Report INFID Conference, Hotel Santika, Yogyakarta 2002

8/14/2019 Report INFID Conference, Hotel Santika, Yogyakarta 2002

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Proceedingsof The 13th INFIDs Conference 2002

PREFACE

Indonesia is in the midst of deep systemic transition triggered by the 1997 financialcrisis and the aftermath of three decades of military dictatorship. Since the last INFIDconference in 1999 the present process of globalisation has increased inequality andpoverty in Indonesia today.

The heritage of the Suharto era is still overshadowing the current political process,and the excesses of crony capitalism continue unimpeded. Indonesia continues toface the severe effects of increasing poverty with over 50% of the population nowliving on less than US$ 2 per day, and a debt burden that now exceeds US$ 140billion. The repayments on debt are having a dramatic impact on social policy, asexpenditure on basic services continues to be reduced.

The process of decentralisation has many shortcomings with limited power andresources being transferred to the regions and municipalities. Where this hasoccurred, there have been serious problems of corruption simply moving fromcentral to regional lites. The power and role of the military in society continues toobstruct democratic reforms. The military and police continue to commit humanrights abuses and act with impunity. The government needs to strengthenaccountability to the Indonesian people.

Since 1999 NGOs have gained new freedom and opportunities to inform publicopinion and to strengthen the capacity and voice of civil society. There is, however acontinuing need for the government to acknowledge and incorporate thecontribution of NGOs to the development of government policy.

In response to these challenges INFID held its 13th Conference with the theme ofInequality, Poverty and Impunity: the Challenges of Indonesia in the Era ofDemocratization and Globalization from 30 September 2 October 2002 at the HotelSantika, Yogyakarta, Indonesia.

The Conference was attended by 234 people, consisting of 13 Speakers, 30 Membersof the Press / Media, 23 Network Members, 13 Local NGOs, 9 International NGOs, 6International Institutions, 39 INFID Indonesian Participants, 12 INFID non-Indonesian Participants, 4 INFID Observers, 12 INFID Board Members, 52Individuals, 20 people from 11 Funding Agencies and 1 Embassy Representative.

On Saturday 28 September, a Press Conference was held to introduce the Conferenceand its three themes of (1) Inequality and Poverty as a Challenge, (2) Debt andGlobalisation (3) Impunity, Conflict and Human Rights. For a copy of the 1st ConferencePress Release, please see Annexes F. Prior to the Conference on 29 September the 1st

Board Meeting for the Conference was held to discuss issues such as preparation ofthe Conference, agenda of the GAM, and decisions on the drafting committee.

Hotel Santika ~ Yogyakarta ~ Indonesia29 September - 02 October 2002

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Simultaneously to this Board Meeting, the Open Forum was held for IndonesianNGOs on Social Movement in Local Autonomy. The Forum was split into twodiscussions.

The first discussion on Development and Social Economic Rights was held in the

morning and moderated by Wahyu Basjir from IDEA. Three speakers for the firstdiscussion session presented issues on (a) Social Protection and Realisation ofEconomic, Social and Culture Rights / Perlindungan Sosial dan Realisasi Hak-hakEkonomi, Sosial dan Budaya (Muhammad Farid from SAMIN) (b) ECOSOC Rightsand Women in Indonesia / Hal-hak Sosial Ekonomi dan Perempuan di Indonesia(Nursyahbani Katjasungkana from Koalisi Perempuan Indonesia), and (c) MuchtarAbbas from GAPRI.

The second discussion session on Managing Public Participation, Local Politics andGood Governance was held after lunch and moderated by Amin Miftiyana from

YASANTI. Two speakers for this second discussion presented issues on (a) WomensQuotas in The Parliament and The Struggle for Public Participation (Budi Wahyunifrom PKBI Yogyakarta) and (b) The Expropriation of Social Rights in PublicParticipation Management Discourse in Influencing Decision Making (MartinusUjianto from Forum LSM Yogyakarta).

The Conference Opening Ceremony was held at the Sultans Palace on the night of 29September 2002, and was attended by invited guests and Conference participants.Welcome speeches were delivered by Zoemrotin K Soesilo (Chairperson of the INFIDBoard) and the brother of Sri Sultan Hamengku Buwono X, GBPH Prabukusumo.

Dinner and traditional performances were enjoyed by the guests.

On Monday 30 September, INFIDs 13th Conference was opened by Zoemrotin KSoesilo (Chairperson of the INFID Board) and introductory presentations were givenby A. Syafii Maarif Central Executive Board Muhammadiyah on Managing theChallenge of Globalisation. Following the presentations, business announcementswere made regarding Board nominations and the Drafting Committee, moderated bySandra Moniaga (INFID Board Member). The Conference was then divided into 3consecutive panel sessions exploring the three Conference themes throughpresentations followed by discussions. Panel Session I on Inequality and Poverty as

a Challenge and Panel Session II on Debt and Globalisation were held on Monday,30 September and Panel Session III on Impunity, Conflict and Human Rights washeld on Tuesday, 1 October.

The speakers for the three Panel Sessions included:

Panel Session I Inequality and Poverty as a Challenge

1. Dr. Satish C. Mishra from UNSFIR, speaking on Systemic Transition in Indonesia:The Crucial Next Steps

2. Drs. Djoharis Lubis MSc (4th Deputy Co-ordinator for the Indonesian Ministry ofPublic Welfare), speaking on Poverty Problem in Indonesia and Indonesias Strategy

3. M. M. Billah from KIKIS, speaking on Against Impoverishment: An AlternativePerspective from Non-Government Organisation for the Mainstream Paradigm


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4. Andi Mallarangeng from the Institut Ilmu Pemerintahan, speaking onDecentralisation and Poverty Alleviation

Panel Session II Debt and Globalisation

1. Prof. Mohan J. Rao from the Department of Economics University ofMassachusetts, speaking on Globalisation, Debt and Development: Lesson and Policy

Alternatives Facing Indonesia2. Irene Knoke from the Sudwind Insititut, speaking on International Insolvency

Arbitration: Towards a New Sytem for External Debt Management3. Hira Jhamtani and Bonnie Setiawan from the Institute for Global Justice, speaking

on The Doha Agenda: The Death of Development in Indonesia?4. Dr. Ing Nengah Sudja (Independent consultant on Energy Project Development),

speaking on Questioning the Electricity Price of the IPPs: Case Study of Paiton I, aConsideration to a Win-Win Solution

Panel Session III Impunity, Conflict and Human Rights

1. Munir from KONTRAS, speaking on Indonesian Civil Society Strategy for EndingImpunity

2. Otto Syamsudin Ishak from YAPPIKA, speaking on Aceh Case: the Base for Reformor Military Reconsolidation

3. M. Riefqi Muna from RIDEP, speaking on Military Reform in Indonesia: How Farand How Real

Following the conclusion of the last Panel Session on Tuesday, 1 October, theConference was split into three groups to facilitate simultaneous group discussionson each of the three themes. Each working group discussed the issues in-depth andproduced a statement and recommendations that were tabled at the ensuing plenarysession, moderated by Jaimie Isbister (INFID Board Member). The statements andrecommendations were changed and amended as necessary and finally agreed uponduring the plenary session before being transferred to the Drafting Committee, whowere tasked with drafting a Conference Statement to be approved by the Conferenceparticipants the following day.

The Conference Statement was ratified and adopted in the second ConferencePlenary on the morning of Wednesday, 2 October. Following the conclusion of theConference a Press Conference was held to discuss the outcomes if the 13th INFIDConference. For a copy of the 2nd Conference Press Release, please see Annexes F. After thePress Conference, Zoemrotin K Soesilo opened the 1st General Assembly Meeting(GAM) that was held in conjunction with an INFID Conference. During the GAM,the INFID Secretariats Program and Financial Report for 2000-2001 was tabled andapproved, results of the Participant Survey carried out by M.M. Billah were tabledand discussed and the Board Report to the GAM was tabled and approved. Electionswere held for the Board of 2002 2004 were held during the GAM and a new Boardwas successfully elected. For a list of the Members of the new INFID Board, please see

Annexes G.


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On Thursday, 3 October the Board held its second meeting to prepare for the nextINFID Conference, Forum and Board Meeting, to follow up on the results of theGAM, to nominate members to the Executive Board and to welcome the newmembers of the Board and welcome back the returning members. The final PressConference regarding the results of the 13th INFID Conference was held in Jakarta on

10 October 2002.

Jakarta, 21 October 2002


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I. OPENING OF THE CONFERENCE

I.1. Ms. Zumrotin K. Soesilo, Chairperson of INFID

Beginning with a word of thanks to all who came and thanking the organizer andsecretariat.

This conference is held to bring together participants and networks, and because ofwhat we are facing today. Inequality, poverty and impunity are the problems that weIndonesians still have to face in this era of democratisation and globalization.

Our government is facing the New Order Legacy, which rest mainly in tow areas:

1.

Bankrupt economic system, including an unsustainable debt burden andwidespread poverty2. Centralized and authoritarian political system where dominant role of the

military in politics and unjust relation between central government and localgovernment.

Since the end of 1980s Indonesia has moved to liberalize its financial sector andbecome a member of WTO which ratified and implement WTO agreement and alsoimplemented full scale adjustment program imposed by the World Bank and IMFbased on Washington Consensus. Globalization did not lead to greater equality, but

widened the gap between the rich and the poor, where in 1980s, median income ofthe richest ten countries was 77 times that of the poorest, and increased become 149times in the 1999.

Questions from this situation: Has the government done enough and been doing theright things to overcome the problems? What did the NGOs and CSOs contribute toensure the situation does not persist? Have we come up with proposals for alterativesolutions? Can the financial institution assist Indonesia in promoting recovery?Where and how the will the government get the money from for development andserve its citizens ? have we been doing the rights things and speak out the true voice

of the people or our constituent ?

After crisis, more than 50% Indonesian live under poverty, with daily income lessthan US$2. This inequality affects the process of structural poverty and it will also bean obstacles for creating economic growth. Inequality increased since the 1990s, Thisaffects the process of structural poverty and obstacle for creating growth.Widespread poverty is not just the product of crisis, but it could become the sourceof instability and conflict in the future. Gross human rights violations in Aceh,Papua, East Timor and other parts of Indonesia have until now never beensufficiently addressed. One of the main obstacle to a serious human rights

prosecution, and the reason for continuing impunity, is the military, where till now isstill remains a power for force in Indonesia political scene. Will President Megawatibe able to bring this intolerable situation of impunity and the and the everlasting


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dominance of the military to an end ? can Megawati uphold the human rights ? whathave we done to promote human rights and stop impunity ?

Hope in this conference we can find answers to these questions. We should come upwith with pragmatic alternative solotion to the current situation in Indonesia. What

we need is to make a plan, a medium-long term framework which will lead us to therecovery and sustainability or at least outline constructive contribution from us, theNGO community in general and INFID in particular, especially regarding economicand political democratisation process.

Some achievement which weNGOs and civil society have accomplished at thenational level is succeeded in bringing a democratic election in 1999 with havingmultiparty system instead of just three parties, and at the global arnea, NGOs havebeen through and watched closely the WTO meeting in Doha, UNs Financing forDevelopment Meeting in Monterey and World Summit on Sustainable development

in Johannesburg.

However, there are still many agendas have to be carried out to overcome theproblems of inequality, poverty and impunity. INFID will continue to explore thepossibility debt relief and debt arbitration for Indonesia. We must work hard toensure that the cost of integration into the global economy, would not be too hughfor us and we must push the government to spur growth, poverty reduction andequity for the benefit of people.

I.2. Mr. A. Syafii Maarif, Chairman Central Exec. Board, Muhammadiyah

Globalisation has both positive and negative side. On the positive side , the averageeconomic growth rates in the countries that part in the process globalisation hadincreased from 2.9 5 in the 1970s to 3.5% in the 1980s and 5% in the 1990s.

Those who do not participate in the globalisation process, has seen their economicgrowth declining, from 3.3% in the 1970s to 0.8% in the 1980s, though slightly

increasing in 1990s to 1.4%. It also presented the developing nation economicopportunities, open wider access towards technology, science, knowledge.

But globalisation also has its dark side, as expressed by many individuals andcommunities, including the Muslim world. Globalisation has been blamed for thewidening of poverty and income gap and the disparity between the rich and the poorwas 74 to 1 in 1997, a drastic change from the disparity in 1960 which was only 30 to1. Globalisation is held responsible for the impoverishment of more than 1.2 billionpeople who already live below the poverty line, while a few hundreds billionairesare getting richer. The contrast between the winners and the losers in the

globalisation is striking.


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Is Indonesia a loser? It is not a winner, but it is not a complete loser either. Despitethe encouraging signs in the late 1980s, it has failed to fully tap the benefits ofglobalisation and now still struggling to deal with its perils. The force ofglobalization have confused us and forced us back almost to the point where westarted off. The economic crisis started in 1997 is still hitting Indonesia, resulting in

deprivation of tens of millions of Indonesians. We have the rights to be angry for theforces of globalization that marginalized our farmer, worker, fishermen, forced tojustify lower wages, forced to open the market to be dominated by foreign food. Isthere anything we can do ?

Despite our apparent ainability in dealing with the challenges of globalization, weshall not not vent our anger and frustation by resorting to futile acts of violence,become helpless and surrender to the perils of globalization. We should strive toinfluence, manage , shape and make it work into our advantage and resist thenegative effects. We can do this if we manage our future with three imperatives: first,

we have to understand and recognise our own weaknesses; second, we understandhow the forces of globalisation work. Mastering science and knowledge is the key tomeaningful participation in globalization process; third, we should strive and workharder to bring human rights at the centre of our developmenr strategy and policy,the challenge of globalization, especially its effects on widening the poverty gap, canonly be dealt with the bringing human rights to the centre of development.

Development should be geared toward the improvement of the peoples livingstandart. It should not involve just economic growth, but also equitable distribution,enhancement of peoples capabilities and widening of their choices. It should

priorities poverty elimination, integration of women into the development processand protection of the rights of indigenous people.


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II. PANEL DISCUSSIONS

II.1. Inequality and Poverty as a ChallengePRESENTATIONS

Moderator: Sandra Moniaga, HuMa

A. Dr. Satish C. Mishra, UNSFIRSystemic Transition in Indonesia: The Crucial Next Steps

(Paper and presentation are personal view and do not represent those of UNSFIR)

It has been six years since Indonesia was hit by the economic crisis. What was

initially perceived in Indonesia as merely an economic flu turned out to be theprecursor of a systemic transition. What is happening in Indonesia is not just aneconomic crisis. What Indonesia is going through now is comparable to Russia afterthe fall of Berlin Wall or Iran after the fall of Shah. Economic crisis triggerstransformation.

But when we talk about recovery, we often only refer to economic recovery.Economic recovery is like fixing a car, but what we are facing now is more like thetransformation of a caterpillar into a butterfly. We cannot servers the process ofsystemic transition, therefore, we need a different mindset. Very often unifying

vision comes from our enemies. It is indeed easier to find what we disagree with thanwhat we agree with. It is now the time to construct a common platform,interconnected arguments to produce vision onf what we stand for than what westand against. But there is no good school or clear models for systemic transition.Thus, there is no IMF model alone can solve this problem. It has to be realated topolitical, social, cultural aspects.

Four determining priorities to manage systemic transition in Indonesia andcontribution of civil society:

1. Arguing the case of democracy. Civil society has to reaffirm its commitment todemocracy and brings it to the public

2. Dismantling the structural foundation of crony capitalism3. Civil rights-based entitlements4. Building new social consensus. A cross regional consensus on key social

priorities is needed by organising an Indonesian Social summit

Three points need to be highlighted :1. Advanced economics need decentralised decision making. Democracy is

much more stabil as a system. Advanced market economies are democraticpolicies.

2. The essence of crony capitalism is the relation between the military and thestate and business in the economic and political structure in Indonesia. Thereare four areas that can deal with the problem: first, fully funded military


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because you cant control military you cant pay; second, democratic oversightmechanism; third, Indonesian social summit; fourth: optimism: technocratdoes not rule everything and the Indonesian people can influence change.

3. The need to look at wether and how institutional structural changes are beingeffected. There is no need to get pessimistic. No one has the blue print. The

people that know best are the Indonesian people.

DISCUSSION

Discussion focused on systemic transition and how to solve it. The participantsagreed that Indonesia needs to strengthen the grass root , it is important to goingdown to the grassroots, learning from them, learning about their problem.

One participant believes that systemic transition needs a radical breakthrough thatcan touch the root of the problem. Another participant that said, reformation andevolution have failed; therefore revolution is needed because mentality and culturalproblem embedded in Indonesian society supported this statement.

Regime creates followers, thus mentality problems are temporary, when institutionalstructure changed, mentality also changed. There is a need to discuss the reformagenda to be done by civil society, civil society is not government, it criticizesgovernment but should realize in their criticism that government is a part of ademocratic life

One participant feels pessimistic with the economic crises, the military and thespreading of corruption. Another participant saw that it is the government who is incrisis, peoples economy has recovered from the crisis, it is the government who isgetting worst, not the people. It is a must to dismantle crony capitalism and need tofocus what is to be done before means. The civil society needs to launch a totalcampaign against corruption. The civil society has to have, and argue for, a commonagenda, not arguing on the important of civil society

Moderator: Pol Vandevoort, 11.11.11 - Belgium

B. Drs. Djoharis Lubis, Deputy to Coo. Minister for Peoples WelfarePoverty Problem in Indonesia and Indonesias Strategy

I hope I can be considered as a friend, because this is the first time Ive spoken infront of NGOs.

The opening remarks of the Indonesian Constitution of 1945 mandated that

Indonesia improve social welfare, which includes reducing poverty. There are fiverelevant articles in the UUD 45; look at articles 27, 31, and 34. It mandates that the


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poor should be taken care of by the state. Article 34 says the state should alleviatepoverty and empower people. Indonesia has very strong legal issues on poverty.

Why discuss poverty, social welfare, economic roots, stability, and national security?Because social welfare is closely related to the poverty level. To improve social

welfare means to reduce poverty. Systematically, we can say that there are threeindependent variables. Poverty can be reduced if there is economic growth, whichdepends on social-political stability and security. Stability can be achieved if there iseconomic growth and security. To reduce poverty, we need a comprehensivedefinition and approach.

What is poverty? According to the definition from the social summit, it is multi-dimensional, including low level of income, low level of health status, limited accessto irrigation and other public services, homelessness, unsafe environs, discriminationand social isolation, etc. It is also marked by a low level of participation in political

and cultural processes.

The Central Bureau of Statistics says that the percentage of people in poverty wentdown from 40.1% to 11.% from 1976 to 1996. But because of the crisis, it rose again to24.23%. Government efforts to provide basic staple foods, health, and education, andthrough microcredit, have decreased the number of poor from 24% in 1999 to 18% in2000 and then to 17% in 2002. 59% of the poor are on Java and Bali, 16% in Sumatra,and 25% in certain other islands. So more than half of the population in Java arepoor.

What is the problem of poverty in Indonesia? First, centralistic policy. Second,stagnation of microcredit flow. Third, ineffective poverty reduction programs. IDTand JPS were effective in some cases, but mostly unsuccessful. Also, fifth,overlapping implementation and lack of coordination. Number six, but there arelimited resources and experts, inaccurate data, that make it hard. Number seven,approaches are project-oriented, so programs disappear when the project iscompleted. This trickle-down design results in unfairness only those in the centerof power, in the government, have access to opportunities and benefits. The negativeimplications are social conflict, such as in Maluku, Ambon, and other places;disintegration; high level of crimes and social instability, loss of human respect and

dignity.

The government has decided to change the policy by emphasizing equality. How tosolve this problem? One, integrated, comprehensive action. The government hasbeen combatting poverty for more than three decades by providing staple goods,health and education services, opportunities, farm equipment, resources for slumareas. Some are integrated, sectoral. Second, a change in paradigm. Due to changesin political and systems, in a process of transition, the governement has to changetheir paradigm and approach. Third, poverty must be understood as a multi-dimensional problem, in economic, social, and cultural domains. Participation of all

stakeholders, including planning, operating, and monitoring, should be taken intoaccount. The institution should have good governance, transparency andaccessability to poor. Economic growth and economic equality have to be improved


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to reduce poverty. Regional approaches should be based on local needs and wants.In order to encourage participation of all people, we need a comprehensive strategic-policy plan.

How do we establish PRSP? IPRSP is a document, a reference in creating PRSP,

planning long-term strategy, hearing voice of all stakeholders. Since January 2002,the Government of Indonesia has been working together to establish cooperation atdifferent levels. There have been seven meetings to coordinate the PRSP, includingpoverty reduction as a key issue. There have been several meetings in 2002,including NGOs, and we will be conducting another meeting with all of thestakeholders. We have a cross-stakeholder coordinating team, government, NGOs,universities, private sector.

GOI has been making the IPRSP for more than two years and it will be finished inearly October and will be handed it over to the committee on poverty reduction

formed by the President at the ministerial level. The Director-General or Director hasa team to prepare policy reduction poverties. GOI will prepare for implementation inseveral regions where will provide suggestions to tackle poverty in those regions.Recently, GOI met in Medan for all the provinces in Sumatra, in Bali for severalother islands, and soon in Ujung Pandang, GOI will meet for another set ofprovinces. All participants are involved and GOI open the opportunity for all peopleto be involved in making the draft.

Pol Vandevoort(summarizing)

In the Indonesian constitution there is enough legal substance to attack poverty, butexperience has shown that the present policy in fact was not so successful, and thatdue to that the Indonesian government has been rethinking poverty reductionstrategy, trickle-down did not really work, and the office of coordinatin minister forpeoples welfare is involved in creating these more comprehensive frameworkknown as IPRSPs, which are supposed to be more integrating. This is a veryinteresting, challenging subject, because many NGOs and governments around theworld have gone through this process. There is a real debate over the value of these,and their effect on poverty.

C. MM Bilah, KIKISAgainst Impoverishment (Better Than Reducing Poverty) : An AlternativePerspective From Non-Government Organization For 'The MainstreamParadigm'

Billah thought that the explanation from Mr. Lubis was normative and the storyabout the efforts conducted by the government, a partial explanation with somedistortion of thought. Billah wanted us to draw our own conclusions.

Billah explained this issue from a different point of view than the government.When he joined the Bappenas meeting regarding Mr. Lubis draft, there was awoman who, after hearing the explanation of alternative approaches from the NGOs


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who were present, mentioned that poverty could not be eliminated because povertywas destiny, from God. Seventeen years before, Romo Mangun said the poor are notpoor, they are made to be poor. There is an opinion that structural causes are not theonly cause of poverty. One economist says poverty is the result of the lack of capitaland technical capacity. This story describes clearly that every person can have their

own perception, different from other peoples perceptions, of poverty. Theseperceptions are caused by belief and adjustments. Belief is from science whileadjustment is a value adjustment. Poverty can be seen as based on sacred texts, orcan also be seen from a different point of view. This shapes our thoughts about howto resolve poverty issues. These efforts are not happening in Bappenas, even thoughthey quote the results of Copenhagen. Bappenas defines poverty in theconservative paradigm, regarding costs only, including low income and lack ofaccess to resources. This approach is still accepted by many parties, including manybureaucrats, so dont be surprised that there are no serious conceptual efforts totackle poverty. At the grassroots level, NGOs take a different perspectives from the

government regarding how to eradicate poverty. They do not see poverty as a cause,blaming it on the poor, but rather see the process of being poor. Their poverty is notbecause they lack nutrition, or education, it is because the income of therepresentative at Parliament increases.

The crisis has had various effects on poverty first, spreading it more widely;second, deepening it; third, changing its characteristics from a gender perspective:the feminization of poverty. The spreading of poverty includes three factors:increasing the amount of poverty, doubling during the crisis; increasing the sectorssuffering from the crisis, including economic, educational, and health; and increasing

the territories suffering from poverty, expanding to outside Java.

There are various explanations of the causes widening and deepening of poverty.Mr. Misras stated that poverty goes to the farming sector and manufacturing sector,for example from 11.7 to 16, and services, building, and trade are suffering frompoverty. Poverty is also related to nutrition. The index of body weight, a UNICEFmeasure, is decreasing, and there are other examples. There are two types ofindicators, health indicators and human poverty etc. indicators, as well as resources.There is also cultural poverty, a culture of poverty, which makes it impossible forcommunities to escape poverty.

Next, the feminization of poverty. Those who become sufferers of poverty arewomen, because the mothers, the women, the children, are the one who dont getenough food when the familys economy decreases. Women are also laid off first.There are three fields political, meaning that women are excluded from the politicalprocess during village meetings and representative bodies, so there is no genderedperspective, second, women are excluded from social and economic processes.Those who can get credit from the cooperative are the heads of household,traditionally men. Since women are not treated as heads of household, they do nothave access to credit. Third, psychologically women lose confidence and feel guilty

because they have no access and are trapped in the patriarchal structure, hopelessand unable to help themselves.


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Next, globalization of poverty. Changes at the global level include change incapitalist organization and globalization. The production of the world have increasedbut natural resources and the poor have been victimized. The poor are excludedfrom cultural and economic processes. The trade structure does not giveopportunities to poor groups or small businessmen to participate in the world

market. Global institutions also play an important role, through macroeconomicplanning and structural adjustments, particularly the IMF and World Bank. This canbe said to violate human rights, including intellectual property rights issues such asthose surrounding Javanese jamu and soy beans. People at the village level who haveno knowledge of intellectual capital lose out. The triangular division of powerbetween the IMF, World Bank, and WTO rules over developing countries.

So what are the NGO approaches? They see poverty as a process. There is failurefrom the old paradigms, which state that poverty should not be reduced because ifthe economy grows then there will be a trickle-down effect, but this never actually

happens. Therefore, a structural analysis dictates a structural power change, majorchanges in the market, social structure, and political structure. Some say that first,we should create an effective government, so that the government has to take theside of the people, examine the interests of the people. Although Megawati wassupported by the people, her policies are now criticized as ignoring the peoplesinterests. Second, we need agrarian reform and social structural change. Third, weneed autonomous industrialization supported by technology in the country.

NGOs have come up with strategies that basically change production in theeconomy. There are five main dimensions of structural poverty that need change.

First, relationship with power in the political sector. Now, the legislative rather thanexecutive is in power, but they are plagued by corruption. Second, is institutions.Third, is policy. Fourth, cultural. Fifth, physical environment. The anti-povertymovement in Indonesia is a coalition of NGOs continuing KIKIS strategy but with aglobal dimension. There are five suggested actions. First, restructuring therelationship with political power, a major political change at the local level withregional autonomy and at the national level. We add an international dimension,also changing the people in power at the international level; right now, thats whohas money. Second is the economy, for the people. There are three main pillars ofeconomy state, cooperatives, private sector. Third, a pro-poor budget. To this

point, national and regional budgets are not for the poor people. Fourth, to empowerto the people, to organize them, to develop critical power. Last, to restructure therole of donors, the IMF, World Bank, and other international institutions. We nowread that in Washington there are major demonstrations protesting the meeting ofthe World Bank.

Pol Vandevoort(summarizing)Billah has stressed that the current government is still talking about effects, notstructural causes, and that NGOs want to put that in the analysis. Poverty is broader,

deeper, and feminized. There is an important international element of poverty,thinking of structural adjustment and other measures imposed by the IMF, World


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Bank, and WTO. He has talked about five dimensions of poverty, and somealternatives being put forward by civil society.

DISCUSSION

Discussion focused on poverty alleviation and the poor rights, and also critics on thegovernments policy in dealing poverty.

One participant thinks that the government makes people poor in the country andalso in the city, such as street vendors who have no capital because the governmentgives them no capital but rather arrests them and makes them criminals. Moreover,when the government sides with the forces of globalization rather than the people,arguing that the IMF helps the people, the fact is it only aids the businessmen, not the

poor. The peoples situation grows more difficult. The cause of poverty is not onlythe state, but the markets, so a major change requires a change in the oppressivepowers of the centralized state, and also in the market. Thats about free marketideology, which is winning right now. The mechanism of the market can solveproblems of supply and demand but cannot solve the problem of poverty. Thisshould be refused; perhaps the government should intervene to remove distortionsin the market, to make it not favour conglomerates and big capital.

The 1945 Constitution should have been taking care the poor, but the constitutioncant provide it. Indonesia needs a new social contract. This is difficult, because civil

society faces major political powers in changing the constitution and other fights. Thecentralistic policy has made the implementation on the region uncontrolled anduncoordinated. In the future, GOI should change the system or the paradigm ofthinking and behavior to create a climate or conducive environment especially forthe movement of poverty alleviation. All this time the poverty alleviation policiesran by the government always project-oriented. The policies that were made by thegovernment tend to use top-down system, where it should be made by the inputfrom the people (bottom-up system). One thing, which is challenging about oursystem, it is very corrupt, especially when the system is arranged by the elite.

The Government has drafted an Interim Poverty Reduction Strategy Paper, one ofgovernments program for alleviating poverty. Although the government claimedthat they have gained input from public participation, but the NGOs think that theIPRSP still project oriented and it still lack of public participation.

One participant thinks that it is necessary to reform the government, to urgeinstitutional reform. Another participant stated that it is urgent for the governmentto ratify the ECOSOC covenant so that the economic and social rights of the peoplecould be guaranteed. There is a need to empower the people about budget analysis,

especially about local budgets, how to create them, their relationship to health,education, etc. This way people will know that the right to create the budget is theirs,and they will have the knowledge, the tools, to control it.


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Moderator: Wahyu Widiarto Basjir, IDEA

D. Andi Mallarangeng, Institut Ilmu PemerintahanDecentralization And Poverty Alleviation

Some people have been asking me, is there any guarantee that decentralization willbe positive for poverty alleviation? There is no guarantee. But there is hope. On theother hand, centralization and authoritarianism would have no hope at all ofalleviating poverty. Centralization of power has proven a failure in povertyalleviation. The result would be misallocation of resources, late and inadequateresponses, and bad decisionmaking processes. It is too far from the people beingserved by the process. Because its too far, it relies heavily on the long chain ofbureaucratic structures for information regarding poverty. Weve seen also underthe New Order, and in other countries such as China before it decentralized, thatcentralization of power and structure do not resolve problems of poverty. The

information they get through the bureaucratic chain is designed to make those whoare in power look better or make those at the top happy. The information is usually,there is no poverty in this region.

In the New Order, for example, when the government tried to categorize villageswith its own categories based on the welfare of people in the village, all of the partiessaid we have no problem of poverty, of famine. There is no effective mechanism forcontrol of implementation, design, resource allocation, and because there is nofreedom of expression, speech, press, there is no objective mechanism to serve as acontrol on the information, say whether it is correct, assess it. So usually this is too

late, the response comes only when the problem is so bad it cannot be covered upany more.

Another facet of centralization was that no money circulated in the regions. Allrevenue was central government revenue, and then was allocated to the regionsthrough a web of central government offices. The money allocated to the regionswas determined by the central government planning office, Bappenas, which usuallygave specific grants for technical guidance and implementation guidance. Usuallythat guidance came with contractors and suppliers from Jakarta. The result was thatalmost no money circulated in the region, but rather went back to Jakarta. In the past,

with fiscal decentralization, there is more money being transferred to the region thanbefore. In 2001, the first year of decentralization, the amount of money transferred tothe regions was 86 trillion and in 2002 was 91 trillion, almost three times as muchpost-decentralization than pre-decentralization. Much of this money was in blockgrants, meaning that the regions can use the money as they wish according to theirlocal priorities. As a result, the principle of law 25, that a certain percent of alldomestic revenue should be transferred to the regions, plus specific set percentagesfor different industries. This is 27%, still low compared to the Philippines, but itmeans a lot. The money circulating in the regions creates multiplying effects,meaning that local businesses are open now in the regions, and the most impressive

Kutai Timor in East Kalimantan opened its first pharmacy, after more than 50 yearsas part of Indonesia. No one had buying power for medicine. Now after


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decentralization, there is more money, multiplier effects, buying power, and apharmcy is open.

There are some problems with how the money is being applied, depending onwhether the Parliament has the right priorities or not. This means the power of the

local Parliament is important. Because they are elected through a proportionalsystem, their allegiance is toward the party more than the people. This is where theproblem lies. The local government, the bupatis and governors and so forth, areelected by the DPRD, so their allegiance is toward the local Parliament not thepeople. This can distort the priorities at the local level. The remedy for that situationwould be changing the election system, how the bupatis, mayors, governors areelected, to a direct system. But my point is, this brings the process closer to thepeople being served, so the decisionmaking process can accommodate more,understand more, the needs of the people, the interests and aspirations of the people.Because the decisionmaking process is done by people who are part of the

community being served at the local level, they can better understand those needs.Also, protest against wrong decisions can be done quickly, easily, and more cheaply,because its closer. For example, I live in one place, and if I wanted to challenge adecision being made by a minister or Megawati, I have to go to Jakarta to protest. Butif my mayor makes a decision that I dont like, or I want to give input, I can go anyday, any time, its close, its cheaper. This is one of the principles embodied in thelaw, that it is not just decentralization of administration but also politicaldecentralization and decentralization of democracy.

Civil society should be put high on the agenda for decentralization in Indonesia. Not

only the decisionmaking process being decentralized, but power, politics, are alsonow local. Priorities are being set locally. So just like other democracies, thedynamics of the political forces at the local level determine the policies of the localgovernment. What we need is empowerment of civil society locally, decentralizationof civil society. So we dont have just one Binny Buchori, based in Jakarta, advisingeverybody all over Indonesia, but we need one in each kabupaten (regency). Weneed a committee like this in each kabupaten. This is why there is no guarantee thatdecentralization will alleviate poverty, but there is hope. There is a collective actionmechanism. In the New Order, all politics were central. Now, all politics are, shouldbe, local. This is why our NGO communities should now think about empowering

civil society at the local level.

Wahyu Widiarto Basjir, IDEAThere are two groups of people who can be distinguished by how they talk aboutregional autonomy. There are those who see it as a threat because it moves thesystem of corruption from the national bureaucrats to the local elites. There is alsothe more optimistic side that says that it is an opportunity for local government,local people to manage their own resources and exercise control over theirgovernment.


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DISCUSSION

The debate focused on whether decentralization or regional autonomy can helpalleviating poverty on the region.

One participant thinks that the government will use the poverty alleviation processfor political purposes. When they asks NGOs to give ideas for the draft of povertyalleviation program, they will use it as a legitimacy for their program. Poverty policyshould start from the bottom, from the people. Another participant said thatdecentralization is a choice to manage a very big country, one choice within manychoices. Indonesia has not ready yet to implement the regional autonomy(decentralization). Another participant warned about the danger of euphoria ondecentralization. He thinks that Indonesia still needed a good and effectivecentralization of power because if Indonesia applies a sharp dichotomy between

decentralization and centralization, it will bring negative consequences. Anotherpoint, total centralization will only bring authoritarianism. Before implementingdecentralization, the civil society must be ready to watch the implementation ofdecentralization, to check whether its has ran on the right track or not.

One participant believes that regional autonomy should be seen from the perspectiveof women, dont let the policies of regional autonomy disadvantaged women in theregion. Therefore, there should be a collective action mechanism. Those who areinterested in women, education, health, poverty, or any issue that doesnt interest thegovernment to take care of, have to stand up and organize people to deal with issuesthey are concern about. Then, they could start pressuring the local parliament,lobbying, pushing for something that doesnt make money but is basic for localgovernment to perform.

As decentralization helps the spreading of corruption, the amount of money beingcorrupted by the central government is much more than the money being corruptedat the local level. The amount of money being handled by the central government isstill much bigger than local government. Corruption is still there, at local andnational governments.

There are functions of the central government and the local government, its noteither-or but how do we distribute power to each layer of government so that eachcan be exercised, implemented, in a way that maximizes the welfare of and servicesfor the people. There are many functions that can be done by all of the levels at once.There should be a certain requirements that must be fulfilled if some regions want toexpand their region. One, there should be an objective condition, an objectiveeconomic capacity to pay for the administrative costs of a new administration.Second, there is an objective political condition, meaning there is a politicalmeasurement that people in that new area, region, would like to form a new policy.


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One participant thinks that regional autonomy will not help the poverty alleviationprogram since the percentage of government expenditure for the poor is very low.Decentralization was expected to bring recovery but what has happened isdestruction. There is competition between each region (kabupatens or provinces) tolook for their own source of income. This might lead to one kabupaten building an

industrial area in an area needed as forest for regional purposes.

II.2. Debt and GlobalizationPRESENTATIONS

Moderator: Frances Seymour, World Resources Institute

A. Prof. J. Mohan Rao, University of MassachussettsGlobalisation, Debt and Development: Lessons and Policy Alternatives FacingIndonesia

Professor Rao analyzed the links between globalization, debt and development in thecontext of finding policy alternatives to development policies resulting from top-down globalization. He claimed that while all countries existed in an increasinglyglobalized world, many developing countries such as Indonesia were experiencingthe negative effects of top-down globalization which is characterized by the viewthat international markets are a fundamental element of globalization, that there is a

push to eliminate national policies, that there is a pretense of a level playing fieldand that all forms of collective action are replaced with commerce.

Professor Rao stated that the lessons learned from two decades of globalization werethat the Washington Consensus, aimed at promoting growth, is part of the problemand not part of the solution (growth has actually slowed down in the last decade)and that there is increasing inequality across and between nations. He indicated thatthe reasons for the willing acceptance of this top-down globalization by developingcountries included: (1) Globalizing institutions preceded national decision making;(2) National decisions were forced by the debt crisis of the 1980s and by powerful

countries (and powerful corporations); (3) Failure of developing countries to takeaction against top-down globalization as they preferred (and it seemed easier) tojoin the WTO than remain outside it; (4) There has also been national failures at thegovernment (democracy deficit) and intellectual levels (intellectuals failures tochallenge the neo-liberal foundations of the Washington Consensus).

Following on from this, alternatives to the orthodox economics of the WashingtonConsensus were discussed. For example, in orthodox economics public expenditureand investment was said to crowd out private investment. Professor Rao claimedthat in reality public investment crowds private investment in rather than out.

Also in orthodox economics, macro-economic policies such as liberalization,privatization and deregulation were considered to be a panacea for micro-economicproblems such as corruption, collusion and nepotism. Professor Rao emphasized that


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in reality , macro-economic policies cannot possibly solve micro-economicproblems. Macro-economic policies should only be used to solve macro-economicproblems while micro-economic policies should only be used to solve micro-economic problems.

As a result of this analysis Professor Rao suggested that collective action needed tobe taken to make the global economic order more just, that mechanisms were neededfor a more equitable sharing of the debt burden, that international trade andmonetary institutions needed to be reformed because global markets are not a levelplaying field, that developing countries must be free to pursue industrial andeconomic policies in accordance with their own interests and needs and thatindividual countries should have the right to implement selective capital controlswith managed floating exchange rates and should have the choice of regulatingborrowing from their own banks.

Professor Rao then went on to specifically analyze the situation in Indonesia and

noted that high growth levels, which were very important to clear theunemployment backlog have plummeted over the last 5-7 years. He also noted thatthe debt overhang or the continuation of debt was unfair to the Indonesia peoples,that it was anti-growth as well as anti-poor, and that TINA (There is No Alternative)is pervasive. He expressed his observations that despite the implementation oforthodox macro-economic policies al la IMF, the situation in Indonesia had notimproved.

Following these observations, Professor Rao claimed that there was an alternative toTINA. He stated that no effort should be spared to reduce the debt stock, that TINA

should be rejected outright as there are alternatives to orthodox financial policies andthat because problems such as corruption, collusion and nepotism were micro-economic problems, they could not possibly be dealt with by macro-economicpolicies. He emphasized that Indonesia needed and investment leader and asignificant public investment drive to crowd in private investment. Methods to raisecapital for public investment were suggested such as increasing tax compliance ratesand slapping on a 10% tariff on all imports (which would not have the negativeimpact that the IMF claims it would have).

Professor Rao ended his analysis by saying that great political resolve is needed by

the Indonesian government to implement the above suggestions against the policiesof the International Financial Institutions and that this will only happen if the peopleof Indonesia send out a powerful message to the government of Indonesia and ifNGOs and Civil Society Organizations mobilize strongly to get the message down tothe grassroots.

B. Irene Knoke , Suedwind InstituteInternational Insolvency Arbitration: Towards a New System for External DebtManagement

Ms. Knoke presented an analysis of International Insolvency Arbitration and focusedparticularly on debt restructuring mechanisms. She claimed that a new mechanism


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was needed and suggested that a fair and transparent international arbitrationprocess in debt negotiation should be introduced which was mutually inclusive(debtor and creditor countries should have an equal standing in all debt negotiations)and where the national sovereignty of the debtor countries was recognized andrespected. Ms. Knoke followed this statement with an example of US insolvency

loans to public entities that possess a debt overhang.

Stating that debtor countries and civil society have a right to be heard, Ms. Knokethen went on to describe the crucial elements required for International InsolvencyArbitration. The first crucial element required that decisions and negotiations shouldbe made by an independent and neutral body. The second critical element was thatthe debtors economic prospects must not be evaluated by the IMF and the thirdcritical element required that as a precondition, there should be a temporarymoratorium on all payments until the negotiations are concluded.

Ms. Knoke mentioned that the IMF and World Bank recently concluded a meetingabout these issues and proposed a new approach in response. This approach wasentitled the Sovereign Debt Reduction Mechanism and was aimed at establishing anindependent body to direct negotiations between debtor countries and bilateralcreditors. However, Ms Knoke criticized this new IMF/World Bank initiative bypointing out the lack of power that this body would have, that the rights of civilsociety are not included, that poverty reduction is not mentioned, that multilateraldebt is not discussed and that debtor countries are not given equal weight withcreditor countries. Ms. Knoke stated that this means that the IMF is not actuallyseeking arbitration but is rather organizing to maintain its monopoly of international

macro-economic policies for the benefit of the rich and powerful countries (andcorporations).

This means that for Indonesia, the current debt restructuring mechanisms do notwork and the process of implementing the new IMF/ World Bank policies is takingplace so quickly that no real information can be analyzed before the new policies areimplemented across the board. However, this process does show signs of optimism,nothing can be done without the input of the Southern debtor countries and theirpeoples.

Ms. Knoke concluded that debt relief was needed for any progress on povertyreduction, that the North and South need to work together equally within theinternational insolvency framework because both have important roles to play, thatdomestic debt must also be included in the arbitration agenda and that sympathywill increase if there is a clear commitment by the government in poverty reductionand transparency efforts as well as the inclusion of civil society and democraticprocesses. Ms. Knoke suggested that an audit of international and domestic debtshould be conducted by civil society in their respective countries, particularly inIndonesia.


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C. Hira Jhamtani and Bonnie Setiawan, Institute fo Global JusticeThe Doha Agenda: The Death of Development in Indonesia?

BONNIE:

Mr. Setiawan introduced what he termed the trade trap as opposed to the debt trap

that was discussed by the two preceding speakers. He stated that in 1994, whenIndonesia joined the WTO and ratified the WTO Agreement, it was with the hopethat developing countries like Indonesia could compete with the developed countrieson a level playing filed but after six years Indonesia realized that the WTO TradeAgreement had become a trap. He claimed that during colonial times Indonesia hadbeen physically colonized but now Indonesia had been re-colonized byinternational trade forces.

He also stated that every WTO Conference has re-enforced the re-colonization ofdeveloping countries and that the last Conference in Doha blatantly carried out

unethical negotiations. Mr. Setiawan concluded that the WTO does not exclusivelylimit itself to issues of trade but it also creates policies that deal with and have animpact on other important aspects of life in an unethical and immoral way, whichconstitutes a re-colonization of developing countries by powerful developedcountries and Transnational/ Multinational Corporations.

HIRA:

Ms. Jhamtani presented an analysis about the consequences of the recent WTO

Conference in Doha on issues of development and began her presentation with adescription of nightmare stories about the WTO. She stated that after the DohaConference, Pascal Lami (Trade Commissioner for the EU), traveled to developingcountries to sell the WTOs new development agenda. However, Ms Jhamtanideclared that the outcomes of the Doha Conference were anything but developmentand that it was instead the beginning of the death of development.

Ms Jhamtani then explained that the Doha Conference resulted in the launching of anew negotiating agenda for GATT (FTAs), agricultural liberalization and a review ofTRIPS. It also resulted in the launching of new issues not discussed in the 1994

Conference (the Singapore Issues) such as liberalization of investment, transparencyin government procurement etc. The outcomes of the Doha Conference would beimplemented and the negotiations would be started in 2003 at the next discussion inGeneva.

Ms. Jhamtani pointed out that there was not enough time to review and makecomments on this new development agenda before it was implemented and that anew set of issues needed to be discussed before any implementation of newmechanism are considered. These issues included environment and trade,implementation, technology and capacity building, and trade debt and finance inter-

relations.


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She then stated that this subtle terrorism of the developed countries meant thatglobalization and democracy were a contradiction and that it was having negativeimpacts on Indonesia. She claimed that the IMF is arguing for liberalization ofinvestment in order to ensure FDI but that there are no laws to govern this. She alsosaid that future policy options are greatly reduced under the WTO restrictions,

Indonesia is dancing to the tune of foreign creditors and trade bodies and thatliberalization is occurring too soon and too fast which means that there is noinformation base on which to make decisions.

She criticized the corporate takeover of out lives and stated that TNCs/MNCs areaffecting the sovereignty of states and that our lives are defined by the free-market.She further claimed that the UN was also being taken over by business interests andpointed to the Conference on Sustainable Development held in South Africa, wherethe private sector managed to manipulate and influence the outcomes.

Ms Jhamtani concluded that INFID has a strategic role to play and must at least stopgovernments and the WTO from using the words development agenda for theirpolicies and that the spirit of the UN Charter that states we the people believe thatanother world is possible must be reclaimed.

D. Dr. -Ing Nengah Sudja, Electricity ConsultantQuestioning The Electricity Price of The IPPs : Case Study of Paiton I, aconsideration to a win-win solution

Dr. Sudja presented a technical analysis on the electricity price of IPPs, concentratingon the Paiton I Project. Dr. Sudja provided details of an agreement signed on the 12 thof February 1994 between PT PLN and PT Paiton Energy and he also provided apercentage breakdown of the Paiton I Project shareholders. He then stated that thePaiton I Project was valued at USD2.5 million, that electricity tariffs that must bebought by PLN amounts to 8.5 cents USD per kWh and that PLN is selling electricityto domestic consumers at 3.2 cents USD per kWh, according to the agreement(assuming an exchange rate of Rp 7.000 per US dollar).

Dr. Sudja claimed that high level US officials, including former Vice President DanQuayle, then President Bill Clinton, Commerce Secretary Ron Brown, TreasurySecretary Robert Rubin, State Department Secretary Warren Christopher, and HenryKissinger promoted the deal, and even sought US-backed financial aid for the projectthrough Ex-Im and OPIC, the other US export credit agency.

He argued that the result of such intense political maneuvering was an overpriced,uncompetitive project with devastating environmental and social consequences.Mission-GE local partners well-connected to Suharto ordered PLN to utilize coalfrom one of its mines, charging 30-40 percent more than the going rate for coal. The

government ordered Mission-GE to buy boilers for the plant, adding $20 million inunnecessary costs, from ABB Combustion Engineering, whose state-owned affiliatewas connected to the Suharto family. Most alarmingly, Mission-GE insisted that


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PLN pay an electricity tariff 32 percent higher than comparable tariffs in Indonesia.An independent audit by the Indonesian government found that engineering,procurement and construction costs of Paiton power plant were inflated some 72percent.

Indonesias economic breakdown resulted in huge losses for the countrys highstakes power deals. PLN told Mission-GE that it would not buy any electricity fromthe consortiums 1,230 MW plant, when it is to come on-line. A lawsuit ensued.After severe arm-twisting from the US government, in which the US threatened thatfailure to honor contracts such as Paiton would harm new foreign investment anddelay Indonesias recovery, Indonesia pulled the lawsuit. An interim deal has beenreached to reduce Paitons rates from the extremely expensive 7.9 cents per kilowatthour to a more manageable level. PLN now has about 50 percent more energycapacity than it needs on the main grid, but will nonetheless owe approximately $1billion a year just to Paiton I and II.

In July 2002, negotiations between the Indonesian Government/PLN and Paiton Istakeholders resulted in an agreement on a power purchasing contract for Paiton Iamounting to 4.93 cents USD per kWh (consisting of the following: financial capitalcosts of 3.53 cents/kWh, fuel costs of 1.0 cent/kWh, continuing operational andmaintenance costs (O&M) of 0.3 cents/kWh, and variable O&M costs of 0.1cents/kWh) in addition to Arrears / Restructuring costs amounting to 4 million USDper month for 30 years. Apart from that, an energy price rise was agreed upon (takeor pay clause) with the Availability factor (AF) rising from 83% to 85% per year andthe time clause of the contract lengthened from 30 years to 40 years.

Referring to the agreement Dr. Sudja mentioned previously, debt payments of 4million USD per month for 30 years will increase the cost by 0.52 cents USD per kWh.This means that the price of electricity for Paiton I is 5.45 cents per kWh (4.93 + 0.52).In reality, PT PLN will pay more than 5.45 cents USD per kWh because the size of theAvailability Factor (AF) of 85% each year for 40 years is difficult to achieve inpractice. A more suitable Availability Factor for reference would be approximately70% each year. When/ if 70% AF is achieved, then the buy/sell costs of electricitywill amount to 6.62 cents USD per kWh.

Dr. Sudja declared that this was a very expensive agreement. It is clearly moreexpensive than similar contracts in Malaysia (3.2 cents per kWh), Vietnam (4.2 centsper kWh) and the experience of the energy generation costs of PLTU in Suralaya,Indonesia (3.7 cents per kWh).

According to the results of Dr. Sudja Nengah Sudjas calculations the real costs of theProject are between 3.14 3.48 cents USD per kWh as displayed in the table below :


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Cost Components Negotiated Results

(cents USD/kWh)

Dr.Sudja Calculations

(cents USD/kWh)

A.Captial Costs 3.53 1.68 2.02

B. Fixed O&M Costs 0.3 0.4C. Fuel Costs 1.0 1.01

D. Variable O&M Costs 0.1 0.05

Total Cost 4.93 0.14 3.48

Dr. Sudja explained that the differences in component cost A (Capital Costs) are notcaused by the use of a different rate of return but are primarily caused by differencesin the calculation of development costs for Paiton I amounting to 2,500 million USD.This amount is very different from the amount that was audited by Lavalin

Consultants who estimated that the Engineering, Procurement and Construction(EPC) amounted to 1,033 million USD. After adding IDC (Interest DuringConstruction) and a generous estimation error of 20%, the capital costs amounted tobetween 1,208.65 and 1,450.38 million USD.

He then stated that the expensive cost of generation, the discrepancies in costcalculations and an unbalanced contract on Paiton I is causing great damage toIndonesian society and needs to be resolved quickly and fairly. He argued that thebalancing process can be achieved through political will based on theencouragement of industry and commerce that is suitable and healthy. Apart from

this, because the problems of electricity tariff are connected with public interests,transparency and accountability must be ensured, taking public agreement intoaccount. The results of solving the problems with the Paiton I contract will becomethe benchmark for the solution of other Independent Power Producers.

DISCUSSION

Discussion reflected the sentiments expressed in the presentations. One participant

agreed that debt seriously need to be tackled. Japanese ODA and Japans role asIndonesias largest bilateral creditor was mentioned. Several suggestions wereoffered. Firstly, people in both creditor countries and in Indonesia need to beeducated about issues of debt and mobilize a strong grassroots movement (action-oriented movement). Secondly, considering that the World Bank has admitted that30% of its lending to Indonesia was corrupted, International Financial Institutionsneed to take responsibility and at least the 30% that was corrupted needs to becancelled. Thirdly, the government of Indonesia should be requested and/or forcedto independently audit public and private funds used during the Suharto regime.Lastly, civil movements in creditor countries should force an audit of money lent to

developing countries to reveal creditor corruption.


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Irene Knoke responded to the above comments by agreeing that there is indeed allotof evidence of corrupt / odious debt and that this problem of illegitimate debt hasbeen recognized by the World Bank. She stated that a framework for debt arbitrationand auditing has already been presented but that in addition, mobilization at thegrassroots level was needed. However she claimed that debt is easy to bring down to

the grassroots level because it directly affects people. Ms. Knoke pointed out thatmuch work has been done in Brazil on public auditing of debt but that researchneeds to be done on how Indonesia can begin its own public auditing of debt.

Three participants commented on the presentation by Dr. Sudja regarding electricityprices. One of the participants explained the role of the WG-PSR (Working Group onPower Sector Restructuring in Indonesia) and stated that the process of restructuringelectricity was forced by the multilateral creditors / International FinancialInstitutions and that the extreme costs of PAITON I are a result of KKN both in thecrony capitalist mentality of the Suharto regime and in the corrupt/ immoral

practices of international businesses and foreign countries in collusion with theSuharto family. The participant then went on to clarify that the economic andmonetary crisis in 1997 decreased the demand for electricity, which had previouslybeen growing at 15% per anum. As a result, the government of Indonesia invitedIndependent Power Producers to open up the electricity generation market. TheTNCs (Paiton, Karaha Bodas etc) signed a Power Purchase Agreement between theGovernment of Indonesia and the IPPs. However, the contract was unbalancedbecause the take or pay clause obliged the government of Indonesia to buy the highercost of electricity from the IPPs (6-8 cents USD per kWh). It was suggested that newlaws be created to control KKN and unrestrained privatization, and that the ADB is

taking the lead in supporting the government of Indonesia to draw up a newElectricity Bill to endorse multi-buyer multi-seller (full competition). Concern wasexpressed about a global conspiracy.

Another participant asked if there were any other explanations, apart fromcorruption, regarding the huge cost of electricity and if there was any informationsharing between Indonesia and the Philippines because of the similar situationregarding electricity price. A third participant reaffirmed the similarities of thesituation in Indonesia with the situation in the Philippines regarding the electricitysector. The Casetan Power Plant in the Philippines was referred to as a case of

economic sabotage but it was recognized that Paiton I is far worse than any case inthe Philippines. This participant asked what action could the Indonesian governmenttake in the face of strong opposition by foreign governments and IFIs that claim anyintervention by the government will affect investor confidence.

Dr. Sudja responded to the question regarding corruption in the electricity sector bysaying that the differences in the costs of electricity generation depends on the capitalcosts of generation and the site location and that the capital cost generation is worldstandardized. The capital costs of Paiton I were very expensive (twice from thestandard) and while there is no firm evidence of corruption in the Paiton I Project,

the mark up in the capital costs indicates corruption. Dr. Sudja did not havesufficient time to address the other questions relating to electricity.


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One participant questioned Professor Raos argument that individual countriesshould have the right to implement selective capital controls with managed floatingexchange rates, claiming that most financial institutions advocated the opposite andthat the country might risk capital flight if it implemented this policy. Professor Raoresponded that while the ADB has been reasonable on issues concerning the power

sector it was unreasonable on issues concerning exchange rates. He argued that fixedexchange rates and domestic controls is preferable to floating exchange rates andopen markets as espoused by ADB and IFIs because the risk to investor confidenceand business because of fluctuations in floating exchange rate was high. The cost ofhedging was also very high.

One participant commented that in the presentation regarding the WTO, the focushad been on the mobility of capital and goods. It was suggested that developingcountries should focus on labor mobility and problems of WTO asymmetry. Hira

Jhamtani responded that WTO meetings were failures, particularly the Seattle

Conference. She stated that more input by developing countries was needed and thatan example should be made of the African groups who presented a strong unitedfront in Seattle. She added that Asia needs to try and develop a similar united frontbecause developing countries have a stronger negotiating position if they negotiateas a group rather than as individual countries.

Ms. Jhamtani explained that Seattle was the first time that developing countries wereable to table their proposals on dealing with the asymmetry of the WTO. She alsostated that Indonesias rejection of the Cairns Group Proposal led by the D7 was apositive step. Ms. Jhamtani mentioned that the Singapore Issues still needed to be

negotiated and she agreed that the free movement of labor should be advocated aslong as labor rights are respected. In conclusion, Ms. Jhamtani stated that there is aneed for transparency in government procurement and made a call to stop theterrorism (of developing countries by developed countries) during negotiations.

Bonnie Setiawan chose not to directly respond to statements and instead made ageneral comment that many people are starting to lose hope. He concluded that amuch bigger social movement for change was needed for the next WTO meeting inMexico.

II.3. Impunity, Conflict and Human RightsPRESENTATIONS

Moderator: Ifdhal Kasim, ELSAM

A. Munir, KONTRASIndonesian Civil Society Strategy for Ending Impunity

Munir presented an analysis on military impunity. He stated that impunity has oftenbeen used as a ticket to freedom from law charges. Impunity in Indonesia is not only


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a legal problem but is also related to legitimacy. Indonesia is now facing a new globalconflict, where the possible existence of an Alqaidah network based in the country isthreatening Indonesias stability. The previous authority in Indonesia is becomingmore powerful again. In this context, Indonesian transition needs to be correctedagain. The war against terrorism in Indonesia is giving the Indonesian military room

to consolidate its power.

He then went on to say that the New Order Regime was under strong pressure to setup a Human Rights Tribunal for East Timor cases. Now the question is how toreduce military impunity? How can Civil Society secure enough room to opposeimpunity? What will Civil society face in their efforts against impunity ?

Munir asked, what does the civil society face in Indonesia? Impunity has always existin the elite circles and the domination of the military is getting stronger after theSeptember 11 tragedy. United States itself is against the establishment of the

International Criminal Court and this situation has affected the domestic sector inIndonesia by giving the elite justification to preserve impunity. This powerdomination has caused grave difficulties in efforts to reform the military. Thecountrys legal powers are far behind Indonesias political powers, which arecommitted to protecting the military. Although there have been efforts to uphold

justice and end impunity, the legal capacity is weaker than the political capacity.

Munir stated that what we face now is hegemony and domination. For instance, thediscourse on nationalism and integration is always positioned against human rightsissues. If any effort is made against impunity it will often be stigmatized as anti-

nationalist and against the spirit of integration. This forces civil society to accept thelegitimacy of impunity enjoyed by the military. Impunity emerged from the politicalelite who were not able to deliver alternative policies. As a result, impunity isgrowing stronger and political society is showing that it has no power to opposeimpunity.

Munir claimed that it is obvious that impunity in Indonesia has grown stronger inthis last year. This can be seen by the process and results of the Ad Hoc East TimorHuman Rights Tribunal, where many military personnel who were involved inhuman rights violations after referendum were either freed or sentenced to light jail

terms. Civil society must face and not avoid the reality or the need for solidarity inthe global arena because whatever happens outside Indonesia will have a direct orindirect impact on Indonesia. Efforts to oppose impunity are very important.Stopping coercion, supporting the victims, student movements and anti-impunitymovements are becoming important in the struggle to stop impunity.

Munir suggested that one way to counter the hegemony of the military is to open updebate on hegemony itself. Is the justice system in Indonesia strong enough toendure the arguments for national integration or the hegemony of the military? TheAceh conflict forms part of the mainstream thinking of the Indonesian military.

Munir concluded that the peoples movements against military impunity should beencouraged to open up discourse. This movement should continuously push for the


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abolishment of military impunity to counter military hegemony. Wide networksshould be created to deal with the issue of impunity.

B. Otto Syamsudin Ishak, YAPPIKA

Aceh Case : The Base for Reform or Military Reconsolidation

Otto presented his speech as a victim of the Aceh conflict. He said that it is difficult toexplain about Aceh from the Indonesian perspective compared to the Internationalperspective. It is because the problem is so complicated and mixed up with ideology,the existence of the NKRI and International problem, which in this context isterrorism. Otto claimed that there is strong effort to identify the Aceh movement as aterrorist movement. The result is that the space for the movement and the activists,particularly in Aceh, is getting smaller. For example the arrest of Mr. Raihan that hasbecome a national issue, but there is no national solidarity for him. This is a result of

successful propaganda efforts to reflect a negative image of the Aceh movement. Thispropaganda effort managed to connect bombings in Java and Aceh with the Acehmovement.

As a result, the arms struggle in Aceh is becoming increasingly high, increasinglymilitant and increasingly well trained. The civilian movement is also becoming bettertrained, stronger and more organized. Another result of this propaganda is that themovement in Aceh becomes more dichotomized. Some people support GAM andsome autonomy. The consequence of the military operation in Aceh is the creation ofan environment that is conducive to the growth of the separatist movement and is

responsible for the birth of a new, more militant generation. In the year 2000, GAMrefused to allow the Acehnese youth to join the separatist movement. Thehumanitarian and human rights issues were packaged as a political issue and wascovered up by the referendum movement.

Based on the data published by KONTRAS, the main perpetrators of gross humanrights violations in Aceh is military. The spreading of troops in almost all areas inAceh has caused a reciprocal spread of the separatists in the same areas. The militaryis becoming increasingly free to carry out its operations in any way that it sees fit.Otto revealed that as a result, the budget expenditure for military operations in Aceh

has become high, especially in the area where Exxon Mobil operates, costingtaxpayers about Rp. 127 million per day and meals fee about Rp. 17,000/day/person.To intensify the political conflict in Aceh, the separatist movement targets the MNC(Multi National Corporation) operations in the area. The Indonesian governmentpolicy to open dialogue as an alternative approach to solve the problem in Aceh hasfailed, because of the contradictions in the field. For example, the government hassought to deal with the Aceh problem on a domestic level, however the involvementof MNCs such as Exxon Mobil raises the Aceh issue to the international level.

Maintaining Aceh as a domestic problem has become impossible. There are still

strong efforts being made to cause the failure of the dialogue process so far. Whilethe Indonesian government wants to open and maintain dialogue with the separatistmovement, it is the military who wish to destroy these efforts and solve the Aceh


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problem by force. It is interesting to note that while the separatist movement hasbeen operating for 20 years, it is only in 2002 that dialogue has been opened.

Otto concluded that in the current situation military operations in Aceh are closingoff space for civil society, which is encouraging the separatist movement to become

stronger and more militant. This in turn is providing a reason for the existence of themilitary who argue that it is only the military that can keep the nation united.

C. M. Riefqi Muna, RIDEPMilitary Reform in Indonesia : How Far and How Real

Riefqi Muna presented an analysis on military reform in Indonesia. He began bystating that military reform is only one part of a larger reform movement. Riefqiidentified 3 areas that needed to be considered in the broader context of security

reform. Firstly, reform of the military and its armed forces. Secondly, reform of theintelligence sector and its management and thirdly, reform of civilian police and itsinstitutions. Riefqi also illustrated the need for reform of the judicial systemincluding issues of impunity and discussed civilian structures and managementresponsibilities.

Riefqi stated that the emergence of democratic power in Indonesia has pushed themilitary to decrease their involvement in Indonesian politics. Research conducted byLIPI regarding the location of the military in politics recommended that the militaryshould leave the political arena by 2005. In fact, recommendations for the military to

step down from involvement in politics have been discussed since 1996.

Pressure for reform of the international security structure emerged after the cold war.Indonesia is faced with a powerful military hegemony and strong political interests,which make efforts to reform the military very difficult. There have been strong callsfor the military concentrate only on military issues. However, security is not only amilitary issue. It has many factors and many levels of society are involved. Securitycan be defined as national security, cultural security and human security.Considering this situation the military has three roles. To ensure national security,social security and protect Indonesias citizens. However, it is the role of the military

in protecting the Indonesian peoples is the most problematic.

The tragedy of September 11 became the point that signified the return of thestrength of military power in Indonesia. This is because the US, in its efforts to fightthe war against terror, introduced a new security system that gave the Indonesianmilitary greater legitimacy for involvement in Indonesian politics. This has createdan obstacle for the advocacy of reform of the military body. The issue of militaryreform has now become crucial.

Riefqi then went on to say that territorial command is related to military business

that is in turn related to the military budget. He stated that Indonesia is anarchipelago state that actually needs an ocean-based rather than land-based securitysystem. The incorrect focus on land-based defense forms one of the biggest problems


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of the current defense strategic systems and causes friction between the roles of thepolice and the military.

Riefqi stated that Indonesian society had a right to control the military because themilitary function was not to serve i

Report INFID Conference, Hotel Santika, Yogyakarta 2002

Documents

Transcript of Report INFID Conference, Hotel Santika, Yogyakarta 2002