VZCZCXRO1355
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJA #1815/01 2690718
ZNR UUUUU ZZH
R 250718Z SEP 08
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 0192
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 WASHINGTON DC
RUEHKO/AMEMBASSY TOKYO 2536
RUEHBJ/AMEMBASSY BEIJING 5437
RUEHBY/AMEMBASSY CANBERRA 3087
RUEHUL/AMEMBASSY SEOUL 4946
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 JAKARTA 001815 
 
MCC FOR AMBASSADOR DANILOVICH AND MORFORD 
MCC FOR MARIA LONGI 
MCC FOR DEPUTY CEO RODNEY BENT 
DEPT FOR E - U/S JEFFERY 
DEPT FOR EEB A/S SULLIVAN 
DEPT FOR EAP DAS MARCIEL AND EB/IFD DAS DAVID NELSON 
DEPT FOR EAP/MTS, EEB/IFD/OIA, INL SNYDER, INL ROESS 
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 
DOJ FOR CRIM AAG SWARTZ 
DOJ/OPDAT FOR ALEXANDRE/LEHMANN/JOHNSON 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV KMCA KCOR ECON KJUS ID
SUBJECT: ANTI-CORRUPTION REFORM RESHAPING INDONESIA 
 
JAKARTA 00001815  001.2 OF 003 
 
 
¶1. (SBU) Summary: Although corruption remains endemic, Indonesia is 
making continued progress to root it out.  In the past six months, 
the Corruption Eradication Commission (KPK) has arrested six Members 
of Parliament in six separate scandals.  Challenges remain: limited 
resources, legal challenges, and uncertain political will. 
Indonesia is in the initial years of a long-term process to reduce 
corruption throughout the country.  And U.S. assistance to Indonesia 
is institutionalizing anti-corruption reform successes.  End 
summary. 
 
High-level corruption arrests highlight 2008 progress 
--------------------------------------------- -------- 
 
¶2. (SBU) Indonesia apprehended several high-level corruptors in 
¶2008.  Parliament has long been considered one of the most corrupt, 
yet also untouchable, institutions in Indonesia.  That immunity 
ended in 2008.  In the past six months, the Corruption Eradication 
Commission (KPK) has arrested six Members of Parliament - from both 
government coalition and opposition parties - in six separate 
scandals.  And other senior Members of Parliament, including the 
Budget Commission head, might fall soon. 
 
¶3. (SBU) The KPK has also focused its attention on corruption within 
the Attorney General's Office.  The KPK caught Urip Tri Gunawan, a 
senior AG prosecutor, red-handed with a $600,000 bribe in March. 
Within six months of the arrest, the Anti-Corruption Court sentenced 
Urip to 20 years in prison and sentenced the businessperson who 
passed the bribe to five years. 
 
¶4. (SBU) The KPK is also investigating other high-level officials, 
including ministers Paskah Suzetta (National Development Planning) 
and M.S. Kaban (Forestry).  In mid-September, the KPK arrested a 
Commissioner of the Business Competition Oversight Unit, an 
independent government body that rules on monopoly cases.  In 
February, the KPK sentenced a former head of the National Logistics 
Agency to ten years in prison.  The KPK also arrested former central 
bank head Burhanuddin Abdullah for corruption related to illegal 
payments to Parliament.  Earlier in the year, the KPK raided the Tax 
& Customs office at Indonesia's largest port, exposing many corrupt 
practices and cash bribes in desks. 
 
Building institutions for anti-corruption reform 
--------------------------------------------- --- 
 
¶5. (SBU) Eradicating corruption remains a central pillar of 
President Yudhoyono's overall governing strategy and political 
agenda.  And the Corruption Eradication Commission (KPK) is the 
independent government institution leading this effort.  The KPK has 
the authority to conduct investigations and then try cases in the 
specialized Anti-Corruption Court.  While the KPK is the new 
headline independent government body tasked to lead corruption, the 
Attorney General's Office is the larger, more permanent 
institutional presence.  The Attorney General's Office and police 
handle over 95% of all corruption cases nationwide whereas the KPK 
handles fewer than 5%.  Separately, President Yudhoyono has created 
the Office of Government Procurement Policy to tackle the 
inefficiency and problems within the government procurement system, 
a major source of corruption. On the military front, President 
Yudhoyono appointed former KPK Commissioner Erry Hardjapamekas to 
lead the Defense Department's 150-person business divestiture unit. 
Under Hardjapamekas' leadership, the initiative to divest the 
 
JAKARTA 00001815  002.2 OF 003 
 
 
military of its businesses is moving forward after three years of 
inaction, although long-term success will require significant 
Defense Department budget increases. 
 
¶6. (SBU) Increased personnel help to explain the rising tempo of 
operations at the KPK.  The KPK has nearly doubled the number of 
investigators (111 now) and prosecutors (28 now) since 2005.  The 
KPK's long-term strategy balances prosecution and prevention.  The 
KPK is on track to conduct more investigations in 2008 than any 
previous year and is maintaining the prosecution case load. 
Regarding prevention, the KPK is leading wider government reform, 
including working with the Supreme Court to better account for case 
fees and promote better governance and case management with the 
support of the USAID-managed MCC Threshold Program. 
 
¶7. (SBU) Damaged by the Urip bribery scandal, the AGO is also moving 
to strengthen its capacity.  Indonesian AG Supandji inaugurated the 
AGO's Anti-Corruption Task Force during AG Mukasey's June 2008 
visit.  This U.S.-supported task force of 50 prosecutors will 
receive additional resources to investigate and prosecute corruption 
cases nationwide.  The task force is untested as it just began to 
receive its first cases, but the task force leader has a credible 
corruption prosecution record.  Separately, the AGO initiated 
broader bureaucratic reforms in coordination with the Ministry of 
Finance in September. 
 
Strong anti-corruption reform leadership 
---------------------------------------- 
 
¶8. (SBU) The second group of KPK commissioners began their four-year 
team in January clouded with suspicion of the new commissioners' 
bona fides and reform credentials.  Some activists interpreted 
current KPK head Antasari Azhar's questionable confirmation hearing 
comments as a sign that he would not prosecute Members of 
Parliament.  Quite the opposite occurred: Parliament has been the 
KPK's number one target in 2008. The KPK brought corruption charges 
against six Members of Parliament and is investigating others.  Our 
legal, law enforcement, and NGO contacts broadly agree that the 
KPK's leadership is cause for optimism.  In September, President 
Yudhoyono appointed leading anti-corruption reform scholar and 
activist Denny Indrayana to be Presidential advisor on legal 
affairs.  While the post has no direct authorities, bringing 
Indrayana and civil society perspectives directly into the 
President's Office is notable. 
 
Passing Anti-Corruption Court bill next big marker 
--------------------------------------------- ----- 
 
¶9. (SBU) The biggest threat to Indonesia's anti-corruption reform 
agenda would be failure to pass the Anti-Corruption Court Law.  If 
the Anti-Corruption Court is not reauthorized by December 2009, the 
KPK would prosecute corruption cases in the regular courts, which 
are of uneven quality and subject to corruption.  The KPK has 
successfully prosecuted 100% of its cases before the Anti-Corruption 
Court.  The key element in the Anti-Corruption Court's success is 
the continued use of independent, non-career "ad hoc" judges.  With 
2009 elections on the horizon, the legislative calendar is shortened 
and enthusiasm by Members of Parliament is reduced due to the string 
of recent Parliamentary arrests by the KPK.  Human resources remain 
another institutional challenge for both the KPK and AGO in 
combating corruption.  The KPK's human resource improvements (e.g., 
 
JAKARTA 00001815  003.2 OF 003 
 
 
nearly doubling prosecutors at KPK since 2005) must be placed in 
perspective: there are 28 prosecutors supported by 111 investigators 
for a country of 240 million people. 
 
Corruption fight continues, trajectory positive 
--------------------------------------------- -- 
 
¶10. (SBU) There is hardly a day when a high-level corruption scandal 
is not on the front page of Indonesian dailies.  Are the KPK arrests 
exposing just the tip of the iceberg?  Our contacts generally agree 
that the government's anti-corruption drive is making progress.  In 
2008, Indonesia improved its score on the World Bank's "Control of 
Corruption" indicator and Transparency International's Corruption 
Perceptions Index.  The KPK is taking a more aggressive stance 
through its increased personnel, record of success, and strong 
mandate.  And the Attorney General's Office is taking on important 
reforms, particularly the Anti-Corruption Task Force and internal 
bureaucratic reforms.  The government is making an impact: the 
arrests of six Members of Parliament in six separate cases in 2008 
speak to the growing strength and commitment of anti-corruption 
reform in Indonesia. 
 
HUME