VZCZCXRO0637
RR RUEHJS
DE RUEHJA #1735 2881015
ZNR UUUUU ZZH
R 151015Z OCT 09
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 3592
RUEHJS/AMCONSUL SURABAYA 2549
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS JAKARTA 001735 
 
SIPDIS 
 
DEPT FOR EAP/MTS AND EEB/IFD/OIA 
STATE PASS TO USTR EHLERS 
COMMERCE FOR 4430/NADJMI 
TREASURY FOR T RAND AND G RAO 
 
E.O. 12958: N/A 
TAGS: ECON EINV ETRD ID
SUBJECT: YOGYAKARTA'S OPPORTUNITY TO LEARN FROM CALIFORNIA 
 
¶1. SUMMARY: Yogyakarta's economy has weathered the global financial 
downturn reasonably well in 2009, bolstered by tourism and 
education.  Local leaders search for ways to attract foreign direct 
investment (FDI). Action by the local government to renew a dormant 
partnership with the California Chamber of Commerce could help 
Yogyakarta learn how to attract FDI.  END SUMMARY 
 
STABLE LOCAL ECONOMY 
-------------------- 
 
¶2. Yogyakarta business leaders and government officials were 
recently confident that the local economy would weather the global 
economic downturn. Major sectors such as tourism and the city's 
large education industry continue to drive growth in the city. 
Yogyakarta officials claimed that tourism from Europe remains 
robust, despite economic difficulties elsewhere. Nur Syhahrir 
Rahardjo, head of Yogyakarta's Regional Board of Cooperation and 
Investment estimated Yogyakarta's economy would grow by 4% for 
calendar year 2009. 
 
STATE OF FDI 
------------ 
 
¶3. In order to encourage further growth the Yogyakarta Board of 
Cooperation and Investment wishes to attract FDI in agriculture, 
heritage industries, infrastructure, telecommunications and tourism. 
Government officials and business leaders are unsure as how to 
attract new foreign investment to these sectors and were also unsure 
how to leverage the human capital that Yogyakarta's education sector 
develops each year. 
 
¶4. Currently, Yogyakarta's FDI is concentrated in consumer goods and 
tourist based companies such as Carrefour and Hyatt. Wasesa, Head of 
Development for City of Yogyakarta, said the presence of 
multinational companies creates jobs for local residents and also 
supports the creation of low level food vendors. However, he has 
concerns as to how Yogyakarta can attract a higher level of FDI in 
such industries as telecommunications and software. 
 
¶5. S.R. Yunastuti Daud of the Yogyakarta Chamber of Commerce and 
Industries said the city hopes to someday have an information 
technology (IT) center and has spoken with companies from Singapore 
and Malaysia about potential IT projects. In addition, she hinted at 
the possibility of the city competing with Bali as a site for 
business conferences. She admitted that complex regulations and 
uncertainty over regulatory implementation are still prominent 
barriers to FDI. 
 
YOGYAKARTA AND CALIFORNIA 
------------------------- 
 
¶6. S.R. Yunastuti Daud referred to a 1997 memorandum of 
understanding between the California Chamber of Commerce and the 
Yogyakarta Chamber of Commerce outlining the goal to broaden 
economic relations. S.R. Yunastuti Daud said that while the chambers 
signed the agreement, local ministers were confused as to why 
California would wish to partner with Yogyakarta and never pursued 
it. As recent as 2006, Governor Arnold Schwarzenegger called the 
Governor of Yogyakarta to discuss the partnership. According to S.R. 
Yunastuti Daud the two never spoke and later Yogyakarta's official 
contacted the foreign ministry in order to end the partnership. 
 
¶7. Embassy official advised S.R. Yunastuti Daud that a partnership 
with the California Chamber of Commerce represented an enormous 
learning opportunity on how to attract FDI, just as Palo Alto and 
Santa Clara leverage local universities Stanford and Santa Clara to 
attract high-tech multinational corporations. A partnership could 
help Yogyakarta attract FDI from California. S.R. Yunastuti Daud 
responded enthusiastically to this idea and asked how the 
relationship might be revived. Embassy will follow up with 
California state officials to re-establish a dialogue between the 
regions. 
 
OSIUS