VZCZCXRO6417
OO RUEHLMC RUEHPT
DE RUEHJA #1779/01 2630348
ZNR UUUUU ZZH
O 190348Z SEP 08
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0144
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UNCLAS SECTION 01 OF 05 JAKARTA 001779 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR S, D, P, E, G, OES, EAP 
STATE FOR ADMINISTRATOR FORE 
STATE PASS TO PEACE CORPS DIRECTOR TSCHETTER, OPIC 
PRESIDENT MOSBACHER, USTR FOR AUSTR WEISEL, EXIM FOR VP 
MORIN, MCC FOR AMBASSADOR DANILOVICH 
PACOM PASS TO PACOM J5 
SECDEF PASS TO OSD POLICY 
NSC FOR E.PHU, DENNIS WILDER 
 
E.O. 12958: N/A 
TAGS: ECON PGOV SENV PREL KDEM ID
SUBJECT: ADVANCING U.S. RELATIONS WITH INDONESIA 
 
 ¶1. (SBU) Summary:  Now is the time to lock in place the 
positive directions that U.S.-Indonesian relations have taken 
since 2001 and to make more progress.  Seven years ago, 
Indonesia was highly vulnerable to terrorist threats, but 
Indonesian resolve and U.S. assistance have reduced these 
risks greatly.  Indonesia then suffered from economic 
stagnation and political uncertainty, but now it enjoys 
democracy, stability, and an improving economy.  Positive 
policy impulses from the war on terror and the campaign for 
freedom have created new space for the bilateral 
relationship, a space where opportunities outweigh risks. 
This message proposes action on several standard bilateral 
agreements and a few program initiatives to provide greater 
ballast for a healthy relationship with the world,s fourth 
most populous nation.  End Summary. 
 
Security cooperation provides a basis to expand relationship 
--------------------------------------------- --------------- 
 
¶2. (SBU) At the core of our growing relationship with 
Indonesia is expanded security cooperation with both the 
police and the military.  Here, in the world,s largest 
Muslim-majority country, public rejection of terrorist 
methods, better intelligence, U.S. and Australian police 
training, and the determination of President Yudhoyono and 
his senior officials have combined to roll back the threat of 
terrorist attacks.  Although terrorist networks have not been 
eliminated, they have been degraded and contained, thanks in 
large part to the police. 
 
¶3. (SBU) The conflict in Aceh, a devoutly Muslim region, has 
been resolved by an agreement that provided for regional 
autonomy and an election in which a former rebel became 
governor.  Tensions elsewhere, such as in Papua, Ambon, and 
Central Sulawesi, have been reduced by democratic politics, 
increased regional authority through decentralization, and 
improved policing.  The Government of Indonesia (GOI) is 
restructuring the military: first the police were constituted 
as a separate force, then the military voluntarily withdrew 
itself from politics, and now military owned businesses are 
being prepared for divestiture.  The reformed military and 
reformed police actively cooperate with the U.S. military and 
are a significant contributor to UN peacekeeping operations, 
such as in Lebanon and Darfur. 
 
¶4. (SBU) Nevertheless, more trust is needed to overcome the 
consequences of the previous USG decision to cease military 
cooperation with Indonesia due to past human rights abuses. 
Our first step was the 2005 decision to resume military sales 
and military training after a 13-year embargo. 
Accountability for past human rights abuses is an ongoing 
process, and the recent Commission on Truth and Friendship 
report is a positive marker.  Three program challenges are 
ongoing.  First, we have been asked for a modest level of 
assistance to the Indonesian Ministry of Defense to support 
efforts to professionalize their forces via a National 
Defense University for both military and civilian students. 
Second, we need to resolve the contradiction between the 
Leahy Amendment,s ban on training members of military units 
 
JAKARTA 00001779  002 OF 005 
 
 
that had previously committed human rights violations--even 
of completely innocent troops--and the policy goal of 
achieving reform by training such troops.  Third, we should 
go forward with our assistance that boosts the military,s 
efforts to divest itself of commercial operations, which 
benefit few and can lead to abuses.  This divestiture would 
also give the Finance Ministry the basis it wants to seek 
full funding for the Ministry of Defense from the 
legislature.  In Indonesia, expanding security cooperation 
and promoting good governance are mutually reinforcing. 
 
¶5. (SBU) The growing bilateral activities on security 
questions need more form.  In June, the Indonesian government 
proposed a text for a Defense Cooperation Agreement, 
including provisions for periodic consultations.  Indonesia 
has such an agreement with several other countries, including 
China, India and the Philippines.  Embassy Jakarta 
recommended that the USG respond affirmatively to this 
proposal, with the condition that the text should be drafted 
in a non-binding way that avoids the need for parliamentary 
action in either capital.  Such an agreement would help lock 
in the progress achieved in the past few years and lay down a 
roadmap for future collaboration.  ACTION REQUEST:  Mission 
now seeks authorization to inform the GOI of USG readiness to 
participate in talks aiming at concluding a Defense 
Cooperation Agreement. 
 
Improving governance key to democratic development 
--------------------------------------------- ----- 
 
¶6. (SBU) In the last decade, Indonesia has moved its 
political system from authoritarian to free and democratic, 
with a direct benefit to 240 million people.  Freedom House 
ranks Indonesia as the only "free" country in Southeast Asia. 
 President Yudhoyono reached an agreement with Aceh rebels to 
resolve the thirty year conflict in Aceh, and new provisions 
for regional autonomy defused conflict in Papua. 
Decentralization has moved government closer to its citizens, 
with frequent elections unseating underperforming incumbents. 
 However, the decentralization of administration of such 
services as education and health care has created challenges 
for less developed communities lacking educated officials and 
strong institutions.  In some areas, improvements in 
governance have been hard to achieve.  And decentralization 
has often made it harder for foreign investors to gain 
necessary approvals. 
 
¶7. (SBU) U.S. programs aimed at good governance have been 
making a substantial difference, but risks abound. 
Indonesians welcome USG programs aimed at ending the culture 
of corruption here.  Police training is increasing respect 
for human rights and is fighting corruption.  DOJ programs 
assist prosecutors, and bilateral judicial assistance is 
improving even without a specific agreement.  And MCC,s 
large program to support Indonesia,s anti-corruption reform 
is making a real difference.  ACTION REQUEST:  If Indonesia 
passes its policy indicators this year, it should be given an 
MCC Compact with funding commensurate with its importance to 
U.S. policy interests.  In any case, gap funding is needed to 
 
JAKARTA 00001779  003 OF 005 
 
 
continue these valued anti-corruption programs between the 
end of the threshold program and the beginning of Compact 
implementation. 
 
Economic cooperation lagging 
---------------------------- 
 
¶8. (SBU) In part because economic reform lags in Indonesia, 
U.S. business faces growing competition.  For example, a 
recent Chinese trade delegation from Guangzhou to Indonesia 
included almost 700 participants; the upcoming U.S.-ASEAN 
Business Council mission to Indonesia will have only 48 
participants.  The growing number of Indonesia,s free trade 
agreements with other countries and regional blocks signal 
Indonesia,s greater integration within Asia at the expense 
of U.S. business.  Indonesia prefers these less ambitious 
deals to the rigorous economic agreements we seek. 
Negotiations to renew the OPIC agreement and to conclude a 
Bilateral Investment Treaty have stalled, and we are finding 
it difficult even to get Indonesia to engage seriously in our 
Trade and Investment Framework Agreement (TIFA) process. 
Resource nationalism is on the rise, and progress on 
improving the investment climate is slow.  In the meantime, 
we are looking for specific issues where we can advance our 
trade and investment interests.  The Embassy is working with 
EXIM to secure passage of legislation to implement the Cape 
Town agreement that would permit EXIM financing of a sale of 
170 Boeing 737s to Indonesia,s Lion Air.  We are also 
working to encourage Indonesia to overturn the $100 million 
libel judgment against Time magazine, an unfortunate example 
of Indonesia's uncertain rule of law.  Despite these 
problems, we need to renew work on our economic relations. 
ACTION REQUEST: Mission requests authorization to reopen 
negotiations on an updated OPIC agreement. 
 
Indonesia as an environmental "super power" 
------------------------------------------- 
 
¶9. (SBU) Indonesia needs the United States as a partner on 
environmental issues, and vice versa.  Indonesia is number 
one in marine diversity, number two in land biological 
diversity, but number three in greenhouse gas emissions.  At 
last year,s climate change conference in Bali and in the 
Major Economies Meetings, the United States and Indonesia 
worked constructively together.  We are working on a $20 
million Tropical Forest Conservation Act agreement, a Clean 
Energy Fund proposal for the World Bank, and the Coral 
Triangle Initiative announced last year by President 
Yudhoyono. 
 
¶10. (U) To launch new collaboration on the marine 
environment, the Embassy is working with NOAA and USAID to 
secure a positive response to Indonesia,s invitation for the 
Okeanos Explorer, NOAA,s most advanced ocean research and 
exploration ship, to visit Indonesia next year on its maiden 
voyage.  Such a visit linked to the May 11-15, 2009 World 
Oceans Conference and Coral Triangle Initiative Summit in 
Manado would promote science, increase Indonesian capacity to 
study and manage its marine resources, and build an active 
 
JAKARTA 00001779  004 OF 005 
 
 
environmental partnership as part of the bilateral 
relationship.  ACTION REQUEST: Mission seeks Department,s 
support for Embassy,s ongoing efforts to seize this 
opportunity. 
 
Health, science, and technology areas for engagement 
--------------------------------------------- ------- 
 
¶11. (SBU) Indonesia has underperformed on health issues, and 
the current Health Minister is a difficult partner.  However, 
Indonesia, with nearly half of Southeast Asia,s population, 
and half of all human cases of avian influenza, will remain 
the world,s largest petri dish for many infectious and 
tropical diseases.  The health system remains poor in many 
areas, evidenced by many wealthy Indonesians flying to 
Singapore for treatment.  To secure the USG,s long-term 
public health interests, we are pursuing four tracks.  First, 
Australian-brokered consultations to secure WHO approval for 
a new global sample-sharing mechanism are going forward, with 
November as the target date for agreement.  This agreement 
would be the basis for Indonesia to resume sharing virus 
samples.  Second, before the end of the year, we hope to 
secure Indonesian signature of the already approved 
Biosecurity Engagement Program agreement.  Third, public 
debates over renewing the agreement for NAMRU (the US Navy,s 
medical research unit here) have quieted down, and we hope to 
restart negotiations by the end of the year.  Finally, 
looking toward to a day when there is a change in leadership 
in the Health ministry, we should develop long-term 
professional relations through training programs, 
particularly with the CDC and NIH. 
 
¶12. (SBU) Indonesia has underperformed in science and 
technology, with only 7,000 PhDs in the country.  Success in 
the 21st century for any economy requires better human 
capacity.  The prior bilateral science and technology 
agreement expired in 2002.  It is time to explore interest in 
a new agreement.  ACTION REQUEST: The USG should propose 
concluding an umbrella science and technology agreement.  The 
text should include provisions for joint research projects, 
institutional collaboration, and personnel exchanges with an 
emphasis on environmental science, biomedical science, and 
perhaps other areas. 
 
Perceptions of U.S. in Indonesia improving 
------------------------------------------ 
 
¶13. (SBU) Public diplomacy is critical for building the 
bilateral relationship.  In February 2008, the BBC reported 
that U.S. "favorability" rating in Indonesia had risen from 
21 percent to 32 percent in the previous twelve months, which 
meant a positive opinion shift by 27 million Indonesians. 
Public diplomacy programs have sped forward that progress, 
and we should be building upon these successful initiatives. 
Education should be central to our strategy here.  We are 
working to conclude an updated Fulbright agreement within the 
next two months, which would provide the basis to expand 
higher education cooperation.  In the same timeframe we hope 
to obtain agreements for the Ministry of Education to use its 
 
JAKARTA 00001779  005 OF 005 
 
 
scholarship funds to finance Indonesian Fulbright scholars to 
study in the U.S. and for the use of $3 million of old PL 480 
funds to fund agricultural Fulbright scholarships. 
 
¶14. (SBU) Finally, the Peace Corps.  In 2006 and in 2007 the 
Peace Corps sent teams to Indonesia to consider opening a 
program.  Peace Corps decided to open a new program here, but 
funding has delayed this opening.  Frankly, it is time to add 
a sense of priority and, indeed, urgency.  Volunteers here 
will be safe and welcome, and their impact will be enduring. 
ACTION REQUEST: Embassy Jakarta requests that a team be sent 
to open negotiations for a new Peace Corps agreement to 
replace the exchange of letters dating from 1965 and to 
develop concrete plans on how to re-establish a Peace Corps 
program. 
 
A Way Forward 
------------- 
 
¶15. (SBU) We recommend formalizing our developing bilateral 
partnership through a Defense Cooperation Agreement, an 
umbrella science and technology agreement, and a renewed 
Fulbright agreement that provides the basis for additional 
higher education cooperation.  We need to continue the good 
governance programs now funded by the MCC and to reopen 
negotiations aimed at renewal of OPIC operations here.  The 
Peace Corps should implement its internal decision to open a 
program.  Ten years after its transition to democracy, 
Indonesia is at a critical point in its development and we 
have strategic opportunities to support this process. 
Security cooperation is one element, but we also have 
opportunities to seek closer cooperation on education, 
environment, health, science and technology, and the economy. 
 Success in these areas would help convince Indonesians that 
democracy delivers the goods and international partners are 
valuable.  The trajectory of reform is positive.  The 
challenge over the next 10 to 20 years is to institutionalize 
such successes through further cooperation. 
HUME