VZCZCXRO0507
PP RUEHLMC
DE RUEHJA #1728/01 2550835
ZNR UUUUU ZZH
P 110835Z SEP 08
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC PRIORITY 0059
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEHLMC/MILLENNIUM CHALLENGE CORP 0075
RHEHOMB/WHITE HOUSE OMB WASHINGTON DC

UNCLAS SECTION 01 OF 03 JAKARTA 001728 
 
SIPDIS 
 
MCC FOR AMBASSADOR DANILOVICH AND MORFORD 
MCC FOR MARIA LONGI 
MCC FOR DEPUTY CEO RODNEY BENT 
DEPT FOR E - U/S JEFFERY 
DEPT FOR EAP DAS MARCIEL AND EB/IFD DAS DAVID NELSON 
USAID FOR ADMINISTRATOR FORE 
USAID FOR DEPUTY ADMINISTRATOR KUNDER AND ANE WARD 
USAID/ODP FOR KAREN TURNER AND PETER DELP 
USAID/ANE FOR STEPHAN SOLAT 
TREASURY FOR A/S LOWERY 
TREASURY/IA FOR RACHEL BAYLY 
DEPT PASS USTR FOR SCHWAB 
DEPT PASS USTR FOR ELENA BRYAN 
DEPT PASS USTR FOR FRAN HEUGEL 
DEPT PASS USTR FOR AUSTR BARBARA WEISEL 
OMB FOR JACQUELINE STRASSER 
 
E.O. 12958: N/A 
TAGS: ID ECON PGOV MCC
SUBJECT: SUCCESS OF INDONESIA'S MCC THRESHOLD PROGRAM 
 
¶1.  Summary:  Indonesia's Millennium Challenge Corporation (MCC) 
Threshold Program is in full-stride, exceeding expectations in both 
its areas of focus, Control of Corruption and Immunization Rates. 
Since being awarded the largest MCC Threshold Program in November 
2005, the Government of Indonesia (GOI) has embraced the extensive 
judicial sector reforms at the Supreme Court; leveraged MCC 
assistance at the Corruption Eradication Commission to expand 
prosecutions; enhanced anti-money laundering capacity at the 
Financial Intelligence Unit; and initiated on-line procurement 
processes under the e-Government Procurement component. 
Concurrently, the GOI Ministry of Health has actively partnered with 
the MCC Threshold Program, World Health Organization (WHO) and 
UNICEF to capture accurate immunization coverage data that reflect a 
higher-than-expected coverage rate.  Indonesia's strong performance 
on its Threshold Program should be clearly articulated to the MCC 
Board members in their consideration of Compact-eligible countries 
in December 2008.  End summary. 
 
A POSITIVE TRACK RECORD 
----------------------- 
 
¶2.  At its November 2005 Board meeting, MCC selected Indonesia to 
participate in the Threshold Program based on the country's strong 
track record on reform.  The two-year, $55 million Threshold Program 
focuses on "Control of Corruption" ($35 million) and "Immunization 
Rates" ($20 million), two areas where Indonesia fell short on its FY 
05 MCC indicator Scorecard.  Indonesia's strong performance on its 
Threshold Program to date bolsters the country's steadily improving 
MCC indicator scores, particularly the upward trend under the 
"Control of Corruption" indicator which has risen steadily over the 
past five years.  The Threshold Program projects, managed by USAID 
Indonesia, run from approximately May 2007 through May 2009. 
 
CONTROL OF CORRUPTION 
--------------------- 
 
¶3.  The Threshold Program's $35 million Control of Corruption 
component builds capacity at the Corruption Eradication Commission 
(KPK); the Financial Transaction Reports and Analysis Center (PPATK, 
Indonesia's Financial Intelligence Unit); the Supreme Court; and the 
National Development Planning Agency's (BAPPENAS) e-procurement 
agency.  A review of progress to-date by specific threshold goals is 
as follows: 
 
¶A.  Reforming the Judiciary:  Long regarded as a bastion of 
corruption and poor governance, the Supreme Court has embraced the 
MCC reform agenda, yielding impressive results: 
 
--The implementation of an interactive Code of Conduct curriculum 
and training program.  Court judges have been trained as trainers 
and over 1500 judges have received intensive Code of Conduct 
training. 
 
-- The Supreme Court issued a decree requiring all judges and 
registrars to submit wealth reports as a condition for promotion or 
transfer consideration. 
 
--MCC has sponsored training to over 1200 Court budget and finance 
personnel on the Ministry of Finance's new budget system and 
software, the first major budget reform program since Dutch colonial 
times.  Budget transparency and publication protocols are being 
developed across the Court. 
 
--Breaking new ground for a court system not historically 
comfortable with public scrutiny, the Court adopted a "Transparency 
Decree" establishing guidelines for access to court information. 
The Court has now published over 4900 decisions online with MCC 
assistance.  (see http://www.putusan.net/app-mari/putusan/). 
 
--The Supreme Court has achieved specific bureaucracy reform 
milestones as conditions for increased allowances for Court 
personnel.  Completed initiatives include job descriptions and 
performance standards for all positions within the court system, as 
well as a court remuneration plan. 
 
JAKARTA 00001728  002 OF 003 
 
 
 
--The Court is completing inventory of physical assets in over 700 
courts, along with training of personnel in asset management and 
implementation of an asset tracking system. 
 
¶B.  Improve the Capability of the Financial Transaction Reports and 
Analysis Center (PPATK):  MCC support is primarily focused on 
promoting Anti-Money Laundering  capacity by increasing the level of 
suspicious transaction reports reported to the PPATK by Non-Bank 
Financial Institutions , which include insurance companies, capital 
markets, pension funds, leasing/finance companies, and money 
changing operations. PPATK has already exceeded its MCC Threshold 
Program target for the level of Non-Bank Financial Institutions 
reporting on suspicious transaction reports.  This initiative works 
in close collaboration with Bank Indonesia and the KPK, and includes 
the following accomplishments: 
 
--Training of almost 200 authorized money changer businesses on 
monitoring techniques. 
 
--A nationwide "Know Your Customer" media campaign (television, 
print) promoting use of only authorized money changers. 
 
¶C.  Improve the Capability of the Corruption Eradication Commission 
(KPK):  At the end of 2007, Parliament selected entirely new KPK 
senior leadership.  The KPK has built on the success of the previous 
leaders and become even more aggressive in fighting corruption: 
 
--The KPK has surpassed its MCC performance indicator for the 
prosecution of high-ranking government officials: 
 
2007 Prosecution Target:  4   Actual:  10 
2008 Prosecution Target:  6   Actual (as of 31 Jul 08):8 
 
--The KPK and MCC are co-funding an Integrity Survey in 40 national 
government institutions to identify factors leading to corrupt 
practices. 
 
¶D.  Implement Electronic Government Procurement (e-GP).  The GOI is 
implementing electronic government procurement systems both at the 
national level and, as supported by this MCC program, with pilot 
projects in five provincial governments.  All five centers are now 
fully equipped with necessary hardware, software, and internet 
connectivity. Two provinces (West Java and Gorontalo) have made 
their first electronic tenders. 
 
PROMOTING INCREASED IMMUNIZATION COVERAGE RATES 
- - - - - - - - - - - - - - - - - - - - - - - - 
 
¶4.  The MCC Immunization project is integrating and strengthening 
the GOI's existing Expanded Program on Immunization (EPI) to ensure 
continued GOI ownership and post-project sustainability.  EPI 
developed mass media and print packages to convince parents to fully 
immunize their children and to encourage key decision-makers to 
support local routine immunization programs with adequate funding. 
Diminishing vaccine stocks that had been a concern for several 
months have now been replenished.  The Project support mechanism for 
Local Area Monitoring and supportive supervision is in place. 
 
THRESHOLD PROGRAM IMMUNIZATION COMPONENT YIELDING RESULTS 
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶5.  The GOI deserves credit for undertaking serious, effective 
reform initiatives.  And MCC has supported these efforts to produce 
key results: 
 
--6,847 District Health Officers personnel trained in immunization 
program management during the first year, representing 69 percent of 
the two-year overall target. 
 
--The immunization coverage baseline rate was established at 78 
percent as a result of the national joint cluster survey conducted 
this year, providing the first reliable routine immunization 
coverage data by province since 2003. 
 
JAKARTA 00001728  003 OF 003 
 
 
 
--Seventy-nine percent of health centers now use Local Area 
Monitoring tools, up from 49 percent. 
 
--In the first year of the Project, 2.9 million children were 
immunized in priority provinces, representing 56 percent of the 
project's two-year target of 5.1 million. 
 
--One hundred percent of Project priority districts (68) have 
implemented EPI action plans. 
 
CONCLUSION 
---------- 
 
¶6.  Indonesia's MCC Threshold Program is an ambitious component in 
President Yudhoyono's overall reform agenda to support a democratic, 
well-governed Indonesia that is a responsible and active member of 
the international community.  The GOI's demonstrated commitment to 
reform and Indonesia's Threshold Program impressive results bode 
well for Indonesia's development and its consideration by the MCC 
Board in December. 
 
 
HUME