Friday, April 21, 2006

Myanmar: Diplomacy is not a one-way street


ASEAN should perhaps ask junta if a win-win solution is possible

Friday • April 21, 2006

Thang D Nguyen

ALMOST everyone has tried to help free Ms Aung San Suu Kyi, the democracy activist and Nobel peace laureate, from her oppression by Myanmar's junta.

The United States and the European Union have imposed sanctions on Myanmar and threatened to boycott regional meetings in which it participated. The United Nations Secretary-General Kofi Annan, too, has tried, by appointing a Malaysian diplomat as a special envoy to deal with Myanmar on the issue of its human rights record and its lack of democracy. But the envoy resigned recently.

A group of Ms Suu Kyi's fellow Nobel laureates wrote a letter to the junta demanding that it free her and in 2003, the foreign ministers of the Association of South-east Asian Nations (Asean) issued a statement urging Myanmar's military rulers to free her.

All of these actions were sparked by Myanmar's poor human rights record and the 16-year-long house arrest imposed on Ms Suu Kyi since 1990, when her National League for Democracy won a landslide election victory which the regime never acknowledged.

Despite the actions taken by the international community and Asean, of which Myanmar is a member, the junta has shown no inclination to free Ms Suu Kyi or work on its promised democratic reforms. In fact, Ms Suu Kyi's house arrest term has just been extended.

To Asean's credit, though, the pressure it exerted in the past led to Myanmar giving up its scheduled turn as the chair of Asean this year. An Asean Inter-Parliamentary Myanmar Caucus was also established last year and its aim is to "institute democracy in Myanmar" and help free Ms Suu Kyi.

And after much pressure, Myanmar allowed Malaysian Foreign Minister Syed Hamid Albar to visit last month. But the visit was cut short, and he did not get to meet Ms Suu Kyi or make any progress on talks about the country's democratic reforms.

Nevertheless, considering Asean's founding principle of non-interference — which says that the members will not comment on or interfere with one another's domestic political affairs — the group should be lauded for its actions so far.

But for the international community, who has pushed for Ms Suu Kyi's freedom, the efforts by Asean are not good enough.

This is perhaps because of their one-sidedness. In other words, so far, everyone has criticised Myanmar for being an undemocratic regime and demanded that it free Ms Suu Kyi unconditionally.

Perhaps one needs to ask the question: What does Myanmar want in order to let her go? Is there a win-win option for the country and the parties involved? Diplomacy, after all, is not a one-way street.

But the challenge is hobbled by the fact that Asean is seen to have mixed responses on the issue of Myanmar. Reports say that there are two camps: On one side, Indonesia, Malaysia, Singapore and Thailand have spoken out on the issue. The second group — Brunei, Cambodia, Laos and Vietnam — has remained neutral.

Asean has to work on this in order to deal with Myanmar effectively and it should ensure that whatever solution it comes up with, should be an Asian and an Asean one, not one that is influenced by what the international community wants.

Bullying will not work. The truth is, Myanmar does not appear to give a hoot about all the sanctions and rhetoric piled against it so far by the US, the EU and Asean.

Myanmar knows that it can just keep Ms Suu Kyi under house arrest for the rest of her life and nothing will happen to the regime.

Unlike the backlash that Iran and North Korea face for their nuclear programmes, Myanmar has recently discovered a less internationally-sensitive energy source: Oil fields. Said to last for 30 years, it knows that it can use this natural resource to its advantage.

So far, Myanmar's cosying up to India, Russia and North Korea speaks volumes on whether it plans to toe the Asean line.

The writer is a journalist based in Jakarta. His writing can be read at www.thangthecolumnist.

Thursday, April 06, 2006

Deal with substance more than form to attract FDI

Attracting the big money: Vice-President Jusuf Kalla beating a gong to mark the opening of the International Investment Conference in Nusa Dua last month. Without equity, predictability and more rigorous leadership, the investment that Indonesia so badly needs will stay away.

Business Times
Singapore, 04 Apr 2006

Indonesia must implement economic measures, and introduce legal reforms and sanctions


ON THE surface, it looks like Indonesia is doing all the right things to attract foreign direct investment (FDI).

In January 2005, shortly after President Susilo Bambang Yudhoyono (SBY) came to power, the Indonesian government organised an infrastructure summit in which it pledged to make infrastructure development a top priority.

And now, more than a year later, the government is planning another one for this coming June.

Meanwhile, both SBY and Vice-President Jusuf Kalla, accompanied by economic ministers and Indonesian business delegations, have taken numerous trips abroad in an effort to boost the country's international standing and attract foreign investment.

But, alas, these road shows are nothing more than a Potemkin village.

In other words, these initiatives by the government amount to nothing more than broadcasting a rosy picture of doing business in the country.

Unfortunately, as many investors find out shortly after they arrive in Indonesia, the business operating environment on the ground is very different.

Of all the challenges that confront investors, the most formidable are macroeconomic instability, regulatory policy changes, corruption and legal uncertainty.

In taking a look at each of these risks, we can see that, taken together, they make Indonesia one of the least favoured destinations for foreign direct investment in the world today.

Since the 1997/98 East Asian financial crisis, of which Indonesia was a prominent victim, the macroeconomic condition of the country has been undermined, for the most part, by political instability.

The lack of stability over the past seven years has been a direct result of transitional politics and the fact that the nation has seen four presidents and administrations since the fall of Suharto in 1998.

To be sure, Indonesia's transition from authoritarianism to the world's third-largest democracy has been an inspiring story. Nevertheless, democracy is not enough. Without equity, predictability and more rigorous leadership, the investment that Indonesia so badly needs will stay away.

As a Hong Kong-based investment banker put it: 'We (businesses) don't have a problem with either a dictatorship or a democratic government in Indonesia.

'It's something between the two that we cannot accept.'

With regard to corruption, what more is there to say? Better known in the country as 'KKN' - an acronym associated with the Suharto era that stands for corruption, collusion, and nepotism - corruption is so entrenched that many doubt it can seriously be addressed until society as a whole becomes more embarrassed by it.

Until this happens, fairly or unfairly, Indonesia will continue to be dogged by the unflattering image that corruption is the rule, not the exception.

But among all the frightful risks investors face, legal uncertainty is by far the most formidable.

Laws and regulations are often contradictory, vague or antiquated. A much larger problem, however, is the behaviour of judges, lawyers, courtroom clerks, the police, and others who have the solemn duty to uphold the law.

In this system, a verdict in a commercial lawsuit or legal dispute can be purchased no matter what the respective merits of the case. If an investor involved in a legal matter is unwilling or unable to play this game, the chances of losing in court - particularly at the lower level - is high.

Some business people have even gone as far as to say that abiding by the rules only serves to disadvantage them.

Another point worth mentioning is that the Indonesian legal system operates on inconsistency. For instance, not all the laws concerning foreign investors are applied in all cases.

What is more, the speed with which the Indonesian courts process legal cases or appeals often depends on the size and perceived importance of the plaintiff or defendant.

In other words, if a case involves a big foreign business, it is likely to be heard relatively quickly. By the same token, if a case involves a small foreign business, the process can take a lot longer.

Examples abound. A case in point is that of PT Kangar Consolidated Industries (KCI) vs PT Multi Inti Trada (MIT). KCI is the Indonesian subsidiary of Owens Illinois, a US-headquartered multinational company with a modest manufacturing enterprise in the country. The company worked with MIT as its local distributor until last year when it ended the distributor agreement because MIT paid late and violated other trading terms. Upset with KCI's decision, MIT filed a suit against KCI in the East Jakarta District Court.

Although right was on the side of KCI, the East Jakarta District Court ordered KCI last November to pay MIT six billion rupiah (S$1.07 million) in material damages and another one billion rupiah in immaterial losses for 'wrongful termination' of the distribution agreement.

In reaction to the dubious court decision, KCI has reported the case to the Judicial Commission and says it intends to contest the verdict.It remains to be seen what the Judicial Commission will do with the case of KCI vs MIT and how long it will take to hear from it.

Meanwhile, one thing is certain: While they don't make headlines like US mining giants Newmont and Freeport, or Canadian insurance giant Manulife, it is smaller ventures like KCI that have stayed loyal to Indonesia through the Asian financial crisis and the years since.

So, if the SBY government really wants foreign businesses in Indonesia, it must get beyond form and start addressing the substantive issues that are damaging the business operating environment.

It should implement new economic measures and introduce legal reforms and sanctions now. Otherwise, do not expect much improvement in the investment picture.

The writer is a Jakarta-based columnist.

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