Time for South-South deals

By Terry Lacey

(May 26, Jakarta, Sri Lanka Guardian) A Namibian delegation, consisting of 23 members and led by Namibian Foreign Affairs Minister Marco Hausiku, was in Jakarta last week for a two-day ministerial meeting. The big issue is that Namibia has not yet exploited its potential diplomatic and trade links with Indonesia, which is now one of the top 20 global economies.

Teuku Faizasyah, an Indonesian Foreign Ministry spokesman said, “The large (Namibian) delegation reflects their commitment to forge a better bilateral cooperation.”

Although the large Namibian delegation attended the World Ocean Conference in Manado, Northern Sulawesi, from May 11 to 14, the back-to-back Ministerial Joint Commission in Jakarta was more important for long term economic and trade relations between Namibia and Indonesia.

Sudirman Haseng, the Indonesian Foreign Ministry’s Director for African affairs confirmed that the two countries had identified the first three areas they would tackle together, which were agriculture, education and tourism.

But three other specific items that came up in the talks in Jakarta included media co-operation between the two countries, an exchange of medical experts and the setting up of full diplomatic links by establishing a Namibian diplomatic mission in Jakarta.

The two countries have agreed to exchange media content between state-run news agency ANTARA and the Namibia Press Agency, and between state-owned television station TVRI and the Namibian Broadcasting Corporation.

There is also to be an exchange of medical experts between Gadjah Mada University in Yogyakarta and the University of Namibia.

Finally although Indonesia set up its mission in the Namibian capital of Windhoek in 1991, the Namibians have no permanent presence in Jakarta.

But Indonesia is now an increasingly important player in world economic forums and a member of the G20. Indonesia supports global economic reform and a far greater say for southern countries in the UN system, the World Bank, the International Monetary Fund and the World Trade Organization.

Meanwhile in trade and investment Namibia may be missing out in several opportunities in not having better links with Indonesia:

First Indonesia has a population of over 235 millions, a GDP (purchasing power) of $916 billions and an economic growth rate of 4.5 percent and is a big potential trade and investment partner, contrasted with the Namibian population of 2.1 million with a GDP of $11.2 billions and a growth rate of 2.6 percent.

Second Indonesia has strong banks and international financial links. Many new developments are the result of deals involving for example China, Japan. The country is targeting deals with the Gulf States and Saudi Arabia to tap the $1.6 trillion of liquidity there to finance investments in Indonesia and possibly jointly with third countries.

The government recently launched a US$650 million package of retail dollar denominated Islamic loans with a 5 year maturity, 8.8 percent yields and backed by underlying assets and had to ration sales among buyers ready to put up $4.7 billions. The Islamic banking and finance niche market is open to Muslims and non-Muslims.

Third, Indonesian state and private companies are increasingly global players in oil and gas, infrastructure, road construction, property development, large scale tourism investment, agriculture and fisheries, especially oil palm plantations and bio-fuel development.

Indonesian companies are developing gas and oil fields in Libya, building roads in Algeria, exporting solar panel systems to East Africa and looking at other acquisitions and activities.

Indonesia, the third largest democracy in the world, had general elections on April 9th and will have direct Presidential elections on July 8th. President Susilo Bambang Yudhoyono is likely to lead his Democratic Party and its Islamic party coalition allies to victory, and form a new government for five years in October, with continuing economic growth and political stability.

This is a good time for Namibia to start taking Indonesia seriously and plan ahead and not to just see Indonesia as a diplomatic tourist destination.

II. INDONESIA AND NAMIBIA – HOT AIR OR GAS ?

A Namibian delegation, consisting of 23 members and led by Namibian Foreign Affairs Minister Marco Hausiku, was in Jakarta last week for a two-day ministerial meeting. Neither the Government news agency ANTARA nor the Jakarta Globe (12.05.09) reporting on the Namibia-Indonesia talks mentioned that both Indonesia and Namibia have a big interest in oil and gas.

Indonesia earned $35.3 billion in state revenues from oil and gas in 2008 but paid out about $9.4 billion in exploration and development payments to the industry.

Indonesia expects oil and gas firms to invest $20 billion in the industry in 2009, up from $19 billion in 2008. The country targets 960,000 barrels per day of oil and condensate in 2009, having produced 967,778 per day in 2008 and 954,000 in 2007. Indonesian gas production was 7.757 million standard cubic feet per day in 2008 and 7.283 MMscfd in 2007.

The country has estimated oil reserves of 8 million barrels and gas reserves of 170 trillion cubic feet. It is also opening up large coal bed methane reserves.

The power industry is just completing the financing of an accelerated 10,000 MW coal fired program financed largely by China and starting another 10,000 MW investment program to be financed by IPPs focusing on geothermal and renewable energy.

Indonesia’s state-backed Pertamina oil and gas company, now headed up by pushy new top woman executive Karen Augustinian is looking to help transform this slightly sleepy State Owned Enterprise, previously male-dominated by the old fashioned kind of Indonesian time-serving state officials, into a world class player.

Similarly powerful women top civil servant Evita Legowo, Director General of Oil and Gas, is coordinating a new wave of oil and gas exploration and development.

Meanwhile Indonesian companies like Medco are also becoming global players expanding new investments in oil and gas fields in Libya.

The impetus and size of the Indonesian oil and gas industry may have just the right profile to work well with the struggling Namibian oil and gas industry.

Although Namibia has oil and gas potential its first steps have been faltering. The small scale Hunt Oil program off Luderitz needs to strike lucky and then attract larger investment. The Vanco Energy and Sonangol explorations in the North may be promising but without very positive results yet. The Kudu gas field looks promising but the pulling out of Chevron was disappointing.

The Indonesian industry is in a different opposition. The country was a member of OPEC and is no longer a member because it has become a net oil importer. The Government is pushing ahead with more exploration and investment to try and improve production figures.

There are plans for more LNG gas trains including at least one floating one. Domestic gas demand is burgeoning but at the same time Indonesia is an important LNG trader, so it actually produces, imports and exports LNG.

Namibia maybe needs to partner with new medium sized global players but with extensive experience in helping to bring in finance and technology. Indonesia needs new partners if it is to push its state and private companies into competitive global roles.

Indonesia, the third largest democracy in the world, had general elections on April 9th and will have direct Presidential elections on July 8th. This is therefore a good time to plan ahead and get in at the start of the new government which will take over on 21st October.

It looks like President Susilo Bambang Yudhoyono and his Democratic Party, and his Islamic party coalition partners, will coast to victory on July 8th, continuing both economic growth and political stability into the next five years.

There are plenty of concrete cooperation possibilities to go for if these initial talks between Namibia and Indonesia are followed up properly. Lets see if this latest visit will lead to joint co-operation on hot air or gas !

(Terry Lacey is a development economist who writes from Jakarta on modernization in the Muslim world, investment and trade relations with the EU and Islamic banking.)

-Sri Lanka Guardian