No subject

Police in Bali have arrested the man who they claim was the chief planner of 
the bombs that killed almost 200 people on the Indonesian resort island last 
month. But radical Islamic groups are thought to be planning more attacks 
on “soft” targets in Asia

A month ago, when almost 200 people, many of them young Australian backpackers, 
were killed in a bomb attack on the Indonesian holiday island of Bali, western 
intelligence agencies were sceptical of a quick response by the Indonesian 
authorities. After all, America had been warning of terrorist activity in 
Indonesia for months, but the Asian country’s politicians had dismissed the 
warnings. And Indonesia’s police force is not known for its competence or its 
integrity. However, the scale of the attacks, and their devastating effect on 
tourism throughout Indonesia, seems to have spurred the country into action. 
The appointment of an experienced chief investigator, Made Mangku Pastika, 
combined with some diligent detective work, has meant that investigators 
already appear to have a clear picture of who perpetrated the attack, and how 
it was carried out.

The first question on everyone’s mind was whether this attack was carried out 
by al-Qaeda, the group led by Osama bin Laden that was responsible for the 
terrorist attacks on New York and Washington on September 11th, 2001. This is 
difficult to prove—after all, al-Qaeda is not a company with a list of 
employees and a defined hierarchy. It appears, rather, that the bombing was 
carried out by people affiliated with Jemaah Islamiyah, a South-East Asian 
militant Islamist network that is linked to al-Qaeda. The Bali attack has been 
claimed as part of a new, broader campaign against America’s allies. In the 
tape broadcast earlier this month on al-Jazeera, a satellite channel, a voice 
that appears to be that of Mr bin Laden says: “We had warned Australia about 
its participation in Afghanistan… It ignored the warning until it woke up to 
the sound of explosions in Bali.”

On November 21st, the police made a breakthrough by arresting the man they 
claim was the mastermind of the attack, Imam Samudra. He was among three people 
arrested in Banten province, near the capital, Jakarta. Police say Mr Samudra, 
a 35-year-old computer expert, learned how to make bombs in Afghanistan, 
hinting at a link to al-Qaeda, which ran terrorist training camps there before 
the Taliban regime was overthrown last winter. He is also suspected of planning 
a series of bombings across Indonesia in December 2000.

The police had been helped in their inquiries by their other detainee, a man 
called Amrozi. He had confessed to having bought the explosives and to owning 
the van in which they were left outside the Sari nightclub in Bali's Kuta 
nightclub district. Though he is a relatively low-key operative, Amrozi gave 
police the names of at least six other people, out of around ten that police 
believe were involved in planning the attack. 

Some intelligence experts point to another link to al-Qaeda. They suspect an 
Indonesian cleric called Riduan Isamuddin, known as Hambali, of a role in the 
attack. He is believed to be al-Qaeda’s most senior man in South-East Asia, and 
is suspected of involvement in an earlier, foiled plot to bomb the American, 
British and Australian embassies in Singapore last year. Police also think he 
helped arrange a meeting between two of the September 11th hijackers and other 
al-Qaeda operatives in December 2000.

Another link is that Amrozi is a self-proclaimed disciple of Abu Bakar Bashir, 
a cleric suspected of involvement in church bombings in 2000 and of a plot of 
kill Megawati Sukarnoputri, the Indonesian president. Mr Bashir is said by 
police to be a founder of Jemaah Islamiyah, although he denies any links to the 
organisation. He is currently in custody, a detention that has been extended 
until the end of the year to allow further questioning. 

Not everyone is happy with the way the investigations have been conducted, 
though. On November 18th, Indonesia’s vice-president, Hamzah Haz, criticised 
police raids on Islamic boarding schools to hunt for suspects. Mr Haz, who 
heads the Muslim-based United Development Party, said police should show more 
sensitivity. The raids have raised the prospect of a backlash against the 
government’s anti-terror policies.

The Bali attacks have led westerners to be vigilant about South-East Asia, 
especially Indonesia. Many western countries have issued travel alerts about 
journeys in the most populous Muslim nation in the world. On November 18th, 
international schools in Indonesia run for American, British and Australian 
children, were closed until their security could be assured. Intelligence 
experts had received threats that were “specific in detail” about the Jakarta 
International School, which takes mainly American children. It is believed that 
al-Qaeda and other Islamic terrorist groups have switched their attention away 
from “hard” targets, such as embassies—the American embassy in Jakarta came 
under threat in September and was closed—to “soft” ones, such as resorts and 
schools, which are not so well guarded. By closing the schools, the authorities 
may have averted another Bali.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The Guardian
Jakarta dispatch 
Bali bomb investigators confound their critics 
-- Indonesian police have astonished observers by making steady progress in the 
search for the perpetrators of last month's bombings, writes John Aglionby 
Thursday November 21, 2002 

Compared with most Indonesian police investigations, there is something 
abnormal going on in the Bali bombings case at the moment. 

Perhaps it is the help they are receiving from more than 100 foreign officers; 
perhaps the international spotlight being so firmly focused on them is spurring 
them into greater productivity; or perhaps the investigators always had the 
information about the terrorists, but only now felt the need to publicise it. 

Whatever the cause, the inescapable conclusion - bolstered by today's arrest of 
the alleged mastermind, Imam Samudra - is that investigation commander Major 
General Made Mangku Pastika and his team appear to be making excellent progress 
in tracking down the perpetrators of the October 12 attack. It seems as if the 
Indonesian police are confounding their critics and doing something right for 
once. 

Although there is still some uncertainty as to the exact composition of the 
main bomb, placed in a minibus outside the Sari Club in the town of Kuta, there 
is little doubt in police circles as to who put it there and organised the 
operation that resulted in the deaths of almost 200 people.

The alleged ringleader of the all-Indonesian team, born Abdul Aziz but now 
living mostly as Imam Samudra, 35, has been arrested. The police are giving 
little away about him yet, except that he is thought to have been trained on 
numerous visits to Afghanistan and was involved in a series of church bombings 
across Indonesia on Christmas Eve 2000.

A Javanese used-car dealer, Dulmartin, 32, whom police described as an 
electronics expert, is believed to have assembled the mobile-phone triggering 
devices for the bombs. 

The others suspects are: Umar, 35, who is thought to have placed the first 
bomb, in Paddy's Bar; Idris, 35, who bought the motorcycle found at the blast 
scene and coordinated many of the logistical arrangements; another Umar, 35, 
one of Mr Samudra's assistants; and Ali Imron, 30. 

The last man is the younger brother of Amrozi, the one suspected plotter 
already in custody. In addition to allegedly spilling the beans on most of his 
co-conspirators, this car mechanic has confessed to buying the minibus used for 
the bombing and many of the chemicals used in the bomb, and helping with the 
preparatory logistics in Bali. 

If all of the above was the baseball equivalent of reaching second base, Maj 
Gen Pastika is going to find it much harder to progress to third and home. And 
even if he does score, Indonesia will need the next "batter" to hit a home run -
 namely either eliminate the Jemaah Islamiyah organisation that is widely 
suspected of being Al Qaida's regional network and behind the bombing, or 
neutralise it by persuading it to give up its terrorist tactics.

Maj Gen Pastika reckons the remaining plotters at large are still in Indonesia 
and probably hiding in Islamic boarding-schools in east Java. Or perhaps, as 
the Samudra arrest shows - Mr Samudra was picked up boarding a ferry from Java 
to Sumatra - he is deliberately misinforming the public to lull the fugitives 
into a false sense of security.

They are also likely to find a sizeable degree of support across the country, 
if an online survey by internet news portal Satunet is anything to go by. 
Although it admitted its techniques were unscientific, the portal said 82% of 
participants believed the CIA was involved in the bombings. 

Even if the accurate figure is only half the published one - to account for 
polling inaccuracies - 41% is still a huge number of people. With such an 
attitude prevalent, finding sanctuaries is unlikely to be hard. 

Hitting the home run will involve not only combating such widely-held 
suspicions, and so cutting off the supply of willing recruits, but also 
neutralising those who are higher in the food chain than Mr Samudra. 

Regional intelligence agencies believe one of Mr Amrozi's elder brothers, 
Mukhlas, is the new operations commander of Jemaah Islamiyah. He is thought to 
have replaced Riduan Isamuddin, known as Hambali, whose current role in the 
organisation is uncertain. 

Alleged Jemaah Islamiyah members detained in Singapore and Malaysia have 
recognised the name Mr Amrozi and the photograph of Mr Samudra, although they 
reportedly know him as Qudama. 

However, they have also allegedly said that all operations had to be sanctioned 
by Jemaah Islamiyah's spiritual leader, Abu Bakar Ba'aysir. Mr Ba'aysir is 
conveniently already in custody - on suspicion of involvement in the church 
bombings Mr Samudra is linked to - and has yet to be connected to the Bali 
blasts. 

If all the assumptions about Jemaah Islamiyah and its membership are correct, 
and that is a very big if, there appears little left to do except join the dots 
and hit the home run. But, as one regional intelligence official said this 
week, that could take another five to 10 years. And the terrorists are unlikely 
to just lie low in the meantime. As the official said: "Indonesia still has a 
big problem". 
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The Daily Telegraph
Video may hold Bali clues
By Sean Parnell and Cindy Wockner
November 22, 2002

A tourist holidaying in Bali may have unknowingly video taped the van used to 
bomb the Sari Club a night before the fatal blast.

Australian Federal Police commissioner Mick Keelty said yesterday investigators 
were analysing a videotape which appeared to show the white Mitsubishi L300 van 
on Legian St, Denpasar, on October 11.

Mr Keelty said the picture quality was poor but if investigators could make out 
the plate number it could create strong new leads.

Mr Keelty said the van may have been used to stake out the Sari Club but was 
probably not abandoned until just before the bombing on October 12.

"They wouldn't have taken the chance because where the car was parked to do the 
bombing was an actual traffic lane," Mr Keelty said. 

"[The driver] held up traffic to park the car there to set the bomb off."

Mr Keelty also revealed Amrozi, the only alleged bomber arrested by police, has 
been sick from stress all week and unable to be interviewed.

While AFP officers have not joined their Indonesian counterparts in the 
interviews, Amrozi's statements have been provided to them and independently 
checked.

"We're comfortable that most of what he has said has been corroborated either 
by analysis of the crime scene or witness accounts," Mr Keelty said.

Amrozi allegedly bought 500kg of explosive chemicals, including the main bomb 
ingredient, chlorate, from a shop in the Javanese city of Surabaya on October 4.

The Sari Club van carried between 100kg and 150kg of chlorate, while another 
20kg was recovered from Amrozi's Suzuki Vitara and the remainder has yet to be 
found.

The chlorate was probably detonated using more rare C4 explosives or TNT, which 
was used for two other explosions that night.

Amrozi is alleged to have parked the van in front of the club before fleeing on 
a small motorbike purchased two days earlier. Switches on the motorbike enabled 
the rider to disengage the ignition to prevent theft and turn off the rear tail-
light to hide the licence plate.

Yesterday Mr Keelty said he feared the Bali bombers may be planning more 
attacks because hundreds of kilograms of explosive material was missing.

He said terrorists often waited before mounting follow-up attacks.

Finding the more than 300kg of outstanding explosive chemicals – twice the 
amount contained in the Sari Club bomb – was a top priority for police.

"Clearly there's a quantity of chlorate that's been purchased that's 
outstanding," Mr Keelty said.

Mr Keelty said there was no guarantee the six suspects still at large would not 
use it, although the intense police hunt would make it difficult.

Indonesian authorities have also revealed they are investigating the discovery 
of an active grenade, almost 100 bullets and some tubes of the chemical C02 in 
the government area of Denpasar.

Yesterday, Inspector-General I. Made Pastika, the head of the bombing 
investigation, said the ammunition was being examined and that a link to the 
bombing could not be ruled out.

In Central Java, Indonesian authorities are continuing their hunt for the six 
outstanding suspects.

They have raided the former home in Pemalang, Central Java, of Dulmatin, alias 
Amar Usman – the electronics expert who police believe helped make and then 
detonate the bombs. Dulmatin and his family left the home about three months 
before the Bali attack.

It is understood police found books relating to electronics and letters 
providing clues to the relationship between Dulmatin and the other bombers.

A passport issued in January 1991, in the name of one of his aliases also was 
found.

Police have said Dulmatin's teachers described him as a "genius" with one 
saying he excelled at mathematics.

As of yesterday, 75 Australians were confirmed dead, with serious concerns for 
another 12.

Of those killed, 66 bodies have been repatriated to Australia, another was 
cremated in Bali, one repatriated to Britain and one repatriated to France. 
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The Age (Melbourne)
Weapons cache discovered
November 22 2002
By Darren Goodsir, Stephen Gibbs
Kuta, Bali

Police hunting the Bali bombers have described as serious the discovery of a 
live grenade, bullets and gas cylinders outside the island's major court, the 
complex that is almost certain to be used next year for the trial of Amrozi, 
the confessed terrorist. 

Stashed inside three black plastic bags, the weapons were found under a tree 
near the perimeter fence for the District Court in Denpasar, adjacent to a 
military compound and appeal courts. 

Police found seven gas canisters, a grenade and 92 bullets capable of being 
fired from assault rifles. They were discovered at 1am on Wednesday, the second 
day of the Galungan festival, a Hindu religious holiday, after police received 
an anonymous tip-off. 

No warnings accompanied the call and the motive for the dumping of the weapons 
has not yet been established. 

The complex has five courtrooms with holding cells behind to house prisoners. 

Although police have not linked the weapons with the Bali bombings, the 
discovery has heightened security concerns on the island, less than a month 
before representatives from 33 countries, including Australia, are to meet in 
Denpasar to discuss a range of counter-terrorism matters. 
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Asia Times Online
November 21, 2002
Tourist arrivals in Indonesia down 

JAKARTA - The number of foreign tourist arrivals in Indonesia in 2002 is 
estimated at only 20 percent of its target figure of 4.3 million to 5.4 
million, the country's top tourism official said. 

"The number of foreign tourist arrivals in 2002 will be the lowest since the 
economic crisis hit our tourist industry in 1998," Minister of Culture and 
Tourism I Gede Ardhika said in a hearing with the House of Representatives' 
Commission VI on tourist, postal and telecommunication affairs. 

In 1998, Indonesia was visited by as many as 4,606,416 foreign tourists. 
Ardhika said the October 12 Bali bombing tragedy was the main cause of the 
drastic decline in foreign tourist arrivals. After the devastating bomb blasts 
in Bali, hotel occupancy rates dropped, international events were cancelled and 
foreign travel operators unilaterally aborted travel programs, he said. 

With the 80 percent shortfall in the number of expected tourist arrivals, 
Indonesia's tourism industry would suffer a negative growth of 16.56 percent in 
2002, the minister said. 
-- (Asia Pulse/Antara)  
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The Straits Times
Nov 21, 2002 Thu
IMF? We don't need it, says Amien 
By Shefali Rekhi 

THE Budget deficit may be soaring and the government might be preparing to seek 
more low-cost inflows from international creditors, but National Assembly 
chairman Amien Rais believes Indonesia can cope without the International 
Monetary Fund.

'The IMF is a necessary evil but it is giving the wrong medicine,' he told The 
Straits Times yesterday.

'It is like if a patient in Indonesia has malaria, then the IMF is giving pills 
for diarrhoea. The prescription and the economic ills are not matched.'

Pointing out that the People's Assembly had decided to say 'goodbye' to the 
IMF, he said he hoped the government would soon follow suit.

The Indonesian government, he charged, had lost confidence in the country's 
ability to solve its problems and was over-reliant on foreign advice when the 
country had many experts of its own.

Dr Amien made these remarks while on a day-long visit to Singapore to address a 
conference on mobilising investments for Indonesia.

The IMF's role has been debated in elite circles in Indonesia lately, with 
critics noting that despite the nation's adherence to fund policies, investors 
have not been lining up.

But a ballooning budget deficit means officials continue to bank on the fund - 
on Monday, the parliamentary Budget committee and the government agreed to 
revise the 2003 budget deficit to 1.78 per cent of gross domestic product, from 
1.3 per cent.

And even as Dr Amien spoke, Vice-President Hamzah Haz pitched for 'grants' 
instead of 'loans' from multilateral lending agencies such as the IMF.

But Dr Amien said the IMF has similar prescriptions for countries, which do not 
always work.

Since 1998, the fund has been coordinating a US$5 billion (S$8.9 billion) 
assistance package for Indonesia, in return for promises of economic reforms. 
The pact expires next year.

Dr Amien said: 'After 1 1/2 years, Thailand and South Korea are determined to 
say goodbye to the IMF. Malaysia never fully opened its shores.

'These three countries are now fully recovered from their economic crises. We 
can learn from these countries.'

The alternative for Indonesia, he said, was to bank on internal resources and 
foreign investments.

Stating that a 'mark-up' tendency prevailed in budgets, he said the country 
needed a 'down-to-earth national budget where all that was unnecessary was 
slashed'.

'We can survive, with just minimal foreign aid,' he said.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Asia Times Online
November 21, 2002
Indonesia's SMEs get a shot in the arm 
By Bill Guerin 

JAKARTA - A new initiative to boost prospects for small and medium enterprises 
(SMEs) in eastern Indonesia has been launched by the International Finance 
Corporation (IFC), the World Bank's private sector development arm. 

Although aimed at poorer provinces far removed from Jakarta, the news will be 
encouraging for a vital sector that has fought against bureaucratic red tape, 
conflicts over funds by different ministries in their local areas, and 
downright fraud. 

Eastern Indonesia sweeps all the way from Bali in the west, up north to 
Kalimantan and Sulawesi, and through to the eastern-most provinces of Maluku 
and Irian Jaya. With a total population of over 40 million people, the region 
is richly endowed with resources such as oil, gas, minerals, agricultural land, 
forests and fish. The downside is that not only is it one of the lowest income 
regions of the country, it is also affected by the same fundamental problems of 
security, environmental degradation, and inadequate laws as the rest of the 
country. 

The region was left far behind during most of the New Order rule of Suharto, 
but he finally focused on the area in his 1990 budget speech and from then till 
the regional financial crisis in 1997, increased central government transfers 
and capital spending went east. 

The new Indonesia Enterprise Development Facility will use Dutch and other 
donor nations' money to improve access to capital for the eastern region's 
small businesses, help them improve their business performance, and improve the 
business environment. 

IFC will provide US$5 million over the next five years, with the remainder 
coming from the Netherlands and other donors, but the facility will be 
commercially oriented, seeking to recover up to 30 percent of its operating 
costs from fees charged for its services. 

Enterprises that fall into the SME category are defined by Bank Indonesia as 
those with a maximum income of Rp 50 million a year, maximum assets of Rp 200 
million excluding land and property, and debts amounting to less than Rp 10 
billion. Though each has 100 employees or less, they make up an enormous 99.9 
percent of all registered companies and employ more than 80 percent of the 
workforce. Sixty percent of all SMEs operate in the agricultural sector, and 23 
percent in retailing, restaurant and hotel businesses. 

Not only do the estimated 37 million SMEs collectively absorb a huge part of 
the work force, last year they contributed 54.59 percent of the country's GDP. 
The actual and potential contributions the companies make to the overall 
economy account for the unabated interest of politicians, post 1997, in what 
was a brand new and fertile arena for corrupt practices. 

During President B J Habibie's watch, the highly popular Adi Sasono, when he 
was Minister for Cooperatives and Small Businesses, was able to launch no less 
than 17 separate credit schemes for the benefit of cooperatives, small 
businesses and farmers, funded largely by central bank credits. The initiative, 
however, was stalled by imprecise targeting and lack of publicity, as well as 
downright chicanery. Many businesses happily borrowed the money and deposited 
it in the bank. 

Many SMEs now owe a lot of money. A grand total of 414,700 SMEs owes some Rp 39 
trillion (US$3.75 billion) in bad debts to the banking sector and to the 
Indonesian Bank Restructuring Agency, though this is small by comparison with 
the US$10.5 billion owed by the "Top 21" largest debtors alone. 

Earlier this year, SMEs were thought to be in line for a massive trim of more 
than 50 percent on their debts - championed by no less a figure than Vice 
President Hamzah Haz. Haz had been instrumental in pushing for the relief, amid 
charges of political patronage and a hidden agenda aimed at improving the image 
of his United Development Party (PPP) among the SMEs. Discussions about ways to 
support SME development were sidelined by the furor over Haz's proposed 
economic revival program, with both the International Monetary Fund (IMF) and 
the World Bank expressing strong reservations about its implications for the 
state budget. 

Quite simply, the controversial Haz had wanted the government's sacred and 
vital asset sales and privatization program to be bled dry by using hard-earned 
receipts from the program to raise capital for what he dubbed "value creation". 
The sudden initiative followed an equally sudden move by President Megawati 
Sukarnoputri to insist that her vice president control the direction of the 
country's economic planning, much to the chagrin of the economic team of 
ministers, the IMF and the World Bank. 

The banking industry, still struggling to survive the 1997 banking crisis, was 
also against such generosity and fought back doggedly. Bankers were concerned 
that over-lenient debt-restructuring terms to SMEs would threaten the liquidity 
of the many weak banks and also be seen as unfair to those SMEs that had been 
conscientious in repaying their debts. 

The World Bank criticized Haz's proposal as misplaced, saying it was wrong to 
focus on providing relief to the 2 percent of SMEs with non-performing loans, 
while ignoring the 98 percent that have survived and even thrived through the 
crisis. Such a policy would have a negative impact on future bank lending to 
all SMEs, the bank said. 

State Minister of Cooperatives and Small and Medium Enterprises H Alimarwan 
Hanan, from Hamzah Haz's PPP party, slammed the IMF for opposing the debt 
reduction scheme. "Outsiders need not intervene into our domestic affairs 
because the [SME restructuring] does not cause others to bear burdens," he told 
journalists in March. 

In any event, Minister of Finance Budiono and Minister of State Enterprises 
Laksamana Sukardi won the day. SMEs with bad debts now enjoy a 25 percent debt 
reduction if they make a one-time cash settlement. 

Local economists had earlier warned that the SME restructuring scheme might be 
used by politicians to gain popularity ahead of the 2004 general election. This 
was all taking place at a time when the government was acutely aware of the 
urgent need to set aside 40 percent of budget expenditure to service a whopping 
US$129.7 billion in sovereign debt. 

Constraints or barriers to successful investment in the East and every other 
region have increased as local governments scramble for more political power 
and control over the country's natural resources, since regional autonomy was 
implemented last year and the country's 180-plus districts need to survive on 
their own revenues. 

These constraints hit local investors just as much as foreign investors, and 
SMEs in the Eastern regions were thwarted and spooked for the some of the same 
reasons as mega-sized enterprises, such as Kalta Prima Coal, Freeport McMoRan 
and BP. 

The Wahid administration had allocated funds to empower SMEs and programs 
dedicated to SMEs were distributed among several government bodies, namely the 
newly established Ministry of SMEs and Cooperatives, the Ministry of Trade and 
Industry, the Ministry of Agriculture and Laksamana Sukardi's State Owned 
Enterprises Ministry. 

The idea was that these bodies would give cross-subsides to SMEs, but 
implementation across the regions varied from poor to none at all and 
businesses slammed them as being little more than a formality, with the funds 
allocated for the programs being fought over by the ministries concerned. 

In July this year, after a year of political wrangling, Megawati finally gave 
the green light for the restructuring of SME debts when she signed off 
Presidential Decree No 56/2002. 

This restructuring will be a vital element of any plan to get the banks to woo 
SMEs seeking working capital to expand their businesses. There are indications 
that domestic banks may once again be turning their attention to SMEs. Central 
bank figures were released recently showing a 10.9 growth in bank lending to 
the sector in the first five months of this year against the same period last 
year, which saw only a 3.3 percent hike. 

The banks handed over Rp 11.4 trillion, or 35 percent of their total amount of 
lending commitment, to SMEs from January to May this year. 

"SME friendly" programs such as these should spur the small companies to 
greater heights and enable them to absorb more and more of the country's vast 
numbers of unemployed. After all, while the larger industries collapsed in the 
midst of turmoil in the banking sector and massive currency falls, the SMEs 
carried on, seemingly able to adjust well to the rapidly deteriorating business 
climate of the time. One great advantage has been their low level of dependency 
on imported materials. 

One proposal said to be being mooted in the corridors of power is a new draft 
banking bill, which would make it mandatory for commercial banks to allocate 40 
percent - twice as much as currently - of their total loan portfolio to SMEs. 
That's one extreme. At the opposite end of the spectrum is the crying need for 
SMEs to have access to capital for growth and expansion. 

The problem for the targeted SMEs in the Eastern regions is even more acute, 
located as they are in rural areas where incomes and access to business 
services lag way behind other wealthier regions. Access to any information at 
all is difficult, and the owners are unlikely to have had any business 
education or training and they generally have poor management skills. 

The new program should impact positively on the willingness of banks to lend to 
these SMEs and, in the words of the IFC, is designed to create a healthy and 
fair business environment, to build local capacity for SME development, to 
promote market-based business development services, and to develop the capacity 
of banks to lend to SMEs. 

The needs of SMEs across the nation, however, are the same as those who will 
benefit from the IFC initiative. Banks must be given more incentives to invest 
in SMEs and SMEs in turn need the long promised empowerment and training in the 
ways to qualify for commercial bank credits. 

Insufficient capital, low collateral and thus limited access to bank loans, 
means they cannot expand and increase their efficiency or the quality of their 
products. 

An earlier Asia Foundation survey found that only 17 percent of SMEs had ever 
received a bank loan in Indonesia, mainly because they had very little, if any, 
information about credit programs or they were unable to qualify for a loan 
with banks that typically ask for collateral of up to 90 percent of the value 
of the loan. 

A new government initiative now would square with the recent drive by the 
country to woo locals into investing in their country on the assumption that 
they have a better tolerance for the recent security fears than the ever-
elusive foreign investor. 
-- (©2002 Asia Times Online Co, Ltd.