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Cablegate: U/S Jeffery Meeting with Vice President Kalla

VZCZCXRO0094
RR RUEHCHI RUEHDT RUEHHM
DE RUEHJA #2616/01 2610657
ZNR UUUUU ZZH
R 180657Z SEP 07
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 6313
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHKO/AMEMBASSY TOKYO 0813
RUEHBY/AMEMBASSY CANBERRA 1194
RUEHWL/AMEMBASSY WELLINGTON 1770
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEHRC/USDA FAS WASHDC

UNCLAS SECTION 01 OF 02 JAKARTA 002616

SIPDIS

SIPDIS
SENSITIVE

DEPT FOR A/S HILL AND EAP/MTS
TREASURY FOR IA-BAUKOL
SINGAPORE FOR BAKER
DEPT PASS USTR FOR DBHATIA AND DKATZ
COMMERCE FOR 4430/GOLIKE
ENERGY FOR A/S HARBERT, CUTLER AND GILLESPIE

E.O. 12598: N/A
TAGS: ECON PGOV EINV SENV ID
SUBJECT: U/S Jeffery Meeting with Vice President Kalla

1. (SBU) Summary. Vice President Jusuf Kalla and Under Secretary
Reuben Jeffery discussed U.S.-Indonesia cooperation in
anti-corruption, energy security, and climate change during a
forty-minute meeting on September 11. Kalla returned to his
customary theme of the importance of stability and economic security
for the Indonesian people amidst the continuing social upheaval that
accompanies democratization. Kalla also expressed the hope that the
U.S. and EU can achieve a breakthrough on agricultural subsidies to
save the Doha Development Round. End Summary.

2. (SBU) Kalla started the meeting by observing that Indonesia had
learned a great deal from the Asian financial crisis ten years ago.
He expressed confidence that the sub-prime mortgage meltdown in the
U.S. would have little effect on Asia, in general, and Indonesia, in
particular. He said the Indonesian financial system was in a much
stronger position than ten years ago. Soaring commodity prices have
caused some pain domestically but have also been a boon to a host of
primary products industries, which are Indonesia's strength.

3. (SBU) Turning to the first theme of U/S Jeffery's visit -
anti-corruption efforts - Kalla said no other country in the region
has arrested as many public officials, whether at the national or
local level, as Indonesia. He said the GOI has served notice to all
politicians and bureaucrats that corruption will not be tolerated.
He repeated his complaint that the initial success of the GOI's
anti-corruption efforts has caused increased cautiousness by public
officials regarding contracts and procurement.

4. (SBU) Kalla welcomed U/S Jeffery's offer of increased cooperation
in energy security and noted that the GOI is looking for more
foreign direct investment (FDI) across the board in energy. He said
the GOI's energy plan calls for the country to diversify its energy
mix and seeks FDI in oil, natural gas, coal, as well as in
non-traditional biofuels and coal-bed methane. Kalla added that
growing interest in biofuels has been a boon for crude palm oil
(CPO) producers who grow the feedstock for biodiesel, but it has
also had two less than salutary impacts. Rising global corn prices
as a result of the U.S. ethanol program have raised the price of
chickens in Indonesia, which is both upsetting and perplexing to the
average Indonesian. He said the boom in CPO has also meant the
doubling of cooking oil prices domestically. The GOI has had to
raise its outlays for subsidized cooking oil, but the budget cannot
accommodate a full subsidy. Kalla noted the second impact was in
the form of increased pressure on Indonesian forests. The GOI is
under pressure to clear more land for palm oil plantations. GOI
policy is to create harmony between the need for a clean
environment, plentiful food supplies, and energy security.

5. (SBU) Warming to his subject, Kalla talked at length on the need
to make best use of marginal land for biofuels feedstock. He said
already cleared land that was unused for food production was ideal
for cultivating the jatropha plant, which can also be used for
biofuels feedstock. "We can use jatropha," he said, "to maximize
biofuels without hurting food production or the forests." Kalla
also welcomed U/S Jeffery's offer to seek ways to share U.S.
technology in biofuels since the U.S. faces the issue of food versus
fuel in the biofuels arena.

6. (SBU) Turning to climate change, Kalla mentioned that President
Yudhoyono would be traveling soon to New York for a UN meeting on
the subject and that Indonesia was proud to be hosting COP-13 in
Bali in December. Kalla noted that Indonesia has great
environmental challenges but that it was not alone in that regard.
He said the rest of Asia, Africa, and India all share the same
concerns about sustainable development. Kalla added that
environmental problems - like haze from land-clearing fires - were a
big concern to everyone in the region. Kalla said the GOI is
looking for international cooperation on the environment and would
be glad to partner with the U.S.

7. (SBU) Kalla then returned to one of his frequent themes with
official USG visitors: the need for economic security for
Indonesians as democratization continues apace. He noted that
Indonesia and the U.S. have partnered successfully in
counter-terrorism efforts. However, Indonesia will require
sustained economic development to fight poverty and unemployment.
The people of Indonesia need stability and economic development, not

JAKARTA 00002616 002 OF 002


just democracy. "What good is democracy without growth and
stability?" he asked. Indonesia needs FDI for growth and noted that
the Department of State travel warning is not helpful in getting
potential investors to visit Indonesia.

8. (SBU) In closing, Kalla expressed his hope that the U.S. and EU
can bridge their differences on agricultural subsidies to save the
Doha Development Round. He added that Indonesia had a great
interest in seeing agriculture subsidies eliminated as this would
benefit Indonesian farmers. Kalla mused that the proliferation of
bilateral agreements around the region might complement the Doha
talks and noted that Indonesia had recently signed bilateral deals
with Japan and Korea.

9. (U) U/S Jeffery cleared this cable.

HUME

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