VZCZCXYZ0000
PP RUEHWEB

DE RUEHJA #0381/01 0630959
ZNR UUUUU ZZH
P 040959Z MAR 09
FM AMEMBASSY JAKARTA
TO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 1727
RHEHNSC/NSC WASHDC PRIORITY
INFO RUEHBK/AMEMBASSY BANGKOK 8665
RUEHLO/AMEMBASSY LONDON 0914
RUEHGP/AMEMBASSY SINGAPORE 6470
RUEHKO/AMEMBASSY TOKYO 3028

UNCLAS JAKARTA 000381 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MTS, EAP/EP, EEB/IFD/OMA AND E 
TREASURY/IMB FOR MURDEN, MONROE AND BEASLEY 
NSC FOR HENNESSEY-NILAND 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ID
SUBJECT: INDONESIAN SHERPA VIEWS IN ADVANCE OF G-20 MEETINGS 
 
REF: SECSTATE 17502 
 
¶1. (SBU) Summary: Indonesia's key objectives for the upcoming 
G-20 meetings are: 
 
-- Agreement on the rapid recapitalization of the 
multilateral development banks, even if governance reforms 
are delayed. 
 
-- Broader focus of G-20 deliberations beyond financial 
market instability to include the negative impact on the real 
economy. 
 
-- Recognition that developing countries may not have the 
capacity to implement stringent new financial and capital 
market reforms immediately, requiring flexibility in 
implementation. 
 
-- Possible linkage between the IMF Short-term Liquidity 
Facility (SLF) and regional programs such as the Chaing Mai 
Initiative (CMI). 
 
President Yudhoyono has still not committed to attend the 
April 2 Summit.  End Summary. 
 
MDB REFORM URGENTLY NEEDED 
 
¶2. (SBU) Indonesia G-20 Sherpa and Deputy Minister of the 
Coordinating Ministry for Economic Affairs Mahendra Siregar 
told Embassy on March 3 that reform of the multilateral 
development banks must proceed quickly.  He argued that 
measures that allow the MDBs to recapitalize should be taken 
immediately with broader governance issues moving on a slower 
track if necessary.  MDB recapitalization is needed to enable 
MDBs to raise additional resources and provide needed support 
to emerging markets in meeting the growing global downturn, 
he argued.  Emerging countries, especially middle-income 
countries, face increasing difficulties in raising financing 
in capital markets in the current global environment. 
Indonesia proposes the establishment of a Global Expenditure 
Support Fund to assist countries in carrying out 
countercyclical spending. 
 
IT'S MORE THAN A FINANCIAL CRISIS 
 
¶3. (SBU) Siregar argued that the financial crisis has become 
a real-sector crisis.  The G-20 must therefore broaden its 
focus beyond the financial sector to include broader policy 
responses consistent with medium- and long-term economic 
growth and development priorities.  Siregar said that the 
World Bank could provide important policy advice and 
financing to help developing countries stimulate their real 
economies.  He said that the IMF is too narrowly focused on 
finance and the WTO is too legalistic and technical to 
provide the broad support needed by developing countries now. 
 
FLEXIBLE IMPLEMENTATION NECESSARY 
 
¶4. (SBU) Siregar said Indonesia recognizes financial and 
capital markets reforms are crucial to restoring confidence 
to markets.  But he added there must be sufficient 
flexibility in their implementation.  He fears that some of 
the reforms might be too rigid (or simply too sophisticated) 
for emerging markets to meet them. 
 
"INDIRECT LINKS" WITH THE IMF 
 
¶5. (SBU) Indonesia and other developing countries still find 
it politically difficult to go to the IMF for assistance, 
Siregar advised.  Despite some significant IMF reforms, 
including development of new instruments such as the 
Short-term Liquidity Facility, Siregar said developing 
countries need an indirect link to make access to the IMF 
acceptable.  For example, he suggested the IMF engage with 
CMI to consider creation of an indirect link to developing 
countries through the establishment of a special window 
providing IMF assistance to CMI-eligible countries without 
additional conditionality.  This would allow countries like 
Indonesia to use IMF resources without risking a domestic 
backlash. 
 
YUDHOYONO'S PARTICIPATION STILL NOT CONFIRMED 
 
¶6. (SBU) Siregar said that President Yudhoyono has not yet 
committed to attend the G-20 London Summit on April 2 because 
of its proximity to Indonesia's April 9 legislative 
elections.  He also expressed disappointment that the U.K. 
government had not consulted with Indonesia before inviting 
Thailand to attend the summit on behalf of ASEAN. 
HUME