Author Archives: Cempaka

Europe announces a fresh, ‘credible’ Greek rescue deal

Deutsche Welle, 22 July 2011 


Greece’s second aid package is
larger than the first
European leaders say the eurozone, the International Monetary Fund and the private sector will all contribute towards a second package of emergency loans for Greece, as a debt-dominated summit concludes in Brussels.
European Union President Herman van Rompuy said after Thursday’s summit in Brussels that the bloc had reached three important decisions which had unanimous support within eurozone.
“We improved the Greek debt sustainability, we took measures to stop the risk of contagion, and finally, we committed to improve the eurozone’s crisis management,” Rompuy said in the opening moments of his official address.
The EU president said that the instability of the Greek economy, coupled with the resultant jitters on international markets, ultimately could have threatened the single European currency and the economic recovery in Europe and the wider world.
“Convening this meeting focused the minds and accelerated finding a solution. I could not allow a difficult situation to become a dangerous one,” Rompuy said.
The nuts and bolts
European leaders in conjunction with the International Monetary Fund (IMF) agreed to lend Greece an additional 109 billion euros (157 billion dollars) in order to cover its financing shortfalls and prevent Athens from defaulting on its sovereign debt.
The program will include lower interest rates and extended maturities as well as a voluntary contribution from private sector financial institutions amounting to 37 billion euros, according to a statement released by the leaders after the summit.
Merkel and Sarkozy struck an
agreement before the summit
European Central Bank chief Jean-Claude Trichet reacted coolly to concerns that even voluntary participation by the private sector could provoke rating agencies to downgrade Greece’s credit worthiness.
“I don’t think experts consider that what has been done would trigger a credit event,” Trichet said after the summit.
‘European package’
Greece’s second aid package, including private contributions, will total at least 146 billion euros. The package comes in addition to the 110 billion euros Athens was promised as part of its first bailout in 2010.
“The only thing we’re asking for is the right to make deep changes in our country to make our country a viable one, one of growth and jobs creations,” Greek Prime Minister George Papandreou said. “This is a European success, a European package.”
The breakthrough deal was made possible after German Chancellor Angela Merkel and French President Nicolas Sarkozy came to an agreement in Berlin on Wednesday.
Sarkozy said that Europe was prepared to stand with Athens and guarantee its credit worthiness in the event that credit agencies declare Greece in limited default.
“We have agreed to create the beginnings of a European Monetary Fund,” he said.
Author: Spencer Kimball, Mark Hallam (AFP, Reuters, dpa)
Editor: Joanna Impey


Paul Hellyer – Abolishing Fed and new energy disclosure key to US survival

Chinese FM calls for further ASEAN Plus Three cooperation for regional prosperity

Foreign ministers and delegates of ASEAN and China, Japan and the
 Republic of Korea, pose for group photos during the ASEAN and China,
Japan and the Republic of Korea foreign ministers’ meeting held in Bali,
Indonesia, July 21, 2011. (Xinhua/Chen Duo)

Indonesia Exposure to Global Risk is Limited: IMF

Jakarta Globe, July 21, 2011

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Indonesiafaces limited exposure to a large exit of foreign capital at a time of globalrisk aversion due to strong fundamentals and relatively low dependence onexternal demand, the IMF said on Thursday.
TheInternational Monetary Fund cited the country’s strong export growth, includingin manufacturing, and said the continued flexibility of the rupiah’s exchangerate would help protect against volatile cash inflows.
Thecomments come as Indonesia’s central bank tries to cap huge inflows of foreigncash from investors seeking higher interest rates than in the West, which itfears could trigger economic instability.
“IndonesianGDP growth is projected to remain robust at around 6.5 percent in 2011–12,”the IMF said in a statement following a consultation with Indonesian officialsand central bankers.
“Increasesin both foreign and domestic investment are supporting growth, whileaccelerating credit growth and expected reductions in energy subsidies shouldpush core inflation modestly higher this year and into 2012,” it said.
The fundalso urged Indonesia to reduce fuel subsidies so that it could boost spendingon infrastructure and social welfare.
IMF,however, said there was a risk of higher inflation if the government cut energysubsidies, and that the central bank would need to “act decisively” if thegovernment took that course.
Agence France-Presse

Indonesian ruling party to hold congress following revelation of corruption among senior officials

English.news.cn,by Abu Hanifah, 2011-07-21
JAKARTA,July 21 (Xinhua) — Indonesian ruling political party, the Democrat Party, isscheduled to hold a two-day national congress Saturday following a high-profilecorruption allegation that implicating senior officials at the party asconfessed by the party’s sacked treasurer to the media recently.
Allegationon the implication of Anas and several senior officials at the party in ahigh-profile corruption case rife in national media following the confession offormer party’s treasurer Muhammad Nazaruddin about it was televised nationwiderecently.
Nazaruddin,who is still at large after being declared a suspect in the corruption casethat was said masterminded by Anas, said Anas bought the votes from the party’scadres that made him seized the chairmanship in the party’s congress heldNovember last year.
Nazaruddinalso said that the money used to buy the votes came from bribes provided bycontractors who were just awarded contracts to build national sport facilitiesin Bogor, West Java and dormitory building projects for the athletes contendingin the upcoming regional sport event of SEA Games scheduled in Jakarta andPalembang.
In thetestimony aired by local TV station MetroTV in the last two days, Nazaruddinsaid from his hideout that part of the money provided to buy the votes wasretrieved from the state budget funds.
Nazaruddinhas been declared a suspect by the country’s anti-corruption commission forfixing all the project contracts to those contractors. He was suspected ofreceiving 13 percent of commission fee from total SEA Games athletes dormitoryproject that worth 200 billion rupiah (about 23 million U.S. dollars)
IndonesianPresident Susilo Bambang Yudhoyono, the Democrat party’s patron figure, hassummoned Anas and several party’s senior officials regarding Nazaruddinconfession on Wednesday.
Butnone of them was willing to disclose the content of the meeting with thepresident who secured two maximum presidency periods with landslide votes in2004 and 2009 elections.
Discourseon possible chairmanship replacement in the upcoming congress rife in nationalmedia as an effort to save the party’s image before running in 2014 elections.
Theparty would no longer nominate President Susilo Bambang Yudhoyono as he had hismaximum two presidency terms. The party has yet to find the correct figure tobe nominated as its presidential candidate in the elections.
TheDemocrat party was initially established to usher Susilo Bambang Yudhoyono, aretired army general, to seize presidency.
Theparty gained massive votes in the last two elections, dominating the seats inthe parliament that assuring adequate backup to the president’s policies inrunning the country.
Apolitical expert, Syamsuddin Haris, said earlier that the current high-profilecorruption scandal make the party risk losing significant votes in 2014election.
Hesaid that the corruption scandal has eroded the public’s trust on PresidentYudhoyono’s party that strongly voiced anti- corruption drive during theelection campaign.
Editor: Xiong Tong

Foreign Direct Investment in Indonesia Up 21% in Q2

Jakarta Globe, July 21, 2011

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Foreigndirect investment in Indonesia rose 21 percent in the second quarter of 2011from a year ago, as strong commodity prices attracted investors into the miningsector, the government said on Thursday.
FDI fromApril to June was Rp 43.1 trillion ($5 billion), which followed $4.6 billion offoreign investment in the first quarter, the country’s investment board (BKPM)said.
This tookFDI in the first six months to just short of a half of its full year target fora record Rp 156 trillion this year. Last year foreign investment into Indonesiareached a record Rp 148 trillion.
SoutheastAsia’s largest economy has been a hot destination for foreign investors in thepast two years due to its resilient economic growth, abundant resources,emerging middle class and political stability.
Reuters

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Law Enforcers Sign Whistle-Blower Protection Agreement

Jakarta Globe, UlmaHaryanto, July 19, 2011


Agus Condro, the whistleblower in the Miranda Goeltom Bank Indonesia
bribery scandal. (JG Photo/Safir Makki)  
   
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Topofficials from Indonesian law enforcement institutions gathered at the AryadutaHotel in Central Jakarta on Tuesday to sign an agreement granting protection towhistle-blowers as an integral part in the fight against crime.
“Thisagreement is a joint commitment of law enforcement institutions to provideprotection to whistle-blowers as justice collaborators,” said Abdul Haris,chairman of the Witness and Victim Protection Agency (LPSK).
He wasjoined at the signing by Supreme Court Chief Justice Harifin A. Tumpa, JudicialMafia Eradication Work Unit chief Kuntoro Mangkusubroto, Coordinating Ministerfor Political, Legal and Security Affairs Djoko Suyanto, National Police ChiefTimur Pradopo, Justice and Human Rights minister Patrialis Akbar, AttorneyGeneral Basrief Arief, and Corruption Eradication Commission (KPK) chairmanBusyro Muqoddas.
Protectionfor whistle-blowers, Haris said, was important in revealing corruption andother serious or organized crimes.
JudicialMafia Eradication Task Force secretary Denny Indrayana added that his team,together with the LPSK, had pushed for a revision of the 2006 Law on Witnessand Victim Protection.
“Throughthe joint agreement and international seminar we hope to have helped lawenforcement officials understand the issues and speed up the revisionprocess,” Denny said.
It isunclear if the new agreement would affect the sentencing of the whistle-blowerin the Miranda Goeltom Bank Indonesia bribery scandal.
The man whowent public with the case, Agus Condro Prayitno, a former lawmaker from theIndonesian Democratic Party of Struggle (PDI-P), is serving a 15-month jailsentence for accepting a bribe in exchange for voting for Miranda as a BankIndonesia deputy governor in 2004.

KPK, Surabaya administration promote anti-graft mentality through Integrity Fair

InaParlina, The Jakarta Post, Jakarta | Sat, 07/16/2011

TheCorruption Eradication Commission (KPK) and the Surabaya municipality organizedthe latest Integrity Fair as a means of promoting anti-corruption behavior.
The two-dayevent titled “Creating Integrity in Surabaya” held at Taman Surya, City Hall,opened today.
“We hopethe event can promote the importance of integrity and challenge officials toimprove the quality of public service,” KPK deputy chief Bibit Samad Riantosaid Saturday.
The eventalso offers anti-corruption games for children to reinforce values at an earlyage.
“It isimportant to raise awareness and understanding of not tolerating corruptionfrom an early age,” said Bibit. “We can teach them integrity from children’s’games and stories.”
TheIntegrity Fair is a part of the KPK’s 2011 corruption prevention program. Asimilar event is currently being held in Bandung, West Java, after also beingheld in Palembang, South Sumatra and Makassar, South Sulawesi.

Kadin Says Renewables the Key to Heading Off Energy Crisis

Jakarta Globe, FaisalMaliki Baskoro, July 15, 2011

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TheIndonesian Chamber of Commerce and Industry has called on the government toshow its commitment to developing renewable energy resources throughregulations and pricing as the nation tries to reduce its reliance on fossilfuels.
Thegovernment had yet to issue any regulations to set the price of renewableenergy, which has hampered business plans for developing the resource, saidHarry Salman F. Sohar, the deputy for new and renewable energy at the chamber,also known as Kadin.
“Renewableenergy is still seen as an alternative, not a solution,” he said. “Developingrenewables is necessary, and the government needs to be more serious aboutthis.”
Theimportance of moving away from fossil fuels and natural gas for electricity generationhas been acknowledged in legislation that prioritizes shifting energy use tonew and renewable resources, including coalbed methane, nuclear, gasified coal,geothermal, solar and wind.
“There’sstill a lack of regulation that is pro-renewables, especially on the pricingmechanism,” Harry said. “Kadin will form a working committee that will provideinput to the government.”
Kadin, hesaid, will propose a feed-in tariff payment plan, which would pay those whooperate renewable electricity systems for every kilowatt hour generated basedon the cost of production by technology. That means homeowners who have solarpanels installed on their roofs would be paid for the surplus electricity thatis generated and transmitted to the power grid.
The FITscheme is already widely used in Europe, Asia and Africa.
Accordingto government data, Indonesia has up to 40 percent of the world’s geothermalreserves, with the potential to produce the equivalent of 28,000 megawatts.
Harry saidcountries had already committed to helping develop Indonesia’s renewable energypotential, including $364 million coming from the United States. Finland hasalso set aside $40 million to develop renewables in South Kalimantan and Riau,he added.
Accordingto Shinta Widjaja Kamdani, Kadin’s deputy for the environment and climatechange, the government needs to act on developing renewables because fossilfuel reserves could run out as soon as in the next 15 years, leaving thecountry with an energy crisis. “A major breakthrough needs to happen soon,” shesaid.
Indonesia’soil reserves are estimated at 4.7 billion barrels, the equivalent of 15 years’worth with average domestic consumption of 1,126 million barrels per day, shesaid, citing data from the BP Statistical Review of World Energy.
At the sametime, the use of renewable energy by way of solar, wind and biodiesel hasincreased significantly over the past four years, she said, citing theInternational Energy Agency.

S&P warning puts damper on Eurogroup plans

Deutsche Wellle, 5 July 2011

Standard & Poor’s is critical of
the banks’ plans
The Standard & Poor’s rating agency says a debt rollover plan pushed by French banks would amount to a default, putting a damper on European efforts to solve the Greek debt crisis.
French banks last week thought up what they figured was a really good plan: a debt rollover plan under which some of the Greek bonds would be voluntarily renewed when they become due, but on different terms, giving Greece some breathing space without actually reducing the amount owed to creditors.
German banks, which together with French banks and insurance companies are among the major holders of Greek debt, agreed to the plan – and so did the German finance ministry.
But the ratings agency Standard & Poor’s warned on Monday that this option “would likely amount to a default under our criteria.” The other two major rating agencies, Fitch and Moody’s, did not react immediately, but it was expected that they could well come to a similar assessment.
S&P warning calls into question second bailout package
Since German banks have made it clear that any solution to the Greek debt crisis which rating agencies viewed as a default was not viable, that would call into question the voluntary contribution of banks and insurance companies to a second bailout package designed to help Greece through to 2014.
Eurozone finance ministers put off
deciding on a second bailout package
to help Greece
At the weekend, the finance ministers of the 17 eurozone countries put off a decision about such a bailout, which is expected to amount to 80 to 90 billion euros ($116 to 131 billion) because of conflicts over the extent of private sector involvement in the effort.
The eurozone ministers did sign off an 8.7 billion euros loan to Greece which is part of an 110 billion euros package agreed upon last year. Without this loan, the Greek government would have faced insolvency within weeks. But without a second bailout deal, a funding shortfall is imminent between 2012 and 2014.
Criticism grows louder of rating agencies’ power
With the controversy surrounding a second bailout package due to the assessment of Standard & Poor’s, criticism of the big rating agencies’ power is growing louder.
ECB member Ewald Nowotny is
one of the rating agencies’ critics
European Central Bank policymaker Ewald Nowotny told Austrian public radio that the rating agencies were placing obstacles in the way of those banks willing to contribute to Greece’s financial stabilization.
The Bavarian finance minister, Georg Fahrenschon of the conservative Christian Social Union party, or CSU, told the German newspaper Passauer Neue Presse that the warning issued by S&P was “inappropriate.” And Joachim Poss, finance expert for the Social Democrats in the German Parliament, told Deutsche Welle that the game the US rating agencies were playing had to make one “uneasy.”
The three major rating agencies hold a collective market share of roughly 95 percent. Their special status has been cemented by law – at first only in the US, but then in Europe as well.
“The ratings from the big three were declared mandatory for European firms active in the US market,” Thomas Straubhaar, the director of the Hamburg Institute of International Economics told Deutsche Welle.
The agencies rate the creditworthiness of companies and countries, as well as the quality of funds and stocks. Their assessment determines the conditions under which firms, banks or countries may borrow money on the capital markets.
“We can’t have private companies, whose primary goal is maximizing profit, behaving like sovereign judges passing down opinions that are binding for disinterested third parties,” Straubhaar said.
EU makes efforts to curb the influence of the three big players
Over a year ago, the heads of the state and governments of the 27 European member states called upon the Union’s executive body, the European Commission, to come forward with proposals on how to supervise credit rating agencies. The Commission then proposed to set up a a new European supervisory authority, the European Security Markets Authority (ESMA).

The European Commission set up a new supervisory body for
rating agencies.

ESMA started work on January 1, promising to compel rating agencies to disclose the methodology of their ratings. But so far, the power of the big rating agencies appears unfettered.
Apart from calling for closer supervision of the big rating agencies, many European politicians have supported the creation of a European ratings agency. An independent European rating agency was indispensable, Bavarian finance minister Georg Fahrenschon said.
But economists are not so sure such a European agency would change much. “We don’t need rating agencies to tell us that Greece is on the verge of bankruptcy,” said Thomas Straubhaar. “A European agency would not be able change anything about this fact, nor could it correct it.”
And Torsten Hinrichs of Standard and Poor’s told Deutsche Welle investors were already free to place their trust in a whole range of agencies.
So even if a European ratings agency was to come into existence, it would still have to establish itself on the market and gain investors’ trust.
Author: Andrea Rönsberg
Editor: Nicole Goebel

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S&P warning puts damper on Eurogroup plans

Deutsche Wellle, 5 July 2011

Standard & Poor’s is critical of
the banks’ plans
The Standard & Poor’s rating agency says a debt rollover plan pushed by French banks would amount to a default, putting a damper on European efforts to solve the Greek debt crisis.
French banks last week thought up what they figured was a really good plan: a debt rollover plan under which some of the Greek bonds would be voluntarily renewed when they become due, but on different terms, giving Greece some breathing space without actually reducing the amount owed to creditors.
German banks, which together with French banks and insurance companies are among the major holders of Greek debt, agreed to the plan – and so did the German finance ministry.
But the ratings agency Standard & Poor’s warned on Monday that this option “would likely amount to a default under our criteria.” The other two major rating agencies, Fitch and Moody’s, did not react immediately, but it was expected that they could well come to a similar assessment.
S&P warning calls into question second bailout package
Since German banks have made it clear that any solution to the Greek debt crisis which rating agencies viewed as a default was not viable, that would call into question the voluntary contribution of banks and insurance companies to a second bailout package designed to help Greece through to 2014.
Eurozone finance ministers put off
deciding on a second bailout package
to help Greece
At the weekend, the finance ministers of the 17 eurozone countries put off a decision about such a bailout, which is expected to amount to 80 to 90 billion euros ($116 to 131 billion) because of conflicts over the extent of private sector involvement in the effort.
The eurozone ministers did sign off an 8.7 billion euros loan to Greece which is part of an 110 billion euros package agreed upon last year. Without this loan, the Greek government would have faced insolvency within weeks. But without a second bailout deal, a funding shortfall is imminent between 2012 and 2014.
Criticism grows louder of rating agencies’ power
With the controversy surrounding a second bailout package due to the assessment of Standard & Poor’s, criticism of the big rating agencies’ power is growing louder.
ECB member Ewald Nowotny is
one of the rating agencies’ critics
European Central Bank policymaker Ewald Nowotny told Austrian public radio that the rating agencies were placing obstacles in the way of those banks willing to contribute to Greece’s financial stabilization.
The Bavarian finance minister, Georg Fahrenschon of the conservative Christian Social Union party, or CSU, told the German newspaper Passauer Neue Presse that the warning issued by S&P was “inappropriate.” And Joachim Poss, finance expert for the Social Democrats in the German Parliament, told Deutsche Welle that the game the US rating agencies were playing had to make one “uneasy.”
The three major rating agencies hold a collective market share of roughly 95 percent. Their special status has been cemented by law – at first only in the US, but then in Europe as well.
“The ratings from the big three were declared mandatory for European firms active in the US market,” Thomas Straubhaar, the director of the Hamburg Institute of International Economics told Deutsche Welle.
The agencies rate the creditworthiness of companies and countries, as well as the quality of funds and stocks. Their assessment determines the conditions under which firms, banks or countries may borrow money on the capital markets.
“We can’t have private companies, whose primary goal is maximizing profit, behaving like sovereign judges passing down opinions that are binding for disinterested third parties,” Straubhaar said.
EU makes efforts to curb the influence of the three big players
Over a year ago, the heads of the state and governments of the 27 European member states called upon the Union’s executive body, the European Commission, to come forward with proposals on how to supervise credit rating agencies. The Commission then proposed to set up a a new European supervisory authority, the European Security Markets Authority (ESMA).

The European Commission set up a new supervisory body for
rating agencies.

ESMA started work on January 1, promising to compel rating agencies to disclose the methodology of their ratings. But so far, the power of the big rating agencies appears unfettered.
Apart from calling for closer supervision of the big rating agencies, many European politicians have supported the creation of a European ratings agency. An independent European rating agency was indispensable, Bavarian finance minister Georg Fahrenschon said.
But economists are not so sure such a European agency would change much. “We don’t need rating agencies to tell us that Greece is on the verge of bankruptcy,” said Thomas Straubhaar. “A European agency would not be able change anything about this fact, nor could it correct it.”
And Torsten Hinrichs of Standard and Poor’s told Deutsche Welle investors were already free to place their trust in a whole range of agencies.
So even if a European ratings agency was to come into existence, it would still have to establish itself on the market and gain investors’ trust.
Author: Andrea Rönsberg
Editor: Nicole Goebel

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