VZCZCXRO5440
RR RUEHLMC
DE RUEHJA #1870/01 3160007
ZNR UUUUU ZZH
R 120007Z NOV 09
FM AMEMBASSY JAKARTA
TO RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC
RUEHC/SECSTATE WASHDC 3784
INFO RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 JAKARTA 001870 
 
STATE FOR EAP/MTS, EAP/EP, EEB/IFD/ODF 
AIDAC FOR ANE, EGAT 
USTR FOR (EBRYAN) 
TREASURY FOR (BPELTON) 
 
 
SENSITIVE 
SIPDIS 
 
 
E.O. 12598: N/A 
TAGS: EAID PREL PGOV ETRD ECON KMCA MCC ID
SUBJECT: REWARD PERFORMANCE: RESELECT INDONESIA 
 
REF: STATE 108510 
 
¶1.  (SBU) SUMMARY.  Embassy strongly supports MCC reselecting 
Indonesia as eligible for compact.  Indonesia deserves reselection 
based on its performance both on and outside the indicators. 
Failing to reselect Indonesia would dash Indonesian expectations 
created by the U.S. government and would weaken the hand of 
government officials pushing for economic reform, good governance, 
and accountability.  Embassy urges all agencies and board members to 
support the reselection.  See action request. END SUMMARY 
 
¶2. (U) BACKGROUND.  Embassy understands MCC is sounding out other 
agencies on this year's selections for eligibility for compacts and 
that an interagency meeting is set for November 12. Furthermore 
Embassy understands the MCC board is set to meet on December 9 to 
make the final selections. 
 
¶3. (SBU) BASED ON PERFORMANCE INDONESIA DESERVES TO BE RESELECTED. 
In general Indonesia has improved its absolute performance on a 
range of the indicators and did not go down on the control of 
corruption indicator.  The only technical problem is that Indonesia 
has graduated from a Low Income Country (LIC) to a Lower Middle 
Income Country (LMIC) and hence is being compared to a more 
competitive group.  This graduation is questionable (See para 4). 
Within the Low Income Country group Indonesia would pass without 
difficulty.  Even in the LMIC group Indonesia is only slightly off 
(See para 5).  In addition Indonesia performance includes major 
accomplishments that should be recognized and rewarded (See para 6). 
 If MCC fails to reselect Indonesia, our partners here would 
question U.S. commitment to the country and our reliability as a 
partner (See para 7). 
 
¶4. (SBU) INCOME GRADUATION IS QUESTIONABLE.  The Gross National 
Income per capita for Indonesia for 2007 was USD 1,650 and for 2008 
it was USD 2,010.  However there are serious methodology issues with 
these numbers, particularly on the appropriate exchange rate to use 
to convert Indonesian rupiahs into US dollars.  The USD numbers used 
show a per capita income gain of almost 22 percent in a single year. 
 However the real gain in per capita national income was only around 
six percent.  If six percent is applied to the original USD GNI per 
capita figure, Indonesian 2008 income figure would only be USD 1,749 
which is substantially less than the USD 1,856 which marks the 
beginning of the lower middle income group.  Hence Indonesia would 
still be a low income country and would pass the indicators without 
a problem. 
 
¶5. (SBU) PERFORMANCE IS GOOD EVEN IN LMIC GROUP.  Indonesia does 
well against the increased competition of the Lower Middle Income 
Countries.  Indonesia has problems only with investing in people and 
control of corruption.  Indonesia is only off four hundreds of a 
percent in passing primary education expenditures and hence passing 
investing in people (1.93 versus 1.97).  In control of corruption, 
Indonesia's performance has not declined on an absolute basis, but 
is only off slightly in a relative sense, only having to beat out 
three more countries in the group to pass. 
 
¶6. (SBU) INDONESIA HAS ACCOMPLISHED A LOT.  Since being selected 
last year, Indonesia has successfully carried out the largest single 
time parliament and presidential elections in the world. Indonesia 
has been a good partner of the U.S. in international fora, including 
the G20, where we are now addressing key global economic issues, 
including climate change and food and energy security.  The 
democratically reelected president has installed some excellent 
economic ministers and committed the new government to major reform 
efforts.  While progress on compact preparation has been slower than 
desired, Indonesia has formed a technical unit to advance progress 
on the compact.  The constraints analysis is being presented this 
week and ambitious plans for public consultations have been put in 
place. 
 
¶7. (SBU) SERIOUS POLITICAL RISKS SURROUND A NEGATIVE DECISION. The 
selection of Indonesia as eligible for a compact has received 
substantial press and attention from Indonesia decision makers and 
the general public.  It was hailed as an important step in 
U.S.-Indonesia relations.  Failure to reselect Indonesia is likely 
to trigger serious negative reactions within the GOI and the public, 
leading them to question the U.S. government's reliability as a 
partner.  This is especially true as Indonesia has generally 
performed quite well and does not meet a couple of performance 
indicators because the standards have been changed as a result of a 
growing economy and questionable converting. 
 
¶8. (SBU) ACTION REQUEST. Embassy asks all involved agencies and 
board members to support MCC reselecting Indonesia for a compact. 
 
 
JAKARTA 00001870  002 OF 002 
 
 
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