VZCZCXRO6728
PP RUEHCHI RUEHDT RUEHHM
DE RUEHJA #1768/01 1780614
ZNR UUUUU ZZH
P 270614Z JUN 07
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC PRIORITY 5247
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHBY/AMEMBASSY CANBERRA 0855
RUEHWL/AMEMBASSY WELLINGTON 1559
RHHMUNA/HQ USPACOM HONOLULU HI
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
ZEN/AMCONSUL SURABAYA

UNCLAS SECTION 01 OF 02 JAKARTA 001768 
 
SIPDIS 
 
DEPT FOR EAP/MTS AND EB/ESC/IEC 
DEPT FOR DS/IP/EAP 
DOE FOR CUTLER/PI-32 AND NAKANO/PI-42 
COMMERCE FOR USDOC 4430 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ECON EINV EPET ELAB ENRG PGOV ASEC ID
SUBJECT: East Java: Lapindo Mudflow Devastation Continues 
 
Ref. A: Jakarta 1038 (notal), Ref. B: Jakarta 1629 
 
¶1. (SBU) SUMMARY: ConGen Surabaya and Embassy Jakarta officers 
accompanied EAP Assistant Secretary Christopher Hill to the Lapindo 
mudflow disaster (reftel A) and surrounding areas on May 28, the day 
before the one year mark of the disaster.  The mudflow continues at 
approximately 150,000 cubic meters per day and the mouth of the flow 
has grown to 150 meters in diameter.  The Porong Road and 
Surabaya-Malang rail line reopened May 20 after being closed for 
seven weeks.  8-10,000 displaced Porong residents still live in the 
open-air Porong Market and 40-60,000 Porong residents are displaced 
from 12-13,000 homes already destroyed.  The Indonesian Supreme 
Audit Agency (BPK) estimates economic damages now exceed $3.7 
billion and the National Development Planning Agency (Bappenas) 
projects Indonesian national GDP will be reduced significantly in 
2007 due to effects of the mudflow disaster.  National 
parliamentarians' recent call for an interpellation, demanding the 
President appear to explain  central government's handling of the 
mudflow (reftel B), is a symptom of growing frustration at a 
national level over failure to solve the problem or compensate the 
victims.  END SUMMARY 
 
Mudflow Disaster Update 
----------------------- 
 
¶2. (SBU) Sofian Hadi, Director of Operations for the Mudflow 
Disaster Management Board (BPLS), showed EAP Assistant Secretary 
Hill, Embassy Jakarta and ConGen Surabaya officers the extent of the 
mudflow disaster on May 28, the day before the one year mark of the 
PT. Lapindo Brantas (Lapindo) gas well drilling accident that 
started the eruption.  Hadi showed us weakening dam walls that are 
ready to fail again, potentially causing additional flooding.  He 
told us the mud continues to flow at approximately 150,000 cubic 
meters per day (roughly 1 million barrels) but has recently 
increased its flow rate.  The mud is also changing from primarily 
fine particles to nearly 40% gravel, dampening BPLS plans to divert 
the mudflow to a series of irrigation channels and eventually to the 
sea.  Hadi demonstrated BPLS's newest effort to pump muddy water in 
to the Porong River.  The BPLS is currently able to pump 10-20,000 
cubic meters per day; however the pump motors frequently seize due 
to the water's high temperature.  Hadi also admitted that there has 
been little progress on a permanent solution to stopping or managing 
the mudflow.  In addition, the Porong Market internally displace 
persons (IDP) camp is still housing 8-10,000 people. Lapindo 
continues to provide food, water and basic sanitation to the 
residents.  Many of the IDPs stay in the camp rather than accepting 
rental assistance from Lapindo and scattering their village members 
to away from one another.  There remain an estimated 40-60,000 
people displaced by the mud. 
 
¶3. (SBU) On June 16, a new 20-foot fountain of water erupted 
adjacent to the Porong Road, in the Porong Fruit Market.  Local 
newspapers report the "water" is flammable, containing elements of 
methane gas.  BPLS leaders anticipate more flammable geyser 
eruptions as the newest threat to the sensitive infrastructure at or 
under the Porong Road. 
 
Economic Impacts Mount - Investors Preparing to Leave 
--------------------------------------------- -------- 
 
¶4. (SBU) The economic impact of the mudflow disaster continues to 
mount, now exceeding $3.7 billion, according to the BPK.  In April 
2007, Bappenas released an estimate that mud damage will reduce the 
Indonesian national 2007 GDP by 1.03%, although this figure is seen 
as overstated by some outside economic experts.  According to BPLS 
contacts, little progress has been made on moving critical 
infrastructure, as no GOI funds have been appropriated for the 
project.  New foreign direct investment (FDI) in East Java has 
slowed to a trickle, with hundreds of millions of approved 
investments canceled by mainly Asian investors.  Several Japanese 
managers of factories assembling products for export south of the 
mud told us that their companies are looking to relocate their 
factories.  The transportation difficulties, unreliable gas, water 
and electricity supplies and the indefinite nature and growing 
impacts of the mudflow have dimmed business prospects to the point 
that closing operations and moving their plants to neighboring 
countries may be their best option.  To date, 20-25,000 East Java 
jobs have been lost due to the mudflow. 
 
GOI Rhetoric Pressuring President to Act 
 
JAKARTA 00001768  002 OF 002 
 
 
---------------------------------------- 
 
¶5. (SBU) Rhetoric coming from various parts of the GOI is changing 
from conciliatory and accepting of the government's actions, to 
frustrated and confrontational.  The DPR's recent call for an 
interpellation of President SBY to appear before parliament and 
explain the government's response to the mud disaster, led by Djoko 
Susilo East Java representative from the National Mandate Party, 
expresses the frustration many lawmakers and citizens feel about the 
deteriorating situation on the ground and the lack of progress in 
Lapindo paying victims' compensation.  Support for the 
interpellation seems to be faltering as various ministers have 
privately explained GOI actions to the disgruntled parliamentarians. 
 Another example is the recent statement by Paskah Suzetta, Chairman 
of Bappenas, that the GOI is developing evacuation plans for the 1.1 
million residents of Sidoarjo due to the mud.  Local East Java 
political leaders and the head of the BPLS retired Gen. Sunarso 
condemned the comment as an overreaction and inflammatory. 
 
¶6. (SBU) Pol/Econoff heard (via cellphone courtesy of a contact) 
part of a recent DPR Commission V debate over whether the mud 
volcano should be classified as a natural disaster or an industrial 
accident.  This highly sensitive issue will have direct impact on 
possible criminal charges against Lapindo executives, victim 
compensation levels and sources and financial liability for damages 
and efforts to combat the mud.  The debate was heated, but everyone 
acknowledged that the impasse on this issue hinders an effective GOI 
response to the disaster. 
 
Comment 
------- 
 
¶7. (SBU) The May 29 one year anniversary marked a turning point in 
East Java residents' patience with the GOI's efforts to handle the 
mudflow.  The GOI had been fairly successful in pressuring local 
authorities to keep a tight lid on criticism of the central 
government's response to the disaster.  However, local authorities 
have seen little reward for their cooperation and now local and 
national parliamentarians are much more willing to criticize the 
central government's lack of progress in managing the ongoing 
mudflow disaster.  GOI inaction combined with Lapindo's failure to 
pay already-agreed compensation has frustrated the victims and has 
left the GOI wide open to political attacks.  Even SBY's emotional 
visit June 24 with mudflow victims at the Presidential Palace 
brought accusations that this was merely for political purposes in 
advance of the interpellation.