VZCZCXRO4033
PP RUEHCHI RUEHDT RUEHHM
DE RUEHJA #2034/01 2080847
ZNR UUUUU ZZH
P 270847Z JUL 07
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC PRIORITY 5574
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHKO/AMEMBASSY TOKYO 0610
RUEHBJ/AMEMBASSY BEIJING 4165
RUEHBY/AMEMBASSY CANBERRA 0944
RUEHUL/AMEMBASSY SEOUL 4109
ZEN/AMCONSUL SURABAYA

UNCLAS SECTION 01 OF 02 JAKARTA 002034 
 
SIPDIS 
 
FROM AMCONSUL SURABAYA 0053 
 
DEPT FOR EAP/MTS AND EB/IFD/OMA 
TREASURY FOR IA-JEWELL 
COMMERCE FOR 4430-GOLIKE 
DEPARTMENT PASS FEDERAL RESERVE SAN FRANCISCO 
DEPT PASS USTR FOR WEISEL, KATZ, VESPINEL AND JGROVES 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: KIPR EFIN EINV ECON KCOR PGOV ID
SUBJECT: Eastern Indonesia - Optical Disk Factory Closures Reducing 
Pirated Disk Supplies 
 
Ref A: Jakarta 1813; Ref B: 06 Jakarta 3892 
 
JAKARTA 00002034  001.2 OF 002 
 
 
¶1. (SBU) SUMMARY. ConGen Surabaya informally surveyed pirated 
optical disk vendors in Bali and Surabaya to assess the impact on 
supplies after two Jakarta pirated disk factories were raided July 2 
(Ref A).  Initially we noticed minimal changes in Bali pirated disk 
supplies.  However, a Balinese pirated disk distributor told us that 
the factory closures had affected his ability to get new pirated 
disk supplies from Jakarta and his vendor customers had begun 
complaining.  There were noticeably fewer pirated disk vendors in 
Surabaya than when last surveyed in 2006.  Surabaya vendors were 
taking elaborate security measures to avoid police detection, 
suggesting that East Java police are following through their 
promised commitment to IPR law enforcement (Ref B).  END SUMMARY. 
 
¶2. (SBU) Indonesian police raided two optical disk factories in 
Jakarta July 2, confiscating equipment able to produce 220,000 
pirated music and video disks per day (Ref. A).  ConGen Surabaya 
went undercover in Bali and Surabaya to assess the impact factory 
closures are having on pirated disk supplies.  We also took the 
opportunity to review the impact of stepped-up police enforcement of 
IPR protection laws in East Java announced by Provincial Police 
Chief Herman Sumawiredja March 2006 (Ref. B).  Sumawiredja told his 
regency and city police chiefs that IPR law enforcement would be an 
important factor in East Java police promotion and advancement 
opportunities.  East Java police cracked down on most pirated disk 
vendors in the province shortly after the announcement. 
 
Bali Disk Vendors Starting To Feel Supply Pinch 
--------------------------------------------- -- 
 
¶3. (SBU) During a July 15 survey in Bali, we initially noticed 
little difference in pirated disk vendor operations in Kuta, Legian 
and Seminyak, the largest tourist shopping areas in Bali.  We 
visited 27 out of more than 100 pirated disk stores and stalls in 
the area.  There were no special security measures being taken by 
store operators to avoid police detection.  According to shop 
owners, inventory levels range from 5-10,000 disks in small shops to 
50,000 disks in a pirated disk "Super Store".  Volume discounts are 
common, ranging from "buy 5, get one free" to "buy 1,000, get 365 
free".  One Super Store manager told us that they average several 
tourist customers per week buying 1,000 or more pirated disks, 
generally good quality copies of unreleased films that would be 
resold in their home countries.  Disc prices have recently increased 
43% to $1.10 and disk prices no longer include a plastic case, which 
now costs an extra $.10.  Several shop owners complained that local 
police increases in monthly "security fees", rather than supply 
shortages, forced the price increase. 
 
¶4. (SBU) In one store we overheard a conversation between a Balinese 
pirated disk distributor and the shop owner.  The shop owner 
complained that she only had 100 copies of the new 95% quality "Die 
Hard 4.0" remaining in inventory and was selling 10 of the disks an 
hour and needed many more.  She also complained that a better 
quality copy than the 30% "Harry Potter and the Order of the 
Phoenix" had not yet been released.  (Note: Pirated DVDs in 
Indonesia are quality graded by the vendors for the benefit of 
customers.  A 30% quality disk would typically be recorded on a 
digital camcorder in a theater and have low quality sound and 
picture.  A 95% copy typically comes from a preview disk sent by 
movie studios to theater owners and has digital quality sound and 
picture but contains periodic subtitles warning that the disk is not 
for resale. End Note.)  The distributor replied to his shop-owner 
customer that his largest supplier from Jakarta had been closed down 
by police and he was struggling to get new stocks of pirated disks. 
He said that raids happened periodically and the factories typically 
reopened after a few weeks, once the police are paid off. The 
distributor told us that virtually all pirated disks in Bali come 
from Jakarta now and the two factory closures had stopped supplies 
of certain types of disks, especially television programs.  He added 
that Malaysian disk suppliers were unreliable, as their disks had 
become too expensive and difficult to get through customs. Balinese 
pirated disk suppliers are now completely dependent on Jakarta 
factories for the thousands of disks per week sold on the island. 
 
JAKARTA 00002034  002.2 OF 002 
 
 
 
Surabaya Disk Sellers Wary of Police 
------------------------------------ 
 
¶5. (SBU) A July 20 survey in Surabaya showed there are fewer pirated 
optical disk vendors in Surabaya compared to March 2006.  The number 
of pirated disk sellers in Pasar Atum dropped from more than two 
dozen to 11.  The 11 remaining ethnic Javanese vendors are operating 
under much tighter security.  Storefronts show only original music 
and video disks. The shops have hidden entrances to back rooms for 
vetted customers to view pirated disk inventories.  Stall vendors 
have only catalogs of pirated disks available for viewing.  Once a 
customer selects disks, stall attendants retrieve them from 
inventories kept separately.  The new ITC Mall has seven ethnic 
Chinese-owned pirated DVD shops all operating under tight security. 
Mall security guards work as lookouts, alerting shop owners, who 
then shutter their stores before police arrive.  Tunjungan Center 
formerly had several dozen ethnic Madurese disk vendors, all of 
which are now closed.  Galaxy Mall and Super Mall are down to one 
pirated disk vendor each.  The Super Mall vendor is only open from 7 
to 10 in the evening, after police leave duty.  Surabaya vendor disk 
inventories range from 5-10,000 disks and are priced at $0.77. 
Storeowners say 100% of their pirated disk supplies come from 
Jakarta, but they said they have not noticed a change in supply 
levels since the factory closures. 
 
Comment 
------- 
 
¶6. (SBU) Our informal survey of pirated optical disk vendors points 
to two primary conclusions.  The raids on two pirated optical disk 
factories in Jakarta are beginning to have an impact on pirated disk 
supplies in Bali, a primary Indonesian pirated disk distribution 
point for foreign national tourists.   Continued pirated disk 
factory raids and follow-up with police to ensure the factories are 
not reopened will have even greater impact on pirated disk supply. 
Also, local police commitment to IPR enforcement hinders illegal 
disk vendors from distributing their products.  The reduced numbers 
of pirated disk vendors and reduced availability of pirated disks in 
Surabaya is compelling evidence that East Java police are 
maintaining their promised enforcement efforts.  ConGen Surabaya 
will press Balinese police leaders to make a similar commitment to 
IPR enforcement in their province. 
 
MCCLELLAND/HUME