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Government still calls economic shots

Jakarta Post - August 18, 2005

Rendi A. Witular, Jakarta – Following the signed peace deal between the government and the Free Aceh Movement (GAM) rebel group, Aceh will still adhere to most of the key fiscal and monetary policies set by the central government with some exceptions.

Based on the Memorandum of Understanding (MoU) signed by the government and GAM representatives on Monday, the exceptions would include the rights to set interest rates beyond that set by Bank Indonesia (BI), Coordinating Minister for the Economy Aburizal Bakrie said on Wednesday.

"There are several special rights given to Aceh in managing certain economic affairs," he explained.

With those rights, he added, the Aceh administration would have the right to set up provincial banks and allow those banks to decide their own interest rates for its deposits and loans without having to stick to the central bank's benchmark rates.

At present, Bank Indonesia's benchmark interest rate stands at 8.71 percent. "There is no way that Aceh can set up its own central bank with the existing legal framework. Their provincial banks will have the freedom to set their own level of interest rates if they believe they can benefit from it," Aburizal said.

BI Governor Burhanuddin Abdullah said the board of governors would soon convene to study the points in the MoU, which gave some monetary authority to the Aceh administration. "We are still studying the MoU to see if the points in it will require the government to revise certain laws or regulations. BI has yet to come to any conclusions," he said.

The peace pact also included points on Aceh's rights to raise funds from foreign loans and to retain 70 percent of the revenues from all current and future hydrocarbon deposits and other natural resources in the oil-rich territory. Additionally, the province will have jurisdiction over living natural resources in the territorial sea surrounding the province.

Indonesia currently has proven oil reserves of 4.7 billion barrels and estimated reserves of 9.0 billion barrels, with much of it stored beneath Aceh's soil and sea. Indonesia also has proven natural gas reserves of 92.5 trillion cubic feet, and is the largest liquefied natural gas (LNG) producer in the world. Aceh is believed to have a huge amount of untapped gas resources.

Aburizal emphasized that the points were not new to the government, because they had already been included in the Special Autonomy Law passed in 2001, but the MOU just emphasizes them for the government to fully implement the law.

Minister of Communications and Information Sofyan Djalil, who had been a member of the negotiating team, said the economic arrangements in the MoU were unlikely to trigger any jealousy from other provinces. "Aceh is a special case. I believe other provinces will not demand the same economic arrangements as Aceh," he said.