solve privatization collision between ministers andsend clear signal to the society and market at large.

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