VZCZCXRO1845
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJA #2304 3570016
ZNR UUUUU ZZH
R 220016Z DEC 08
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 1035
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS JAKARTA 002304 
 
DEPT FOR E, EAP/MTS, EAP/EP, EEB/IFD/OMA, E/CBA 
TREASURY FOR IA/MALACHY NUGENT AND TRINA RAND 
COMMERCE FOR 4430/KELLY 
DEPARTMENT PASS EXIM BANK VP MORIN 
DEPT PASS USTR WEISEL, EHLERS 
 
SIPDIS 
 
E.O. 12598: N/A 
TAGS: BEXP ETRD EAIR EINV ECON ID
SUBJECT: NEW INDONESIAN CIVIL AVIATION LAW PAVES THE WAY FOR EX-IM 
FINANCING FOR HUGE BOEING SALE 
 
REF: Jakarta 1262 
 
¶1. Summary.  The Indonesian parliament passed a new civil aviation 
law on December 17 that paves the way for Ex-Im bank to provide 
financing for the sale of billions of dollars worth of Boeing 
aircraft to Indonesian air carriers.  The new law implements the 
provisions of the Cape Town Convention on International Interests in 
Mobile Equipment.  Embassy and Ex-Im worked extensively with the 
Indonesian parliament and government to get this outcome.  End 
Summary. 
 
¶2. The Indonesian parliament approved a new civil aviation law on 
December 17, which specifically implements the provisions of the 
Cape Town Convention (CTC), an international treaty designed to 
standardize the transactions of moveable property, particularly 
aircraft and aircraft engines.  Although Indonesia had previously 
issued a Presidential decree implementing the CTC, Ex-Im's local 
counsel determined that the decree did not fully implement the 
convention.  Without full CTC implementation, Ex-Im was unable to 
proceed on a $1 billion financing agreement for the initial sale of 
30 Boeing 737-900 Extended Range aircraft to Indonesia's Lion Air. 
Lion Air has total orders for 178 737-900ERs with purchase rights 
for an additional 50, making them Boeing's largest customer for the 
craft. 
 
¶3. In a series of meetings between February and June, Embassy met 
with parliamentarians, Ministry of Transportation officials 
including the Minister, individual airlines, and the local air 
carriers association to encourage the parliament to include specific 
language in the new civil aviation bill to implement the CTC. 
During these meetings, the local air carriers association requested 
legal assistance to draft appropriate implementing language 
(reftel). 
 
¶4. Ex-Im responded by hiring local counsel to advise the the 
Indonesian working group (consisting of the local air carriers 
association, parliament, and the Ministry of Transportation) in 
drafting legislation that would be acceptable to parliament while at 
the same time satisfying Ex-Im's requirement that the CTC be fully 
implemented.  The December 17 law was the result of this 
collaborative effort. 
 
¶5. The new law paves the way for possible Ex-Im financing not only 
of Lion Air's substantial orders.  National carrier Garuda announced 
earlier this year the purchase of four Boeing 777-300ERs on top of 
their existing orders of twenty-five 737-800s and seven 777-300ERs. 
In addition, there are several other possible purchases of Sikorsky 
helicopters that may qualify for Ex-Im financing now that the Cape 
Town Convention is implemented in Indonesia. 
 
HUME