VZCZCXRO4296
PP RUEHLMC
DE RUEHJA #3135/01 3170432
ZNR UUUUU ZZH
P 130432Z NOV 07
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC PRIORITY 7011
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEHLMC/MILLENNIUM CHALLENGE CORP 0046

UNCLAS SECTION 01 OF 03 JAKARTA 003135 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR E - U/S JEFFERY 
DEPT FOR EAP DAS MARCIEL AND EB/IFD DAS DIBBLE 
MCC FOR AMBASSADOR DANILOVICH AND MORFORD 
AID FOR DEPUTY ADMINISTRATOR KUNDER AND ANE WARD 
TREASURY FOR A/S LOWERY 
DEPT PASS USTR FOR SCHWAB 
 
E.O. 12958: N/A 
TAGS: ECON KMCA KCOR KJUS TBIO ID
SUBJECT: SUCCESS OF INDONESIA'S MCC THRESHOLD PROGRAM 
 
 
¶1. Summary:  Indonesia's two-year, $55 million Threshold Program 
focuses on the Control of Corruption ($35 million) and Immunization 
Coverage ($20 million), two areas where Indonesia fell short on its 
FY 2006 MCC indicator Scorecard.  The Threshold Program projects, 
operational since April 2007, have already yielded results and 
continue to demonstrate the GoI's strong commitment to the Threshold 
Program as well as its goal of achieving Compact eligibility. 
Indonesia's performance on its Threshold Program to date bolsters 
the country's improved MCC indicator scores as a reason for its 
serious consideration as a Compact eligible country when the MCC 
Board meets on December 12.  End Summary. 
 
Background of the Threshold Program 
----------------------------------- 
 
¶2. At its November 2005 Board meeting, MCC selected Indonesia to 
participate in the Threshold Program.  The United States-Government 
of Indonesia bilateral agreement for Indonesia's Millennium 
Challenge Corporation (MCC) Threshold Program was subsequently 
signed in November 2006.  USAID Indonesia and the Economic Section 
worked closely with the Government of Indonesia (GoI) to support 
development of its Threshold Plan as well as to support the MCC 
Investment Board's review and analysis of the Threshold Plan.  While 
acknowledging the final Threshold Plan is ambitious there was 
consensus to move forward.  Indonesia's MCC Threshold Program is a 
two-year, $55 million grant program focused on the Control of 
Corruption and Immunization coverage indicators, two indicator areas 
where Indonesia fell short on its FY05 Scorecard.  The Threshold 
Program projects, managed by USAID Indonesia, have been operational 
since the first quarter of CY 2007. 
 
Control of Corruption 
--------------------- 
 
¶3. The Control of Corruption component of the Threshold Program 
totals $35 million.  One component, consisting of a $24 million 
project, builds capacity at the Corruption Eradication Commission 
(KPK); the Financial Transaction Reports and Analysis Center 
(PPATK); the Supreme Court; and the National Development Planning 
Agency's (BAPPENAS) e-procurement pilot project.  A second 
component, managed by the Department of Justice's International 
Criminal Investigative Training Assistance Program (ICITAP) through 
an interagency agreement with USAID, consists primarily of the 
procurement of specialized equipment for the KPK and PPATK to 
enhance their communications and surveillance capacity as part of 
their mandates to combat corruption and money laundering. 
 
Judicial Sector Reform 
---------------------- 
 
¶4. There is a consensus among donors and the GoI itself that reform 
of the Supreme Court and the broader judicial sector is of paramount 
importance in successfully combating corruption in Indonesia. 
Judicial reform is the most challenging of the MCC Threshold Program 
components: the Supreme Court is an independent branch of the 
government and where entrenched interests and opportunities for 
corruption are abundant.  Nonetheless, Post has been impressed by 
the commitment to judicial reform of senior GoI officials as well as 
key senior Supreme Court Justices and bureaucrats. 
 
¶5. Threshold Program activities have begun in earnest and include: 
 
 
-- Developing the curriculum for, and training judges on, the 
newly-adopted Judicial Code of Conduct. 
 
-- Training senior-level court personnel on wealth reporting and 
wealth report monitoring requirements. 
 
-- Developing job descriptions and performance standards. 
 
-- Improving the Court's budgeting process and accountability. 
 
-- Publishing Supreme Court decisions online and enhancing the 
Court's website (see http://www.putusan.net/app-mari/putusan). 
 
-- Implementing public complaint procedures and distributing 
corresponding public awareness materials. 
 
-- Developing guidelines to publicly release disciplinary 
information concerning court personnel and the judiciary. 
 
The Supreme Court has sent a letter to MCC expressing its commitment 
to continue key elements of the Threshold Program after the 
 
JAKARTA 00003135  002 OF 003 
 
 
conclusion of the project. 
 
Improved Capability of the Financial Transaction 
Reports and Analysis Center (PPATK) 
--------------------------------------------- --- 
 
¶6. The PPATK is a committed and effective government organization 
and a strong proponent of combating money-laundering in Indonesia. 
Indonesia was removed from the FATF Non Cooperating Countries and 
Territories list on February 11, 2005 and from its direct monitoring 
list in February 2006.  Yunus Hussein, head of the PPATK, is also a 
supportive counterpart on other USG assistance efforts to combat 
money laundering.  Key PPATK-related components of the Threshold 
Program include: 
 
-- Enhancing the "Know Your Customer" education and public awareness 
campaign by introducing it to non-bank financial institutions to 
detect and report suspicious transactions that may indicate money 
laundering activity. 
 
-- Increasing the capacity to receive and analyze online financial 
transaction reports. 
 
-- Establishing an online communications system between PPATK and 
law enforcement agencies to enhance their information-sharing 
ability. 
 
Improve the Capability of the 
Corruption Eradication Commission (KPK) 
--------------------------------------- 
 
¶7. The KPK is Indonesia's lead agency in combating corruption and 
has delivered on its mandate with a significant conviction rate over 
the past year.  The current KPK Board's tenure is coming to an end 
and a new Board is in the process of being vetted, selected and 
appointed.  The KPK works closely with Post on a variety of projects 
and engagements.  Key KPK-related components of the Threshold 
Program include: 
 
-- Providing equipment and training to improve the KPK's technical 
capabilities to investigate and prosecute corruption cases. 
 
-- With the assistance of Transparency International - Indonesia, 
expanding collection of data for a Bribery Index and an expanded TI 
Corruption Perception Index. 
 
-- Procuring specialized communications equipment to support 
corruption investigations and prosecutions. 
 
Implement Electronic Government Procurement (e-GP) 
--------------------------------------------- ----- 
 
¶8. BAPPENAS's Center for Development of Public Procurement Policy is 
tasked with developing and promoting the e-GP system and has created 
the Indonesian National E-Procurement Center.  The Threshold Program 
supports the national endeavor by: 
 
-- Supporting establishment of five regional government 
e-procurement centers. 
 
-- Supporting collection of baseline data from the five centers to 
reduce single-source procurements and help identify suspicious and 
inappropriate activity. 
 
Promoting Increased Immunization Coverage Rates 
--------------------------------------------- -- 
 
¶9. The GoI proposed a very ambitious immunization component to its 
Threshold Plan, reflecting its renewed emphasis on basic 
immunization and investing in people.  The GoI recently initiated a 
World Health Organization (WHO) standard "cluster survey" to gain 
greater data, analysis and insights into actual immunization 
coverage rates.  The Threshold Plan provides technical assistance 
supporting the GoI's efforts to rapidly increase routine 
immunization coverage rates among infants, enabling Indonesia to 
score above 80.5% coverage on the MCC Immunization Coverage 
indicator. Specific areas of support include: 
 
-- Providing technical assistance for developing revised national 
immunization strategies for routine services. 
 
-- Increasing commitment from policy makers at national, provincial 
and district levels. 
 
 
JAKARTA 00003135  003 OF 003 
 
 
-- Building capacity of immunization health staff in both public and 
private sectors. 
 
Threshold Program Already Yielding Results 
------------------------------------------ 
 
¶10. While the GoI and the people of Indonesia deserve credit for 
undertaking bold reform initiatives, the MCC Threshold Program 
support has yielded some key results to date. 
 
-- The KPK has exceeded its Threshold Program target of monitoring 
Supreme Court sessions in the greater Jakarta area. 
 
-- The KPK met its Threshold Program target for the number of KPK 
corruption prosecutions of high-level government officials. 
 
-- PPATK has exceeded the percentage targets of suspicious 
transaction reports (STRs) filed by non-bank financial 
institutions. 
 
-- These are but three key examples of specific targets that have 
already been achieved under the Threshold Program. 
 
Threshold Program Performance Supports Compact Eligibility. 
Indonesia's ambitious Threshold Program is one part of the GoI's and 
President Yudhoyono's overall reform agenda to support a democratic, 
free-market Indonesia that is a responsible and active member of the 
international community.  Indonesia's performance on its Threshold 
Program to date bolsters the country's improved MCC indicator scores 
and further argues for its serious consideration as a Compact 
eligible country when the MCC Board meets on December 12. 
 
HUME