Indonesian Gov't Signs Peace Accord with Rebels

The Indonesian government and the Free Aceh Movement have ended their 30-year war. Thousands of Indonesians, including citizens from the tsunami-destroyed province of Aceh, crowded together to watch the signing of a peace accord Aug. 15 on television. The peace deal was signed in Finland, which has served as a broker in the long-running conflict, in which at least 15,000 people have died. Indonesian Justice and Human Rights Minister Hamid Awaluddin signed for Indonesia, and Malik Mahmud, a former exiled rebel leader, signed for the Acehnese.

The agreement provides amnesty for members of the Free Aceh Movement (GAM) and gives the region limited self-government and control over 70% of the revenue from the province's mineral wealth, including oil and natural gas.

The accord became possible after GAM agreed to renounce its demand for full independence and to disarm. Indonesia, in turn, agreed to cut the number of soldiers in the region from 35,000 to 14,700, and police from 15,000 to 9,100. In addition, all major troop deployments must now be cleared by Pieter Feith, a Dutch diplomat who will head the 250-member international monitoring force.

In return for the rebels dropping their secession demands, the government agreed to give them some form of political representation. Members of the Free Aceh Movement will be eligible to run in 2006 elections for a new regional chief and in 2009 polls for a new legislature. Aceh will also be allowed to pass its own laws, collect taxes and have its own symbols, including a flag. Monetary matters, justice and freedom of religion will be controlled by the national government.

China Faces Slowdown in Exports, Real Estate Bubble

China's National Development and Reform Commission (NDRC) reported Aug. 16 that the nation faces a big slowdown in exports, a real-estate bubble, and a tight money supply. Meanwhile, the Peoples Bank of China stated Aug. 15 that there are "heavy risks" if the "fast growth" of the Chinese real-estate market becomes a housing bubble. The PBOC stands to suffer big losses if the bubble were to burst.

The NDRC reports that the housing market has calmed down notably, but there is no certainty yet that this will end in a "soft landing." The key question is whether the government will attempt to control the market. If the market is not cooled down, China again faces the problems of "over-heated investment," which will badly exacerbate the severe bottleneck in resources, energy, and transport infrastructure.

Growth of exports will likely see "a remarkable slowdown" later this year, which will put heavy pressure on the economy in the short term, although in the longer term this will be beneficial, making it possible for domestic industry to develop. (Almost 60% of exports are produced by foreign firms in China.) But in the near-term, a smaller export sector will hit jobs and could increase the pressure of deflation.

The PBOC, in its statement, warned that as China tightens credit, if the real-estate bubble bursts, "the capital chain might have difficulty or even break down." Housing loans were currently 2.6 trillion yuan ($310 billion) by end-2004, or about 15% of the total domestic loans. Various speculative scams are also threatening the lending banks' stability.

Foreign Investment Falling in China

Foreign investment into China fell by 3.4% to $33.1 billion so far in 2005, year on year, the Chinese Ministry of Commerce reported Aug. 15. In 2004 at this time, Chinese FDI had risen 13% year on year, and was second only to FDI flows into the United States.

China Selects Site for Next Nuclear Power Station

Guangdong Nuclear Power Holding announced Aug. 16 that it has decided upon the city of Lufeng as the preferred location for its fourth nuclear power plant complex. Plants are already in operation at Daya Bay and Ling'ao, and one will start construction next year at Yangjiang, in this southern province. Construction of the two 1,000 MW reactors will begin in 2007 and be completed in 2013.

Former Indonesian Official Visits Myanmar as UN Rep

Former Indonesian Foreign Minister Ali Alatas left for Myanmar on Aug. 18 as a special envoy of UN Secretary General Kofi Annan, Agence France Presse reported Aug. 18. "The visit is part of his duty to tour several Asia Pacific nations in relation to UN reforms," said a spokesman of the UN Information Center, without providing more detail. Alatas was appointed in 2003 as a special envoy to Myanmar.

Under intense international pressure, Myanmar agreed in July to skip its turn in the rotating chairmanship of the Association of Southeast Asian Nations. Ali Alatas has strongly advocated Myanmar's right to settle the extremely difficult internal relations among ethnic groups, the legacy of former British colonial rule, without outside interference.