VZCZCXYZ0012
OO RUEHWEB

DE RUEHJA #0895/01 2440646
ZNR UUUUU ZZH
O 010646Z SEP 06
FM AMEMBASSY JAKARTA
TO SECSTATE WASHDC IMMEDIATE 9452

UNCLAS JAKARTA 010895 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EB/CBA SMITH-NISSLEY 
 
E.O. 12958: N/A 
TAGS: BEXP EINV ELAB ETRD KSEP SENV ID
 
SUBJECT: DUE DILIGENCE FOR CORPORATE EXCELLENCE AWARD 
NOMINEE CHEVRON INDONESIA 
 
REF: A) STATE 133146 
 
¶1. (SBU) Summary.  We are not aware of any significant 
embarrassment likely to arise should Chevron Indonesia 
receive the 2006 Award for Corporate Excellence.  Chevron 
has been an outstanding corporate citizen and contributed 
greatly to community development in Indonesia.  The largest 
crude oil producer in Indonesia, Chevron's Indonesian 
operations provide several hundred jobs in the U.S. both at 
its own facilities and those of its contractors.  Chevron, 
like other large foreign companies operating in Indonesia, 
has been the target of labor unrest in the past, the most 
significant of which was a 2002-3 labor dispute over 
contract labor issues, now long since resolved.  End 
Summary. 
 
¶2. In response to Ref A, we reviewed our files on Chevron, 
interviewed Jakarta-based Chevron officials, and contacted 
local representatives of the American Center for 
International Labor Solidarity (ACILS).  Based on those 
actions, we provide the following information keyed to Ref A 
questions. 
 
A) Could there possibly be any downside or embarrassment 
caused by the selection of the nominee? 
 
Post is not aware of any high profile lawsuits or other 
negative actions against Chevron Indonesia, which could 
cause embarrassment.  However, Chevron's local operating 
unit has been the target of labor protests in the past, the 
most recent of which was in 2003 (see answer to question D 
below). 
 
Chevron is widely recognized in Indonesia as a top tier 
company based on its employment record, contribution to the 
local and national economies, development of the country's 
people and resources, and exceptional response to natural 
disasters such as the tsunami in Aceh in December 2004. 
Chevron continues to donate supplies and housing assistance 
to employees and communities in the affected areas in Aceh. 
 
Chevron has a strong community development program.  In 
addition to the community development projects cited in our 
nomination cable, Chevron has offered the Caltex Riau 
Scholarship program to senior high school graduates since 
2001, selecting the top 60 students each year.  It also 
provides tuition for graduate education and apprenticeships 
for 100 university graduates, as well as training for 
teachers.  Chevron renovated Meranti Pandak Village in Riau 
Province, home to 1500 residents, repairing and replacing 
housing, improving sanitation and water supply.  Chevron has 
also contributed to infrastructure development, such as the 
Siak River Bridge and the Pekanbaru-Dumai highway in 
Sumatra. 
 
 
B) Do you have any information concerning job creation in 
the U.S. resulting from the operations of the company you 
nominated? 
 
Chevron pumps 50 percent of Indonesia's crude oil at its 
Duri and Minas fields in Sumatra, operates a 55 MW 
geothermal power plant at Darajat in West Java, and has a 25- 
percent interest in a 2.5 trillion cubic feet gas 
development in the Natuna Sea.  In addition to the 
approximately 20,000 employees of Chevron Indonesia and its 
contractors, hundreds of additional employees at Chevron 
USA, or its contractors and vendor companies in the U.S., 
support the company's operations on a full-time basis.  The 
nature of these jobs includes high tech computing and 
information technology, engineering design, facilities 
construction (especially in Louisiana), and oil field and 
drilling support services. 
 
C) What is your assessment of the company's trade and 
investment activities with regard to helping stimulate 
economic growth in the U.S. and increasing American exports 
(what is the U.S. content of its products)? 
 
In addition to creating high-paying support jobs in the 
U.S., Chevron's exploration and production activities 
contribute directly to bringing important supplies of crude 
oil and natural gas into the marketplace. 
 
D) What is the state of labor conditions in the company's 
facilities and are workers unionized? 
 
Union members do work for Chevron in Indonesia.  Chevron, 
like many of the large energy companies in Indonesia, 
 
indirectly employs the majority of its work force through 
independent contractors.  In 2002-03, Chevron-Caltex 
experienced significant labor unrest related to a court case 
in which a group of security guards charged that the firm 
had promised to convert them to permanent employees, but 
reneged.  Despite what appeared to be a strong case, Chevron- 
Caltex lost in the Indonesian Supreme Court, and eventually 
settled with the workers.  The Jakarta ACILS office told us 
it has received complaints from Caltex contract workers over 
allegedly poor working conditions, and alleged efforts by 
Chevron-Caltex to frequently roll over contracts to 
discourage unionization.  However, neither ACILS nor we have 
confirmed any of these allegations.  The situation calmed 
significantly by 2004, when Chevron completed a long-overdue 
downsizing of its direct-hire workforce through a voluntary 
retirement program.  Under this program, Chevron reduced its 
workforce by 17 percent without strikes or stoppages. 
Neither we nor ACILS-Jakarta have seen any change in this 
quiescent situation during 2005 and 2006.  ACILS-Jakarta was 
continuing to consult with its affiliate in Jambi and unable 
to meet our deadline, however. 
 
It is important to note that foreign firms were frequent 
targets of labor unrest from 2000-04 in Indonesia's newly 
liberalized labor relations system, in large part because of 
the perception that they are more concerned about their 
corporate reputation than Indonesian companies and have 
deeper pockets.  We have seen no credible evidence that 
western firms, including Chevron, in general treat their 
employees unfairly.  In fact, the opposite is true-salaries, 
benefits, and working conditions tend to be the best in 
western firms.  Chevron is no exception to this rule, and 
has in general enjoyed excellent relations with its 98- 
percent Indonesian workforce.  Another issue is that the 
hiring of contract workers and severance benefits are a 
source of ambiguity in Indonesia labor law, and labor issues 
have been one of the top complaints of foreign companies 
operating in Indonesia.  The GOI has acknowledged the 
problem, and has committed to revising key severance pay 
regulations.  The International Finance Corporation in 2005 
ranked Indonesia as one of the most "business unfriendly" 
countries in the world regarding the hiring and firing of 
workers with the highest costs in the region, equal to 145 
weeks of salary (compared to 90 in China, 65 in Malaysia 39 
in Cambodia and 4 in Singapore). 
 
¶F. Please Confirm that the Chief of Mission and others 
involved in the nominating process do not hold shares of the 
stock or have other financial interests in the company. 
 
No senior embassy personnel involved in the nominating 
process own Chevron stock directly.  However, as the twelfth 
largest U.S. company by market cap, Chevron occupies an 
important position in the TSP C Fund, S&P 500-based index 
funds, and other large cap mutual funds. 
 
PASCOE