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RR RUEHCHI RUEHCN RUEHDT RUEHHM
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ZNR UUUUU ZZH
R 170004Z FEB 10
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 4494
INFO RUEHRC/USDA FAS WASHDC
RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS COLL
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 04 JAKARTA 000202 
 
SIPDIS 
 
DEPT FOR EAP/MTS 
DEPT ALSO FOR EEB/TPP/BTA AND EEB/CBA 
DEPT PASS TO USTR BWEISEL AND KEHLERS 
COMMERCE FOR 4430/NADJMI AND SBERLINGUETTE 
USDA/FAS/OSTA FOR CASEY BEAN 
 
E.O. 12598: N/A 
TAGS: ECON ETRD EAGR EINV ID
SUBJECT: US-ABC PROMOTES BILATERAL TRADE AND INVESTMENT 
 
¶1. Summary.  A delegation of business representative from The 
U.S.-ASEAN Business Council (US-ABC) sent a delegation of U.S. 
business representatives to Jakarta from January 25-28 for a series 
of meetings with senior Indonesian officials to discuss Indonesia's 
investment climate.  Council members encouraged greater transparency 
in the regulatory process, more stakeholder input into legislation, 
legal reform for greater contract sanctity, transparent dispute 
resolution, and reliable enforcement of decisions.  US-ABC 
representatives praised Indonesia's G-20 role and stated that this 
was a clear sign of respect for Indonesia's global economic power. 
US-ABC members also urged a successful conclusion to negotiations of 
an updated OPIC agreement.  End Summary. 
 
¶2. US-ABC's delegation included more than 40 representatives of 
around 20 companies that are already established or seeking to do 
business in Indonesia.  The sectors that these businesses represent 
include agribusiness, energy and resources, food processing, 
infrastructure, car and heavy equipment manufacturers, chemicals, 
pharmaceuticals, and communications and IT equipment producers. 
US-ABC stressed that its members' foreign direct investment (FDI) in 
Indonesia has a positive multiplier effect through the transfer of 
technology, growth of local jobs, benefits of a local supply chain 
distribution system, and significant corporate social responsibility 
programs.  Because of the diversity of the delegation and the need 
for multiple companies to participate, many of the high-level 
meetings lacked the focus that organizers had planned. 
 
Vice President Boediono 
----------------------- 
 
¶3. Vice President Boediono highlighted Indonesia's recently released 
100-day report, stating that Indonesia is determined to accelerate 
development of infrastructure and improve people's economic and 
social welfare.  Boediono said Indonesia is also looking for "quick 
wins" on the environment, education and improvements to the 
investment climate.  He stated that the country will participate in 
the global market while formulating an explicit policy to promote 
its domestic market.  He encouraged biotechnology, especially for 
rice, to promote food security. 
 
¶4. The Ambassador pointed out that this delegation reflects 
increasing U.S. interest in expanding business ties and relations 
with Indonesia.  He said that President Obama's visit will focus our 
attention so that we can strike deals which will demonstrate that 
Indonesia is a good partner for international businesses.  Rod 
Hills, Vice Chairman of US-ABC and President & CEO of the Hills 
Companies, told the Vice President that University of Indonesia's 
Center for the Study of Governance planned to release a report with 
suggestions to increase jobs in both countries. 
 
Coordinating Ministry of the Economy 
------------------------------------ 
 
¶5. Coordinating Ministry of the Economy Deputy Director for 
Macroeconomics and Finance Dr. Erlangga Mantik stated that Indonesia 
was committed to improving its investment climate.  Under President 
Yudhoyono's 100-day plan, Indonesia had recently completed 
amendments on land zoning regulations, adopted a mechanism for 
financing infrastructure development, and enacted new energy 
regulations.  In addressing the delegation's specific concerns, he 
noted that food security is important to the cabinet, specifically 
through plans to develop food security programs in Papua.  Prior 
legislation on public-private partnerships had been unsuccessful, 
and officials are working to improve this legislation.  Indonesia is 
aware of the need to make the oil and gas sector more attractive to 
investors, and Mantik wants to solve cost recovery problems in the 
near term. 
 
¶6. Members brought up additional concerns.  Cargill highlighted its 
work on food security issues but stressed that food security does 
not equate to elimination of imports.  Monsanto hopes to develop 
biotech corn in Indonesia, if relevant regulations are enacted.  GE 
seeks to improve infrastructure in Indonesia and was enthusiastic 
about its geothermal project.  GE referred to an impending 
locomotive deal thanks to EXIM financing.  Phillip Morris encouraged 
private sector input on health legislation.  Time Warner expressed 
concern that regulations limiting foreign content do not support 
growth of the film industry in Indonesia.  Mantik committed to 
raising these issues with the relevant ministries. 
 
Minister of Finance Sri Mulyani Indrawati 
----------------------------------------- 
 
¶7. Finance Minister Sri Mulyani Indrawati stated that Indonesia's 
rising prominence is the result of successful policy efforts and 
 
JAKARTA 00000202  002 OF 004 
 
 
institution-building.  She declared that the top echelon of civil 
servants had taken ownership of reform efforts.  Indrawati 
acknowledged reform "failures" in President Yudhoyono's recently 
completed first term, due to the lack of consistency and 
implementing capacity.  Indonesia is still committed to reform, 
despite the distraction of recent "headlines," a reference to the 
controversy over the bailout of Bank Century.  Indrawati wants to 
return to the pre-2009 fiscal policy when economic conditions allow, 
and she hopes that good coordination among members of the G-20 will 
provide a forum to look at a stimulus exit policy.  The Finance 
Ministry remains focused on increased health, education, 
infrastructure, and defense spending.  The Minister stressed that 
businesses must also consider local government when making 
investment decisions.  She defended the cap on oil and gas cost 
recovery, claiming that it is to mitigate the effects of unfair 
contracts from previous administrations.  US-ABC representatives 
encouraged the Minister to provide additional business incentives 
and direction on existing tax policies, and to address issues of oil 
and gas cost recovery. 
 
Vice Minister of Trade Siregar 
------------------------------ 
 
¶8. Vice Minister of Trade Mahendra Siregar welcomed the delegation 
and expressed optimism about Indonesia's improving business climate. 
 He stressed Indonesia's commitment to ASEAN and discussed his 
government's efforts to improve "domestic connectivity."  He 
cautioned US-ABC members to not be overly harsh in their appraisal 
of Indonesia's investment climate.  Siregar argued that most of the 
concerns member companies have are not unique to Indonesia, but are 
common among large emerging economies.  Siregar also commented on 
Indonesia's recent inclusion in the G-20, describing it as 
"unexpected."  Siregar argued for "quick wins" in the bilateral 
relationship to build momentum toward greater cooperation. 
 
Minister of Industry Hidayat 
---------------------------- 
 
¶9. Minister of Industry Hidayat welcomed all participants and spoke 
of his hopes to lay the foundation in Indonesia for a fundamental 
change in the domestic business sector.  Minister Hidayat noted 
President Yudhoyono's support for removing bottlenecks in the 
investment process and expressed his optimism that opportunities 
will grow over the next five years.  He assured attendees that the 
Bank Century scandal was being adequately managed.  Hidayat hopes to 
position Indonesia as the center of ASEAN, and he called for a 
strong business relationship between Indonesia and the United 
States.  Hidayat asked participants to speak directly with his 
office about company-specific concerns. 
 
Minister of Information and Telecoms Sembiring 
--------------------------------------------- - 
 
¶10. Minister of Information and Telecoms Tifatul Sembiring remarked 
on the continuing problem of the "digital divide" and noted the IT 
goals in Yudhoyono's 100-Day Plan.  He provided an update on the 
Palapa Ring, a fiber-optic cable project that will connect the 
entire country.  He advised that the west side of the project is 
still 2-3 years from completion.  Sembiring also highlighted his 
Ministry's recent anti-cyber-crime efforts. 
 
¶11. US-ABC participants cited the emphasis President Yudhoyono 
placed on infrastructure and telecommunications.  Intel noted the 
low levels of broadband availability and the need for a clear policy 
for spectrum frequency development, procurement, and allocation in 
Indonesia.  UPS asked about the new Postal Law and possible impact 
on courier and logistics services.  Sembiring promised that there 
would be a public comment period for the Postal Law implementing 
regulations.  (Note: the public comment period has already closed. 
End note.)  He defended measures promoting development of local 
capacity in the IT and telecoms sector. 
 
Minister of Foreign Affairs Natalegawa 
-------------------------------------- 
 
¶12. Foreign Minister Marty Natalegawa lauded the council for its 
corporate social responsibility activities.  He encouraged increased 
U.S.-Indonesian business ties in line with Indonesia's democratic 
transformation, sturdy economy, and progress in the U.S.-Indonesia 
and U.S.-ASEAN relationships.  Natalegawa enlisted US-ABC's help on 
business innovations to combat climate change. 
 
¶13. US-ABC members noted that the OPIC agreement discussions are a 
positive signal to U.S. investors that Indonesia is a good place to 
invest.  Microsoft told the FM about its work on the Foreign 
 
JAKARTA 00000202  003 OF 004 
 
 
Ministry computing system, and Sampoerna Foundation asked that the 
MFA consider stakeholder input on the new health bill. 
 
Vice Minister of Transportation Susantono 
----------------------------------------- 
 
¶14. Vice Minister of Transportation Bambang Susantono discussed 
Indonesia's transportation development, a plan to develop a "6 
Corridor" Special Economic Zone program that will form the backbone 
of a national logistics system, and efforts to take more of the 
Ministry's processes online.  Susantono said Indonesia is 
considering the ASEAN Open Skies agreement, but he takes the view 
that domestic carriers should be given preference. McDermott pointed 
out that Indonesia's cabotage rules limit marine construction 
vessels, which currently need to be approved on a case-by-case 
basis.  There are no Indonesian-flagged marine construction vessels 
available.  Susantono agreed that the policy needed to be more 
transparent but stressed that Indonesia's cabotage policy exists to 
protect the domestic fleet. 
 
BKPM Chair Wirjawan 
------------------- 
 
¶15. Chairman of the Investment Coordinating Board Gita Wirjawan 
reassured the members that Indonesia's investment climate was 
heading in the right direction.  He announced that the government 
was considering revisions of Indonesia's negative list on foreign 
investment in the areas of creative industries, health, education 
and telecommunications.  He explained that he needed to "show the 
delta" to make the case to other ministries of the advantages to 
opening up sectors to foreign participation.  In response to a 
question from the Motion Picture Association, Wirjawan used his 
positive experience with the Ministry of Health as a model of how to 
persuade ministries "using quantifiable data" to allow foreign 
participation and majority ownership.  Wirjawan also proposed 
seconding select BKPM staff members to US-ABC companies to give them 
private sector insights and perspective.  An MPA representative 
suggested that several of the studios may be interested to follow up 
on that proposal. 
 
Minister of Energy and Mineral Resources Saleh 
--------------------------------------------- - 
 
¶16. Minister of Energy and Mineral Resources Darwin Saleh welcomed 
the group and discussed the Ministry's goal of changing Indonesia's 
energy mix to rely less on oil and more on resources that are still 
plentiful in the country:  coal, gas, and renewable energy.  A 
number of companies, including Marathon Oil, Caterpillar, GE, and 
McDermott highlighted their interest in investing more in Indonesia, 
but stressed the need for regulatory and contractual clarity.  A few 
raised specific issues, including the impact of cabotage rules and 
fuel standards implementation.  Ministry of Energy officials stated 
that they were working on solutions to both issues, although 
resolution would not be as quick as industry would like. 
 
¶17. The Director General of Mining Bambang Setiawan pointed out that 
Chinese investors were now overtaking Western companies in terms of 
new mining investment.  DG Setiawan claimed that because the Chinese 
had never operated under the old Contract of Work system, 
arrangements under the new mining law provided encouragement.  He 
asked that Western mining companies invest in Indonesia under 
current rules. 
 
Parliamentarian Dinner 
---------------------- 
 
¶18. Deputy Speaker Pramono Anung (PDI-P) told the group that the DPR 
is committed to supporting business relations in a transparent 
manner, noting that most current MPs have business backgrounds.  He 
expressed support and appreciation for Freeport, Boeing, and GE. 
Anung said that Indonesia and the DPR must protect people who come 
to do business here, not stand by idly, for example, as Freeport 
workers are shot at.  About 15-20 members of parliament (including 
chairs) from the agriculture, trade, energy, and banking commissions 
attended. 
 
¶19. Peter Gontha of the Indonesian Chamber of Trade and Industry 
(KADIN) noted that this MP meeting was the first of its kind for 
US-ABC (he joked that he expected only 1-2 members to show up). 
Gontha told the MPs that the council would like to have items 
removed from the negative list, such as communications. 
 
ASEAN Secretariat 
----------------- 
 
 
JAKARTA 00000202  004 OF 004 
 
 
¶20. Anna Robienol, Head of ASEAN's External Economic Relations 
Division, said that the organization's free-trade agreements with 
its regional dialogue partners -China, India, Korea, Japan, 
Australia and New Zealand - were central to ASEAN's economic 
integration strategy and effort to retain a central position in 
Asia's emerging regional architecture.  Ms. Robienol expressed 
ASEAN's desire for more robust work under the U.S.-ASEAN Trade and 
Investment Framework Agreement (TIFA), and she said that the 
organization was eager to participate in a "road show" of ASEAN 
Economic and Trade Ministers in the United States later this year. 
Answering questions from U.S. business representatives, Ms. Robienol 
commented on a lack of institutional compatibility between ASEAN, 
APEC and the Trans-Pacific Partnership.  Ms. Robienol added that 
ASEAN was suffering from a major lack of capacity to deal with the 
pace of activities being pursued under its auspices. 
 
BPOM Chair Kustantinah 
---------------------- 
 
¶21. BPOM Chair Kustantinah listened to the delegation's concerns 
regarding labeling imports, and approvals of biotech crops and food. 
 She acknowledged that Indonesia must move forward on biotech 
products, although with her limited tenure at the head of BPOM, she 
was not yet able to offer a specific path forward.  She did, 
however, commit to improving communications with Indonesia's trading 
partners on food safety issues. 
 
HUME