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IP/00/98

Brussels, 2 February 2000

Commission proposes closer EU relations with Indonesia

The European Commission has adopted a Communication on "Developing Closer Relations With Indonesia". This Communication analyses the fundamental changes which have taken place in Indonesia over the past two years and suggests a new approach for the European Union. The Communication identifies areas where the EU should do more to assist Indonesia's development including addressing the needs of those who have suffered most from the impact of the economic crisis. It covers programmes intended to alleviate poverty, in particular in problem areas such as the Mollucas and West Timor, and the sustainable management of natural resources, in particular forestry, where the EU and Member States have already established a solid background of co-operation in Indonesia. The Commission intends to increase the level of its co-operation with Indonesia.

Commissioner for External Relations Chris Patten said: "The emergence of Indonesia from authoritarian rule to democracy, and Indonesian withdrawal from East Timor give the EU a real opportunity to build a substantial relationship with a country that has an enormous role to play in the region. What happens in Indonesia matters not just to its people but to all of us. We have the prospect of securing democracy in one of the largest countries of Asia and the biggest muslim country in the world.

The EU must support the reformers. This Communication identifies ways to do that. I look forward to pursuing it within the EU and with Indonesia over coming months".

BACKGROUND

A. Development and Economic Co-operation:

    1. Legal framework:

  • bilateral EU-Indonesia co-operation: in the absence of a bilateral agreement, co-operation with Indonesia takes place within the framework of the EU-ASEAN Co-operation Agreement of 1980. Since 1976, this co-operation amounts to approximately Euro 325 million grant assistance, through both governmental and non-governmental channels spread over all parts of the country.

  • multilateral co-operation: donor activities have been traditionally co-ordinated through the Consultative Group for Indonesia (CGI), a World Bank led group of bilateral donors. The Commission traditionally does not make any pledges in this context, as projects are exclusively grant-based.

    2. EU-Development Co-operation Projects:

The main element is the EU-Indonesia Forest Programme (since the early 90s, amounting to over Euro 100 million).

    1. Leuser Development Programme (Gunung Leuser National Park, covering 2 million ha in North  Sumatra and Aceh),

2. Forest Fire Prevention and Control Project (South Sumatra),

3. Berau Forest Management Programme (East Kalimantan),

    4. Forest Inventory and Monitoring Project (updating national forest resource data and  establishing an integrated information system),

5. South and Central Kalimantan Production Forest Project,

6. Forest Liaison Bureau (Jakarta).

EU-development co-operation with Indonesia is moderate: from 1995-1999, only Euro 98 million were committed (1995: 66, 1996: 3, 1997: 1, 1998: 1, 1999: 21, including the support for the elections). The annual average of co-operation amounts to not more than Euro 19 million.

TITLE

total amount (Euro)
Parliamentary elections 1999:

European observer team; support of local NGOs regarding voter education and information

7.000.000

Asian Financial crisis: emergency contraceptive supply15.000.000
Leuser development Project (1996-2003): conservation of tropical forest in a National Park, stabilisation of wildlife areas; applied research and monitoring programmes

32.500.00

Forest Inventory and Monitoring Project: (1995-2000)

Support for sustainable management of forest ressources

6.300.000

Forest Fire Prevention and Control Project: (ended in June 99)4.100.000
Berau Forest Management Project: (1996-2002) sustainable management of tropical forests at an operational level

9.000.000

South and Central Kalimantan Production Forest project:

(1998-2005) sustainable forest management

28.000.000

Forest Liaison Bureau: (1997-2004) assistance in developing a forest policy; overall co-ordination of projects

5.000.000

Lusi Irrigation-Jratunseluna Basin (1985-2000)8.340.000
Satellite Assessment of Rice in Indonesia - SARI (1996-2001)3.000.000
Development of Punggur Utara Irrigation (1990-29.300.000

    3. Economic co-operation

The Commission is committed to foster economic co-operation with Indonesia. It present this is limited and takes place only on a regional basis within the ASEAN framework.

    4.  Review and Planning

In July 1998, an annual bilateral review mechanism at Senior Officials level (SOM) was agreed, similar to the bilateral SOMs already in place with Thailand and the Philippines. The Commission envisaged the first such meeting would be held in October 1999. At Indonesian request, the SOM was postponed. A mutually convenient date is now being sought in the first half of 2000.

B. Trade relations EU-Indonesia

Trade relations between the Indonesia and the EU are well developed, due to Indonesia's export diversification policy (from agricultural products and raw materials towards durable consumer goods such as textiles, shoes, furniture and electronics), adopted in the mid-eighties.

The EU is Indonesia's second largest trading partner (after Japan), and in 1998 was the main destination for Indonesia's exports of goods other than oil and gas. Despite the economic downturn, in 1998 the EU imports from Indonesia amounted to Euro 8.935 million, growing by almost 7,3% compared to 1997. The 1998 EU exports to Indonesia came down to Euro 3.896 million (decrease of 53% compared to 1997). In the first quarter of 1999, the deficit of the EU in its trade balance with Indonesia decreased to Euro 1.258 million, but remains substantial.

For the last 25 years, the EU also has been the largest foreign direct investor in Indonesia (figure for 1998: Euro 206 million).

C. Indonesia and the EU Common Position

Following events in East Timor, restrictive measures including an embargo on the export of arms, munitions and military equipment were applied for a four-month period, expiring on 17th January 2000. The Presidency issued a declaration on 17th January 2000 emphasising that despite the expiry of the embargo, EU policy regarding arms exports would continue to be governed by strict implementation of the Code of Conduct on Arms Exports. The EU underlined its concern at events in the Moluccas and Aceh and the persisiting conflict in Irian Jaya, and its support for a strong and united Indonesia.

D. Visits

Commissioner Nielson visited Indonesia (and East Timor) between 28 November and 3 December 1999. President Wahid and five Ministers of his government will visit Brussels on 7 February 2000.


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