Indonesia risk: Security risk 01/17/2008 05:24:58 PM EST
Risk Briefing Indonesia COUNTRY BRIEFING FROM THE ECONOMIST INTELLIGENCE UNIT RISK RATINGS Current Current Previous Previous  Rating Score Rating Score Overall assessment C 56 C 56 Security risk C 57 C 57 Note: E=most risky; 100=most risky. SUMMARY Security risk is a serious impediment to business operations. The threat of separatist violence remains, particularly in Papua. The risk of ethnic and religious conflicts is also high, but these tend to be contained within certain regions. Of more concern to foreign investors is the terrorist threat; the bombings in Bali in October 2002 and October 2005, the Hotel Marriott in Jakarta in August 2003 and the Australian embassy in September 2004 were specifically aimed at foreign targets. The incidence of violent crime is fairly high. A peace accord was signed with the separatist Free Aceh Movement (GAM) in August 2005 and orderly local elections completed in December 2006, however, a high incidence of crime in the region and ongoing divisions between the central and local governments could undermine stability. SCENARIOS Armed conflict compromises personal and corporate security (Low risk) There remains the risk of an escalation in inter-ethnic strife, particularly in Central Sulawesi, where there have been a number of attacks in regions with a roughly equal balance between Christians and Muslims. There has been progress on resolving the separatist conflict in Aceh, with a peace treaty signed in August 2005. A law on governance in Aceh was passed in July 2006 and local elections took place peacefully in December 2006, but unrest could be reignited as the international aid that was provided in the wake of the end-2005 Indian Ocean tsunami begins to dry up. Tensions have been rising in Papua since late 2005. There have been repeated demonstrations against the US-owned Grasberg mine, attracting both Papuan nationalists and separatists. The military has been increasing presence in the region. This could fuel separatist sentiment in the local population, which tends to see the military as a threat to their security rather than a protector. With the exception of Papua, there have been few instances of attacks on foreigners or foreign installations in the inter-ethnic, inter-religious or separatist conflicts. Historically, foreign companies planning to invest in these areas came to some, often very expensive, arrangement with the police or Indonesian military for security, but the government is now trying to curtail such deals. It is advisable for companies, particularly in affected regions, to either have their own security force or at least operate exceedingly high levels of protection of assets and personnel. Hostility towards foreigners and foreign-owned enterprises increases (Low risk) Nationalist sentiment was very strong in the late 1990s. Anti-western sentiment was particularly strong as a result of resentment over East Timor's independence and the economic decline suffered after the financial crisis in 1997--which was often blamed on the developed world-dominated global financial system. The US-led war against terrorism, the invasion of Iraq in early 2003 and the US stance on the Israeli/Palestinian conflict fed this resentment. Indonesia is 90% Muslim and, although traditionally a moderate form of Islam is practised, the combination of nationalism and Islamic solidarity raises the possibility of more overt anti-western activity. There was also particularly strong opposition to the sale of state or distressed assets to foreigners. However, there are signs that the situation is improving. Nationalistic rhetoric was not a feature of the 2004 parliamentary and presidential elections. Indeed, the president, Susilo Bambang Yudhoyono, who studied for some years in the US, made a point of making his maiden speech in both Bahasa Indonesian and English. Foreign companies are still advised to maintain a relatively low profile and make efforts to accommodate the cultural and religious practices of their labour force. Terrorist activity by hard-line Islamist groups increases (Moderate risk) The bombing of tourist spots in Bali in October 2002 represented the first outright attack on foreign individuals in IndonesiaÂ's recent history. The bombings were carried out by the region-wide terrorist group, Jemaah Islamiah (JI), whose aim is to create a South-east Asian Islamic state including parts of southern Thailand, the Philippines and Malaysia. Further attacks have taken place on a roughly annual basis since then. In August 2003 a suicide bomber attacked the JW Marriott hotel in central Jakarta resulting in the loss of ten lives and about 150 injured people. In September 2004 a suicide bomb outside the Australian embassy resulted in the death of nine people with over 100 people injured, and a second attack on Bali in October 2005 led to 23 deaths and over 100 people injured. Although JI's operations have been greatly disrupted by counter-terrorist measures (since 2002 the police have arrested more than 150 members of the organisation and 2006 passed without a major attack) there remains the risk of further violence; a number of key JI figures remain at large and the organisation is likely to be recruiting further. Hardline Islamist groups also direct terrorist attacks at the local population. JI targeted local Christian communities in the late 1990s, before switching to foreign targets. Other radical groups continue with these tactics. In May 2005 a terrorist bomb attack in eastern Sulawesi, which killed 21 people and wounded over 60, appeared to be an attempt to re-ignite tensions between the Muslim and Christian communities in that area. There was no major attack in 2006, which could be a sign that the government's counter-terrorist operations have been successful, but the threat still undoubtedly remains. Foreign companies operating in Indonesia should be aware of the ever-present terrorist threat and should operate enhanced security arrangements. BACKGROUND (Updated: October 9th, 2007) Armed Conflict Communal violence claimed thousands of lives in the unstable years that followed the end of the Soeharto era. The violence was confined to areas with delicate religious and ethnic balances, such as the Moluccas, Central Sulawesi and Central Kalimantan. Peace accords signed in all of these areas in 2000-02 have succeeded in restoring relative calm, although the Poso region of Central Sulawesi remains volatile and highly tense. Solving the conflict in Aceh proved more of a challenge. The collapse of the December 2002 peace accord led to the imposition of martial law in the province in May 2003. A military assault was simultaneously launched on the Free Aceh Movement (GAM) guerrillas. Martial law was replaced by "civil emergency status" in May 2004, but this had little impact on security policy in the province. However, the tsunami disaster at the end of 2004 cast a new perspective over the conflict, and the government and GAM began negotiations under foreign mediation. A peace agreement signed in Helsinki, Finland, in August 2005, has led to disarmament and a scaling back of the military presence in the province. Legislation translating the peace accord into Indonesian law has passed through the House of Representatives (DPR). GAM has disbanded, renounced its goal of independence in exchange for concessions on autonomy, and its former members participated in democratic local politics in the province. In the extreme east of the country, a broad cross-section of native Papuans support independence by peaceful means, but the Free Papua Organisation (OPM), which is fighting for independence, is poorly armed and badly organised. Discontent with Indonesian rule has been inflamed by alleged human rights abuses by the military, and by the plunder of the province's natural resources. The partition of Papua into two provincesÂ-Papua and West Papua (formerly West Irian Jaya)Â-has also caused resentment. A perceived disregard for the terms of special autonomy granted to the province in 2001, and continued anger at the exploitation of Papua's natural wealth, led to heightened tensions in early 2006, with several members of the security forces killed in clashes with demonstrators. Terrorism Hardline Islamist terrorist groups resurfaced in Indonesia after the fall of Soeharto. These groups initially targeted Indonesia's Christian communities, but in recent years they have turned their attention to Western targets. Jemaah Islamiah (JI), a terrorist organisation seeking to establish a South-east Asian Islamic state, was responsible for the October 2002 and 2005 Bali bombings, as well as for attacks on the JW Marriott hotel in the capital, Jakarta, in 2003, and on the Australian embassy in 2004. After a slow start the Indonesian government has conducted an effective campaign against JI, arresting close to 300 operatives since the 2002 Bali attack, including most of the organisation's top leadership. Close co-operation with other South-east Asian security forces and the US and Australian counter-terrorist services, together with tough new anti-terrorism legislation and better intelligence, has also served to impair JI's operational capacity. The organisation nevertheless remains present in Indonesia, and the release of many militants and sympathisers jailed in the immediate aftermath of the 2002 Bali bombings, as well as continued evidence that the group is actively plotting further attacks, has led to fears of a resurgence in its activities. Civil Unrest Mass demonstrations became a feature of the early years of Indonesian democracy, but have waned with the return of political stability. The student movementÂ-which drove the reformasi, or reform, movement of the late 1990sÂ-has lost its ideological focus. The government's success in raising fuel prices in March and October 2005 demonstrates just how far mass protests have slipped from the political landscape in recent years. Rioting sparked by fuel price increases led to the fall of Soeharto in 1998, and the government of Megawati Soekarnoputri backed away from an attempt to raise fuel prices in the face of widespread public opposition in 2003. In contrast, protests following the much larger 2005 price increases did not come close to reaching critical mass. Street Crime Violent crime has been on the rise in recent years, but does not pose a serious threat to foreign business interests. Likewise, organised crime is seldom a threat to foreign business, although it thrives in the Indonesian underworld. Kidnapping has not traditionally affected foreigners, but separatist fighters in Papua have occasionally kidnapped non-Indonesians, and Islamic militants are now known to have considered this as a tactic. Extortion in the conventional sense does not affect foreign business in Indonesia. However, government officials typically demand illegal payment for permits, licences and other privileges, and the army or police often require additional payments for security arrangements. http://www.hoovers.com/free/co/news/detail.xhtml?ID=56078&ArticleID=20080117545.50_039000c479ec4cca&source_type%5B%5D=n mediacare http://www.mediacare.biz [Non-text portions of this message have been removed]
