VZCZCXRO6777
RR RUEHCHI RUEHDT RUEHHM
DE RUEHJA #1957/01 2000605
ZNR UUUUU ZZH
R 190605Z JUL 07
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 5475
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHKL/AMEMBASSY KUALA LUMPUR 2354
RUEHBK/AMEMBASSY BANGKOK 8045
RUEHGP/AMEMBASSY SINGAPORE 6085

UNCLAS SECTION 01 OF 02 JAKARTA 001957 
 
SIPDIS 
 
SINGAPORE FOR SUSAN BAKER 
 
SIPDIS 
SENSITIVE 
 
DEPT FOR EAP/MTS, EAP/RSP, EB/TPP, EB/TPP/BTA 
COMMERCE FOR SBERLINGUETTE 
USTR FOR DKATZ, RBAE 
TREASURY FOR IA-BAUKOL 
 
E.O. 12598: N/A 
TAGS: CASC ASEC EINV ECON KCOR ID
SUBJECT: GOI PROMISES SWIFT RESPONSE TO NIKE TRADE DISPUTE 
 
¶1. (SBU) Summary.  On July 18, Ambassador Hume met with Muhammad 
Lufti, Chairman of the Government of Indonesia (GOI) Investment 
Coordinating Board (BMPK)at Lufti's request to discuss the 
escalating trade dispute between U.S.-based Nike Corporation and 
their local business partner, Central Cipta Murdaya (CCM).  Lufti 
was designated by the GOI to resolve the situation and promised both 
security guarantees and CCM cooperation if Nike representatives 
would consider returning to Indonesia.  Both Ambassador and Lufti 
agreed that a swift GOI response to resolve the dispute was in the 
interest of all parties.  End Summary. 
 
SBY is in the Loop 
------------------- 
¶2.  (SBU) Lufti explained that President Susilo Bambang Yudhoyono 
(SBY) directed Lufti, the GOI Minister of Trade, Minister of 
Industry, and Minister of Manpower to meet with Vice-President (VP) 
Kalla to discuss Nike's case.  SBY designated Lufti to coordinate 
GOI response.  Lufti acknowledged GOI fell short in key areas, 
notably security, but assured Ambassador that SBY was personally 
engaged on the issue.  Lufti promised GOI security for all employees 
and gave his personal guarantee that Nike executives would not be 
detained by authorities even in the event of civil litigation. Lufti 
offered to fly to Singapore to meet with Nike executives personally. 
 He asked Ambassador to call Nike to encourage them to return to 
Indonesia. 
 
¶3.  (SBU) Ambassador Hume agreed to call Nike executives, but 
reminded Lufti that security assurances must come from GOI directly. 
 He explained that Nike executives were likely less anxious in the 
immediate sense, but still wary of entering a litigation trap upon 
return to Indonesia. Lufti responded that he would "escort them to 
the airport and put them on a plane myself before allowing that to 
happen."  Both Ambassador and Lufti agreed on the need to handle 
disputes quietly and not in the press or the streets. 
 
¶4.  (SBU) The Ambassador asked Lufti about CCM's culpability and 
willingness to participate in a resolution.  Lufti responded that he 
already spoke with CCM and promised Murdaya family cooperation. 
Lufti claimed GOI is pressuring the family to fulfill CCM's 
financial obligations and accept a "reasonable and fair" phase-out 
proposal from Nike.  While promising to play a facilitating role, 
Lufti hinted that Nike concessions on the terms of the phase-out 
would be helpful.  Ambassador offered to make a public statement 
once a negotiated agreement is successfully realized. 
 
Background 
----------- 
¶5.  (SBU) Four Nike executives abruptly departed Jakarta for 
Singapore on July 16 after thousands of protesters descended upon 
their Jakarta headquarters, instigated by one of Nike's estranged 
local business partners, CCM.  Nike executives informed CCM on July 
6 that Nike would end their business relationship with CCM at the 
end of 2007. Nike explained the decision was based on the factory's 
inability to meet the company's minimum contractual product quality 
and delivery standards.  CCM responded by ceasing all Nike factory 
production and directing disgruntled employees to Nike's downtown 
offices. CCM also made veiled personal threats directed at the Nike 
executives.  The ensuing protest alarmed Nike executives, who 
received Embassy assistance in obtaining protection from local 
police and safe passage to the airport.  Ultimately, the crowd 
dispersed peacefully and Nike executives were able to leave their 
offices.  Nike executives, accompanied by the FSN Investigators, 
were then taken to Soekarno-Hatta airport via police escort where 
they departed the country. 
 
An Infamous Local Partner 
------------------------- 
¶6. (SBU) COMMENT:  Business contacts tell us that the Murdaya family 
"plays hard ball" and has been known to use their money and 
influence to harass foreign investors, even having them arrested in 
some cases. According to Forbes, Siti Hartati Murdaya is ranked 16th 
among the 40 richest people in Indonesia.  Hartati's husband, 
Murdaya Poo, is a Member of Parliament from the Indonesian 
Democratic Party of Struggle (PDI-P) representing East Java.  GOI's 
Cabinet level response to this latest incident reflects growing GOI 
awareness of the need to reassure foreign investors already spooked 
by the Newmont Mining and Asian Pulp and Paper (APP) scandals.  END 
COMMENT 
 
 
JAKARTA 00001957  002 OF 002 
 
 
HUME