Of various unpopular decisions by the government in recent times, the most invasive will be the request from President Suharto for every single Indonesian man, woman and child to contribute a substantial sum towards a new commercial jet aircraft being developed in Bandung. The request comes on the heels of the blatant cronyism of the Timor car affair, and the equally blatant engineering to remove Megawati from the PDI leadership. It must suggest a serious deterioration in the President's normally astute political judgment.
The N-2130 (N for Nusantara, 2 engines, 130 seats) is being designed at the government owned aircraft factory IPTN and is expected to fly by 2002. But the venture will be paid for by a private company, PT DSTP (Dua Satu Tiga Puluh), chaired by President Suharto acting in his personal capacity.
IPTN itself does not have enough money to develop a new aircraft. Indeed, it has only been able to sell its existing aircraft to other countries by means of rather primitive barter deals (rice, cotton), because it lacks export financing.
DSTP was set up in February and includes the owners of 20 well- connected conglomerates, including Prajogo Pangestu, Henry Pribadi, Eka Tjipta Widjaya, and Sudwikatmono. They immediately bought about US$400 mn worth of shares. Among the commissioners are two former Vice-Presidents: Sudharmono and Umar Wirahadikusumah. Its director is Saadilah Mursjid, ministerial-rank secretary of cabinet.
Pressure has been applied to a variety of government-owned corporations (BUMN) to contribute. In May, six BUMN under the Forestry Ministry, responsible for managing forests throughout Indonesia, bought US$15 mn worth of shares in DSTP. The money was taken from rainforest preservation funds. This recalls a controversial $185 mn interest-free loan taken from reafforestation funds in 1994 at the President's request, for the development of another aircraft.
In June, 21 BUMN under the Ministry of Industry and Trade agreed to buy Rp 70 billion (US$35 mn) worth of shares, even though many BUMN under this ministry have been declared 'unhealthy'.
Then on 13 June the President called on all regents throughout Indonesia to collect Rp 5000 from every member of the population, a first instalment of a projected US$10 from every Indonesian. He had foreshadowed this move at a meeting with governors at the end of March. The total target is US$2 billion. He spoke of the 'national importance' of the aircraft, and used the language of 'gotong royong' - mutual self-help - thus making the request virtually inescapable.
Not surprisingly, the request at a meeting of 306 regents caused disquiet. Some said they would await detailed instructions from the Interior Ministry first, and pleaded for consideration of their people's poverty. They no doubt realize many Indonesians are proud of Habibie's aerospace industry, but may not be willing to pay the equivalent of up to a month's wages per family for it.
There has been critical comment from legal and economic experts as well. While economic observer Christianto Wibisono praised the President for 'getting directly involved' with a strategic industry, political observer Marsilam Simanjuntak thought it represented a 'personalisation of power'. Law professor Sri Soemantri pointed to a government regulation (PP 30/1980) barring public servants from taking part in business.
Another well-known law professor, Harun Al-Rasyid, thought the government regulation may not apply to the President, and added that the 1945 Constitution did not mention the matter. But the Federal Constitution (RIS) of 1950, and the Temporary Constitution (UUDS) of 1950 both disapproved of mixing the presidency and business, and it was clearly inadvisable today in order to avoid compromising the dignity of the office.
In a withering editorial in its latest edition, Warta Ekonomi questions the President's reasoning that the fund is necessary to 'overcome our aerospace technological backwardness'. It pointed out that wealthy Japan had no aircraft industry and preferred to buy its aircraft elsewhere. Few new entrants to the already overcrowded aeroplane market could compete with the massively funded European Airbus Industries. The bankruptcy of Fokker merely illustrated this competitiveness. The editorial also questioned the propriety of keeping DSTP a private company - people would believe in it more if it was floated on the stock exchange.
Indeed, the N-2130 will face stiff competition. A European consortium (AIA) will introduce 3 Chinese-built models similar to the N-2130 a year or two earlier than Indonesia. Other competitors are the Boeing 737-600, the MD-59 and the F-100.
PS: Since this Digest was written, Finance Minister Mar'ie Muhammad reportedly wrote to Habibie complaining that the method of selling shares to the public being adopted by DSTP contravened the law on the stock market.
Gerry van Klinken, editor, 'Inside
Indonesia' magazine.
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