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RR RUEHCHI RUEHDT RUEHHM
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FM AMEMBASSY JAKARTA
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RUEHUL/AMEMBASSY SEOUL 4193
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RUEHJS/AMCONSUL SURABAYA 1938
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RUQODAZ/CARIBROC KEY WEST FL
RHHJJPI/PACOM IDHS HONOLULU HI
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 JAKARTA 002600 
 
SIPDIS 
 
SIPDIS 
 
FOR EAP/MTS; EB/TPP/IPE; EB/TPP/BTA; EB/TPP; EAP/RSP 
COMMERCE FOR 4430/ BERLINGUETTE 
COMMERCE PASS USPTO JNESS 
DEPT PASS USTR FOR DKATZ, RBAE 
 
E.O. 12958: N/A 
TAGS: ETRD EINV ECON BEXP ID
SUBJECT: TRADE MINISTER EMPHASIZES REGIONAL ENGAGEMENT OVER 
BILATERAL AGENDA 
 
REF: A. 2188 
 
     ¶B. 2351 
     ¶C. 2433 
 
JAKARTA 00002600  001.2 OF 002 
 
 
¶1.  (U)  SUMMARY: Minister of Trade Mari Pangestu outlined 
the Government of Indonesia's (GOI) "multi-track" approach to 
trade policy emphasizing multi-lateral and regional 
engagement over bilateral agreements in public remarks 
delivered on September 12th.  Pangestu also stressed the 
inclusion of trade capacity components in negotiated trade 
agreements, explained GOI's Ramadan price stabilization 
strategy and shared her views on Doha, APEC, and the 
relationship between international commitments and 
Indonesia's domestic reform agenda.  The remarks were made 
during a breakfast hosted by the Jakarta Foreign 
Correspondents Club (JFCC).  END SUMMARY 
 
 
ASEAN: The Name of the Game 
--------------------------- 
 
¶2.  (U)  Minister Pangestu outlined a "multi-track" approach 
to trade policy that emphasizes engagement on the 
multilateral and regional levels.  She described regional 
relationships as the "main game" and declared Indonesia's 
"real" trade negotiations are with ASEAN and ASEAN plus 1 
(China).  She also affirmed Indonesia's commitment to the 
Doha process and supported calls from some countries to begin 
negotiations from the existing draft text.  Meanwhile, 
Pangestu downplayed Indonesia's bilateral trade agenda 
despite engaging in a robust program of bilateral 
discussions.  She stated that after Japan, Australia is next 
for Free Trade Agreement (FTA) discussions and that all 
future agreements would be limited to "major trading 
partners." 
 
 
Capacity Building Key to Trade Negotiations 
------------------------------------------- 
 
¶3.  (U)  Pangestu discussed the importance of including trade 
capacity components as part of negotiated trade agreements. 
She stated that competitiveness assistance is necessary if 
Indonesia is going to optimize the benefits from market 
access.  "Lowered tariffs have little value if Indonesia 
can't meet the standards requirements," she explained. 
Pangestu acknowledged that standards are Indonesia's biggest 
trade challenge, encompassing customs procedures and related 
"trade facilitation" issues.  "The institutional framework 
(to facilitate trade) is a very big agenda that we are just 
beginning to address," she conceded, "but it is also big on 
the ASEAN and APEC agendas as well."   Pangestu explained 
that GOI uses international trade commitments to stimulate 
the domestic reform agenda. As an example, she cited how 
Indonesia's National Single Window initiative has been driven 
by desired compliance with the ASEAN Single Window Program. 
 
 
Passing of Baton on Investment Law 
----------------------------------- 
 
¶4.  (SBU)  In response to a question expressing confusion 
over the grandfathering provision of the new Investment Law, 
Pangestu directed specific concerns to the "newly 
revitalized" National Team for the Increase of Exports and 
Investment, which she said will be responsible for the proper 
implementation of the reform agenda.  The team has a 
full-time secretariat and will carry out the "ground work" 
of addressing issues arising from the Investment Law.  The 
team is allied with the local Chamber of Commerce in a 
partnership Pangestu refers to as "Indonesia Incorporated" 
and will work together in issuing "guidelines" intended to 
clarify various aspects of the law. Pangestu did not address 
the role of the Investment Coordinating Board (BKPM) or its 
relation to the National Team. 
 
JAKARTA 00002600  002.2 OF 002 
 
 
 
 
APEC: "Not An Easy Animal to Understand" 
---------------------------------------- 
 
¶5.  (U)  Pangestu admitted that APEC is an unusual forum and 
"not an easy animal to understand."  Despite the lack of 
concrete deliverables, she contends it remains interesting as 
a platform for promoting dialogue and delivering political 
messages.  She cited three examples: the first, President 
Bush's speech, which Pangestu interpreted as signaling U.S. 
flexibility in future Doha negotiations.  The second was 
Chinese Hu Jintao's statement laying responsibility on the 
U.S. and EU for the stalled Doha process.  Pangestu remarked 
that this was a first for a Chinese delegation and indicated 
an increased willingness on the part of China to play a role 
in the WTO despite its own recent trade controversies. 
Lastly, Pangestu was impressed when Australian opposition 
Leader Kevin Rudd delivered his remarks in Mandarin.  She 
said it raised "interesting questions" of what effect a 
change of national government will have on Australia's 
regional engagement. 
 
 
Ramadan Price Stabilization 
---------------------------- 
 
¶6.  (U)  Pangestu discussed the importance of price 
stabilization of basic goods during the "fasting month." 
She said the GOI will focus exclusively on rice, sugar and 
cooking oil and will try to implement an "enlightened" 
approach that is "more automatic."  As Indonesia is a net 
importer of rice and sugar, prices will be stabilized through 
control of imports.  With rice for example, price tripwires 
will replace "coordination meetings" to determine when import 
increases are necessary.  Also, the State Logistics Company's 
(BULOG) function will be widened to allow direct selling of 
rice into the market as a means to stabilize prices.  With 
cooking oil, Indonesia is a net exporter so price 
stabilization will be achieved through indexing the export 
tax to international crude palm oil (CPO) prices.  Pangestu 
also announced a subsidy for consumption of cooking oil that 
will be undertaken at the regional government level. Pangestu 
did not comment on GOI strategy to address potential negative 
externalities (i.e. smuggling) that can accompany price 
distortions. 
 
Agenda for Trade Ministerial? 
------------------------------ 
 
¶7.  (SBU)  Lastly, Pangestu was asked directly about 
Indonesia's preferred agenda for the Trade Ministerial 
tentatively scheduled on the margins of COP-13, however she 
declined to respond. 
HUME