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Cablegate: Iagga Indonesia Report

VZCZCXRO3647
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJA #0517/01 0730853
ZNR UUUUU ZZH
R 130853Z MAR 08
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 8322
INFO RUEAWJB/DEPT OF JUSTICE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHKO/AMEMBASSY TOKYO 1665
RUEHBJ/AMEMBASSY BEIJING 4819
RUEHBY/AMEMBASSY CANBERRA 2172
RUEHUL/AMEMBASSY SEOUL 4470
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 02 JAKARTA 000517

SIPDIS

DEPT FOR U/S JEFFERY, EEB A/S SULLIVAN, DEPT FOR EAP DAS MARCIEL,EEB
DAS DIBBLE
DEPT FOR EAP/MTS, EEB/IFD/OIA, INL BOULDIN
L/LEI FOR BUCHHOLZ
DOJ FOR CRIM AAG SWARTZ
DOJ/OIA FOR WARNER/ROBINSON
DOJ/OPDAT FOR ALEXANDRE/LEHMANN/JOHNSON
DOJ/AFMLS FOR SAMUEL
MCC FOR AMBASSADOR DANILOVICH AND MORFORD
DEPT PASS USTR FOR AMBASSADOR SCHWAB
TREASURY FOR IA - A/S LOWERY
USAID FOR ANE/AA WARD

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV KMCA KCOR ECON KJUS ID
SUBJECT: IAGGA INDONESIA REPORT

REF: STATE 18836

JAKARTA 00000517 001.2 OF 002

1. (U) This cable responds to the action request in STATE 18836,
regarding the International Anti-Corruption and Good Governance Act.
Below is the text of Embassy Jakarta's report.
Government Efforts
------------------
2. (U) The Government of Indonesia (GOI) is in the process of a
significant anti-corruption campaign, further institutionalizing its
commitment to anti-corruption reform in 2006 and 2007. The GOI has
replaced or sidelined corrupt officials, energized anti-corruption
agencies, and publicly supported reformers. The Corruption
Eradication Commission (KPK) has established itself as the premier
body for anti-corruption reform since its founding in 2003. The
Chief of Police and Minister of Finance as well as the recently
appointed Attorney General and Minister for State-Owned Enterprises
are considered to be "reformers" with the ability to lead further
governance and anti-corruption reform in Indonesia.
3. (U) The GOI and USAID are implementing a Millennium Challenge
Corporation (MCC) Threshold program, which includes a strong focus
on improving anti-corruption efforts. In 2007, Indonesia scored
exactly at the median on the MCC's "control of corruption" index,
marking continual improvement over the past four years.
Institutions throughout the government are taking pro-active
measures and establishing strategic plans to combat corruption.
However, limited institutional capacity remains a constant challenge
throughout the government, both at the national and local levels.
4. (U) Indonesia hosted the 2nd Conference of State Parties for the
UN Convention Against Corruption (UNCAC) in January 2008. A UNCAC
signatory, Indonesia is working to revise its criminal law to comply
with UNCAC regulations. The GOI has also publicly expressed support
for participating in the World Bank - UN Stolen Asset Recovery
(StAR) initiative.
Law Enforcement and Legal Systems
---------------------------------
5. (U) Supreme Court and broader judicial sector reform is of
paramount importance to effectively combat corruption in Indonesia.
MCC is working to improve institutional capacity at the Supreme
Court through budget and human resource systems reform. USAID is
supporting GOI partners to develop systems to manage corruption and
commercial cases at the Supreme Court and five Jakarta District
Courts.
6. (U) The Corruption Eradication Commission (KPK) is an independent
GOI institution that investigates and prosecutes high-profile
corruption cases and coordinates government-wide corruption
initiatives. During its first four years (2003-2007), the KPK
successfully prosecuted 100% of its cases (39 total), including the
prosecution of former ministers, governors, and other senior
officials. The GOI is considering a bill to expand the KPK. The
MCC Threshold program supports the KPK by providing funding for
equipment and training to improve the technical capabilities,
communications, and investigative capacity.
7. (U) A U.S. Department of Justice (DOJ) Resident Legal Advisor
based at U.S. Embassy Jakarta is working with the Attorney General's
Office and Ministry of Law and Human Rights on critical legislation,
including revisions to the criminal procedure code and developing an
asset forfeiture law. The Indonesian National Police is undergoing a
transformation under new leadership with improved internal
discipline. DOJ's International Criminal Investigative Training
Assistance Program (ICITAP) is providing assistance to the police to
clarify professional standards, reform financial management, and
build capacity for effective investigation techniques.
8. (U) The GOI's Financial Transaction Reports and Analysis Center
(PPATK) is a strong proponent of combating money-laundering in
Indonesia. USAID support to PPATK has also led to the formulation
of a National Anti-Money Laundering Strategy. PPATK has increased
the number of suspicious transaction reports being filed by bank and
non-bank financial institutions and has been instrumental in the
increased number of prosecutions of money laundering cases.


JAKARTA 00000517 002.2 OF 002


Transparent Governance
----------------------

9. (U) Both USAID and the USAID-administered MCC Threshold Program
are assisting in the implementation of the 2007 Supreme Court
Transparency Decree, an initiative that requires all Court decisions
to be published. Publishing Supreme Court decisions can transform
the Indonesian judicial system by increasing its transparency and
accountability.
10. (U) The "Group of Five" - the Ministry of Finance (MOF), KPK,
Supreme Audit Board (BPK), Supreme Court, and the Ministry for State
Apparatus Reform - is leading a pilot civil service reform effort.
Reforms include revisions to pay structures as well as efficiency
and performance improvements. The GOI's personnel expenditure in
the 2008 budget increased by 30%. The MOF is improving transparency
in Indonesia's tax administration. The USG has actively worked with
other donors to support these efforts, including the establishment
of a directorate for tax investigations and intelligence and a
sub-directorate for internal controls.
11. (U) The GOI has also made efforts in the past year to
consolidate and improve management at more than 150 state-owned
enterprises, but many remain non-transparent and subject to
political meddling. BPK, similar to the U.S. GAO, is playing a
greater role in exposing corruption and increasing government
transparency and accountability. The BPK continues to receive
technical assistance through USAID to help it build capacity and
implement reforms. The U.S. Department of Defense and USAID are
working with the Indonesian Ministry of Defense to improve defense
resource management systems and evaluate military business
divestiture.
12. (U) USAID is partnering with local governments, local
legislatures and civil society organization in 57 districts to
establish more sound and transparent, performance-based budgeting,
financial management and procurement practices and strengthen civil
society efforts to monitor and prevent public sector corruption.
In 2006, USAID supported a highly successful public information
campaign on procurement integrity and produced and nationally
disseminated practical tools for monitoring local government
procurements. In 2007, USAID trained staff of 50 local governments
on new government accounting and financial management standards for
accountability. These initiatives support Indonesia's ambitious
decentralization reform agenda which devolves significant governing
and budgetary authority to the city and district (kabupaten)
governments. At the national level, USAID is assisting the AGO to
implement their anti-corruption agenda.
Civil Society
-------------
13. (U) Anti-corruption NGOs and media investigations of corruption
are a critical component of the overall anti-corruption reform
movement. Several USAID programs partner with Indonesian civil
society organizations on anti-corruption and governance reform
programs. For example, the MCC Threshold program is working with
Transparency International (TI) - Indonesia to conduct further
survey-based research related to TI's Corruption Perception Index
for Indonesia. Embassy Jakarta is also working with the CSIS Hills
Program on Governance to establish a university institute to promote
research on governance issues.

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