Jay Solomon, Pekanbaru – One of Indonesia's richest provinces is slowly prying control of its natural wealth from the central government, posing a major challenge to Jakarta and some big multinationals at a time when foreign investors are already wary of the archipelago.
Riau is home to only 2% of Indonesia's population, but economists estimate that the central Sumatra province's resources generate up to one-fifth of the government's total revenue. The province contains the giant oil fields of PT Caltex Pacific Indonesia – owned by Chevron Corp. and Texaco Inc. – which produce roughly half the country's crude oil. It has vast oil-palm and rubber plantations, and includes Indonesia's most sophisticated industrial park, Batam Island, near Singapore. Off Riau's shoreline sit the Natuna gas fields, which promise to be one of the world's largest producers of natural gas.
But Riau's people argue that they have prospered little from the home-grown riches and want greater autonomy from Jakarta, if not outright independence. Riau's students say they are infuriated by the sight of destitute indigenous peoples living in wooden shacks beside Caltex's elaborate tangle of oil pipes. Before the economic crisis hit Indonesia, Riau's average per capita income stood at about $1,000, slightly better than the national average – but lackluster in light of the area's natural wealth, locals say.
'Flawed development policy'
The poverty is "a sign of the government's flawed development policy," said Gumpita, a 25-year-old student activist from the University of Riau. "You take a rich area and make it poor."
Mr. Gumpita and his fellow students want that to change. Last week, at least 1,500 students and other protesters rallied at Caltex's headquarters in Pekanbaru, demanding that oil production cease until the central government agrees to channel 10% of the field's future revenues to Riau's local government. This would be no small sum, considering the central government's portion of those revenues constitute 14% of Indonesia's budget.
Caltex refused to stop production and a riot ensued. Company offices were looted, causing approximately 300 million rupiah ($34,800) in damage. Nearly 30 vehicles were damaged and eight students required medical attention after Indonesian security forces moved in to stop the mayhem. Late last year, students briefly occupied Caltex's sensitive port area.
In response, the province's governor, Saleh Djasit, says security will be increased around Caltex's vital installations. The company's managing director, J. Gary Fitzgerald, won't comment on steps Caltex is taking to guard against violence. But he emphasizes the ways in which Caltex has benefited Riau. The company employs 6,000 people and subcontracts nearly 30,000 more jobs, he notes, and has also helped to build schools and hospitals. Company officials proudly show off one Caltex project, a dusty wooden schoolhouse on stilts in a swampy village. About 30 children have gathered at the school to collect the shirts, hats and pants being handed out, along with backpacks with the Caltex insignia. Tellingly, outside the school a hulking oil pipeline snakes through the impoverished village of about 100 shacks.
Legal battle
Riau's activists are also pressing their agenda in the courtroom. This month, a Riau physician-turned-revolutionary, Tabrani Rab, launched a class-action lawsuit – in itself a rarity in Indonesia – demanding $23 billion in damages from the Indonesian government and Caltex. That money represents a portion of the revenue Dr. Rab says was "stolen" from Riau by the government over the past 54 years. He says other multinationals in Riau, such as Conoco Inc., which is partly developing the Natuna gas field off Riau's coast, and Sinar Mas Group's giant PT Indah Kiat Pulp & Paper Corp., also will need to start working more closely with Riau's government.
The Minister of Mines and Energy, Kuntoro Mangkusubroto, dismisses the lawsuit's ability to deter Caltex's oil operations. But he concedes the lawsuit has important "political" ramifications, given that several other parts of Indonesia, from Timor to Irian Jaya, are also calling for autonomy, if not independence.
Dr. Rab himself has a broader agenda for Riau: He envisions it eventually either forming a new federation with neighboring Malaysia and Singapore, or perhaps becoming the 51st US state, should Jakarta not grant sufficient autonomy. "We're a rich country, like Hawaii," Dr. Rab says, noting Riau's potential usefulness as a military base for the US
While statements like that have branded him an eccentric, many locals do sympathize with the underlying sentiment. Tiolina Pangaribuan, a local government trade official, says many Riau citizens feel culturally and socially closer to Malaysia and Singapore than to Jakarta. Centuries ago, the ancient kingdom of Riau Linga encompassed part of Malaysia and Singapore, with Riau at its center, they say.
Resonant message
Dr. Rab's message of greater autonomy resonates with local leaders, too. Mr. Saleh, the governor, says that while a desire for outright independence isn't the answer, desire for autonomy "is felt at all levels of society." Students protesters say their motivation derives partly from Dr. Rab's ruminations. (Dr. Rab denies any role in organizing the protest.)
Jakarta appears to be responding to the message Riau is sending. Last week, Indonesia's Parliament passed laws permitting provinces additional leeway in administering budgetary and investment decisions. More importantly, parliament agreed to share 15% of all oil revenue, and 30% of all natural-gas revenue, with the provinces that produce it.
Dr. Rab and others remain skeptical about whether Jakarta really will cough up that money, estimated at 5.8 trillion rupiah. The governor also says the figures aren't "concrete." He says his community's satisfaction depends on the implementation of the reforms. "In principle, it's sufficient," Mr. Saleh said, "but certain figures are still unsatisfactory."
Optimistic mood
However, Parliament's decision has left many businesspeople in Pekanbaru, the provincial capital, giddy with optimism. After all, in a certain sense it represents Indonesia's new democracy at work: Citizens protested and lobbied, and parliament listened. They anticipate trade increasing as Jakarta's bureaucratic hurdles diminish. Riau officials envision the new oil-revenue windfall paying for improved roads and ports, better schools, and a promotional fair. Riau borders the Straits of Malacca and is less than an hour's flight from Singapore and Malaysia, putting it at the center of a lucrative trading zone.
Indeed, while student activists assert that some 90% of Riau is ready to secede, many businesspeople in fact say they prefer to remain part of Indonesia. But they say that if Jakarta really wants to win over Riau, it first has to loosen its grip. "Our heart and blood are still in Indonesia," says Aslaini Agus, who until January headed Riau's chamber of commerce. "But our loyalty depends on how the government handles our aspirations" for autonomy.
But if the government fails to implement its pledges, even some of the most moderate Riau citizens warn of dire results. Chaidir, a local leader of Golkar, Indonesia's ruling political party, says that "if the government lies, then we'll have to think seriously about [Dr. Rab's] proposals."