History of Indonesia

The nation-state known in modern times as Indonesia encompasses an archipelago of 17,508 islands (6,000 inhabited) stretching along the Equator. The area is populated by peoples of various migrations, creating a diversity of cultures, ethnicities, and languages. These diverse peoples were influenced in varying degrees by trade and contact with the civilizations of the Middle East, South Asia, and East Asia, before the Portuguese initiated a direct relation between Indonesia and Europe, and colonists from the Netherlands finally consolidated most of the archipelago into a single administrative unit, under the Dutch East India Company. The outbreak of World War II saw Indonesia put in the middle of warfare between the Dutch and Imperial Japan. The defeat of the Dutch saw them driven out and replaced with Japanese occupation forces, but the weakening of these two world powers provided an opening for Indonesian Nationalists, led by Sukarno, and other independence movements to launch an armed conflict. After a brief time, during which the Dutch sought to re-colonize the country, the Indonesian Nationalists won recognition for the newly formed Republic of Indonesia. In doing so, it was among the first Third World nations to gain its independence after World War II.

After gaining independence, the Republic of Indonesia has largely been ruled by a strong central government in Jakarta. After Indonesia's founding President Sukarno was weakened by prolonged warfare against Malaysia and its Commonwealth allies in the Konfrontasi, and by internal conflict between the Indonesian Army and the Communist Party of Indonesia, General Suharto took power in 1966. The period of his rule, known as the era of the New Order, would last 32 years and would make Indonesia a rapidly industrializing nation, though not without the problems of extensive corruption and popular discontent. After a wave of protests demanding democracy, Suharto stepped down, beginning the present period of Indonesian history, known as the Reformation era.

Hold EIH; target Rs 115: Citigroup

Citigroup has maintained hold rating on EIH with target price of Rs 115. The stock is trading at a 19% premium to sector valuation.

Citigroup report on EIH:

Strong results, better than expectations

Stand-alone 1QFY08 revenues increased 15% YoY to Rs 2155 million while net profit (before extraordinary items) grew 82% to Rs 367 million largely on account of a sharp increase in other income, due to lower swap loss of Rs 9.7 million (adjusted in other income) vs. Rs 72.4 million in 1QFY07.

EBITDA grew 14%

Margins, however, reduced 100bps YoY to 31%, with stand-alone ARR growth being 12% and occupancies at 67% in the quarter, due to off season for its leisure properties; this should improve in the 2HFY08E.

Earnings growth front loaded

We estimate consolidated earnings growth of 33% based on 13% growth in ARR and occupancy of 69% in FY08E. ARR and occupancy will, however, be adversely affected in FY09E and FY10E given potential supply - therefore we estimate a modest 15% earnings CAGR for FY07- FY10E.

Capex in pipeline

1) Six new hotels in India; 2) hotels in Dubai, Maldives and Cambodia; 3) a luxury train through a JV with Indian Railways and the Govt. of Rajasthan; and 4) a luxury Nile Cruiser in Egypt. However, given long gestation period of 2-3 years for new hotels, we believe most of the growth will kick in after FY10E.

Maintain Hold (2L)

With the stock trading at a 19% premium to sector valuation, we believe most of the strong growth expected in FY08E is priced in. We maintain a Hold (2L) rating for the stock.

Investment thesis

We rate EIH a Hold/Low Risk (2L) with a target price of Rs 115 based on 19x Sept'08E P/E, at a premium to sector valuations of 16x. Although the growth outlook for the company appears strong in FY08E, with the stock's 13% run-up over the past four-months and valuation at 17.5x Sept'08E P/E - a 10% premium to sector valuations - upside appears limited. While we forecast strong 33% growth in FY08E, with potential supply likely to adversely impact ARRs and occupancy growth in FY09-10E, we expect earnings CAGR to moderate to 15% over FY07-10E. Although the company has aggressive capex plans, most of the growth from new properties should kick in post FY10E. We believe most of the growth potential is priced in, however likely extraordinary gains from potential unlocking of some real estate assets, remains a silver lining.

Valuation

Our target price of Rs115 is based on 19x FY08E P/E. Our 19x target multiple factors in the risk of increased supply of rooms coming in starting 2008-09, which would slow ARR growth and dampen occupancy rate. This still places the stock at a premium to sector valuations of 16x Sept'08E P/E, but at a discount to Indian Hotels (21x), offering scale and a stronger business model. The premium to the sector is attributed to: 1) Premium positioning with ‘The Oberoi' brand in the luxury hotel segment; and 2) It is the second largest hotel chain in India. We use P/E as our primary valuation tool, as this captures the rapid earnings growth potential. With the stock trading at 17.5x Sept'08E P/E at a 10% premium to sector valuations of 16x, most of the growth appears priced in, but with growth intact for FY08E and likely extraordinary gains from unlocking of real estate assets, we see moderate upside potential.

Western-style democracy not suitable for Indonesia: Kalla

Jakarta – Vice President Jusuf Kalla has reiterated his wariness toward the application of Western-style democracy in Indonesia.

Speaking before a visiting delegation from the Netherlands-based Institute for Multiparty Democracy (NIMD) on Monday, Kalla said the application of Western democracy in Indonesia would create injustice and inequality.

"Western-style democracy, such as that in Europe or the United States, can't just easily be applied here. It has to be made suitable to the conditions and culture of Indonesia," Kalla was quoted as saying by Golkar Party Central Board member Rully Chairul Azwar.

Kalla also said that democracy should not be seen as an end in itself but as a means to achieve prosperity, and that democracy in Indonesia was more advanced than the form applied in the Netherlands. The NIMD delegation was led by the institute's chairman, former Dutch prime minister Ben Bot.

Also present at the meeting were Indonesian Community for Democracy (KID) chairman Ignas Kleden, KID secretary Daniel Sparingga and Golkar Party secretary general Budi Harsono.

With funding from NIMD, KID recently facilitated the establishment of a forum called the Indonesian Political Parties Dialog Community to promote democratic values in the country.

After the meeting, Bot was quoted by Antara as saying that NIMD's presence in Indonesia is not aimed at strengthening the party system, as this depends on the will of political parties themselves.

He said his organization aimed to encourage the public to take part in the application of democratic principles.

Kalla has repeatedly stated that the application of democracy in Indonesia has been too excessive and has hampered the country's economic growth. He said the excess of democracy in the country has materialized in street rallies and riotous House of Representatives sessions.

The Vice President's latest comments echo those of former dictator Soeharto and former Singaporean prime minister Lee Kuan Yew, who said that Eastern societies have their own versions of democracy which uphold harmony and consensus.

These so-called "Asian values" withered away following the 1998 Asian economic crisis that led to the downfall of a selection of authoritarian regimes in Southeast Asia.

Indonesia: 'The people want fundamental change'

Green Left Weekly's Vannessa Hearman spoke to Agus Jabo, chairperson of the National Liberation Party of Unity (Papernas), in Jakarta about the new party's campaign plans and its defence against ongoing attacks from right-wing organisations.

What are your hopes for the 2009 presidential and general elections?

The Indonesian people want fundamental change. Since the fall of the New Order regime [in 1998], with four changes of presidents, Indonesia is still without economic and political sovereignty. This is the root of the problem of why the welfare of the people is still far from their hopes.

The government led by [President] Susilo Bambang Yudhoyono and [Vice-President] Jusuf Kalla had a significant mandate from the people, as it was elected through the first direct presidential elections. They committed the error of siding with foreign capital and its interests, rather than choosing to defend the interests of the people by formulating people-friendly programs and constructing a strong and independent national economy. This meant the people lost confidence and hope in the current government and the parties that support this government.

There is still a low level of education in Indonesia, which influences the level of consciousness of the people. They continue to patiently tolerate the current situation and not carry out massive national resistance. But this may not necessarily continue, and at some stage there could be an explosive resistance against the rulers. These are the objective conditions facing whatever new political forces are able to carry forth the hopes of the people towards a new alternative party that can gain mass support.

How is Papernas's electoral preparation going?

We are at the stage of constructing and expanding the support of the people, by building regional party structures, at the level of the province, district and city, subdistrict and down to the mass bases. We are sending our cadres to the regional areas that we are targeting.

Are the recent attacks against Papernas meetings and other events by anti-communist groups a significant barrier for the party in its electoral registration preparations?

The most significant obstacle to us becoming a registered political party is the law on political parties. The draft form of the law shows that the political aim of the state (reflected in the attitude of the major parties in parliament) is to limit the number of political parties and in turn, limit the political participation of the people by making the requirements more onerous. Political parties that are legal entities – that is, recognised by the government through a verification process by the department of legal affairs and human rights – must fulfill the requirement of having a certain number of branches.

Under the old political party law, a party was recognised if it had branches in at least half of the provinces and half of the districts. The new law, currently before the House of Representatives, stipulates that there must be branches in 66% of provinces, 50% of sub-districts and 75% of districts. It also requires that parties provide an upfront 5 billion Rupiah [A$650,000] deposit to run in elections.

With this new law, only the ruling parties can continue. People who want to be involved in politics are then forced to be members of the large parties, even though the people are very well aware that the large parties, in the time they have been in office, have proven themselves unable to bring about the economic or political change that has been longed for by the people.

The government's attempts to shape people's political aspirations into three broad streams – like under the New Order where only three political parties were allowed – is in keeping with the aim of achieving as quickly as possible a stable political system for the sake of attracting and protecting foreign investment. Doing so will sacrifice the meaning and process of democracy in a large and pluralist country like Indonesia. This kind of action just repeats the past historical mistake of constructing "democracy" in a way not in keeping with the objective conditions of Indonesian society. If this continues, it will just be a time bomb threatening the political life of this nation.

We are working together with new political parties and parties that did not meet the electoral threshold to fight together against these draft laws, because they threaten the future of democracy in this country.

So the terror actions against us from reactionary groups like the Islamic Defenders Front are just secondary barriers, compared to those we face under the law on political parties. The communist accusation is like an old song sung over and over again by the New Order government. It doesn't have a lot of currency anymore as a political instrument with which to intimidate the people. People will be more frightened of their future being devoid of guarantees of any welfare.

What steps has Papernas taken to defend the party from the right-wing attacks?

We have had experience in confronting these kinds of political attacks since the time of the Suharto dictatorship. Such acts of terror are threats to democracy and we will never retreat in the face of such attacks until the Indonesian people have economic, political and cultural sovereignty, free from the domination of foreign capital.

The most important steps are consolidating and safeguarding our bases and people. Other than trying to foster and expand our network of allies, we also need to explain to the people what our program represents. We also use all the means at our disposal, for example reporting these attacks, which are criminal and anti-democratic acts, to the police.

Do you know who is behind these attacks?

Those backing these radical Islamic and anti-communist groups are forces who feel threatened by Papernas's program. The most urgent priorities in our program are represented by the Tri Panji – the three banners of national unity for the welfare of the people. These are abolishing the foreign debt, nationalising the mining industry and constructing a strong national industry.

What will you do if Papernas doesn't achieve registration for the 2009 elections?

For us, the elections are just a tactic in the struggle to liberate the Indonesian people. There are many other tactics we can also use – of course keeping in mind the objective conditions and what the people's desires are. The elections will still be an important tactic in the context of a people's movement that is on the decline, so we will work with other political parties that have similar political positions to us – that is a program of national self-sufficiency – to respond to the election law so that we can take part in elections and have a real chance of winning in parliament and in the regional parliaments.

When we first founded Papernas, we only had 40 branches in 18 provinces, but four months later, we have 134 definite branches in 23 provinces with hundreds of bases at the sub-district level. People are bored with the big political parties, and based on a recent survey by an independent research institute, almost 70% of those surveyed said they did not identify as members of any political party. That is, the majority of Indonesian people are still a big "floating mass" [the "floating mass" doctrine was enacted by the New Order government, prohibiting political party activities at the local level]. So if there appears a new political force that can really struggle for the people's interests, it could win. That points the way for a new political force like Papernas.

Travel cautions issued, but Bali is safe for incident when Christmas & New Year Celebrations

Travel warnings or cautions from foreign embassies issued anticipating the terrorist attack by the end of 2004 over the holiday season in Bali. However, the fact says that together with the rest of Indonesia celebrated Christmas and New Years without any confirmed reports of terrorist activities.

When the New Year celebration conducted in Bali, every corner of the street particularly in tourism areas are tighten by the security system which is totally organized by the police officers and the local traditional security apparatus called pecalang are also involved. All those apparatus were deployed to maintain the peace over the New Year period while Officers on duty at the entry seaports of Padang Bai and Gilimanuk were equipped with 32 bomb detection units, numerous metal detectors and security gates. Also on stand-by throughout the holiday period were Detachment 88 - an elite anti-terror unit as well as sniper units on guard at various locales across the island.

But, somehow, primarily, prior to the holiday period, Bali's Chief of Police Irjen Made Mangku Pastika cautioned the people of Bali not to lower their guard over the coming holidays, reminding everyone that security is a shared responsibility between the police, the public, businesses and hotel operators.

In contrast with the celebration to welcome the year 2005, Indonesia mourns of many thousands who died in the region following the December 26, 2004, earthquake off Sumatra's northwest coast. Many hotels used the occasion of New Year's festivities to offer moments of silence for those who have died and for organizing special fund raising activities during the evening to aid relief efforts.