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FM AMCONSUL SURABAYA
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INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHBY/AMEMBASSY CANBERRA 0088
RUEHJA/AMEMBASSY JAKARTA 0161
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UNCLAS SECTION 01 OF 02 SURABAYA 000032 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EAP/MTS, EAP/MLS, INR/ EAP, EB 
 
E.O. 12958: N/A 
TAGS: EAGR ID ECON PGOV
SUBJECT: GORONTALO: VISITING A TROPICAL NEBRASKA, INDONESIA'S CORN 
CAPITAL 
 
 
SURABAYA 00000032  001.2 OF 002 
 
 
This message is sensitive but unclassified.  Please protect 
accordingly. 
 
¶1. (SBU) Summary: Well-known across Indonesia both for its corn 
production and dynamic Governor, Sulawesi's Gorontalo Province 
has gained a reputation as a showcase of public administration 
best practices.   In an effort to sort hype from ground truth, 
Consulate General Surabaya Pol/Econ Officer and Pol/Econ 
Assistant visited the province on February 19-20 and met with 
the Vice Governor, representatives from the Regional Development 
and Planning Board (BAPPEDA), a province-owned company Fitrah 
Mandiri, the Provincial Investment Board, and the Trade and 
Industry Department.  Prodded by their high profile governor, 
provincial officials work hard to sell foreign investors on 
Gorontalo's agricultural and non-agriculture sectors.  Their key 
challenge remains diversifying and increasing efficiency of 
Gorontalo's corn-based economy, which is still heavily 
subsidized and inefficient despite higher corn prices.  End 
Summary. 
 
Brand Gorontalo 
--------------------- 
 
¶2.  (SBU) The province of Gorontalo was established in 2001, in 
an amicable split with North Sulawesi.  Gorontalo has been a 
success story and role model for other potential provinces, with 
a dynamic governor Fadel Muhammad and a reputation for strong 
public administration principles. The impact of Governor Fadel 
Muhammad is evident everywhere in Gorontalo.  His popularity 
stems from his status as Gorontalo's first elected governor and 
his efforts at creating a unique identity for the province. 
From billboards to weekly radio speeches, the governor's efforts 
on behalf of the province were under constant discussion.  Even 
critics of provincial policy expressed pride in the governor's 
success at creating a "brand" for the province.  According to 
our meetings there, Fadel Muhammed's stated priorities for the 
new Province have not changed since he first shared them with 
Surabaya Principal Officer in 2002: developing Human Resources, 
developing agriculture (principally corn), and developing 
fisheries and marine products.  During that 2002 meeting, he 
presented the Consulate with a binder entitled "The 
Entrepreneurial Administration of Gorontalo Province as Reported 
by the Press."   Our 2008 meeting with the Vice Governor and 
provincial development officials showed a fully developed public 
relations message: Gorontalo's welcome mat is out for foreign 
investment. 
 
¶3. (SBU) These efforts have reaped rewards according to local 
officials.  Gorontalo has had the largest growth in provincial 
income on the island of Sulawesi: 6.45% in 2002 and 7.49% in the 
first quarter of 2007.  The main source of provincial revenue is 
from the agriculture and mining sectors. Unlike other provinces 
which frequently rely heavily on taxes, Gorontalo has eliminated 
provincial levies or "retribusi" on provincial services.  In 
order to enhance the effectiveness of Gorontalo's large civil 
service the government has instituted a performance pay plan, 
with so far uncertain results. 
 
Betting the Farm on Corn 
--------------------------------- 
 
¶4.  (SBU) While we were told that Gorontalo is the second 
biggest corn producer in Indonesia after West Java, (and the 
only province that currently exports corn), 2007 U.S. Foreign 
Agricultural Service figures show that they are perhaps fourth 
biggest producer.  Whatever the truth to their claims, 
establishing the perception that they are among Indonesia's 
leaders in corn production is key to Gorontalo's public 
relations campaign.  Gorontalo's current customers are found in 
Malaysia, the Philippines, and Japan.  With three corn harvests 
a year in most parts of the province, cheap production costs and 
the potential of corn as a bio-fuel has further raised 
expectations for corn-driven development.  Gorontalo's 
government is now focused on increasing the productivity of 
farmers by providing high-yield seed corn and fertilizer.  The 
long term goal of Gorontalo's planning officials is one million 
tons of corn production annually.  Prohibitions against planting 
in landslide prone areas help protect the ecosystem, according 
to an agricultural department official. However, Gorontalo NGOs 
told us that deforestation is still a problem and land is 
continually brought under corn cultivation that should not be 
 
SURABAYA 00000032  002.2 OF 002 
 
 
due to its potential to cause erosion. 
 
¶5.  (SBU) Officials told us that the key to Gorontalo's success 
has been a focus on both the domestic and international markets. 
 "Although our production is still limited in scale, we look for 
markets and then export commodities to that market."  Said one 
BAPPEDA official.  The province has established the Gorontalo 
International Maize Information Center, (GIMIC) as a gateway to 
foreign investment in corn.  Rising corn prices have encouraged 
increased investment.  Gorontalo produced 87,720 tons of corn in 
2001; in 2007 they harvested 584,800 tons.  Through subsidies 
and aggressive marketing, Gorontalo is betting the farm on the 
continued rise in the price of corn to finance provincial 
economic development. 
 
Pushing the Agenda-Gorontalo's Province-Owned Company 
--------------------------------------------- -------------- 
--------------------- 
 
¶6.  (SBU) The 100% province-owned company, PT. Gorontalo Fitrah 
Mandiri (GFM) is the guiding hand behind provincial efforts to 
develop corn-based agribusiness.  GFM has six divisions: corn 
agribusiness, fisheries, manufacturing, rental services (mainly 
tractor rental), property and trading, and Local Finance 
Guarantee Agency (LPKD or Lembaga Penjaminan Keuangan Daerah). 
Emblematic of the savings GFM claims to bring back to the 
provincial coffers is their rental of civilian vehicles to the 
province for official use, thus saving on maintenance and 
regulatory restrictions.  The LPKD also has cooperative 
agreements with the insurance company (Askrindo) and North 
Sulawesi Bank to provide loans to farmers. The LPKD has 
distributed Rp. 25 billion (USD 2.75 million) in loans at 12% 
interest for farmers and small scale businesses. Loans under Rp. 
5 million (USD 560) are granted without collateral. 
 
Foreign Investment Outlook 
------------------------------------ 
 
¶7.  (SBU) According to provincial figures, the amount of 
investment in Gorontalo is around RP. 3 trillion (USD 330 
million), mostly in medium and small scale trading, services, 
and agriculture sectors. Current foreign investors include 
Korean and Japanese companies.  Gorontalo's provincial 
government ratified local regulations on investment in 2004 
giving privileges to foreign investors such as freedom from 
levies, security guarantees, work force availability, and same 
day permit processing.  Gorontalo has signed an MOU with a 
Mexican company concerning cooperation on the Gorontalo's Maize 
Information Center (GIMIC).  Biological research will be 
conducted in Mexico while Gorontalo will become a maize 
information distribution center, according to local officials. 
MCCLELLAND