22 Economics EIR February 21, 2014
‘To Protect Its People’
Indonesia Says No
To Free Market
by Ron Castonguay
Feb. 13—An important law just passed by the Indonesian
Parliament curtails the rights of the market to control
the destiny of the Indonesian people, apparently
anticipating a need for emergency economic measures.
Article 54 of the new trade law allows the government
to restrict exports of commodities to anticipate “quite
drastic” price increases in global markets or to ensure
domestic supply. It also allows for import restrictions to
develop or protect certain industries and to safeguard
the country’s balance of payments.
The law, approved at a plenary session of parliament
on Feb. 11, may limit exports or imports of staple
commodities to ensure local demand is met. The new
law highlights Indonesia’s push to limit commodity exports
and food imports to develop local production and
boost manufacturing capabilities in the country, as the
government seeks to reduce the economy’s dependence
on overseas shipments for growth.
Indonesia is not shy about its rights to violate the
dogma of “free trade” to protect higher, and more valid,
values. “This law underlines Indonesia’s stance of not
adopting a free market,” Deputy Trade Minister Bayu
Krisnamurthi said after the bill was passed. “The government
has been given the right to intervene to protect
its people.”
Aiming for Food Self-Sufficiency
The goal of the new provisions is not just short term.
Indonesia, with its heritage of Portuguese, English, and
Dutch colonialism, is determined to reject that status,
develop itself, and fully exist as a sovereign nation.
“We can’t rely on coal and palm oil anymore,” said
Juniman, a Jakarta-based economist at PT Bank Internasional
Indonesia. “If all our raw materials are exported,
manufacturers won’t be able to grow and it’ll be
difficult for us to avoid getting stuck in the middle-income
trap.”
Indonesia has 237 million people on its 17,000
islands. Its demands and its actions to establish its
sovereignty are more important than may at first be
apparent. It is not just other minor undeveloped country.
Only China, India, and the United States have a
greater population than Indonesia, and there is no country
with a larger Muslin population. While the poison of
Saudi-backed fundamentalism has touched Indonesia,
Islam is by-and-large moderate there, and the government,
based on a expressly secular model, is relatively
stable. Its actions are watched and noted throughout the
world.
Ever since the 1997-98 Asian financial crisis, which
deeply affected the country’s economy, Indonesia has
been attempting to reform its agricultural sector. It has
put in place a large number of reforms with the objectives
of achieving food security through increased production
of rice, sugar, soybeans, maize, and beef; ensuring
that prices are affordable for consumers;
diversifying production away from carbohydrates to
animal-based products; raising the level of competitiveness
for agricultural products; and improving the
lot of farmers.
A new Food Law, signed by President Susilo Bambang
Yudhoyono in November 2012, was intended to
institutionalize self-sufficiency in food production, and
“food sovereignty” as overarching food security policies,
according to the U.S. Department of Agriculture’s
Foreign Agricultural Service. Among its provisions,
Article 14 states that “Sources of food supply are from
domestic production and national food reserves. In the
case of shortage of food supply from those two sources,
food can be fulfilled by importation, as needed.” In
other words, Indonesia should depend on itself for its
food, only relying on the international market in case of
need.
Another provision, Article 24, limits the export of
food, saying exports “can be carried out by taking into
account the needs of domestic food consumption and
national interest. The export of staple food can only be
carried out after the fulfillment of domestic consumption
and national food reserves.”
Not all the goals of the Food Law have been realized.
While there was opposition to the law from the
international food cartels, Indonesia has been self-sufficient
enough in food to be shielded from cartel retribution.
The exception is Indonesia’s production and
export of edible palm oil in the international arena—
which has been under continued Greenie attack, most
February 21, 2014 EIR Economics 23
especially European, on a variety of so-called health
and environmental grounds.
However, the implementation of the law has encountered
numerous problems, including an Australian
embargo on live cow exports because of Indonesian
“cruelty” in slaughtering, profiteering in certain commodities,
and widespread corruption problems that lead
to a black market in foodstuff import certificates.
Fight with the Mineral Cartels
Indonesia’s fight to escape being merely a raw materials
exporter is also proceeding in the area of minerals.
Indonesia is the world’s biggest exporter of thermal
coal, tin, and nickel ore, and a major supplier of copper,
aluminum, and gold ores. Minerals and related products
have in the past accounted for up to 20% of its exports.
Copper brought in $7.2 billion in annual receipts
in 2011, followed by nickel ($3.1 billion), tin ($2.4 billion),
and bauxite ($1.1 billion).
But, by and large, Indonesian mining is a collection
of holes in the ground and short-haul railroads. Little to
none of the processing of ores, or refining, smelting,
and fabricating the finished metal into semi-finished
goods, or final product is done in Indonesia, leaving the
country dependent on the mineral cartels.
When, in 2009, Indonesia
announced a law to
change that, by requiring
mining companies to at
least do the initial processing
of ores in the country,
beginning in 2014, the international
cartels let out a
howl and produced a
ruckus that still continues.
Rather than investing in Indonesia
by building smelters
and other associated
processing facilities, the
international cartels began
a campaign of press vilification,
legal actions, and
stubborn refusal to accept
the will of the Indonesian
government and people.
With few exceptions, the
mining companies declared
they would not prepare to
carry out the law, but would just cease production in
Indonesia.
On the eve of the law’s implementation in January,
the government let the mining law go into effect, with
the provision that unrefined ores would be subject to an
export tax. Indonesia’s exports of mineral ore are now
at a standstill, with unprocessed bauxite and nickel the
target of an outright ban (for technical reasons involved
the refining process), and mining companies either refusing
or unable to pay the heavy new export duty on
copper and the other concentrates that were given an
11th-hour three-year extension, according to a report in
Asia Sentinel.
So far, there have been no requests for export licenses,
as an effective boycott appears to have been imposed
by London. And, so with out-of-country stockpiles
and the overall weakened state of the world’s
economies, the mining cartels may be able to continue
their anti-Indonesia stance for some time.
But the very success of the mining cartels’ boycott
of Indonesian minerals ultimately reduces the viability
of those cartels. After all, the ultimate industrial consumer
of Indonesia’s minerals is China, which wants
long-term supply under stable conditions. If the cartels
cannot or will not supply that, why not just eliminate
the middle-man?
Creative Commons/Alexis Gravel
Indonesia has put in place a large number of reforms to achieve food security through increased
production of rice, sugar, soybeans, maize, and beef. Here, terraced agriculture in Indonesia.
‘To Protect Its People’
Indonesia Says No
To Free Market
by Ron Castonguay
Feb. 13—An important law just passed by the Indonesian
Parliament curtails the rights of the market to control
the destiny of the Indonesian people, apparently
anticipating a need for emergency economic measures.
Article 54 of the new trade law allows the government
to restrict exports of commodities to anticipate “quite
drastic” price increases in global markets or to ensure
domestic supply. It also allows for import restrictions to
develop or protect certain industries and to safeguard
the country’s balance of payments.
The law, approved at a plenary session of parliament
on Feb. 11, may limit exports or imports of staple
commodities to ensure local demand is met. The new
law highlights Indonesia’s push to limit commodity exports
and food imports to develop local production and
boost manufacturing capabilities in the country, as the
government seeks to reduce the economy’s dependence
on overseas shipments for growth.
Indonesia is not shy about its rights to violate the
dogma of “free trade” to protect higher, and more valid,
values. “This law underlines Indonesia’s stance of not
adopting a free market,” Deputy Trade Minister Bayu
Krisnamurthi said after the bill was passed. “The government
has been given the right to intervene to protect
its people.”
Aiming for Food Self-Sufficiency
The goal of the new provisions is not just short term.
Indonesia, with its heritage of Portuguese, English, and
Dutch colonialism, is determined to reject that status,
develop itself, and fully exist as a sovereign nation.
“We can’t rely on coal and palm oil anymore,” said
Juniman, a Jakarta-based economist at PT Bank Internasional
Indonesia. “If all our raw materials are exported,
manufacturers won’t be able to grow and it’ll be
difficult for us to avoid getting stuck in the middle-income
trap.”
Indonesia has 237 million people on its 17,000
islands. Its demands and its actions to establish its
sovereignty are more important than may at first be
apparent. It is not just other minor undeveloped country.
Only China, India, and the United States have a
greater population than Indonesia, and there is no country
with a larger Muslin population. While the poison of
Saudi-backed fundamentalism has touched Indonesia,
Islam is by-and-large moderate there, and the government,
based on a expressly secular model, is relatively
stable. Its actions are watched and noted throughout the
world.
Ever since the 1997-98 Asian financial crisis, which
deeply affected the country’s economy, Indonesia has
been attempting to reform its agricultural sector. It has
put in place a large number of reforms with the objectives
of achieving food security through increased production
of rice, sugar, soybeans, maize, and beef; ensuring
that prices are affordable for consumers;
diversifying production away from carbohydrates to
animal-based products; raising the level of competitiveness
for agricultural products; and improving the
lot of farmers.
A new Food Law, signed by President Susilo Bambang
Yudhoyono in November 2012, was intended to
institutionalize self-sufficiency in food production, and
“food sovereignty” as overarching food security policies,
according to the U.S. Department of Agriculture’s
Foreign Agricultural Service. Among its provisions,
Article 14 states that “Sources of food supply are from
domestic production and national food reserves. In the
case of shortage of food supply from those two sources,
food can be fulfilled by importation, as needed.” In
other words, Indonesia should depend on itself for its
food, only relying on the international market in case of
need.
Another provision, Article 24, limits the export of
food, saying exports “can be carried out by taking into
account the needs of domestic food consumption and
national interest. The export of staple food can only be
carried out after the fulfillment of domestic consumption
and national food reserves.”
Not all the goals of the Food Law have been realized.
While there was opposition to the law from the
international food cartels, Indonesia has been self-sufficient
enough in food to be shielded from cartel retribution.
The exception is Indonesia’s production and
export of edible palm oil in the international arena—
which has been under continued Greenie attack, most
February 21, 2014 EIR Economics 23
especially European, on a variety of so-called health
and environmental grounds.
However, the implementation of the law has encountered
numerous problems, including an Australian
embargo on live cow exports because of Indonesian
“cruelty” in slaughtering, profiteering in certain commodities,
and widespread corruption problems that lead
to a black market in foodstuff import certificates.
Fight with the Mineral Cartels
Indonesia’s fight to escape being merely a raw materials
exporter is also proceeding in the area of minerals.
Indonesia is the world’s biggest exporter of thermal
coal, tin, and nickel ore, and a major supplier of copper,
aluminum, and gold ores. Minerals and related products
have in the past accounted for up to 20% of its exports.
Copper brought in $7.2 billion in annual receipts
in 2011, followed by nickel ($3.1 billion), tin ($2.4 billion),
and bauxite ($1.1 billion).
But, by and large, Indonesian mining is a collection
of holes in the ground and short-haul railroads. Little to
none of the processing of ores, or refining, smelting,
and fabricating the finished metal into semi-finished
goods, or final product is done in Indonesia, leaving the
country dependent on the mineral cartels.
When, in 2009, Indonesia
announced a law to
change that, by requiring
mining companies to at
least do the initial processing
of ores in the country,
beginning in 2014, the international
cartels let out a
howl and produced a
ruckus that still continues.
Rather than investing in Indonesia
by building smelters
and other associated
processing facilities, the
international cartels began
a campaign of press vilification,
legal actions, and
stubborn refusal to accept
the will of the Indonesian
government and people.
With few exceptions, the
mining companies declared
they would not prepare to
carry out the law, but would just cease production in
Indonesia.
On the eve of the law’s implementation in January,
the government let the mining law go into effect, with
the provision that unrefined ores would be subject to an
export tax. Indonesia’s exports of mineral ore are now
at a standstill, with unprocessed bauxite and nickel the
target of an outright ban (for technical reasons involved
the refining process), and mining companies either refusing
or unable to pay the heavy new export duty on
copper and the other concentrates that were given an
11th-hour three-year extension, according to a report in
Asia Sentinel.
So far, there have been no requests for export licenses,
as an effective boycott appears to have been imposed
by London. And, so with out-of-country stockpiles
and the overall weakened state of the world’s
economies, the mining cartels may be able to continue
their anti-Indonesia stance for some time.
But the very success of the mining cartels’ boycott
of Indonesian minerals ultimately reduces the viability
of those cartels. After all, the ultimate industrial consumer
of Indonesia’s minerals is China, which wants
long-term supply under stable conditions. If the cartels
cannot or will not supply that, why not just eliminate
the middle-man?
Creative Commons/Alexis Gravel
Indonesia has put in place a large number of reforms to achieve food security through increased
production of rice, sugar, soybeans, maize, and beef. Here, terraced agriculture in Indonesia.
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