VZCZCXRO4820
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJA #1262/01 1790918
ZNR UUUUU ZZH
R 270918Z JUN 08
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 9414
INFO RUEHZS/ASEAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHGP/AMEMBASSY SINGAPORE 6310
RUEHBK/AMEMBASSY BANGKOK 8472

UNCLAS SECTION 01 OF 02 JAKARTA 001262 
 
SIPDIS 
SENSITIVE 
 
DEPT PASS EX-IM-RMORIN 
DEPT FOR EAP/MTS, EB/A/TRA/DL AND EEB/IFD/ODF-DWILLIAMS 
 
E.O.  12958: N/A 
TAGS: EAIR ECON EFIN EINV ETRD PGOV ID
 
SUBJECT: INDONESIA SEEKS BETTER FINANCING WITH CAPE TOWN TREATY 
 
REF: JAKARTA 00691 
 
¶1. (U) This is an Action Cable.  Please see paragraph 12. 
 
¶2. (U) This message is Sensitive but Unclassified.  Please protect 
the business sensitive information in para 4. 
 
¶3. (U) SUMMARY: Indonesian airline Lion Air has requested loan 
guarantees from the U.S. Export-Import Bank (Ex-Im) for purchase of 
Boeing airplanes.  Ex-Im has said its decision hangs on the question 
of whether the Cape Town Treaty (CTT) has been fully implemented in 
Indonesia.  In April 2007, the Government of Indonesia ratified by 
presidential decree the CTT, an international treaty that attempts 
to standardize the transactions of movable property, particularly 
aircraft and aircraft engines.  Although some Indonesian law firms 
have said that CTT was fully implemented in Indonesia upon 
ratification by presidential decree, others, including Ex-Im's local 
counsel, have contested this point.  The Indonesian Parliament would 
like to enact CTT legislation and seeks additional input on 
appropriate legal language.  Meanwhile, the Ministry of 
Transportation is drafting CTT operating rules. END SUMMARY. 
 
Ex-Im May Give $1 Billion Loan Guarantee on Boeing Aircraft 
 
¶4. (SBU) Lion Air has ordered 178 Boeing 737-900 Extended Range (ER) 
airplanes, with purchase rights for an additional 50 737-900ERs.  On 
October 24, 2007, Ex-Im authorized a final commitment and 
preliminary commitment totaling over $1 billion for 30 of these 
aircraft subject to Congressional review and other conditions, 
including CTT implementation in Indonesia. 
 
Conflicting Views on CTT Implementation 
 
¶5. (SBU) There are conflicting views on whether CTT is implemented 
in Indonesia.  Ex-Im says Indonesia further requires national 
legislation and implementing regulations by the Ministry of 
Transportation to fully implement CTT.  Lion Air says CTT was fully 
implemented at the time of ratification by presidential decree. 
Without agreement on implementation of CTT in Indonesia, Ex-Im 
officials cannot recommend to its board of directors the approval of 
loan guarantees for Lion Air. 
 
Indonesia Wants CTT Legislation and Operating Rules 
 
¶6. (SBU) On April 16, Minister of Transportation Jusman Syafii 
Djamal told Ambassador Hume that he supported efforts to enact CTT 
legislation and that his Ministry was in the process of developing 
operating rules.  We briefed Parliament's Commission V (oversees 
transportation issues) Chairman Akhmad Muqowam and Members 
Enggartiasto Lukita and Taufik Kurniawan on CTT and submitted to 
them a copy of draft CTT legislation suggested by Ex-Im.  The 
Parliament members promised to review the issue and said the timing 
was ideal as they were preparing to revise the civil aviation law, 
which they expected to pass in July or September 2008.  Ministry of 
Transportation Directorate General of Civil Aviation's (DGCA) 
leading expert on CTT Edward Silooy and Deputy Director of Human 
Resources and Foreign Cooperation Indriarti Tirza, told us that 
subsequent to our meeting with Commission V, Parliament members 
asked DGCA to draft CTT legislation for inclusion in the civil 
aviation revised law.  Silooy said some airlines, including flagship 
carrier Garuda, had also expressed interest in CTT legislation. 
 
¶7. On June 24, Ambassador Hume met with the Indonesian National Air 
Carriers Association (INACA) secretary general and several members, 
including airline executives of Garuda, Lion Air, Batavia Air, 
Sriwijaya Air, Merpati and Global Transport Services.  Ambassador 
Hume discussed the potential financial benefits of CTT to the 
airline industry.  INACA Chairman, who is also President and Chief 
Executive Officer of Garuda, Emirsyah Satar suggested INACA meet 
with Parliament and Ministry of Transportation to voice industry 
support for CTT legislation.  In a meeting with Minister Djamal 
later that day, Satar raised CTT and the Minister said he would 
insert CTT in the civil aviation reform law.  Ambassador Hume also 
discussed CTT with Deputy Coordinating Minister for International 
Economic Cooperation Mahendra Siregar, who expressed interest in 
lower cost financing opportunities for Indonesian airlines. 
 
Uncertainty about Legal Language 
 
¶8. (SBU) Lion Air President Director Rusdi Kirana told us he had 
discussed CTT legislation with his contacts at Parliament's 
Commission V who asked which parts of CTT needed to be included in 
the legislation.  Kirana asked us to relay this request to Ex-Im. 
Kirana expressed uncertainty as to DGCA's capacity to draft legal 
language on CTT that would satisfy both Parliament and Ex-Im. 
 
JAKARTA 00001262  002 OF 002 
 
 
 
Operating Rules in Progress 
 
¶9. (SBU) Silooy told us DGCA was developing operating rules in 
consultation with a team of three leading civil aviation law firms, 
including Lion Air's local counsel, and in parallel with national 
legislation.  He expects Minister Djamal to issue operating rules by 
ministerial decree one to two months after Parliament passes the 
civil aviation law revision. 
 
GOI Official Requests CTT Expert Assistance 
------------------------------------------- 
 
¶10. (U) Silooy requested we fund the visit to Indonesia of Jeffrey 
Wool, secretary and general counsel of Aviation Working Group, a 
non-profit legal entity closely associated with CTT and comprising 
major aviation manufacturers, leasing companies and financial 
institutions.  Silooy said Jeffrey Wool would be able to help 
Indonesian airlines understand CTT and how they might benefit from 
it. 
 
¶11. (U) Post will continue to work closely with Ex-Im, Boeing, 
Ministry of Transportation, Indonesian airlines and Parliament to 
help Indonesia take full advantage of CTT.  Ambassador Hume has 
requested meetings with Parliament Commission V members and the 
Minister of Transportation to discuss progress on CTT legislation 
and operating rules. 
 
Action Request 
 
¶12. (U) Post urgently requests the hiring of local counsel to work 
with the Ministry of Transportation and Parliament on CTT legal 
language to meet Ex-Im's requirements. 
 
HUME