Moody's Upgrades Indonesia's Rating

Good news for Indonesia. But getting to the investment grade threshold could still present a challenge. Ratings analysts continue to note that energy subsidies are still eating into too much of Indonesia's budget. Inflation and "good governance" are also seen as inhibiting factors.

Wayne Forrest

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Moody's Raises Indonesia Rating

By I Made Sentana

JAKARTA, Jan 17 (Dow Jones) — Moody's Investors Service Monday raised
Indonesia's local- and foreign-currency debt ratings one notch to Ba1
from Ba2, citing the country's resilient economy, improving debt and
foreign reserve levels and favorable economic policy.

The outlook on the ratings is stable.

"Momentum in the economy is expected to be sustained by steady
domestic demand, a reasonable pace and sequencing of policy and
structural reforms, and rising foreign direct investment," said Aninda
Mitra, vice president at Moody's and its lead sovereign analyst for
Indonesia.

"Furthermore, the country's debt position and reserve adequacy remain
on an improving trajectory relative to most of its ratings peers," he
added.

Moody's upgrade puts Indonesia's rating one notch below investment
level, and on par with the BB+ ranking assigned by Fitch Ratings, but
one notch above Standard & Poor's BB rating, with a positive outlook.

"The upgrade is already expected, but it reminds investors of
Indonesia's (good) fundamentals," said Bank Danamon economist Helmi
Arman. He added that the upgrade won't erase concerns over the
near-term risk of inflation in Indonesia, which has triggered a
correction in Indonesian assets recently.

The upgrade will help the government's fund-raising efforts both
offshore and at home and encourage further inflows into Indonesian
bonds, helping to deepen the market.

Wayne in Indonesia

I have been in Indonesia for the last 10 days and its been exciting from start to finish. I ended up in Jogjakarta as Mt. Merapi volcano began its current eruption and airports closed. A bumpy 17 hour ride in the back of a jeep allowed me to see the Indonesia few foreign visitors see. Jakarta has been a whirlwind of meetings, conferences, dinners and great opportunities to see members and old friends. I got a sudden invitation to attend the state dinner for President Obama.

Follow the link below to see an interview a local social networking site did and hear a few other stories:

http://www.youtube.com/watch?v=ARVz3-0Q_68&feature=player_embedded

Rising Intolerance

Indonesia’s President, SBY, has asked President Obama to do something about intolerant acts against Muslims and Islam in the United States. But, perhaps now is the time for Obama to ask the same of SBY on behalf of Christians. SBY protested the possible burning of a Koran by a Florida pastor and the many US candidates running against the Islamic cultural center planned for New York (near ground zero) are just part of the growing Islamaphobia in the US. Although it does not appear to be at the level of France and Holland, a continuing high unemployment continues to feed the scapegoating impulse: when 30% of Americans believe Obama is Muslim, we have a problem. Indonesia observers are concerned about the growing number of violent attacks on Christians and Muslim subgroups such as Ahmadiyah. In certain communities in Jakarta, Christians have been attacked en route to a place of worship and the police have stood by. The respected Indonesian Survey Research Institute (LSI) found that 30% of Indonesians supported violent actions against Ahmadiyah, a group that believes Muhammad was not the last Islamic prophet. More shocking to those of us that often tout Indonesia’s marvelous tolerance is that 57.8 percent said they were against the construction of churches and other non-Muslim places of worship – the highest level recorded since 2001. Just this week, a group of youths calling themselves “Laskar Jihad” broke up a traditional Javanese shadow puppet performance (wayang). Perhaps its “Islam” is not pure enough or some spectators were imbibing. Non Muslim leaders are disturbed because the new National Police Chief is reported to have ties to the vigilante group Islamic Defenders Front (FPI), a group that has ransacked bars, attacked peaceful demonstrations, and broken up meetings of gay rights groups. More recently, pressured by hard liners, Indonesia’s Supreme Court upheld the indecency conviction of the founder of Indonesia’s Playboy although the magazine had no nudity. Indonesia’s President has spoken out against the violence and provided a reasonable analysis of why there has been more of it: “In a large-scale transformation, there might be disorientation and resistance,” he said. “It often causes uncomfortable feelings [and leads to different groups] blaming each other. It happens because the old values have been abandoned while the new values have not been properly established.” VP Boediono went a little further in remarks at a recent conference when he said “our state ideology tells us to respect people holding different religious beliefs. If we deviate from or contradict our basic ideology, the nation will come to ruin." It may be time for Indonesia to launch a more vigorous counterattack and for Obama to encourage him to do more to protect the rights of other religions. A start would be to ban incendiary groups like FPI and to more actively facilitate the construction of churches.

A New Era in US-Indonesia Relations Begins

September has brought with it much needed cooler weather, but regarding US-Indonesia relations, things are definitely heating up. The Comprehensive Partnership between the two countries, first announced in 2008, is in the process of being fleshed out: working groups focusing on education, climate change, trade and investment, science and technology, and security met on September 17 in Washington in an event called the US-Indonesian Joint Commission, chaired by Secretary of State Hillary Clinton and Foreign Minister Marty Natalegawa. The Commission has plenty of work ahead of it and will need to somehow rally those outside its halls to fully implement its vision. AICC looks forward to channeling its input.

President Obama finally announced he will visit Indonesia in November, sandwiched between visits to India and Korea. Even though it will be short, the visit will help solidify the important diplomatic progress that has been made since his election in 2008 and President Yudhoyono’s in 2009. Yudhoyono’s absence at the historic US-ASEAN Summit in NY could have been avoided if Obama had fulfilled his earlier commitment to visit Indonesia, but VP Boediono filled in ably and US audiences got to hear him discuss the economy, always a good thing. Traveling with Boediono was Gita Wirjawan, Chairman of the Investment Board as well as Kuntoro Mangkusubroto, head of the Presidential Working Group on government performance. These three symbolize President Yudhoyono’s transformative leadership; they are efficient, strong communicators, practical, modern, and professional. They represent the best of Indonesia. Their challenge is to overcome the anti-reform elements within the bureaucracy and Parliament.

In Dino Djalal,(pictured above) President SBY has chosen a veteran diplomat and Presidential speechwriter who has actually changed the language of Indonesian diplomacy. We have noticed that since 2004 the President’s speechs are devoid of past artifices and circumlocutions, and cut to the core of issues quickly. Having lived in the United States as an adolescent, the new Ambassador is fluent in English as well as America’s diverse culture. His own story here, where he lived with a NY family, is compelling, and will help him in his efforts to present a democratized Indonesia that few Americans really comprehend. For as long as anyone can remember, Indonesia has not had an Ambassador with this level of closeness with the country’s President. AICC looks forward to meeting with Dino next month and to a new era in US-Indonesia relations.

OBAMA TO VISIT INDONESIA IN NOVEMBER

It looks like the real thing this time !

President Obama made a clear statement of his intention to visit Indonesia in November during his speech Thursday at the UN. In my follow-up conversations with senior US State Department officials, its likely that Obama will visit for only 24 hours, following his visit to India, which should occur soon after the November US elections. However, a more extended visit is being planned for 2011 when Obama is expected to attend the East Asia Summit. I applaud this move. Much better to get a visit in now--even if its a short one-- than keep Indonesia and its patient President, Susilo Bambang Yudhoyono, waiting.

Bali-Wood: “Eat, Pray, Love”

The new Julia Roberts vehicle showcases her shining presence and gives Bali a real Hollywood live star turn for the first time. This is no Hope/Crosby “Road To Bali” flick made in a studio; the scenes of the island of the Gods are real and the island looks gorgeous. I kept an open mind, not expecting very much. I hoped Bali would come through as more than a caricature of what it really is. I am not sure that it did. The movie predictably reinforces Bali's image as a place for spiritual renewal but equally clear is its location as a place for well-to-do expats to party and fool around. There's no link to Bali's place within Indonesia; in fact, I am not sure the word Indonesia is mentioned. You don't hear any of its music or see its wonderful performing and visual arts or great temples. Hardly any crafts. What you do see is the creativity of its paddy landscapes. In other words, great tracking shots. The soundtrack for the Bali section is primarily samba, the leit motif of its main character's Brazilian love interest.

I have heard that there has been an uptick in travelers because of the book and I imagine the same with the movie. That's a good thing I suppose.

The Indonesian actors are quite strong (the great Christine Hakim and the wonderful Hadi Subiyanto ) In fact, they steal some of the scenes they have with Julia Roberts. Indonesia can be proud of its performers transcending their locale.

What you learn about Bali is superficial but perhaps it will encourage stronger story lines. Now Hollywood has proven that Indonesia can support a big budget location shoot. To me the movie is a fairly prosaic ode to single womanhood and single motherhood. It has heart and accurately represents expats who find “balance” in their chaotic lives from a time in Bali. But those tracking shots mirror the sense of someone merely passing through, which is exactly what its main character does.

Rupiah May Go on a Diet

The rupiah as we know it may be history in ten years. What, you say, how can that be. Don’t panic; no need to liquidate positions. There is no drastic devaluation coming. Just gaze wistfully at those many zeroes on bank notes and prepare to say goodbye. If a Bank Indonesia plan is adopted (and I emphasize the word if) we will all be making new, simpler calculations. You guessed it: the rupiah is being prepared for a “re-denomination”. After a 10 year phase-in period currency notes would not have the zeroes.

"Re-denomination shall be in no way detrimental to the public as it differs from previous currency reforms that reduced the exchange value of the currency. Redenomination does not affect the value of money against goods (purchase power), several zeros are simply omitted from the current denominations," clarified the new Governor of BI, Darmin Nasution.

Unlike the two other times in Indonesia’s history when the currency was redenominated to cope with high inflation this one would reflect the growing strength and stability of Indonesia’s economy and would simplify transactions. Bank Indonesia spokesmen indicated that another aim is to help in the preparation of an ASEAN Economic Community. So far local businesses and economists have had a positive reaction to the announcement even though they acknowledge there will be be costs. Several leading business leaders speculated that the change (basically shifting the decimal place) will create a more positive perception of value. However, the markets and some members of the public had an initial negative reaction. One group that will immediately cheer this move is the tourist, usually bewildered at money changing windows and the cash register.