Fresh Maneuver on Reshuffle, Aburizal strikes back

I was shocked when Kompas.com display the main story titled President to Replace Economic Ministers late Wednesday. I thought I had missed one of the most important statement people waiting for since I didn't hear such an articulate statement during President Susilo Bambang Yudhoyono's speech and press conference in the afternoon.
But when I download the story then I realized it was not the president who made the statement but Mr Heru Lelono, special staff for president on development and regional autonomy issue. As quoted by Kompas.com, Mr Lelono said, "it's almost certain that cabinet reshuffle will be done in the near future."
The reason for such shakeup, Mr Lelono continued, "the president is upset with performance of some ministers. It started in March when government raised fuel price signigicantly. That time, ministers had promised to report implementation of compensation funds distributed to low-income families. But no reports since then both from chief economic minister Aburizal Bakrie and chief social affairs minister Alwi Shihab."
Nobody knows why Mr Lelono made such statement or who might asked him to do so. Who is Mr Lelono?
He was one of members in Team Eleven, a group of young intellectuals that helped Yudhoyono during campaign last year. Other members of this group are Denny J.A., Munawar Fuad Nuh, Joyo Winoto, M. Lutfi, M. Chatib Basri, Ervan Edison, Djali Yusuf, Andi Mallarangeng, Dino Patti Djalal, and Kurdi Mustofa.
Lelono was secretary general of United Indonesia Movement (Gerakan Indonesia Bersatu, GIB) and former activist at PDI-P (a party led by former president Megawati Soekarnoputri).
Is it possible that Yudhoyono asked Lelono to make the statement while formally he dismissed any speculation on a cabinet shakeup?

ABURIZAL STRIKE BACK

In the meantime, political newspaper Rakyat Merdeka run the story of Aburizal's resign as its headline. "He was so upset when he proposed to Yudhoyono to immediately increase fuel price two days ago but president rejected that," said one businessman who happen to be with him yesterday afternoon at Shangri-La Hotel while Yudhoyono announce new economic package.

The businessman said Aburizal is planning to submit his resignation but VP Jusuf Kalla and chairman of regional representatives council Ginanjar Kartasasmita (former chief economic minister) advised him to cancel that. Aburizal's absence during the TV appearance has sparked speculation that Yudhoyono is about to fire him.

Indonesian Chamber of Commerce and Industry (KADIN) strongly opposed the reshuffle plan. Meanwhile Dr Sjahrir, president's economic advisor, said cabinet reshuffle is not a panacea to strengthen rupiah.

Just one hours ago, Aburizal said fuel price will be increased this month instead of after October as signaled by president in his speech yesterday. But just like Yudhoyono, no firm statement. "We are looking for opportunity to raise, if we could do it in September, we will do it," he said as quoted by Detik.com.

Actually this is a good news for market. The problem is whether Aburizal's statement is a genuine government's position or part of a political game.

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President is not sure yet (on everything)

Indonesian are the best on acronyms including for President Susilo Bambang Yudhoyono (SBY). One of them is Susilo Bawahan Yusuf (gramatically means Susilo is staff of Yusuf Kalla, the vice president), a sarcastic acronym to criticize SBY who tend to follow Kalla's actions.

Another one is Saya Belum Yakin (I am not sure) is a an expression of SBY as a leader who always doubt and indecisive.

Today, people expects a different SBY with strong and clear policy signal. That's why market players speculated in rupiah's favor and help the currency appreciated for its second consecutive day. Stock market also rebound quite significant today on the same expectation.

What were those expectations? That SBY will announce timetable for fuel price hike that had sparked speculation on Indonesia's fiscal and monetary sustainability. That SBY will announce plans to improve availability of fuel and electricity. And that SBY will confirm his plan to reshuffle the cabinet that already lost trust from market.

"But after I followed through SBY's statement, I realize that nothing is clear and certain. On fuel price hike, he gave mix signal on timing. He said in the next two months, he will deliver funds to the poor as part of compensation package in March fuel price hike. But it's not clear whether it means by November fuel price will be raised or in December or January," said one blogger.

Asked what benchmark oil price to put in a revised 2006 budget, SBY said, "this is my personal opinion, well probably around US$55 per barel."

Wait a minute, president should not talk personal views, right?

Asked about cabinet reshuffle, he said, "that's not my priority at the moment. But I will keep my promise to review my minister's performance in two months. It's depend on how the current crisis is managed."

So, how will market react and respond SBY's statement? Let's just see tommorow!

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Rizal Ramli is tipped to lead new economic team

Rumors said Dr Rizal Ramli, former chief economic minister under Abdurrahman Wahid administration, is tipped to replace Aburizal Bakrie, while Dr Boediono, former finance minister under Megawati Soekarnoputri presidency will resume his position to replace Jusuf Anwar.
“Mr Ramli has intense communication with President Susilo Bambang Yudhoyono, but it is not clear whether it has something to do with a possible appointment as chief economic minister,” said one economist close to Ramli this morning.
The problem with Ramli is strong resistance from Vice President Jusuf Kalla who want to keep Aburizal in his post. “Aburizal himself will fight hard to keep the job,” he said.
Meanwhile, Dr Boediono, a credible figure in the market, also seen as the best candidate to replace Aburizal or Jusuf Anwar. “But it’s almost impossible for Boediono and Ramli in a team. President has to choose,” said other economist.
Who is Ramli?
Dr. Ramli was born in Padang, West Sumatra, May 10, 1953. He was imprisoned in the 1970s as a student activist and staunch critic of former President Soeharto. He majored in Physics at the Bandung Institute of Technology, completed graduate coursework at Sophia University Tokyo and earned his M.A (1982) and Ph.D in Economics (1990) at Boston University.
Prior to his government posting, Dr. Ramli headed the ECONIT (Advisory Group in Economics, Industry and Trade) think tank and consultancy. Shortly before President Soeharto's downfall, he led a protest with human rights groups against the World Bank, saying the Bank was aware of widespread corruption in Indonesia and closed its eyes to it. Appointed by Gus Dur as Chairman of the National Logistics Agency (Bulog) in April, 2000, Dr. Ramli was named Coordinating Minister for Economic Affairs August 23, 2000. Ramli was at odd with International Monetary Fund (IMF) and World Bank due to his policies and public comments.
He was appointed finance minister at the end of Gus Dur’s administration but out of cabinet since Megawati Soekarnoputri appointed President in 2002. He then criticized Megawati’s economic team as fake reformists and claimed himself as the true reformist.
Presidential candidate general (retired) Wiranto appointed Dr Ramli as economic advisor with promise to restore his old job. Wiranto failed in the first phase of the election and Dr Ramli then moved to Yudhoyono’s camp and tipped as one of candidates to be economic minister.
Dr Ramli was there when Yudhoyono defended his dissertation to earn PhD from Bogor Institute of Agriculture in early October 2004. “He has strong vision on people. I was amazed with quantitative method in his dissertation,” lauded Dr Ramli on Dr Yudhoyono.
As mentioned by noted economist Dr Sadli, Yudhoyono favored Dr Ramli as chief economic minister but Kalla insisted to have Aburizal. Kalla won, and Dr Ramli completely out of the cabinet.
In early November 2004, President Yudhoyono summoned Dr Ramli to State Palace for undisclosed agenda. Rumors that time said he will chair National Economic Council that gives economic advise to president. He denied the rumor, no such council established and Yudhoyono appointed Dr Sjahrir (Harvard alumni) as advisor instead. Dr Sjahrir has close relationship with Aburizal.
Last week, Dr Ramli made a strong statement that chaos over unrealistic 2006 State Budget is mainly due to wrong input given to President. Could Dr Ramli, or Dr Yudhoyono to be precise, win the race this time against VP Kalla and Aburizal?

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VP said No to cabinet shakeup

Vice President Jusuf Kalla said there is no need for a cabinet shakeup to respond the current economic crisis in the country.

“No, Not Yet. I don’t think the problem is the cabinet. The problem is with oil price and rupiah value,” he said as quoted by major newspaper Kompas today.

Jusuf was commenting on President Susilo Bambang Yudhoyono’s statement signaling a cabinet reshuffle in two months period to improve government’s performance in handling economic crisis. Yudhoyono didn't say that explicitly as he only said that he would review his cabinet. But people interpret this as a respond to a cabinet shakeup demand.

As oil price has reached US$70 per barrel that put state budget under heavy pressure to finance fuel subsidies, Indonesian rupiah has depreciated 11.27% against greenback since early August to reach its lowest level in four years while stock market significantly dropped by 16.6% in the last three weeks.

VP’s resistance is at odd with most of politicians in the country demanding a major overhaul in the cabinet, especially the economic team led by minister Aburizal Bakrie. Almost all political parties are asking for cabinet shakeup. Aburizal, a businessman and key ally of Jusuf Kalla both in cabinet and Golkar Party (the largest political party in Indonesia where Jusuf is the chairman) is on top of the list of ministers that should be replaced.

Others including finance minister Jusuf Anwar and national development plan minister Sri Mulyani Indrawati. Both Jusuf and Sri Mulyani were former executives at International Monetary Fund (IMF). Energy minister Purnomo Yusgiantoro also in the list due to decreasing oil and gas sector.

VP’s resistance for a cabinet shakeup is understandable as that would be a no-confidence vote on his leadership in economic affairs. During the presidential campaign last year, Jusuf and Yudhoyono is said to agree on economic affairs as VP’s portfolio while President take care politics, security, and social affairs.

Commenting on VP’s resistance, Hidayat Nur Wahid, People’s Consultative Assembly (MPR, the highest constitutional body in Indonesia) speaker said a cabinet reshuffle is President’s prerogative right. “That’s why I believe president will follow this up,” he said.

Doubts remain though. “Yudhoyono got to be firm and decisive this time. Else he would still be regarded as a weak leader,” said a political analyst.

Conflict of statements regarding economic policy is intensified recently when President Yudhoyono said government is postponing fuel price hike to early 2006 while VP Jusuf Kalla said previously that new fuel price would be implemented sooner than October 2005 to ease pressure on state budget.

Cracks also seen at Golkar Party. While Jusuf rejected reshuffle, other executives strongly supported the idea. As quoted by Bisnis Indonesia today, deputy House of Representative (DPR) speaker Zainal Maarif (from Golkar) explicitly asked Yudhoyono to replace Aburizal. "House leaders agree to invite an emergency meeting this week to discuss the situation," he said.

Yudhi Chrisnandi, also a Golkar executive said Aburizal is incapable and should be replaced.

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Cabinet Reshuffle: Confirmed, but…

Do you agree on cabinet reshuffle and Golkary Party will have seven ministers in the new cabinet?
This is the question of a survey conducted by Golkar Party in its website (www.partai-golkar.or.id). The result so far is 51% respondents said no. I don’t know whether the party is serious on this survey. But seven ministers from Golkar? Isn’t that just too much?
While President Susilo Bambang Yudhoyono might reject the idea to have seven ministers from Golkar where his deputy Jusuf Kalla is the chairman, he had confirmed such reshuffle in two months period today.
President Yudhoyono seems uncomfortable with the situation. This morning, after a meeting with journalists from Europe and Asia, Yudhoyono promised to review his cabinet in the next two months.
“I keep my promise to review performance of my ministers. We need ministers that capable and solid in teamwork. I have to admit after listening to many observers that I have to improve coordination between ministers and communicate better with Central Bank,” he said as quoted by Kompas.com few hours ago.
What’s remain unclear is whether VP Jusuf Kalla supported the idea. While no formal regulation, Jusuf’s side always argue that he is the CEO of Indonesian economy, while Yudhoyono is the chairman of commissioners.
“Any efforts to reshuffle the economic team, especially chief economic minister Aburizal Bakrie, could put the president in an open conflict with the vice president. This is a big test for the two. Jusuf might see reshuffle as a no-confidence vote his position as the economic affairs CEO,” said a political analyst today.
While rumors on cabinet reshuffle has started few months ago, the fall of Indonesian rupiah against US dollar, increasing international oil price and further domestic fuel price hike, and pressure on the state-budget are seen as the good reasons to do it sometimes in October this year.
Last week all of a sudden some economists and politicians drummed up the reshuffle issue. Almost all national newspapers, including those published in Makassar, South Sulawesi (hometown of Jusuf Kalla) run articles and editorials asking for President SBY to reshuffle his cabinet.
Drajad Wibowo, parliament member from PAN, said reshuffle is not the best solution for current crisis, but it is a must. It is not clear whether Drajad’s argument is in line with his party.
National Mandate Party (PAN) recently moved its headquarter in Jakarta to a new building with a rent fee of ten cents US dollar per year. The building is owned by Aburizal Bakrie, the chief economic minister and dear friend of Sutrisno Bachir, PAN Chairman and businessman. PAN denied any cabinet deal or support with Aburizal regarding the building.
Economists like Fadhil Hasan from Indef, a think-tank where Drajad was one of its members, meanwhile believe reshuffle, especially the economic ministers, is the only way. Currency expert Farial Anwar went further with a possibility of continuing depreciation of rupiah toward 12,000 against US dollar if no immediate action including cabinet reshuffle.
Political scientist from Gajah mada University Professor Riswanda Imawan said reshuffle is a necessary to prevent further collapse of the economy.
“President Yudhoyono is seen indecisive. He should pick capable candidates and no political deals anymore,” Riswanda said.
But his colleague Professor Ichlasul Amal said it is not easy to reshuffle the cabinet and no guarantee that new members could solve the problems.
Yudhoyono’s main supporter, Democratic Party, meanwhile didn’t make strong and clear statement on reshuffle. While criticizing economic team’s performance, Darwin Zahedy Saleh, chief of economy and finance section at Democratic Party said reshuffle is President’s sole authority.
The second largest political party in parliament, PDI-P, has split view on cabinet reshuffle. Emir Muis, chief of House’s Budget Committee and member of PDI-P rejected reshuffle, while PDI-P Secretaary General Pramono Anung supports the idea.

Again, for the time being, Aburizal Bakrie is in the top list to be replaced. Finance Minister Jusuf Anwar also seen incapable to secure the state budget. State-owned enterprise minister Sugiharto was in the list few months ago, but he might survive this time as he got firm support from Prosperous Justice Party (PKS). Sugiharto installed three PKS members/leaning to PKS as his deputy. They are Aries Muftie, Helmy Lubis, and Lendo Novo. PKS is main supporter of Yudhoyono.
How about ministers in the other portfolios?
Internal conflicts at National Awakening Party (PKB) led by former president Abdurrahman Wahid, had demanded cabinet reshuffle to kickout two cabinet members, Alwi Shihab (coordinating minister for social affairs) and Saefullah Yusuf (state minister for East Indonesia Development). Both guys are seen as dissident PKB leaders despite efforts by Jusuf Kalla to settle the conflict.
Investigation on corruption at General Election Committee (KPU) might put Hamid Awaluddin, a former executive at KPU, in the list. But Jusuf Kalla might try hard to keep him especially with Hamid’s recent ‘success’ as government’s chief negotiator in Aceh Peace Deal.
State Secretary Minister Yusril Ihza Mahendra might also in the list pending investigation on corruption charges at the ministry.

Again, the problem is whether Yudhoyono is decisive enough this time.

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Aceh Deal & The Aftermaths

Noted economist Faisal Basri said that the peace deal signed yesterday by Indonesia government and Free Aceh Movement (GAM) has long-term snowball effects for the country as other natural resources-rich provinces could ask similar treatment.

“This is more than just a federal system. This is similar to Scotland. No wonder GAM signed that. But this deal will be employed by Papua to demand even higher than Aceh and we can’t just stop it,” Faisal quoted by Kompas today.

Under the peace deal, Aceh will have authority to raise loans from other countries, impose different interest rates than Indonesian Central Bank, charge local tax, full authority on marine resources, develop and manage all seaports and airports, and most of all to get 70% of hydrocarbon and other natural resources.

Many questions remain unanswered though. On foreign loans, it is not clear whether the deal give Aceh no veto from central government as under the existing law, local administrations are allowed to get foreign loans only with central government's approval.

On different interest rates, it is not clear whether Aceh will have their own central bank and currency accordingly. Details of local tax, profit sharing of hydrocarbon, and infrastructure management will also reshape the way local administration react to Aceh Peace Deal.

A successful peace agreement this time, surely could smooth the way for a $5 billion internationally-backed reconstruction programme in Aceh, where December's tsunami left some 170,000 people dead or missing and destroyed much of the infrastructure.It would also be a plus for investors looking for stability in the world's fourth most populous country.

Peace in Aceh might even reduce piracy in the Malacca Strait—one of the world’s most important shipping lanes, between Indonesia and the southern tip of Malaysia—as well as diminishing an militant insurgency in southern Thailand, since many of the Malacca pirates, and the Thai insurgents’ arms, are said to come from Aceh.

Peace deal will also smooth logging activities in Aceh and help local pulp and paper industry in time of tight wood supply. There are eight companies with license to cut trees in Aceh. PT Krueng Sakti is the largest with concession area of 115,000 hectare, followed by PT Raja Garuda Mas Lestari with 96,500 hectare. Raja Garuda Mas is one of the largest pulp and paper producer in Indonesia. (See Map)

But the deal could lead to other complicated problems and potential uprising in other natural resources-rich areas, especially West Papua which has strong separatist movement like Aceh. In June last year, 20 US senators wrote a letter to Kofi Annan, UN secretary general, urged him to appoint UN Special Representative to Indonesia to monitor and report on the situations in Aceh and Papua.

Talking about hydrocarbon, Aceh was natural gas-rich province, home to the first liquefied natural gas (LNG) plant in Indonesia. The plant, established in 1970s, has six trains with installed capacity of 12 million tones per year. ExxonMobil Oil Indonesia (EMOI) Inc supply gas to the plant from its gas fields in Lhoksukon and North Sumatra Offshore (NSO), both in Aceh territory.

But since 1995, output from those fields decreased significantly due to depleting reserves. As a result, the LNG plant, operated by PT Arun NGL (a joint venture between state-owned oil and gas company Pertamina, Exxon, and Japanese companies) is only running at 40% capacity. Last year, three out of six LNG trains in dormant. Next year, most likely only two trains will be in operation. In less than a decade, gas in the area will be depleted completely.

EMOI also supplies natural gas for two fertilizer plants in nearby. They are PT Asean Aceh Fertilizer (AAF) and PT Pupuk Iskandar Muda (PIM). AAF has one plant while PIM with two plants. Due to natural gas supply problem, AAF is about to be liquidated as the company already stopped its operation more than two years. PIM also has to shutdown one of its plants due to scarcity of gas. Thousands of workers are at stake in these companies, most of them are Acehnese.

PT Humpuss Aromatic, a company owned by Hutomo Mandala Soeharto (youngest son of former president Soeharto), is also processing natural gas from EMOI to produce fuels in Lhokseumawe area. Not to mention PT Kertas Kraft Aceh (KKA), the largest craft paper producer in Indonesia jointly owned by government and Nusamba (controlled by Mohammad Bob Hasan, close ally of Soeharto), that is rely on gas supply from EMOI.

Aceh’s oil and gas future is very much depend on the development of oil and gas reserves in Malacca Strait. A gas block called Block A is currently developed by ExxonMobil and ConocoPhilipps. But Exxon has announced it will sell its shares in the block saying the block is not economically viable anymore for the company. Government has asked Conoco to immediately make decision on the block.

In this oil and gas perspective, Aceh is actually the past for Indonesian economy. The real danger is if West Papua asking for similar or even better deal than Aceh. West Papua is known for its strong Free Papua Movement (OPM). Recently Papuan staged massive protest on weak implementation of special autonomy.

In West Papua, a consortium led by Beyond Petroleum, CNOOC (China), Mitsubishi Corporation (Japan) is constructing two LNG plants with combined capacity of 7 million tones per year and investment of US$3 billion.

West Papua is also home to one of the largest copper mines in the world operated by PT Freeport Indonesia, a subsidiary of US Freeport McMoRan Copper and Gold Inc.

On other hydrocarbon, wood, Papua is Indonesia's future. Aceh has only 550,000 hectares of forest allocated to commercial logging while Papua has 47 licenses with 10 million hectares of forest already awarded to logging companies.

Imagine all of this, a blogger reminded me this morning that the peace deal in Aceh and its aftermath, including the possibility of Papua to strike the same deal, will surely undermine central government's role. But do we still have government anyway?

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Ary Ginanjar: G-Spot Business

We are not talking about sex. We are talking about management and business. While sex educators had introduced G-Spot few decades ago, only recently that we could discuss G-Spot, this time God-Spot, openly in this country. Board of directors should discuss G-Spot as it has budget impact. The state agencies, including tax agency, also has to take this issue seriously as a new source of tax income.

Ary Ginanjar Agustian, the owner and president of Emotional Spiritual Quotient (ESQ) Leadership Center, is the man who make it popular and it is a good business. Some even believe Ginanjar found the G-Spot Theory.

Eight years ago, scientist in California, USA announced a research result that they have discovered a God Module (G-Spot) in the brain, which could be responsible for man’s evolutionary instinct to believe in religion. A study of epileptics who are known to have profoundly spiritual experiences has located a circuit of nerves in the front of the brain, which appears to become electrically active when they think about God.

That was the report published by Los Angeles Times in 1997.

Dr. Ebrahim Kazim in his article Activate your God-Spot few months ago said that Allah might have put a God-spot in the brain because it is His sovereign choice to be in relationship to humankind in order that we could develop it further if we want to understand more about Him.

In Indonesia, G-Spot Training is a lucrative business. Just like some trainers in Western Countries quoting phrases from Bible, ESQ's God-Spot Training mix modern management with Koran's teaching. According to staffs at ESQ Center, cost for such training is Rp2.75 million per head. ESQ is also introducting group pilgrimage to Mecca, Saudi Arabia for its alumni in a program called ESQ 99 Flight.

Ask the staffs, managers, and directors of state-owned enterprises, what kind of training that they should attend?

The answer is Emotional Spiritual Quotient (ESQ). As quoted by Kompas newspaper, Minister of State-Owned Enterprises Sugiharto asked all SOE staffs to take the ESQ training conducted by ESQ Leadership Center.

Even though no formal letter, Indonesian, especially executives at SOE sees Sugiharto’s statement as an order. They have to abide!

The result is clear. PT Telkom Tbk, the largest company in Jakarta Stock Exchange, had sent 500 of its executives to attend the training for 4 days.

Was it good?

“The result of ESQ training is extraordinary,” Kristiono, CEO of Telkom commented in the paper. Kristiono had been kicked out last month from his post.

Do you know how much Telkom should pay? Rp1 billion minimum.

Pertamina, the largest SOE in the country, already sent thousands of staffs to attend the training. Peruri, the company that print money and bank notes, have sent 2,500 staffs.

Pertamina, PLN, Telkom, Pupuk Kaltim, Pupuk Sriwijaya, Krakatau Steel, Taspen, Rajawali Nusindo, Peruri, PTPN, and Garuda Indonesia are some of clients listed in ESQ’s website. Even Director General for Tax and Corruption Eradication Commission (KPK) are other non-SOE clients. But rarely we see private-owned companies in the list except Medco Energy.

Imagine that ESQ has trained 47,000 people. Take Rp2 million per head, ESQ has made almost Rp100 billion.

With such achievement, business magazine SWA named Ginanjar as one of The Most Powerful People and Ideas in Business 2004.

Born March 24, 1965, Ginanjar enrolled at engineering school of Udayana University in Bali and then Tafe College in Adelaide, Australia. Cleric KH Habib Adnan (chairman of Bali MUI branch) was his main mentor.

In a relative short period, ESQ Leadership has branch in 10 provinces accross the nation. Most of the trainers are young guns in their 20s or 30s. Skepticism arise though, especially staffs at SOEs, especially effectivity of ESQ in daily working condition. "Sometimes, people like us just has no choice. But as long as the company pay the training, I don't care," said one of SOE staffs.

Others simply attend the training to follow the order. "If the minister ask us to have ESQ training, we will do it. Regarding corruption in SOEs, well...it has nothing to do with that," said one executive at a state-owned company.

Some are questioning the leadership experience of ESQ trainers. "They are so young and no experience in dealing with business world and real working environment," said other executive.

But nobody doubt Ginanjar's leadership that bring God-Spot into a big business, just like Aa Gym (famous Moslem cleric & preacher) with his Qolbu Management. Tax officers should start to look into their balance sheet then....

And since G-Spot is a business, government and SOEs should implement business approach as well in its decision whether to use ESQ, Qolbu Management or the likes. State officers should open a transparent bid to make sure competition is there.

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