VZCZCXRO3647
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJA #0517/01 0730853
ZNR UUUUU ZZH
R 130853Z MAR 08
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 8322
INFO RUEAWJB/DEPT OF JUSTICE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHKO/AMEMBASSY TOKYO 1665
RUEHBJ/AMEMBASSY BEIJING 4819
RUEHBY/AMEMBASSY CANBERRA 2172
RUEHUL/AMEMBASSY SEOUL 4470
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 02 JAKARTA 000517 
 
SIPDIS 
 
DEPT FOR U/S JEFFERY, EEB A/S SULLIVAN, DEPT FOR EAP DAS MARCIEL,EEB 
DAS DIBBLE 
DEPT FOR EAP/MTS, EEB/IFD/OIA, INL BOULDIN 
L/LEI FOR BUCHHOLZ 
DOJ FOR CRIM AAG SWARTZ 
DOJ/OIA FOR WARNER/ROBINSON 
DOJ/OPDAT FOR ALEXANDRE/LEHMANN/JOHNSON 
DOJ/AFMLS FOR SAMUEL 
MCC FOR AMBASSADOR DANILOVICH AND MORFORD 
DEPT PASS USTR FOR AMBASSADOR SCHWAB 
TREASURY FOR IA - A/S LOWERY 
USAID FOR ANE/AA WARD 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV KMCA KCOR ECON KJUS ID
SUBJECT: IAGGA INDONESIA REPORT 
 
REF: STATE 18836 
 
JAKARTA 00000517  001.2 OF 002 
 
¶1. (U) This cable responds to the action request in STATE 18836, 
regarding the International Anti-Corruption and Good Governance Act. 
 Below is the text of Embassy Jakarta's report. 
Government Efforts 
------------------ 
¶2. (U) The Government of Indonesia (GOI) is in the process of a 
significant anti-corruption campaign, further institutionalizing its 
commitment to anti-corruption reform in 2006 and 2007.  The GOI has 
replaced or sidelined corrupt officials, energized anti-corruption 
agencies, and publicly supported reformers.  The Corruption 
Eradication Commission (KPK) has established itself as the premier 
body for anti-corruption reform since its founding in 2003.  The 
Chief of Police and Minister of Finance as well as the recently 
appointed Attorney General and Minister for State-Owned Enterprises 
are considered to be "reformers" with the ability to lead further 
governance and anti-corruption reform in Indonesia. 
¶3. (U) The GOI and USAID are implementing a Millennium Challenge 
Corporation (MCC) Threshold program, which includes a strong focus 
on improving anti-corruption efforts.  In 2007, Indonesia scored 
exactly at the median on the MCC's "control of corruption" index, 
marking continual improvement over the past four years. 
Institutions throughout the government are taking pro-active 
measures and establishing strategic plans to combat corruption. 
However, limited institutional capacity remains a constant challenge 
throughout the government, both at the national and local levels. 
¶4. (U) Indonesia hosted the 2nd Conference of State Parties for the 
UN Convention Against Corruption (UNCAC) in January 2008.  A UNCAC 
signatory, Indonesia is working to revise its criminal law to comply 
with UNCAC regulations.  The GOI has also publicly expressed support 
for participating in the World Bank - UN Stolen Asset Recovery 
(StAR) initiative. 
Law Enforcement and Legal Systems 
--------------------------------- 
¶5. (U) Supreme Court and broader judicial sector reform is of 
paramount importance to effectively combat corruption in Indonesia. 
MCC is working to improve institutional capacity at the Supreme 
Court through budget and human resource systems reform.  USAID is 
supporting GOI partners to develop systems to manage corruption and 
commercial cases at the Supreme Court and five Jakarta District 
Courts. 
¶6. (U) The Corruption Eradication Commission (KPK) is an independent 
GOI institution that investigates and prosecutes high-profile 
corruption cases and coordinates government-wide corruption 
initiatives.  During its first four years (2003-2007), the KPK 
successfully prosecuted 100% of its cases (39 total), including the 
prosecution of former ministers, governors, and other senior 
officials.  The GOI is considering a bill to expand the KPK.  The 
MCC Threshold program supports the KPK by providing funding for 
equipment and training to improve the technical capabilities, 
communications, and investigative capacity. 
¶7. (U) A U.S. Department of Justice (DOJ) Resident Legal Advisor 
based at U.S. Embassy Jakarta is working with the Attorney General's 
Office and Ministry of Law and Human Rights on critical legislation, 
including revisions to the criminal procedure code and developing an 
asset forfeiture law. The Indonesian National Police is undergoing a 
transformation under new leadership with improved internal 
discipline.  DOJ's International Criminal Investigative Training 
Assistance Program (ICITAP) is providing assistance to the police to 
clarify professional standards, reform financial management, and 
build capacity for effective investigation techniques. 
¶8. (U) The GOI's Financial Transaction Reports and Analysis Center 
(PPATK) is a strong proponent of combating money-laundering in 
Indonesia.  USAID support to PPATK has also led to the formulation 
of a National Anti-Money Laundering Strategy.  PPATK has increased 
the number of suspicious transaction reports being filed by bank and 
non-bank financial institutions and has been instrumental in the 
increased number of prosecutions of money laundering cases. 
 
 
JAKARTA 00000517  002.2 OF 002 
 
 
Transparent Governance 
---------------------- 
 
¶9. (U) Both USAID and the USAID-administered MCC Threshold Program 
are assisting in the implementation of the 2007 Supreme Court 
Transparency Decree, an initiative that requires all Court decisions 
to be published.  Publishing Supreme Court decisions can transform 
the Indonesian judicial system by increasing its transparency and 
accountability. 
¶10. (U) The "Group of Five" - the Ministry of Finance (MOF), KPK, 
Supreme Audit Board (BPK), Supreme Court, and the Ministry for State 
Apparatus Reform - is leading a pilot civil service reform effort. 
Reforms include revisions to pay structures as well as efficiency 
and performance improvements.  The GOI's personnel expenditure in 
the 2008 budget increased by 30%.  The MOF is improving transparency 
in Indonesia's tax administration. The USG has actively worked with 
other donors to support these efforts, including the establishment 
of a directorate for tax investigations and intelligence and a 
sub-directorate for internal controls. 
¶11. (U) The GOI has also made efforts in the past year to 
consolidate and improve management at more than 150 state-owned 
enterprises, but many remain non-transparent and subject to 
political meddling.  BPK, similar to the U.S. GAO, is playing a 
greater role in exposing corruption and increasing government 
transparency and accountability.  The BPK continues to receive 
technical assistance through USAID to help it build capacity and 
implement reforms.  The U.S. Department of Defense and USAID are 
working with the Indonesian Ministry of Defense to improve defense 
resource management systems and evaluate military business 
divestiture. 
¶12. (U) USAID is partnering with local governments, local 
legislatures and civil society organization in 57 districts to 
establish more sound and transparent, performance-based budgeting, 
financial management and procurement practices and strengthen civil 
society efforts to monitor and prevent public sector corruption. 
In 2006, USAID supported a highly successful public information 
campaign on procurement integrity and produced and nationally 
disseminated practical tools for monitoring local government 
procurements. In 2007, USAID trained staff of 50 local governments 
on new government accounting and financial management standards for 
accountability.  These initiatives support Indonesia's ambitious 
decentralization reform agenda which devolves significant governing 
and budgetary authority to the city and district (kabupaten) 
governments.  At the national level, USAID is assisting the AGO to 
implement their anti-corruption agenda. 
Civil Society 
------------- 
¶13. (U) Anti-corruption NGOs and media investigations of corruption 
are a critical component of the overall anti-corruption reform 
movement.  Several USAID programs partner with Indonesian civil 
society organizations on anti-corruption and governance reform 
programs.  For example, the MCC Threshold program is working with 
Transparency International (TI) - Indonesia to conduct further 
survey-based research related to TI's Corruption Perception Index 
for Indonesia.  Embassy Jakarta is also working with the CSIS Hills 
Program on Governance to establish a university institute to promote 
research on governance issues.