[Kabar-indonesia] AFR/Jayapura Observed: Struggle to Fix Years of Neglect

[JoyoNews at aol.com]

Australian Financial Review
Wednesday, October 4, 2006

Jayapura Observed

Struggle to Fix Years of Neglect

By Morgan Mellish

On the main road into Jayapura, a large two-storey building is being
erected - the bureaucrats of Papua's provincial capital are upgrading
themselves to better lodgings.

For decades, Indonesia's central government neglected Papua. Now, a
lot of funds are flowing into the country's second-poorest province.
But not much is reaching the people.

"Where the money is going is easy to answer," says Paul Sutmuller,
head of the United Nations Papua development program. "Everywhere,
government departments are moving into new buildings.

"I'm not saying those new offices mightn't be necessary. But you could
argue: Why do you start with improving your own businesses before you
improve the living conditions of the people?"

Over the years, huge tax revenues flowed to Jakarta from the massive
Freeport copper and gold mine near Timika - up to $1 billion a year -
but much of that was simply pocketed by the regime of corrupt former
dictator Soeharto.

The years of neglect left their mark. Nearly 40 per cent of the
province's population - twice the national average - live below the
poverty line. This, and widespread human rights abuses by the
Indonesian security forces, are the causes of Papua's political
unrest.

But Jakarta's financial neglect, at least, has stopped. Following the
2000 enactment of special autonomy laws - which granted more powers
and funds to the troubled province - the federal money coming in has
skyrocketed.

Papua's per capita revenue was under 300,000 rupiah ($44) in 1999, the
year after Soeharto was ousted. But it jumped to nearly 800,000 rupiah
in 2003 and is now substantially higher than that.

"The statement [Jakarta] is exploiting Papua financially is very
incorrect, now at least," says World Bank senior economist Wolfgang
Fengler.

"That has lots of implications. It means putting more money in is not
the answer. If you talk to the new Governor, he's very blunt. He says,
'We don't need money, we need people who can help us use the money
well'."

Like the rest of Indonesia, part of Papua's problem is simply a
cumbersome bureaucracy.

A recent UNDP study found more than 50 per cent of local government
revenues were spent on "operational expenditure".

On top of this, it can take up to eight months to prepare the
provincial budget, leaving only a few months to actually spend the
money.

"The planning and budgeting cycle takes half a year and sometimes
more," says Sutmuller. "Last year, they had just four months to spend
the budget."

To overcome this, Papua's new Governor, Barnabas Suebu, is proposing
to partly bypass district and local governments and hand money
directly to the villages. Under this reform, he will distribute
$15,000 to each of the province's 3805 villages.

"We will deliver funds and services directly to the people," Suebu
says. "We will save money at the top levels [of the bureaucracy] so
services can touch the people directly."

This has been welcomed by groups such as UNDP but nobody expects it to
completely solve the dilemma of how to raise standards of living. Part
of the problem is the area's geography.

For starters, there are hardly any roads, meaning most goods are
delivered by plane, vastly increasing costs. A bag of cement, for
example, costs the equivalent of $8 in Jayapura, $54 in Wamena in the
central highlands and a massive $180 in the even more remote township
of Mulia.

Part of the solution, some believe, is more foreign investment.
Freeport, which accounts for about half of the province's gross
domestic product, has been able to operate here profitably, although
controversially, since the late 1960s. But virtually no other large
Western companies have been brave enough to try.

Only BP has made a significant investment. It is building a $6.6
billion liquefied natural gas project at Bintuni Bay in the province's
east. But nobody expects BP to have an easy time.

"[Investment] has got to be attractive to the foreign company, to the
national and provincial governments and to the people who surround
it," says the World Bank's country director for Indonesia, Andrew
Steer.

"Getting all of those right is very hard. If BP can't do it, it's
certainly not for want of trying. But if the company succeeds, it will
attract others of its calibre and that really matters."

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Joyo Indonesia News Service
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