The French Strategy in Fighting against the Threats of Terrorism

_{By Agung Cahaya Sumirat, Rudjimin and Rully F. Sukarno (Sesparlu 54 Group Blog)}

_{The terrorist attacks on Charlie Hebdo magazine in January 2015, which was followed by more brutal, concerted attack in Paris in November 2015 have shocked France and Europe.  There is a sense of urgency of how such attacks need to be addressed. The latter attack marked a departure from previous terror tactics in France, confirming the French intelligence community’s worst fear as the country experienced – a systematic, coordinated attack, first seen in Mumbai in 2008. Reports that attackers spoke unaccented French, and carrying Syrian and Egyptian passport, including the one registered in October 2015 at a refugee centre in the Greek Island of Leros, indicated that the ISIS threat to bring the war at the doorstep of Europe and France has materialized.}

_{The terrorist attacks in Paris broadened the scope of the French Government policy strategy in fighting global terrorism particularly the Islamic States of Iraq and Syria (ISIS). The two cases of terrorisms in France have clearly revealed the alarming and dangerous existence of ISIS terrorist network in Europe. ISIS has claimed responsibility and stated that those terrorist attacks were retaliation of the French military air strikes towards several ISIS basis in Syria and Iraq.}

_{Against this backdrop, this situation certainly requires strategic response of the French Government as this “war on terror” will apparently continue. This article wishes to highlight the French Government current efforts in fighting terrorism and offers possible policy recommendation.}    

_Trends

_{Since the beginning of “Arab spring’ in Syria, President Francois Hollande’s strategy was to throw his support to the opposition group in Syria and recognising the opposition Syrian National Coalition (SNC) as representative of the Syrian people. France firmly insisted the removal from power of Syrian President Bashar Assad. However, as the Syrian conflicts grew worse, the SNC opposition found limited supports and was increasingly marginalised by the growing presence of the ISIS. French campaign for Assad’s removal from power have accordingly suffered setbacks.}  

_{After the alleged chemical weapons attack by the Syrian regime in 2013, which was called as “crossing the red lines”, French responded by carrying out several air  strike  against the Syrian regime and ISIS in 2014. The aim was to provide supports towards the strengthening of the opposition coalition. This was carried out despite the UK and the US’s hesitance in supporting military action to Syria. France was left to its own devices by the two allied countries.}

_{France’s stance against ISIS reflected the French hard line approach, which known as the European Union’s (EU) forward line of defense against extremism. Apart from opening the front with ISIS, France has been involved in several military efforts against terrorists groups in Iraq and Mali as well as conducted stabilization operations in the Central African Republic.}

_{After the Paris attack, France has taken up measures in strengthening EU cooperation in its fight against terrorism, especially invoking an EU collective defense clause. The French considers that ISIS as a threat to all of European countries. The Paris attacks were executed through a collaborative network of terrorist cells in several EU countries, notably Belgium. France has strongly demanded measures to secure Europe’s external borders, share passenger data, and institute equitable burden-sharing in other arenas to counter the threat.   Nevertheless, the French proposal on Passenger name Record System was denied by Brussel.}

 _{On a different front, France is also facing another dimension of terrorism threat emerging from its own borders or the so called “homegrown” terrorism. With an increasing immigrant problem at their hands, France has engaged in on-going discussion on how to best integrate the young immigrant population to France’s society without alienating them. There has been serious concerns for many years of how young immigrants felt increasingly marginalised. Such vulnerability opens a window of opportunity for the recruitment and expansion of ISIS terrorist network.}

_Options

_{Considering such developments, the French  government are faced with difficult options of how to fight terrorism without nurturing new breed of terrorist.  First, the French Government needs to provide more focus on internal terrorist threats and Second, build stronger alliance with other countries, especially the EU to deal with ISIS in Syria and Irag.}

_{A majority of the terrorists involved in the Paris attack were born and raised in France. France is estimated to have 2000 citizens involved in Syria and Iraq terrorist network and a further 3800 individuals is indicated by the domestic intelligence service as “radicalized’. Therefore,  French Government need to first deal with the seeds of terrorism domestically. President Hollande devoted most of his parliamentary address to homeland security measures and the need for national unity in the current circumstances. Right after the Paris attack, President Francois Hollande imposed a “State of Emergency” which allow the French police to conduct raid of homes, business, associations and places of worship without judicial review. The police can place people under house arrest even if they do not have sufficient evidence of wrongdoings to detain or charge them. Beyond the emergency power, the French Government pushed through an expansion of surveillance law and right now in the process of lobbying for a constitutional changes, including provisions that would allow some convicted terrorist to be stripped of their citizenship. The state of emergency has outweighed the French policy for migrant integration to France society.}

 _{Critics of the new emergency power mentioned of the human cost of such warrantless searches. Less than 1 percent of the raids resulted in new terrorism investigations. Many people whose homes have been searched complained that their privacy was invaded, their families frightened and their  property  damaged. Additionally, it paints the French government as anti-Muslim.}

_{Disaffected Muslim population at home, unpoliced European borders in which foreign fighters in Syria from France can easily slipped from the watch of French authorities. This renders the emergency  law ineffective.}

_{Another option is that the French Government needs to be more proactive in building international coalition in fighting the ISIS. Immediately after the Paris Attack, French aircraft unleashed a heavy bombardment of Raqqa, the city of Syria which serves as ISIS ‘unofficial capital” to remind everyone that France is capable of striking back and that the terrorist who masterminded the Paris attack cannot retreat to their safe hideouts in Syria.}

_{This foreign policy reaction fits within the traditional French paradigm: namely, active diplomacy with traditional partners and the UN, a lean but muscular military capability, a will to fight, and a dedication to French and European security. President Hollande’s stated goal is the creation of a large international coalition against Daesh, including Moscow. The leaders of the US, Britain, Germany, and Russia have extended their support.}

_{In practical terms, the French bombardment makes not much strategic difference. Over the past year, a 10-nation coalition led by the US has conducted at least 3000 air strikes against targets in Syria. Yet none of this can destroy ISIS completely, unless some countries are prepared to put troops on the ground with the objectives of occupying territory and preventing the terrorist organization from regrouping. The chance of that happening is completely nil, as the US is the only power capable of sustaining such an operation and President Barrack Obama has ruled it out. Another option for France is  cooperating with Assad Government to crash ISIS. This however, would signify a radical shift in their policy}

_{.Recommendation}

_{Having considered the two options, it is advisable to combine the two option with additional adjustment in each of them. The French Government  should focus in dealing with the homegrown terrorism by imposing rules of law taking into account the rights of people, including the French-Muslim, accompanied by strengthening program to integrate the migrant into the French society. The French Government should also strengthen its cooperation with other countries to deal with ISIS in Syria. In this regards, French seems to have to change its policy towards the Syrian government. The French can cooperate with the Syrian to attach the targets vis-a-vis ISIS in Syria and Irag, instead of focusing its efforts to topple down President Assad.}

 _{In conclusion, in dealing with the threat of terrorism, it is advisable that France adjust its policy, either domestic or foreign in dealing with ISIS. The French should start to work with its people, including the French Muslim to address the homegrown terrorism and cooperate with the Assad Government in dealing with ISIS in Iraq and Syria.}

Jakarta, 2 May 2016

 

 

The United States Factor in South China Sea Dispute

The involvement of the United States (US) in the South China Sea (SCS) dispute has clearly shown the SCS’s geo-political and geo-strategic importance which goes beyond the East Asia and South East Asia regions. As a matter of fact, the SCS serves as a strategic commercial gateway for the world’s merchant shipping which has a direct impact to the world economy and trade. Many reports have also indicated that the SCS has significant reserves of oil and gas as well as rich in marine resources.

The US has critically questioned the validity of Chinese claim over majority areas of the SCS. The US argues that all parties need to abide by the United Nations Convention on the Law of the Sea (UNCLOS) especially on the principle of freedom of navigation. It insists on the need of upholding the freedom of navigation vis-a-vis the SCS dispute. This article will try to describe the US motive of involvement in the SCS dispute and provide recommendations.

The SCS dispute has involved several countries namely Malaysia, Brunei, Singapore, Vietnam, the Philippines, Taiwan and China. All of these countries have overlapping claims in the area of SCS which inter-alia include Spratly Islands, Paracel Islands, Pratas Islands, and the Scarborough Reef.

China has the largest claim in the SCS and based its claim on the ‘nine-dash line’ map that was published by the Chinese Ministry of the Interior in 1947. The map has formed the basis of the Chinese territorial claim to a majority of the islands in the SCS. The Chinese Government has argued that the nine-dash line map is based on historical evidence. The other claimants of the SCS dispute has rejected the said Chinese claim. They have argued that the maritime and territorial border of the SCS must be referred to the United Nations Convention on the Law of the Sea (UNCLOS) which contains a series of legal measures and laws on the economic rights of nations based on their territorial waters and continental baselines. In the mid of 2014, the China has taken step further by expanding the ten-dash line map which included the SCS and Taiwan.

Trends

As already mentioned, the US is of the view that the UNCLOS principle on the freedom of navigation should be upheld in the SCS, given the strategic importance of the SCS to the world. In pursuing its objective, the US has carried out several missions by sending military air and navy forces through the SCS water including those of the Chinese’s claim. The Chinese Government has reacted strongly against the US maneuvers. In April 2001, a dangerous incident happened when a US plane and a Chinese fighter jet collided near Hainan Island. In June 2009, the Chinese submarine collided with a US destroyer’s towed sonar array in June 2009. In 2009 another maritime incident happened involving the Chinese vessels and the US navy surveillance ships.

In such a situation, there is a high risk of a miscalculation or misunderstanding between the two sides which may result in a deadly exchange of fire. If this happens, then it may escalate to a further military escalation which is harmful to the stability and security of the SCS.

The US maintains that the UNCLOS does not forbid the right of military forces of all countries to conduct military activities in any particular Exclusive Economic Zones. The coastal state notice or consent is not needed in this regard. While the Chinese Government insists that reconnaissance activities undertaken without prior notification and without permission of the coastal state violate the Chinese domestic law and international law. China has been an UNCLOS party, while the US is a non-party in this respect.

Options:

First, the US and China are two the world’s major powers. In managing the SCS crisis, they need to enhance their trust through intensifying bilateral contacts to prevent from any possible military incidents.

Second, the US needs to become party to the UNCLOS. The US will always face a trust deficit particularly from the Chinese Government if it continues to argue on the provision of the UNCLOS’s freedom of navigation, while it is not a party to the UNCLOS. Basically the basis of the US’s international legal standing can be questioned in this matter particularly by the China.

Third, the US needs to directly engage Indonesia which has been active in facilitating the SCS dialogue and in the SCS dispute, Indonesia can be seen as an “honest broker” considering its position as a non-claimant state to the SCS.

Recommendation

This article recommends that the US needs to consider to be a party to the UNCLOS. The US needs to showcase a good practice of a super power by supporting an international law (UNCLOS) so that its credibility can be enhanced. At the same time, the US needs to engage the third party, which is Indonesia in this regard, since Indonesia has a strong influence in the ASEAN and can use its credential in encouraging a dialogue process of managing the SCS dispute.

 Conclusion

The involvement of the US and China, as the world’s big powers, in the South China Sea dispute has elevated the risk of instability arising from the possible military conflicts between both parties. Through the realism perspective, the competition between the two countries in the SCS dispute may indicate that they are engaged in a process of rebalancing the balance of power so that they can achieve a relative peace and security in the end.

However, the political and military test of balance of power of both sides needs the back-up of a continued political process to show a seriousness of concerned parties in solving the crisis through peaceful means. In this regard, Indonesia may play a crucial role in a dialogue involving the US and China for the sake of managing the SCS crisis and preventing the crisis from escalating it into an open military conflict.

Jakarta, 22 April 2016

 

ASEAN Economic Community: What Next for Indonesia?

_{Group Blog #9 (Agung C Sumirat, Rudjimin, Rully F Sukarno)}

_{Year 2015 just passed by. As agreed in the ASEAN Summit 2013, ASEAN Economic Community (AEC) took into effect. What actually happened then when the AEC came into being? There appears to be a mistaken expectation that something big would happen at the end of 2015, as if huge door of liberalization would open up at the point in time. This is the general perception of the Indonesian public as well as probably the public in some ASEAN Members States. In fact the process of liberalization in ASEAN has started in 1992 when ASEAN Members States signed the ASEAN Free Trade Agreement (AFTA). The reform process in ASEAN took place gradually. Besides the general misunderstanding on the AEC process, what we can capture from the public sentiment is that there is a certain degree of skepticism that AEC on the part of the public, especially the private sector – the Small and Medium Scale enterprise, that AEC brings benefit that Indonesia can reap. What are the advantages of the AEC for Indonesia? Considering that Indonesia is the most populous country in the region in with sizable number of middle class, logical thought that first naturally come out is that Indonesia only the target market for other ASEAN countries.}

 _{The first thing that people will look at in finding whether a Free Trade Agreement could bring some benefit is the level of trade creation that the Free Trade agreement will result in. Statistically speaking what people will measure is the additional market access penetration that the FTA rules will create. Using this parameter, Indonesia experiences trade deficit with ASEAN in the last ten years, around USD 11 billion in 2014. The figure will grow more and more, unless strategic balancing emerges. Then what is the incentive of Indonesia to implement the AEC? Some analysts are of the view that the impact of free trade agreement can reflect on the structural policy change and reform and competitiveness and long-run growth effect. Using the two parameters, how will Indonesia reap the benefit of the AEC? This article will analyze how the AEC can be advantageous for Indonesia and the options that Indonesia shall take to maximize the befit incurred.}

 _Trends

_{There has been a shifting of global economic gravity toward Asia. China and India are the biggest drivers of this “Asianization” of global economic process. In such an undertaking, ASEAN with its ASEAN Economic Community has strengthened its position and attractiveness as an integrated economy with 620 million population and USD 2.6 trillion of GDP. With this credential, ASEAN would be the seventh-largest economy in the world. Based on the AEC Blueprint, the AEC process will enhance ASEAN economic integration through expanding an ASEAN wide single market and production base. This will allows the free flow of goods, services, investment, and skilled labor as well as the freer flow of capital.}

 _{Against this backdrop, Indonesia should reap the benefit of AEC process particularly since Indonesia is the largest economy in the ASEAN with 250 million of population. This means that Indonesia is a huge market which accounts for nearly 42% of the total ASEAN population. However the big size of the Indonesian economy and market is not a guarantee that Indonesia could reap the biggest benefit of the AEC. Instead, Indonesia can only be the target market of the other ASEAN countries economic expansion.}

 _{This happens due to Indonesia’s constraints in its competitiveness. Based on the World Economic Forum’s (WEF) Global Competitiveness Index (GCI) in 2015-2016, Indonesia’s rank has been on the 37th, dropping off from its 34th position of the previous year. Indonesia’s logistics cost is very high mainly due to the lack of adequate quality and quantity of infrastructure. More or less 17% of a company’s total expenditure is used for logistics cost, mainly for land and sea transports. While in other regional economies, the average logistics cost is already below 10%.}

 _Options

_{First, Indonesia should use the AEC as a platform for pushing a structural reform of its economy including through reducing its protectionist measures (such as non-tariff barriers). Recently, President Joko Widodo has adopted 11 deregulation of economic package aiming at improving the country’s competitiveness. The Government has also committed to reduce protectionism as well as cut excessive subsidies which have made Indonesia less competitive.}

 _{Second, Indonesia should view that the AEC is not only about gaining an economic benefit. The AEC is part of ASEAN investment in ensuring peace and stability in the South East Asian region. ASEAN ability in managing possible conflicts through peaceful conflict resolution and non-violence has been an ASEAN biggest achievement. Indonesia with its more than 17,000 islands has a strong interest to make the South East Asia region to be conducive for focusing on the domestic agenda in both enhancing people’s welfare and forging a sustainable national stability.}      

_{Third, the AEC has in fact promotes the expansion of a Global Value Chain (GVC) which would produce a wider benefit of an economic opportunity to many countries. Currently it is not easy to determine which country benefits the most out of certain products. Through the GVC, generating of a product may involve various production bases in different countries. This will make those chain of economies involved grow in this process.}

 _{Conclusion and Recommendation}    

_{Indonesia has no other choice but need to use the AEC momentum as a platform to reform its structural policy with the final aim to enhance the Indonesia’s competitiveness. As a matter of fact Indonesia cannot get away from the challenges arising from the economic regionalism. Aside from the AEC, the Trans Pacific Partnership (TPP) has posed another challenge to the Indonesia’s economy. By focusing on the AEC’s benchmark, Indonesia will expectedly enhance its capacity and competitiveness in facing evolving economic regionalism.}

South China Sea Dispute: A Test Case towards ASEAN Political Security Community

Source pic: asean.org

The establishment of ASEAN Political Security Community (APSC) as part of the ASEAN Community has arguably shown the added strength of ASEAN as a vibrant regional organization. APSC is a reflection of ASEAN’s success in transforming their past hostile relationship and mistrust among its members into a more stable and peaceful Southeast Asian region. Throughout the years, the ASEAN countries have experienced much in dealing with potential threats that might undermine regional stability. ASEAN has thus been able to manage many of those challenges by promoting peaceful means of conflict resolution and creating a conducive region for enhancing growth and development especially through the ASEAN Economic Community.

However, the South China Sea (SCS) dispute has emerged as a serious challenge to ASEAN. Four of ASEAN members namely Brunei, Philippines, Malaysia, and Vietnam are claimants to the SCS dispute. In the SCS, they have overlapped claims with China. The complexity arises since in such a situation the ASEAN has to deal with the China with its enormous power in the world affairs. Hence the SCS dispute may become a test case to ASEAN in implementing its APSC agenda. This article wishes to elaborate on how ASEAN can manage to promote the implementation of ASPC especially in addressing the SCS dispute.

Trends Analysis

The ASEAN’s ability to transform into an ASEAN Community, adopted at the ASEAN Summit in Indonesia 2003, has essentially elevated its status from a loose regional cooperation into a more structured organization with a stronger legal framework. To advance the ASPC implementation, the APSC Blueprint was adopted by the ASEAN Summit in Thailand 2009. The APSC Blueprint envisages ASEAN to be a rules-based Community of shared values and norms, a cohesive, peaceful, stable and resilient region with shared responsibility for comprehensive security as well as a dynamic and outward-looking region in an increasingly integrated and interdependent world.

In view of this, ASEAN involvement in the South China Sea dispute is inevitable. Not only is the fact that four ASEAN members are claimants to the SCS, but it also needs to address it considering the evolving regional geopolitics and geostrategic dimension particularly with the involvement of China and the US. Any politics and security dynamics in the SCS will certainly have a direct bearing to the South East Asia region. It is therefore relevant to highlight that the implementation of APSC Blueprint in the development of the afore-said shared values, norms as well as a cohesive region is not moving out of a political vacuum. There is a dynamic interaction between the ASEAN collective interests and national interests.

There have been cases whereby the ASEAN countries have found difficulties to find a consensus in addressing the SCS issue. Some examples are ASEAN Defence Ministers Meeting-Plus (ADMM-Plus) in Kuala Lumpur 2015 and the ASEAN Foreign Ministers Meeting (AMM) in Kuala Lumpur on August 2015. The final declaration only stated that the serious concerns to the SCS dispute were expressed only by “some Ministers”, not by all ASEAN Ministers over the China’s continuous belligerent island construction in the disputed SCS areas. It may send an impression that there is a lack of ASEAN unity in this regards.

Previously, the AMM in Cambodia 2012 could not adopt a Joint Communique. Cambodia as the AMM Chair was reported to have refused to incorporate the Philippines and Vietnam’s concern regarding the South China Sea dispute. In turn, both the Philippines and Vietnam kept on insisting on a reference to the final document. Observers noted that this was the first time ASEAN had failed to issue a joint communique throughout its history.

Options

First, ASEAN needs to make evaluation and re-examination on its concept of ASEAN centrality. The ASEAN centrality assumes that ASEAN puts the ASEAN cohesion at the forefront of ASEAN diplomacy in dealing with various issues. The ASEAN voice in projecting an ASEAN centrality has thus gained much respect from non-ASEAN members particularly through the ASEAN Regional Forum (ARF) and the East Asia Summit (EAS). In this process, the APSC Blueprint basically tries to strengthen the ASEAN centrality in the evolving regional architecture.

Second, unlike the European Union, ASEAN members as a matter of fact still maintain their national sovereignties in making decisions vis-à-vis regional political and security matters. The establishment of the ASEAN Community does not abolish their sovereignties.  To prevent from any possible disagreement among its members, ASEAN may adopt an alternative approach of a non-engagement attitude towards any dispute or conflict involving big powers in the region.

Recommendation

Given the complexity of the geopolitics and geostrategic in the region, ASEAN best interest is to strengthen its collective position towards the South China Sea matter through maximizing the principle of centrality. ASEAN is highly respected when it acts as a regional institution especially when it comes to a dialogue and negotiation with other external forces.

Since the concept of ASEAN centrality is evolving, it needs a continued evaluation and re-examination. ASEAN therefore may consider to establish the Eminent Persons Group (EPG) composing of respectable individuals which may advise inputs on the evolving practice of ASEAN centrality including in view of possible disagreement or conflicting situation. The ASEAN Secretariat needs to be given a mandate to prepare for the working document of the EPG.

While the second option should not be considered since it will undermine the ASEAN ability in solidifying its position towards various political and security threats. It also will reduce the ASEAN commitment to play a pro-active role in managing the dynamics regional architecture.

Conclusion

In its essence, the ASEAN Political Security Cooperation has been instrumental in embodying and strengthening ASEAN’s ability in transforming the South East Asian region to become a stable and peaceful region. In such a doing, the world affairs keeps on changing. New political and security challenges have accordingly emerged. The ASEAN should adopt a bold step and take on more creativity in facing these new type of challenges.

The ASEAN achievement in maintaining its centrality in the world affairs should be strengthened by its members. In this regard, the ASEAN should keep moving forward in promoting and implementing the APSC agenda by carrying out evaluation and a continued re-examination of its centrality implementation despite the existing sovereignty of its members.

Jakarta, 15 April 2016

The Korean Experience in the Development of Transport and Communication Sectors

(Prepared by Agung Cahaya Sumirat, Patrick Hasjim and Priadji for Sesparlu-54 Group Blog)

After being ravaged by war in early 1950s and becoming a poorer country than most African countries in the 1960s, South Korea has now emerged as the 15th biggest world economy. The prominence of South Korean economy is impressive. The Hyundai, Daewoo and Samsung groups are the backbone of the South Korean economic achievement. The very first foundation of Korean economic success was the launching of First Five-Year Economic Development Plan in 1962, which then generated huge demand for new technologies.

The South Korean strategy was to initially rely on foreign technology sources through the adoption of technology transfer. At the same time, the Korean established policy to develop its capacity designed to digest, assimilate and improve upon those new technologies. The South Korean experience is worthy of learning and is indeed a best practice. How can Indonesia learn from the Korean experience in the development of transport and communication sectors?

Trends

Source pic: ibtimes.com

Over the years, the image of Korean products has steadily improved and now become the world’s market leader. In the car industry, Hyundai is the world’s largest company in industrial equipment sector and the 4th largest global car company after Volkswagen, Toyota and Daimler. The other data has shown that in 2015 the South Korea produced 4.56 million vehicles. This has placed South Korea in the fifth world rank in terms of car production, behind China, the US, Japan and Germany.

During the Asian crisis, the Hyundai Group took the advantage of the crisis situation by buying Kia, the third biggest South Korean car company. The bankruptcy of its main competitor, Daewoo, has also opened the way for Hyundai to control 80% of the national market. Other groups has followed the Hyundai’s strategy of restructuration and rationalization, such as Hanjin (transport) which controls Korean Air.

Source pic: mobile.reuters.com

In 2015, Samsung was the world’s second biggest brand, after Apple, in terms of consumer electronic and high-tech industry sales. Samsung has occupied 20% of the global market share. In electronics, Samsung has engaged in a tougher competition with other established brands like Siemens, Motorola, Nokia, and Sony. It has also engaged in a fight with Apple for the global technology leadership. The group now represents 10% of Korea’s national income and 20% of its total exports.

South Korea is also one of the most notable countries in possessing an advanced internet communication access. Nothing symbolizes a better South Korean global influence than the success of the song “Gangnam Style”. South Korean has acknowledged that its economy could take full advantage of the global enthusiasm for the South Korean cultural model. The Korean Government has therefore proactively supported the production and export of audio-visual works and at the same time put limitation on the importation of foreign films. The Government has established Koica to help SMEs in producing and selling Korean films.

Policy option

There are options that Indonesia can learn from the success of South Korean experience in the development of transport and communication sectors as follows:

First, South Korean policy-makers are strongly aware about upgrading the education and technology system. They think that technology mastery should come first before it enters into a tough global market competition. The Government assumes full responsibility for the promotion of human resource development and deems that technological competence becomes a critical factor. South Korea has over the past four decades invested heavily in research and development (R&D) as well as innovation. South Korea is one of the biggest countries for spending in research and development in the world.

Second, another key to South Korean success is the dominance of major Korean conglomeration groups, mainly established in the 1960s. The design of the conglomeration is structured as multi-diversified conglomerates. Thanks to the Asian crisis, this conglomeration system has been successful in settling excessive indebtedness through a severe restructuring. Samsung is the best example in this regard.

Third, the promotion of South Korean’s pop-culture which has been successful in promoting Korean music and films to the outside world. The Korean pop stars have been gaining wider popularity not only in the Asian market, but also spreading out to Europe and America. This success has been influenced by the combination of technological innovation and cultural creation.

Policy recommendation

Based on the three options above, arguably the most important part that Indonesia should learn from the South Korea is creating policy to prioritize investment in education and research development in technology. The South Korean experience has clearly shown that gaining the world’s acknowledgement to its high technology product neccessitates much investment in a long time period. But in the end, it makes a stronger competitive edge of its products in the world market.

Conclusion

There is much best practice that the world can learn from the South Korean experience. In fact it attests to the fact that there is no an over-night job for creating high calibre capacity in technology product development particularly in transport and communication sectors. The R&D is a fundamental key that any country needs to take if it wishes to become one of the leaders in global market.

Fortunately, Indonesia and South Korea have forged an enhanced bilateral cooperation through a strategic partnership. This is a good platform in advancing bilateral cooperation with the South Korea for the future. The key highlight is the agreement of both countries in the development of military jet of KFX/IFX which has been signed by PT Dirgantara Indonesia (PTDI) and KAI last year. This project may take up more than ten years to be materialized. Both PTDI and KAI will work together in the maintenance/sustainability, modification and upgrading of KFX/IFX. This means that there is a bright prospect for both countries in advancing wide arrays of cooperation in technology related capacity.
Jakarta, 11 April 2016

Problem and Prospect of Infrastructure Development in Indonesia

By Agung Cahaya Sumirat (Sesparlu 54 #8 blog)

Source pic:http://cdn.klimg.com

Indonesia has to redouble its focus in infrastructure development if it really wants to boost a long-term growth and enhance its competitiveness. Compared to other emerging economies, Indonesia is now lagging behind in many parameters of infrastructure capacity. Based on the World Economic Forum’s (WEF) Global Competitiveness Index (GCI) in 2015-2016, Indonesia’s rank has been on the 37^th, dropping off from its 34^th position of the previous year.

Under such circumstances, Indonesia is also facing an inter-regional infrastructure gap particularly between Java and the other non-Java regions. 70% of overall financial circulation has centered in Java. Rice, gasoline and cement are much more expensive in eastern Indonesia than in Java or Sumatra due to expensive transportation costs. How can Indonesia enhance its infrastructure capacity while facing this pressing complexity?

Lack of infrastructure has made Indonesia’s logistics costs very high. This in turn has contributed to reducing the country’s competitiveness and attractiveness to potential investment. More or less 17% of a company’s total expenditure is used for logistics cost, mainly for land and sea transports. While in other regional economies, the average logistics cost is already below 10%.

However, the most pressing challenge in infrastructure development is the limited sources of financing. Indonesia needs 450 billion USD to develop its infrastructure in five years’ term. The government expects to finance 50% of this figure while the rest should come from private sector. As a matter of fact, it is not easy to seal the deal on the private sector’s investment. Indonesia has to compete harder with the other “thirsty” Asian countries to tap as much as source of investment. Asia countries need 10 trillion USD of infrastructure financing in the next ten years.

Positive Trends

The Indonesian Government has shown a strong commitment to develop infrastructure particularly roads and ports. The Government has an additional financing of 230 trillion rupiah (about USD 8 billion) from halting policy of fuel subsidies.  60% of that figure will be spent on infrastructure development. It has also allocated 100 trillion rupiah to the Ministry of Public Work to execute infrastructure development programme.

The Government has increased the village fund allocation in the state budget from 20.7 trillion rupiah in 2015 to 46.98 trillion rupiah in 2016. This aims at creating a positive economic cycle in the villages.

Furthermore the Government has established a national infrastructure plan which has been laid out in the 2015-2019 National Medium-Term Development Plan. This covers among others the production of 35,000 megawatts of electricity in the next ten years, the development of 1,095 km of new toll roads, 5,000 km of railways as well as 15 airports and 24 seaports development in the next five years. The projects will be concentrated in six “economic corridors” of Sumatra, Java, Kalimantan, Sulawesi, Bali-Nusa Tenggara, and Papua-Maluku.

While in boosting the scheme of Public-Private Partnership (PPP), the government has amended the law on PPP which aims at improving transparency and clarity in the tender process of infrastructure projects. It has also established the Indonesia Infrastructure Guarantee Fund to arrange government guarantees for PPP projects.

The Parliament has passed the Land Acquisition Law which allows the government to obtain civilian land for public works projects. The law also provides adequate compensation to the land-owners.

Possible Options

Considering the on-going positive trends in enhancing infrastructure development, there are options to be considered for the next policy follow up namely:

First, Indonesia should enhance its international networking to obtain alternative sources of funding including through Asian Infrastructure Investment Bank (AIIB). Indonesia has an adequate bargaining on AIIB since it is a founding member of the AIIB. The AIIB is set to focus on infrastructure projects of larger scale, such as toll roads and seaports. This may fit in the Indonesia’s infrastructure development priority. The AIIB can complement the existing multilateral financial institutions like the Asian Development Bank (ADB) and the World Bank.

Second, there is a need to follow up the President’s commitment to allocate 60% of the national budget to support the eastern part of Indonesia’s development. Out of 122 of impoverished regencies or “kabupaten”, 83 of those are in eastern Indonesia. It therefore needs a strong political will to realize this commitment.

Third, there is a need to realize the political will to de-regularize policies which inhibits development process, particularly the reduction of 42,000 regulations as mentioned by President Jokowi. In the same spirit, there is also an urgent need to improve harmonization of policies and coordination among government’s stakeholders in facilitating investment potentials.

Conclusion and Recommendation

Attracting investment in infrastructure sector means that the Government needs to push more for creating a conducive investment climate. Indonesia needs to send a strong message that it really means business. Otherwise, the business circle will not see any lucrative point out of the government’s serious efforts.

In that regard, I would pick up the third option as the preferred recommendation. The Government needs to continue its deregulation policy. The main source of the lack of infrastructure investment has been on the excessive and overlapped of regulations. Scrapping the excessive regulations should be the first priority. Since tackling this problem will not only be able to enhance policy coordination among various government agencies, but this will also enhance much bigger opportunity for investment including for the remote places and eastern part of Indonesia.

Jakarta, 8 April 2016

Challenges of the Indonesian Creative Economic Agency In Managing the Creative Economy Sector

(Prepared by Agung Cahaya Sumirat, Patrick Hasjim and Priadji for Sesparlu-54 Group Blog #7)

Source pic: http://detiklgminews.co

At a glance, creative economy seems to be a new word to many of us.  Indonesia has in fact already had a projection on the concept of this creative economy. The establishment of Ministry of Tourism and Creative Economy in 2011 was the first signal of the Indonesian Government’s recognition to the importance of a creative economy. As years pass, the new government of President Joko Widodo has established the Indonesian Creative Economy Agency or Badan Ekonomi Kreatif (Bekraf) since 2015. This article wishes to explore the Indonesian creative economy that the Bekraf must manage and provide recommendation afterwards.

Bekraf’s Mandate

Bekraf’s vision is to make Indonesia a world leading power in creative economy in 2030. Bekraf tasks are to formulate, establish, coordinate and synchronize policy in the field of creative economy. The scope of creative economy among others includes application and game developers, architecture, interior design, visual communication design, product design, fashion, film, animation, and video, photography, crafts, culinary, music, publishing, advertising, performing arts, visual arts, and television and radio.

Bekraf has set up priority programmes such as the establishment of ICINC (Indonesian Creative Incorporated), Creative Economy Ecosystem across Indonesia, and Indonesian Creative Design Center (ICDC); the creation of Indonesia’s as center of the world Moslem fashion in 2016; Coding Mum Project as a training for household wives to become coder/programmer; and alternative screen for Indonesian film production.

Trends of Creative Economy

Creative economy contributed 7.1% of the GDP and  absorbed up to 12 million workers based on the data of 2014. This means that creative economy has a strategic potential to contribute to the poverty alleviation and job creation.

One of a good case of creative economy which has elevated the local economy is Kasongan, a village near Yogyakarta. Kasongan is known for its ceramics industry since early 1970s. It not only manufactures products like pots, masks and sculptures for the domestic market and export abroad, but also has become a cultural destination, where tourists can visit the workshops, discover the extraordinary variety of ceramics exposed in family workshops and buy souvenirs.

In addition to that case, Indonesia has much social economic capital for promoting creative economy. We have a prospective demographic bonus. Around 50% of our 250 million population is young people aged under 30 years old. With continued education upgrading programme, the Indonesian youths would be more creative, skillful and knowledgeable in driving the creative economy. Around 80 million of Indonesian middle class possesses strong purchasing power.

Likewise, the digitalization of our society has strengthened the platform for blossoming online creative economy process. The rapid development of IT-based start-up businesses in transportation businesses such as Go-jek, Grab Bike, Grab Taxi, Uber, Blue-Jek and Lady-Jek have made our life totally changed. The multi-dimensional services that they offer seemingly unthinkable before but this is a real happening now. Thousands of GoJek drivers now have enjoyed a significant income rise. On the other hand, the customers are happy with their multiple services at much lower costs.

Alternative Room for Improvements

There are several options that the Government needs to take in optimizing potentials for the Indonesian creative economy among others are:

1. Bekraf needs to build a roadmap and develop coherent development strategy and give guidance as well as support to all stakeholders of the creative economy. It must also strengthen communication and coordination with various State Ministries (including the Indonesian Embassies), Non-Governmental Agencies, local authorities and other relevant parties;
2. Bekraf needs to scout, open auditions, gather talented individuals with creative resource or skills, and promote them to become globally recognized. It is an opportunity to potentially create wealth and jobs;
3. The need to promote the high quality of film production. This film market is still under developed. In Korea for example, film’s budget is included in the state budget, for they consider films as locomotive of other sub-sectors, such as fashion, music and gastronomy. As a package, we need to intensify movie screening programme of the films in remote and isolated places;
4. There is a need to promote new and comprehensive legislation on promoting of as well as give a stronger legal basis for creative economy.
5. The Government should continue enhancing digitalization programme for wider population particularly providing as much as internet access in order to prepare conditions for the optimalization of online type of creative economy.

Conclusion and Recommendation

There is an enormous potential in cultivating the creative economy, but on the other hand  there are challenges to develop this prospective sector. To improve this, based on the options above, we would suggest that there are three most urgent steps the Government needs to do. First, the Bekraf needs to establish a clear roadmap for the promotion of the Indonesian creative economy. Second, the Bekraf needs to enhance communication and coordination among governmental agencies and other stake holders to focus on the work of creative economy. Third, there is a need to promote new and comprehensive legislation for progressing the creative economy so that it will lure investment and encourage those business communities involved in the creative economy.

Jakarta, 4 April 2016

 

Social Media as a Powerful Platform for Political Change in Indonesia (by Agung Cahaya Sumirat)

Our world has changed because of social media. There are more than 2 billion social media users worldwide. This number is growing by 25% each year. The world is now getting more connected. The power of social media has been enormous. Some 70% of young people worldwide believes that social media can be a force of change. Indonesia is no exception in this regard.

As one of the most active social media users’ countries in the world, Indonesia is the fourth biggest users of Facebook and the fifth biggest users of Twitter. Jakarta specifically is the number one Twitter city in the world. Online business is booming. Young people are taking a lead in online businesses.

The euphoria of social media is happening across the country. The power of social media has also impacted the Indonesian political life. What is the role of social media in shaping our politics?

The Power of Social Media

We have heard the powerful use of social media in bringing the wind of change in Middle East through the movement of Arab Spring. In Indonesia, the social media has also been influential in succeeding Pak Jokowi’s bid to become the new Jakarta’s Governor in 2012. Pak Jokowi’s next move to run in the Presidential Election in 2014 was another case of how powerful social media as an effective tool to garner public support.

To a significant extent, the success of President Jokowi in winning the Presidential Election happened owing to the overwhelming support of social media users particularly the young people. Since then, the role of social media in Indonesia’s political life has become more prominent.

The Posture of Social Media

According to one source, in Indonesia there is 88.1 million of internet users; 79 million of social media users, 62 million of which are mobile users; and 318.5 million mobile connections. Around 67 million are mobile social users; laptops and desktops account for 45%; and tablets users shares only 4%. The young people are the most active internet users in Indonesia. Around half of the Indonesia’s population is under the age of 28.

The most popular social networks in Indonesia are Facebook, Twitter and Google Plus. While in chat apps, WhatsApp, Facebook Messenger, Skype, and Line are competing hard to lead the market share. However, Indonesia is still battling with the problem of digital divide. In big cities and urban areas, internet infrastructure is good but many remote parts of Indonesia are having difficulties in accessing the internet.

Social Media in Politics

Nowadays, many more Indonesian politicians are fully aware of social media. They are cultivating on the social media as a means of communication with the public. In addition to President Jokowi, it is good to note that Governor of Jakarta Pak Ahok, Mayor of Bandung Pak Ridwan Kamil, Governor of Central Java Pak Ganjar Pranowo and Mayor of Surabaya Ibu Risma are active social media users.

In the case of reforming the bureaucracy in Jakarta, Pak Jokowi and his successor Pak Ahok have introduced a new approach in relaying the Jakarta’s Government activities including internal meeting through Youtube channel. Public can easily monitor the process inside the Jakarta Government’s office. Most highlight of these is when public see what Pak Jokowi has done with his “blusukan” agenda and how Pak Ahok gets upset when he finds wrongdoing in the execution of certain projects. Owing to this transparency policy, public are more aware about the Jakarta’s Government’s budget, salary of the Governor, and the ongoing bureaucratic reformation process.

Despite some cons on this new approach, but there are fundamental lessons that are positive in advancing democratic process in Indonesia. The public is learning to be more participative in the political process. Their voice will be heard. There is no more barrier in dealing with their leaders. Their leaders are accessible. This is a good culture to deliver the value of public accountability.

The role of social media also goes beyond the politics during the election. In daily life public can become a fierce watch-dog toward high profile issues such as corruption, lack of public service, parliamentary performance and bureaucracy mismanagement.

In such a connection, the social media has played an important role in influencing public opinion and provides alternative channel of information. The emergence of social media has greatly influenced the process of democracy in Indonesia.

However, in the previous general election in Indonesia there is a lesson learned. There were cases where the supporters of certain party applying black campaign in attacking their rivals. This should not happen again in the future.

Conclusion

Social media has become a powerful factor in shaping the political process in Indonesia. It serves to strengthen the check and balances mechanism of the executive, legislative and judicative power. It also has an important role in educating the public’s political awareness and participation.

Given the current activism of social media in Indonesia, we should be more optimistic for our future democracy. The social media will continue to enrich the working of democracy and serve as an important backbone of the democratization process.

Jakarta 31 March 2016

Should the World Bank be Reformed?

(Group Blog of Sesparlu 54 by Agung Cahaya Sumirat, Ferry Akbar Pasaribu, and Priadji)

source pic: http://newsnextbd.com

The World Bank has been playing an important role in financing international development for the last seven decades. Its role as the provider of financial resources as well as expertise on development related matter has positioned the World Bank at the forefront on global efforts in alleviating the world’s development challenges. However, there has been critics which points out that the World Bank is not able to respond to the shifts on the current global economic development. Some quarters have suggested that the World Bank needs organizational reform. So how to reform the World Bank?

New Realities
New middle-income countries, which used to be the World Bank’s clients, now plug their development fund needs through commercial markets, which offers bigger funds and less complicated procedures. Furthermore, the newly established institutions such as think tanks, universities, research centers and others are mushrooming, and they could also provide high quality expertise on addressing development issues.

Domination of developed countries, especially the United States that has veto right over major decisions, seems as a major irk to the new emerging economic powers. Countries such as China, India, Russia, Brazil, and South Africa have voiced concerns for being under-represented to the decision making process at the World Bank. China therefore took the initiative to establish the New Development Bank with Brazil, Russia, India, and South Africa (BRICS) as well the Asian Infrastructure Investment Bank (AIIB).

With regard to the increased inequality among countries, the World Bank standing argument is that the economic growth will be able to address it. However, it turned out the other around so far. Also, the World Bank’s argument to expand export has been disastrous for the developing countries, as it led to an overexploitation over their natural resources. In such cases, the World Bank’s role to promote ‘development’ deemed as a failure. These are the push factors why the World Bank should reform itself, if it wants to stay relevant.

The Challenges

Jim Yong Kim, the World Bank President since 2012, realized that he has to launch a substantial reform in order to keep the World Bank relevant towards the current economic shift. The World Bank has to undergo managerial and operational reforms. However, there are some major hurdles that Kim is facing in his efforts to reform the World Bank. First, the World Bank has transformed to become a huge bureaucracy, with more than 16,000 staffs, most of whom are permanent ones. Operational cost is unbearably expensive.

Second, the Bank was structured into 6 regional offices, which caused horizontal coordination amongst those offices to be more difficult. Accordingly, the World Bank’s efforts to encounter the world’s current development issues such as epidemic diseases, climate change, and others need to be divided into regions. At the very end this has been deemed as eroding the Bank’s efficiency in handling the world’s pressing issues.

Third, the World Bank’s executive board and share composition are basically a rigid structure, despite how different the world today in terms of distribution of power and influence in the global economy order. The creation of Group of 20 (G-20), where some new emerging economies such as Brazil, China, India, Indonesia, Mexico, Turkey and South Africa joint the developed ones, is a reflection of new realities in the world. So far those countries are not yet proportionately represented in terms of voting right.
Measures for Reform
There are some identified measures that worth considering to reform the World Bank:
First, the good governance such as voting right has to represent the current global economic order. Some view that the ideal decision making mechanism are by 50-50 representation between developed and developing countries. Also the issue of good transparency in transparency, equitable, and representative are to be addressed. In this regard, the Meltzer’s Report published by the US Congress suggests that the reform emphasizes on leadership and controlling structure.

Second, with regard to the views that the World Bank deemed to favour commercial giants, it is timely that the World Bank makes a shift by focusing more on local economic development of its client countries. Third, the World Bank should narrow the time gap between the period of an eruption of economic crisis in one country and the decision taken to assist the said country. It often happened that the gap was caused by the long negotiation over the conditions that the country in crisis must accept before it got the required financial expertise and support.

Fourth, there are some areas where the developed and the emerging economies agreed upon, namely: 1) focus on the fight against global poverty; 2) simplify the operation process; 3) enhance the technical resilience in responding to short-term global crises and 4) a more assertive World Bank leadership to reshape the international financial system.

In addition to that, for Indonesia, the main issue is on how to improve the social security net and to write off foreign debt. The World Bank should do more on debt reduction/relief since as it serves as drag factor to the developing countries’ economic growth.

Conclusion
Given its good track in providing development assistance to the developing countries at their early stage of development, the World Bank has the modality to continue doing so despite the shifting of the global economies. Therefore, the World Bank has to take immediate measures to cope with this new realities. The new emerging countries need to play more roles commensurate with their economic size.

The World Bank should consider to focus its reform by taking the fourth option, since the majority of its members have had a common ground on the 4 core areas of reform. These measures have to be immediately put in place if the World Bank would to retain its role as a knowledge bank in the world’s development process.

Jakarta, 28 March 2016

The Need to Develop an Alternative Source of Energy in Indonesia

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(by Agung Cahaya Sumirat)

Indonesia is no longer an oil exporting country. Our oil production reached its peak in the 1990s and it began to decline afterwards. In 2004 Indonesia has become a net oil importing country. Our national consumption of oil is more or less 1.6 million barrel per day (bpd) while our oil production capacity is less than 800,000 bpd. This is in stark contrast with our highest oil production record in the midst of 1990s which reached 1.6 million bpd. On the other hand, there is inevitably a future rapid growing of Indonesia’s population. In 2016 we already have 250 million of population. We therefore need to narrow the gap between energy demand and energy production.

In such a context, developing alternative energy sources has become a focus of the Indonesian Government’s objective in addressing the country’s lack of energy. In this article, I wish to highlight what type of new and/or renewable energy alternative that should be developed and provide recommendation.

Source pic: http://www.gbgindonesia.com

Shifting Paradigm to Use New and Renewable Energy

There has been a significant shift of paradigm in the management of the Indonesian energy policy. Despite an existing strong reliance on the use of fossil fuels, the Government has carried out steps to enhance a diversification of energy sources.

The Indonesian Government has adopted Law 30 of 2007 on Energy which among others stipulates the need to strengthen an energy security policy to ensure the availability of and access to energy. The Presidential Regulation Number 79 of 2014 regarding National Energy Policy or “Kebijakan Energi Nasional” (KEN) has also been adopted. The KEN highlights the need to develop New and Renewable Energy (NRE) which includes inter-alia geothermal, solar, micro-hydro, wind and bio-energy.

The KEN has set the target of achieving an energy mix by 2025 consisting of 25% of oil, 30% of coal, 22% of gas, and 23% of NRE. While the national energy mix in 2014 was 41% of oil, 30% of coal, 23% of gas, and 6% of NRE.

This policy basically suggests that the Government has a political will to develop energy diversification including through conversion of coal and petroleum-based fuels to renewable energy sources. This policy has also been instrumental in matching the overall national policy in reducing greenhouse gas emission of 26% by 2020.

Geothermal Development as a Best Option of NRE

Geothermal energy is found through cracking the rocks within the earth and extract the heat, steam or hot water which emerge from the tiny fractures of those rocks. Geothermal basically is the result of volcanic geology activity. Indonesia has lots of volcanic mountains. That is why it has enormous geothermal potential.

Its potential can reach as much as 28,000 megawatt (MW) of power. This accounts for 40% of the world’s geothermal potential resources. Currently the Indonesia’s geothermal production capacity accounts only for 1,200 MW and is the third biggest geothermal producer after the US and the Philippines.

The salient benefits of geothermal compared to other NRE inter-alia are its high availability as a source of energy, unlike the solar and wind energy. It is also categorized as a very environmental friendly type of energy.

The current Indonesian President Joko Widodo last year has stated that Indonesia will focus on the development of geothermal as a renewable source of energy. This is in fact an encouraging development.

Previously the former President Susilo Bambang Yudhoyono has also announced a plan to build 44 new geothermal plants by 2014, which will produce a capacity of 4,000 MW. By 2025, he also set out Indonesia’s plan to produce 9,000 MW of geothermal power, to become the world’s leading geothermal energy producer.

However, there are challenges in geothermal development inter-alia on its high cost-investment. It may take 5 million USD for one source of geothermal infrastructure. Its location is often in remote places and can be located within the area of protected forest. This may pose a delicate controversy so as to whether to prioritize the geothermal energy or the forest conservation.

In addition, geothermal investment is a long term project and has quite high risks. The investors may take a lengthy calculation of its return on investment in this sector. Thus far there are three main players in the geothermal business in Indonesia namely Chevron, Star Energy and Pertamina Geothermal.

The Way Forward

In recent years the overall energy diversification has progressed at a very slowly pace. Renewable energy production (hydropower, geothermal and biomass) makes up of only 3.4% of its total potential reserves. Despite an already policy shifting to energy diversification, but there has been not much significant progress. This may be associated with the lack of investment in this sector.

One source has estimated that in the next ten years, Indonesia needs an investment of around 1,600 trillion rupiah by 2025, to be able to achieve the diversification energy targets. Out of this, geothermal investment needs 475 trillion rupiah while the other sources of NRE needs 645 trillion rupiah for bioenergy, 320 trillion rupiah for hydro, and 160 trillion rupiah for other new energy.

In view of these, the Government needs to carry out several steps. It needs to enhance policy coordination among various government agencies at the national level in order to follow up the President’s instruction on prioritizing the geothermal development. There is also a need on enhancing policy coordination between the central and the local governments since several permits and licensing needs the involvement of the local government, in line with the existing autonomy law.

We also need to simplify the policy framework to encourage investment in the geothermal sector. The Government should consider the development of a single integrated service to follow up geothermal investment inquiries. All geothermal business inquiries should be channeled through this mechanism.

Other option that the Government needs to take is to establish a state owned company which its core business specifically operates in geothermal energy. Given the huge amount of geothermal potentials, this can be a good step to take to really make geothermal not only as a dormant potential but turn it into tangible results for securing the future Indonesian energy needs.

Jakarta, 25 March 2016