VZCZCXRO3485
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJA #0175/01 0290600
ZNR UUUUU ZZH
R 290600Z JAN 08
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 7773
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHKL/AMEMBASSY KUALA LUMPUR 2445
RUEHBK/AMEMBASSY BANGKOK 8304
RUEHGP/AMEMBASSY SINGAPORE 6259
RUEHDT/AMEMBASSY DILI 0919

UNCLAS SECTION 01 OF 03 JAKARTA 000175 
 
SIPDIS 
 
SINGAPORE FOR SUSAN BAKER 
 
SIPDIS 
SENSITIVE 
 
DEPT PASS TO USTR SCHWAB 
DEPT FOR EAP/MTS, EAP/IPE, EB/TPP, EB/TPP/BTA 
COMMERCE FOR JKELLY 
USTR FOR BWEISEL 
USTR FOR RBAE 
TREASURY FOR IA-BAUKOL 
 
E.O. 12598: N/A 
TAGS: BEXP EINV ECON ID
SUBJECT: TIFA DIALOGUE HIGHLIGHTS TRADE AND INVESTMENT CHALLENGES 
 
JAKARTA 00000175  001.2 OF 003 
 
 
¶1. (SBU) SUMMARY:  On January 22, Assistant United States Trade 
Representative Barbara Weisel met with Government of Indonesia (GOI) 
officials to discuss investment and intellectual property (IP) 
issues under the U.S.-Indonesia Trade and Investment Framework 
Agreement (TIFA).  Weisel expressed concerns over languishing 
U.S.-Indonesian trade relations and offered suggestions to 
rejuvenate the relationship.  GOI officials responded that they 
welcomed ideas, but presented few of their own.  End Summary. 
 
I Want to Hold Your Hand 
------------------------- 
 
¶2.  (SBU) AUSTR Weisel met with Special Assistant to the Minister of 
Trade for International Trade Cooperation Halida Miljani to discuss 
the need to develop positive momentum on trade and investment 
issues.  Weisel described the current dialogue on bilateral trade 
issues as lacking.  She compared it unfavorably to U.S. TIFA 
dialogues with other ASEAN countries and shared examples of 
substantial U.S. trade cooperation with Vietnam and Cambodia.  She 
argued that the limited U.S. trade engagement does not "do justice" 
to overall U.S.-Indonesian relations and recommended both sides 
identify mutual areas of interest to advance the relationship. 
Weisel offered several ideas, including opening an exploratory 
dialogue on a Bilateral Investment Treaty (BIT) and updating 
Indonesia's OPIC agreement.  She also suggested tailored proposals 
targeting specific business sectors. 
 
I'm Happy Just to Dance with You 
--------------------------------- 
 
¶3.  (SBU) Halida agreed in principle on the need to rejuvenate trade 
relations, but offered few suggestions on how to move forward.  She 
cited U.S.-Indonesian agreements on textiles and illegal logging as 
good examples of cooperation and evidence of progress in trade 
relations.  She explained that the GOI is focused on domestic 
economic priorities, particularly price stabilization of 
agricultural products.  She also proposed creating a bilateral 
dialogue to consider ideas.  (Weisel responded that any initiative 
can be launched under the existing TIFA.)  Halida suggested that the 
U.S. propose ideas for trade initiatives and the GOI would consider 
them internally before deciding how to proceed. She also requested 
increased capacity building assistance, but did not specify in what 
areas. 
 
The Long and Winding Road 
-------------------------- 
 
¶4. (SBU) The GOI arranged an investment working group meeting led by 
Investment Coordinating Board (BKPM) Deputy Chairman Hidayat 
Suralaga.  AUSTR Weisel raised concerns from the business community, 
including a persistent pattern of investment disputes and recurring 
issues with Indonesia's Investment Law.  She argued that the 
cumulative effect has been a negative perception of Indonesia by the 
U.S investment community.  Suralaga responded that GOI is aware of 
business sector concerns and affirmed GOI commitment to address 
investment issues on a case-by-case basis.  He was unresponsive, 
however, to suggestions that GOI develop internal mechanisms to 
resolve investment issues systematically. He also asked the U.S. to 
forward specific examples of U.S. companies adversely affected by 
the Investment Law to BKPM. 
 
How Do You Do It? 
----------------- 
 
¶5.  (SBU) AUSTR Weisel asked about the recent changes to Indonesia's 
negative foreign investment list and the status of the implementing 
regulations to the 2007 Investment law. She also asked about the 
process for considering and implementing future changes to the 
negative list.  Suralaga responded that a review is planned for 
every 3 years.  Weisel referenced public remarks by Trade Minister 
Mari Pangestu suggesting the list was "still open for more review 
and revisions."  Suralaga conceded that there will be opportunities 
for revisions before three years.  He identified transportation as a 
possible sector for review, but explained that the GOI is waiting 
for Parliament to first pass a transportation bill. 
 
 
JAKARTA 00000175  002.2 OF 003 
 
 
If You've Got Trouble 
--------------------- 
 
¶6.  (SBU) Weisel asked about the status of the GOIs National Team 
for the Promotion of Exports and Investment (PEPI).  PEPI was 
instrumental in drafting the implementing regulations to the 
investment law and recommending revisions to the negative list. In 
addition, PEPI's structure, with Minister-chaired working groups 
reporting directly to the Coordinating Minister for Economic 
Affairs, facilitated expedited issuance of a Presidential Decree. 
Lastly, PEPI officials had offered to help mediate investor 
disputes.  Suralaga could not confirm whether PEPI will be 
institutionalized to serve as the prime coordinating mechanism for 
investment policy, or whether it will be used strictly on an ad hoc 
basis to address regulations and amendments to the negative list as 
needed.  He suggested that investment disputes be brought to the 
attention of BKPM Chairman Lutfi first and that he will refer 
investors to individual ministries (or to PEPI) as appropriate. 
 
Here Comes the Sun 
------------------ 
 
¶7.  (SBU) Suralaga announced that the GOI is ready to begin 
exploratory discussions on a BIT, but will need to coordinate 
internally before committing to a specific date.   Hidayat also 
noted that Indonesia is in the process of finalizing BIT 
negotiations with Canada, France and Belgium.  He confirmed that 
BKPM will have the lead in BIT discussions.  Suralaga provided no 
indication, however, of Indonesia's willingness to update its OPIC 
agreement. Weisel promised that the U.S. would follow up with him 
over the next few weeks to schedule a digital video conference 
(DVC). 
 
With a Little Help from My Friends 
----------------------------------- 
 
¶8.  (SBU) The GOI organized an intellectual property working group 
meeting jointly led by Halida and the Director General for IPR (DG 
IPR) Andy Sommeng.  Halida presented GOI's 2008 IPR action plan 
which included public outreach, increased training and education, 
improved law enforcement and more effective coordination among 
institutions and ministries.  Halida announced GOI's intention to 
draft a "National Intellectual Property Policy" to coordinate the 
work of the IPR National Task Force. 
 
Paperback Writer 
---------------- 
 
¶9.  (SBU) DG IPR Andy Sommeng noted that his office has finished 
drafting amendments on patent, copyright and industrial design law 
that will soon be submitted to Parliament.  USTR Director of 
Intellectual Property Rachel Bae expressed hope that the amendments 
will complete Indonesia's adoption of legal standards consistent 
with the WTO-administered Trade Related Aspects of Intellectual 
Property Rights (TRIPS) agreement.  Bae also raised a number of 
specific questions related to Indonesia's action plan.  Halida 
requested that, because of time constraints, USTR submit the 
questions in writing. 
 
While My Guitar Gently Weeps 
----------------------------- 
 
¶10.  (SBU) Inter-agency rivalries and lack of coordination continue 
to bedevil Indonesia's investment policy.  In a meeting with Embassy 
officials a week before USTR's visit, Deputy Minister for 
International Economic Cooperation at the Coordinating Ministry for 
Economic Affairs Mahendra Siregar signaled that the GOI was open to 
initiating an exploratory dialogue on the BIT.  He also suggested 
the GOI would consider incorporating an update of Indonesia's OPIC 
agreement in the latter stages of BIT negotiations. However that 
assessment does not appear to reflect a consensus among participants 
of the investment working group.  We believe a strengthened and 
empowered PEPI could be a key stakeholder for coordinating 
investment policy and promoting reform.  However, as with any 
coordinating body in Indonesia, PEPI's success may pose a threat to 
vested bureaucratic interests and as such raise questions over its 
 
JAKARTA 00000175  003.2 OF 003 
 
 
future. END COMMENT 
 
HUME