Newsletter No. 173
January 26, 2006

 

VICE-PRESIDENT KALLA RATTLES IN TOKYO

Today is the final day of the visit to Tokyo of Vice-President H. Muhammad Jusuf Kalla of Indonesia. Yesterday, there was a significant development: It was announced that the FTA between the two nations would be accelerated so that a basic agreement could be signed before the end of 2006. It will be recalled that the decision to begin talks on a Japan-Indonesia FTA began with the visit of President Yudhoyono in early June 2005. Shingetsu Newsletter No. 146 reported last month that many commentators in Indonesia wanted to move quickly on an FTA with Japan because they felt that their country had fallen behind Malaysia in this respect. This desire to accelerate the negotiations is therefore not a surprise.

Vice-President Kalla has been meeting with various figures in the political and business worlds of Tokyo. Although the Japanese media has had very little to say about Kalla, the Indonesian press has been more interesting.

Below is a fascinating article on Japan-Indonesia relations from the Jakarta Post. Apparently, Vice-President Kalla has been saying a lot of things in Tokyo that one would not expect. His comments in the article touch on Japan-China rivalry, dissatisfaction with Japanese ‘aid’, and LNG exports.

If It Comes From Tokyo, Call It a Loan
By Muninggar Sri Saraswati, Jakarta Post

Japan has disbursed too many "support" loans to Indonesia at rates Indonesia could not afford, Vice President Jusuf Kalla told a group of Indonesians in Tokyo during his four-day visit to the country.

In an offbeat, sometimes amusing get-together with Indonesians living in Tokyo on Tuesday evening, Kalla took some time out to take a few potshots at his Japanese hosts. Kalla told the group about his earlier meeting with Japanese entrepreneurs, where he had answered questions about Indonesia's trade relations with China, and about Indonesia's decision to prioritize LNG supplies for domestic needs in the future. Without disregarding Indonesian-Japanese relations, Kalla said, Indonesia's trade tries with China had improved because the China had offered affordable products to Indonesia.

Indonesia should work to improve bilateral relations with as many countries as possible if it was beneficial to the country, Kalla said. "Never become dependent only on one nation," he told the meeting. Kalla said Japan had been too eager to provide Indonesia with many loans. Their high repayment rates had meant the loans had ended up benefiting the Japanese more than Indonesians, he said.

He said he had ordered Indonesian diplomats and other officials to stop using the word "bantuan keuangan (financial support) packages" for overseas loans offered to Indonesia. "I would never ever use the word 'support' for loans. The correct word is cooperation. Japan always considers a loan 'support' while we are required to repay it," he said. The construction of a dam in North Sumatra with a Japanese loan was once considered a milestone in the relations between the two countries, he said. But Indonesia was still being crippled by the repayment rates on the project, Kalla said."We lent lots of money from (the Japanese) but after more than 30 years, the project is nothing but a loss. I said I would buy it for US$600 million and told (the Japanese businessmen) there to go home. My statement shocked (Finance Minister) Pak Boediono, but that's what it is."

Concerning the LNG issue, Kalla said Indonesia would do anything to fulfill its gas contracts with other countries. This had even led to the closure of a fertilizer company in Aceh. However, after the contracts expired, it was Indonesia's right to prioritize its LNG supplies for domestic needs, he added. The government has announced a plan to cut LNG exports by 6 percent this year due to the lower production in aging gas fields in Aceh and East Kalimantan. This has concerned Japanese entrepreneurs, who are still awaiting a commitment from Indonesia about future supplies of LNG after contracts expire in 2010.

"What's wrong if we buy cheap products from China? What's wrong if we decide to prioritize domestic LNG needs after the gas contracts with other countries expire?" Kalla said. "Like other countries, we will do our best for the most benefit to our people. I realize it is a sensitive issue, but this is our stance and they should understand it."

Indonesia should no longer rely on developed countries to move forward, he said. "We are a bit unwise because we have become too dependent on other people's foreign consultants to set up road maps and evaluate development programs. We can do it on our own. We have plenty of smart people."

The vice president said he told Indonesian embassy staff overseas not to accept foreign loans with many conditions that would hinder development. "Let's be serious about how we handle this. We were rich with oil, wood and had huge amounts of foreign loans. But now our oil is depleted and we are a net oil importer, our forests are destroyed, causing floods and landslides, while we have still to repay the loans. How could this be a good time for me to become the vice president?" Kalla said.