VZCZCXRO8611
RR RUEHCHI RUEHDT RUEHHM
DE RUEHJA #4520/01 1010007
ZNR UUUUU ZZH
R 110007Z APR 06
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 2449
RUEATRS/DEPT OF TREASURY WASHDC
RUEAWJB/DEPT OF JUSTICE WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION WASHINGTON DC 0007
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RHEHNSC/NSC WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 06 JAKARTA 004520 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EAP/MTS AND EB/IFD/IFD 
AID FOR ANE/ESA-CAVITT 
TREASURY FOR IA-JEWELL AND BAUKOL 
DEPT PASS USTR FOR WEISEL AND KATZ 
DOJ FOR CRIM AAG BRUCE SWARTZ 
DOJ FOR ICITAP JONES 
DOJ FOR OPDAT ALEXANDRE AND EHRENSTAMM 
MCC FOR MORFORD AND BENT 
 
E.O. 12958: N/A 
TAGS: PGOV KCOR KMCA ECON EINV ID
SUBJECT: INDONESIA'S ANTI-CORRUPTION EFFORTS - PART II 
OBSTACLES AND USG ASSISTANCE 
 
REF: Jakarta 3490 
 
JAKARTA 00004520  001.2 OF 006 
 
 
¶1. (SBU) Summary.  A slew of high-profile corruption 
prosecutions of current and former Government of Indonesia 
(GOI) officials over the past year has energized the media 
and civil society groups and placed newfound and largely 
positive pressure on the bureaucracy (Reftel). Permanently 
reducing the level of corruption in Indonesia will require a 
generation of reforms to the bureaucracy and the legal 
framework.  Indonesia's largely unreformed bureaucracy 
remains perhaps the biggest hurdle to reducing corruption; 
with weak bureaucratic discipline and low salary levels, GOI 
revenue and expenditure processes have grown corrupt with 
kickbacks and bribes the norm.  President Susilo Bambang 
Yudhoyono (SBY) and his economic ministers, understanding 
the systemic nature of the corruption problem, have moved 
forward cautiously with a broad based civil service reform 
program. GOI ministers and civil society leaders admire the 
United States' strong record of prosecuting corruption and 
white-collar crime, and US agencies provide generous amounts 
of long-term development assistance and hands-on capacity 
building.  Para 19 has suggestions for further steps we 
could take to support reducing corruption in Indonesia.  End 
Summary. 
 
¶2. (SBU) This message, the second of two cables analyzing 
SBY's signature anti-corruption campaign, outlines the major 
legal, judicial, and institutional hurdles to anti- 
corruption progress and areas where we might assist. 
 
Coaxing Progress from an Unreformed System 
------------------------------------------ 
 
¶3. (SBU) Reftel outlined the significant prosecutorial 
successes of SBY's anti-corruption campaign to date, 
including the conviction of nearly 70 current or former 
senior officials of the central government -- including a 
former Minister -- local governments, courts, or regional 
parliaments on corruption charges.  Despite this strong 
start, pervasive shortcomings in Indonesia's legal regime 
for prosecuting graft cases make it unlikely that an anti- 
corruption strategy based predominantly on law enforcement 
measures can by itself dramatically reduce the level of 
corruption.  The current anti-corruption system seems too 
hidebound, inefficient, and, ironically, corrupt to handle 
the huge increase in caseloads that would make fear of 
prosecution an effective deterrent to corrupt behavior.  Key 
weaknesses of the current system include, 
 
--Unavailability of Bank Records:  Access to bank records 
lies at the core of most corruption investigations; 
Indonesia's bank privacy laws tightly restrict police and 
prosecutor access to them.  To get bank records, the 
Attorney GeneralQ Police Chief must write the bank in 
question via Bank Indonesia (BI), a cumbersome process that 
rarely results in the timely production of key records. 
 
--Lack of an Immunity or Cooperation Mechanism:  Indonesia 
lacks a law permitting plea bargains and a system for 
granting immunity or a sentence reduction to a cooperating 
suspect. Prosecutors tend to charge every person involved in 
a crime, leaving no incentive to cooperate or implicate 
others.  The inability to "turn" lower-level operatives 
against higher-level criminals means that many 
investigations go no higher than the "bag man". 
 
--Lack of Witness Protection or Whistleblower Laws:  Law 
30/2002 requires the Corruption Eradication Commission (KPK) 
to "provide protection to witnesses and whistleblowers," but 
provides no resources or legal framework.  Other agencies 
have even less of a legal basis for protecting witnesses. 
Informants, complainants and other witnesses remain 
vulnerable to threats, intimidation, or improper witness 
tampering.  No whistleblower protection laws exist to 
prevent retaliation in the workplace such as firings, 
 
JAKARTA 00004520  002.2 OF 006 
 
 
demotions, or transfers. 
 
--Restrictive Rules of Evidence:  Indonesian rules of 
evidence recognize only five types of evidence: testimony of 
a witness; testimony of an expert; testimony of the accused; 
a "document" as defined in the code; and an "indication" 
(evidence of an act relating to the crime, as proved by 
testimony or a document.) Common evidence used to prove 
corruption charges in other countries, such as undercover 
tapes, evidence recovered from computers, and financial 
records do not clearly fall within the five types of 
admissible evidence.  In Indonesia, a civil law country, 
judges have no obligation to honor rulings on the 
admissibility of evidence in other cases, making it 
difficult to plan effective investigations. 
 
--Lack of Effective Asset Forfeiture and Mutual Legal 
Assistance Laws:  Indonesia's patchwork of poorly drafted 
asset forfeiture laws makes it difficult for police or 
prosecutors to locate criminal assets in a timely manner. 
As Indonesia has very few mutual legal assistance treaties 
(MLATs) with foreign countries, it can rarely recover funds 
transferred abroad.  The legislature recently passed a 
mutual legal assistance law authorizing such international 
cooperation, but with its numerous exceptions likely will 
not substantially augment recovery of such assets. 
 
--Weaknesses in the KPK Law:  The 2002 law establishing the 
KPK gave the new agency special powers against corruption, 
but other sections of the law created obstacles to effective 
prosecution.  The special powers become available only when 
the KPK has commenced an "investigation."  The law expressly 
prohibits the KPK from dismissing cases for insufficient 
evidence, as the Attorney General can do in other cases, 
and, as a result, the KPK must often make a difficult 
decision on whether to commence a formal corruption 
investigation based on incomplete evidence early in the 
process. Various definitions "losses to the state" in 
several Indonesian laws have led many investigators, 
prosecutors, and judges to conclude erroneously that in a 
corruption case a loss to the state must exist. 
 
Weaknesses in Key GOI Anti-Corruption Institutions 
--------------------------------------------- ----- 
 
¶4. (SBU) Institutional weaknesses in key GOI anti-corruption 
bodies also acts to restrict the effectiveness of the 
current prosecution-based anti-corruption strategy. 
Although Attorney General Saleh enjoys a good reputation, 
internal reform at the AGO has advanced slowly, particularly 
when compared to General Sutanto's promising start with the 
Indonesian National Police (INP).  The AGO has little 
experience dealing with outsiders, and few officials at the 
AGO have had exposure to foreign legal systems, giving the 
institution a strong inward-looking perspective. Saleh, an 
outsider with no prior experience within the agency, has no 
network of allies to push his reform program.  The internal 
affairs division within the AGO remains weak and poorly 
regarded, and despite indications of corruption within the 
institution, we have seen no arrests or public reports of 
discipline.  Many of the officials Saleh has appointed have 
little experience as line prosecutors and only a limited 
understanding of the obstacles to prosecuting corruption 
cases. 
 
¶5. (SBU) An overly rigid and dysfunctional relationship 
between prosecutors and police hinders many investigations. 
The two groups rarely work together on investigations; when 
police hand over a dossier, prosecutors find themselves 
often dissatisfied with the results.  The lack of police 
involvement once prosecutors accept a dossier for 
prosecution also produces problems.  Prosecutors cannot 
conduct follow up investigations because the Indonesian 
Procedure Code gives police the primary authority to take 
investigative steps, includingQecuting search warrants, 
 
JAKARTA 00004520  003.2 OF 006 
 
 
obtaining bank records, and making arrests.  Once an 
investigation ends, prosecutors take charge of the dossier 
and the arrested defendants, and have exclusive control of 
the process.  Interagency law enforcement task forces seen 
routinely in the US remain rare in Indonesia; police and 
prosecutors seldom develop joint, long-term strategies and 
often miss opportunities to shake up corrupt networks.  We 
have seen recent progress in this area: the KPK and 
Interagency Team to Eradicate Corruption feature integrated 
teams of investigators and prosecutors who work together. 
 
¶6. (SBU) The evolving relationship between the media and law 
enforcement community complicates the prosecution of many 
corruption cases. Intense media interest in such cases 
coupled with distrust of the police often creates strong 
pressure on the police to act very openly, at times 
excessively so.  As a result, the police announce or leak 
many investigations at the outset, alerting suspects and 
giving them time to destroy evidence, develop alibis, flee 
the country, or transfer assets abroad. 
 
Corruption and Poor Performance in the Courts 
--------------------------------------------- 
 
¶7. (SBU) Despite signs of progress, corruption within the 
law enforcement community and the judiciary provides a 
serious obstacle to prosecution of corruption. Big cases 
involve wealthy businessmen, bankers, or senior GOI 
officials; they provide tempting extortion targets for 
crooked cops, prosecutors, and judges.  That said, we have 
seen no indication to date of serious corruption in the Anti- 
Corruption Court, the KPK and the Team for Corruption 
Eradication, all created to circumvent corrupt law 
enforcement and judicial organs.  INP Chief Sutanto has 
expressed determination to reduce police corruption. 
 
¶8. (SBU) Unlike our Supreme Court, which selects a few cases 
of legal significance each year, nearly every legal case in 
Indonesia may go to the Supreme Court, creating a backlog of 
some 20,000 cases and a climate of uncertainty for important 
cases, which can sit in limbo for months.  SBY appointed a 
Judicial Commission in 2005 to review the performance of 
judges, but the procedures and consequences of a negative 
review remain undefined; it seeks additional authority to 
remove poorly performing judges from the Supreme Court, some 
of whom actively resist this effort.  A Prosecutorial 
Commission, also created recently, has fallen behind 
schedule and not yet become operational.  On the positive 
side, these oversight organizations have sent a clear signal 
to judges and prosecutors about SBY's determination to 
tackle corruption. 
 
Weak Audit Agencies and Inspectors General 
------------------------------------------ 
 
¶9. (SBU) Well functioning state audit agencies and 
Inspectors General (IG) offices provide an important defense 
against official corruption.  The two state audit agencies 
do not perform an effective oversight role.  The Finance and 
Development Control Agency (BPKP), the internal GOI audit 
agency, has no real mandate now that IG offices in line 
ministries have taken over its internal audit function.  The 
Supreme Audit Board (BPK) has a constitutionally mandated 
external audit function, and with decentralization, the 
provincial and district governments have begun taking over 
that function at those levels.  As part of a multi-million 
dollar program to rationalize, professionalize and 
strengthen audit functions and inspectors general, the Asian 
Development Bank (ADB) has recommended transferring BPKP 
resources and staff to regional auditors and the Supreme 
Audit Board. 
 
¶10. (SBU) The Supreme Audit Board (BPK) seems a more 
powerful organization, with an independent status spelled 
out in the constitution.  It, however, only slowly has begun 
 
JAKARTA 00004520  004.2 OF 006 
 
 
programs that could reduce corruption in the bureaucracy. 
BPK publishes thick reviews of agencies' operations on its 
website, but has not developed media-friendly reports that 
would garner public attention. U.S. GAO and USAID advisors 
have suggested that the BPK create short summaries of its 
reports.  Most of its management board consists of political 
appointees who have on occasion contradicted its Chairman, 
Harvard-trained economist and former Bank Indonesia Senior 
Deputy Governor Anwar Nasution. 
 
Civil Service and Government Procurement Reform 
--------------------------------------------- -- 
 
¶11.  (SBU) The salary and incentive system in the civil 
service throws up perhaps the largest single obstacle to 
anti-corruption efforts.  Civil servants do not have a 
performance pay incentive system, and get promoted based 
almost solely on length of service or patronage and paid 
strictly for number of hours worked.  Formal salaries for 
most lower and middle level officials remain low, 
encouraging moonlighting and the collection of informal fees 
or bribes.  A large part of many civil servants' salaries 
comes from formal but irregular "honoraria" that supervisors 
dole out when subordinates participate in special projects, 
training programs or conferences.  The control senior 
bureaucrats exert over the compensation level of their 
subordinates greatly reduces the incentive to report 
corruption.  Applicants seeking positions with high 
potential for informal income (known as "wet" jobs) must 
often buy them, e.g., many police cadets pay significant 
fees to ensure their selection into the force. 
 
¶12. (SBU) The corrupt government procurement system requires 
kickbacks and bribes even for mundane purchases.  The World 
Bank estimates that 40 percent of official corruption comes 
in procurement; kickbacks of 10-20 percent provide a major 
source of income for officials.  As noted Reftel, SBY's anti- 
corruption campaign has created a significant disincentive 
to corruption in this area to both positive and negative 
effect: anecdotal evidence suggests that in 2005 fear of 
prosecution slowed down the execution of block grants for 
support of district-level purchases, as officials no longer 
felt safe doing business as usual. 
 
¶13. (SBU) SBY understands the systemic nature of the 
corruption problem, and has begun moving cautiously with a 
broad civil service reform program and other plans. 
Coordinating Minister Boediono told us in March that while 
SBY did not want to create a formal blue-ribbon commission 
to draft a civil service reform plan (as recommended by the 
World Bank), he asked Boediono to head an informal task 
force to draft a broad-based civil service reform plan that 
addresses salaries and benefits, incentives and promotions, 
human resource development, staffing levels and other 
issues.  While a daunting task given the size and political 
power of the civil service, the World Bank and other donors 
stand ready to offer large-scale technical assistance.  The 
National Development Planning Agency (BAPPENAS) seeks to 
revise Presidential Decree 80/2003 on procurement; the GOI 
might create a separate procurement agency. 
 
Decentralization of Corruption 
------------------------------ 
 
¶14. (SBU) Prior to decentralization, businesses could make a 
single payment to an appropriate national official, who 
would make a few calls if a local problem arose. 
Decentralization has given local officials much greater 
autonomy, reduced oversight from Jakarta, and increased 
opportunities to engage in corrupt activities.  When, for 
example, a prominent local coffee producer announced plans 
to set up a factory in an industrial estate east of 
Surabaya, the head of the village sent him a letter 
demanding the firm pay USD 2,000/month for "causing a 
disturbance," build a new soccer field for the village team, 
 
JAKARTA 00004520  005.2 OF 006 
 
 
and a new office building for the village chief.  The 
proliferation of small-scale, local corruption has become an 
investment climate issue; many businessmen complain that the 
Suharto-era system of one large bribe payment seemed more 
"business friendly" as firms could budget for it. 
 
U.S. Anti-Corruption Assistance 
------------------------------- 
 
¶15. (U) GOI ministers and civil society leaders admire our 
strong record of prosecuting corruption and white collar 
crime, and USG agencies provide generous amounts of long- 
term development assistance and hands-on capacity building. 
USAID has budgeted approximately USD 36 million for 2004 - 
2009 for anti-corruption development programs, including, 
 
--Judicial Reform Initiative: Bolsters capacity at the Anti- 
Corruption Court and the Commercial Court. 
 
--Financial Crimes Prevention Project: Assist the Financial 
Transaction Reports and Analysis Center (PPATK) with 
training and advice.  Recently extended to include the AGO, 
KPK and Ministry of Finance's Inspector General to help 
investigate and prosecute money laundering and other crimes. 
 
--Transparency in Local Governance: Helps local governments 
develop sound policies, performance-based budgeting, and 
participatory planning. 
 
--Justice Sector Reform Project:  Helps the Supreme Court, 
AGO and Judicial Commission with internal reforms and 
transparency issues such as hiring, evaluation, retention 
and promotion policies for judges and prosecutors, together 
with new codes of ethics and improved public outreach. 
 
--Working with the "Institute for the Independence of the 
Judiciary," AID helps the Judicial Commission establish 
transparent judicial selection procedures. 
 
--In February 2006, USAID held a government procurement 
conference that produced recommendations to improve 
government procurement transparency, including a toolkit for 
local and provincial governments.  The KPK, BAPPENAS, 
Indonesia Procurement Watch and USAID's Local Governance 
Support Program will collaborate on a procurement reform 
training program for local governments to increase 
procurement integrity. 
 
¶16. (SBU) Since May 2005, the Department of Justice Resident 
Legal Advisor (RLA) has provided assistance to GOI officials 
working corruption cases. He has worked with the AGO on a 
draft mutual legal assistance law and appeared before 
Parliament to discuss witness protection legislation.  The 
RLA has worked on a proposed regulation to allow the AG to 
dismiss charges against cooperating defendants in corruption 
cases, conducted a series of workshops on prosecuting 
complex corruption cases for the KPK and AGO, and 
participated in anti-money laundering training sessions for 
prosecutors.  He has run seminars on undercover 
investigations and complex prosecutions for prosecutors of 
the AGO's Special Crimes Division, and a workshop for the 45- 
member Team for Corruption Eradication. 
 
¶17. (SBU) DOS-funded International Criminal Investigative 
Training Assistance Program (ICITAP) Anti-Corruption 
Assistance Project has engaged with police to strengthen 
internal discipline. Funded at USD 600,000 through April 
2007, the project hosted a January 2006 high-level workshop 
to review INP's internal discipline system, and supports INP 
financial management reform and capacity building. 
 
¶18. (SBU) Although no extradition treaty or mutual legal 
assistance treaty exists between the US and Indonesia, in 
January 2006 the FBI, Diplomatic Security and DOJ cooperated 
to secure the return from the US of David Nusa Wijaya, an 
 
JAKARTA 00004520  006.2 OF 006 
 
 
Indonesian fugitive convicted of embezzling bank liquidity 
support funds in the late 1990s.  The RLA and DOJ's Office 
of International Affairs responded to a GOI request to 
recover proceeds from the Bank Negara Indonesia (BNI) fake 
letter of credit scam involving convicted felon Adrian 
Waworuntu.  The consular section has requested 
identification information from INP on subjects of ongoing 
corruption cases to prevent them fleeing to the US. 
 
What More Can We Do? 
-------------------- 
 
¶19. (SBU) Our generous assistance to date in this area has 
won praise from ordinary Indonesians and GOI officials from 
President Yudhoyono on down.  We can do more to demonstrate 
U.S. support for GOI anti-corruption capacity, 
 
--During his February 2006 visit to Washington, Minister of 
Law and Human Rights Hamid Awaluddin told Deputy Secretary 
Zoellick the GOI wants an MLAT.  When Attorney General 
Gonzales visited Jakarta in November 2005, Attorney General 
Saleh asked for help tracking down and returning corruption 
fugitives and their gains. Negotiating an MLAT would provide 
at little cost a new channel for cooperation on corruption 
cases, and boost bilateral law enforcement ties.  We 
recommend DOJ respond favorably to Hamid's request. 
 
--Indonesia qualified for Millennium Challenge Corporation 
threshold status in November 2005 and plans an extensive 
anti-corruption initiative.  We should continue engagement 
with the GOI to make sure it delivers results. 
 
--State or DOJ should provide the FBI USD 75,000 to provide 
undercover equipment and training to KPK investigators to 
improve the capacity of the KPK to break open corruption 
cases, and work up the chain from lesser figures to those 
who direct and benefit from corrupt activity. 
 
--The posting of a RLA has given the Embassy a means to 
provide hands-on capacity building assistance to prosecutors 
and investigators on complex corruption cases.  The RLA also 
provides us a resident source of expertise on witness 
protection and whistle blower laws, immunity provisions, and 
criminal procedure reforms.  We recommend INL continue to 
fund the RLA position in Jakarta, and if events warrant, 
consider expanding that support to fund a second RLA 
position. 
 
--The KPK has requested information from DOJ on its 
investigation of Monsanto under the Foreign Corrupt 
Practices Act, and two KPK commissioners met DOJ prosecutors 
on this last year.  Where possible, we recommend that DOJ 
provide information so the KPK can identify and prosecute 
Indonesian recipients of payments made on behalf of 
Monsanto. 
 
--The ICITAP Anti-Corruption Assistance Project has had 
significant success working with INP on reducing corruption 
and promoting internal reform.  We recommend the Department 
continue to fund this program; without additional assistance 
it ends in April 2007. 
 
PASCOE