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Cablegate: Advancing U.S. Relations with Indonesia

VZCZCXRO6417
OO RUEHLMC RUEHPT
DE RUEHJA #1779/01 2630348
ZNR UUUUU ZZH
O 190348Z SEP 08
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0144
INFO RUEHBJ/AMEMBASSY BEIJING PRIORITY 5411
RUEHBY/AMEMBASSY CANBERRA PRIORITY 3063
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UNCLAS SECTION 01 OF 05 JAKARTA 001779

SENSITIVE
SIPDIS

DEPT FOR S, D, P, E, G, OES, EAP
STATE FOR ADMINISTRATOR FORE
STATE PASS TO PEACE CORPS DIRECTOR TSCHETTER, OPIC
PRESIDENT MOSBACHER, USTR FOR AUSTR WEISEL, EXIM FOR VP
MORIN, MCC FOR AMBASSADOR DANILOVICH
PACOM PASS TO PACOM J5
SECDEF PASS TO OSD POLICY
NSC FOR E.PHU, DENNIS WILDER

E.O. 12958: N/A
TAGS: ECON PGOV SENV PREL KDEM ID
SUBJECT: ADVANCING U.S. RELATIONS WITH INDONESIA

1. (SBU) Summary: Now is the time to lock in place the
positive directions that U.S.-Indonesian relations have taken
since 2001 and to make more progress. Seven years ago,
Indonesia was highly vulnerable to terrorist threats, but
Indonesian resolve and U.S. assistance have reduced these
risks greatly. Indonesia then suffered from economic
stagnation and political uncertainty, but now it enjoys
democracy, stability, and an improving economy. Positive
policy impulses from the war on terror and the campaign for
freedom have created new space for the bilateral
relationship, a space where opportunities outweigh risks.
This message proposes action on several standard bilateral
agreements and a few program initiatives to provide greater
ballast for a healthy relationship with the world,s fourth
most populous nation. End Summary.

Security cooperation provides a basis to expand relationship
--------------------------------------------- ---------------

2. (SBU) At the core of our growing relationship with
Indonesia is expanded security cooperation with both the
police and the military. Here, in the world,s largest
Muslim-majority country, public rejection of terrorist
methods, better intelligence, U.S. and Australian police
training, and the determination of President Yudhoyono and
his senior officials have combined to roll back the threat of
terrorist attacks. Although terrorist networks have not been
eliminated, they have been degraded and contained, thanks in
large part to the police.

3. (SBU) The conflict in Aceh, a devoutly Muslim region, has
been resolved by an agreement that provided for regional
autonomy and an election in which a former rebel became
governor. Tensions elsewhere, such as in Papua, Ambon, and
Central Sulawesi, have been reduced by democratic politics,
increased regional authority through decentralization, and
improved policing. The Government of Indonesia (GOI) is
restructuring the military: first the police were constituted
as a separate force, then the military voluntarily withdrew
itself from politics, and now military owned businesses are
being prepared for divestiture. The reformed military and
reformed police actively cooperate with the U.S. military and
are a significant contributor to UN peacekeeping operations,
such as in Lebanon and Darfur.

4. (SBU) Nevertheless, more trust is needed to overcome the
consequences of the previous USG decision to cease military
cooperation with Indonesia due to past human rights abuses.
Our first step was the 2005 decision to resume military sales
and military training after a 13-year embargo.
Accountability for past human rights abuses is an ongoing
process, and the recent Commission on Truth and Friendship
report is a positive marker. Three program challenges are
ongoing. First, we have been asked for a modest level of
assistance to the Indonesian Ministry of Defense to support
efforts to professionalize their forces via a National
Defense University for both military and civilian students.
Second, we need to resolve the contradiction between the
Leahy Amendment,s ban on training members of military units

JAKARTA 00001779 002 OF 005


that had previously committed human rights violations--even
of completely innocent troops--and the policy goal of
achieving reform by training such troops. Third, we should
go forward with our assistance that boosts the military,s
efforts to divest itself of commercial operations, which
benefit few and can lead to abuses. This divestiture would
also give the Finance Ministry the basis it wants to seek
full funding for the Ministry of Defense from the
legislature. In Indonesia, expanding security cooperation
and promoting good governance are mutually reinforcing.

5. (SBU) The growing bilateral activities on security
questions need more form. In June, the Indonesian government
proposed a text for a Defense Cooperation Agreement,
including provisions for periodic consultations. Indonesia
has such an agreement with several other countries, including
China, India and the Philippines. Embassy Jakarta
recommended that the USG respond affirmatively to this
proposal, with the condition that the text should be drafted
in a non-binding way that avoids the need for parliamentary
action in either capital. Such an agreement would help lock
in the progress achieved in the past few years and lay down a
roadmap for future collaboration. ACTION REQUEST: Mission
now seeks authorization to inform the GOI of USG readiness to
participate in talks aiming at concluding a Defense
Cooperation Agreement.

Improving governance key to democratic development
--------------------------------------------- -----

6. (SBU) In the last decade, Indonesia has moved its
political system from authoritarian to free and democratic,
with a direct benefit to 240 million people. Freedom House
ranks Indonesia as the only "free" country in Southeast Asia.
President Yudhoyono reached an agreement with Aceh rebels to
resolve the thirty year conflict in Aceh, and new provisions
for regional autonomy defused conflict in Papua.
Decentralization has moved government closer to its citizens,
with frequent elections unseating underperforming incumbents.
However, the decentralization of administration of such
services as education and health care has created challenges
for less developed communities lacking educated officials and
strong institutions. In some areas, improvements in
governance have been hard to achieve. And decentralization
has often made it harder for foreign investors to gain
necessary approvals.

7. (SBU) U.S. programs aimed at good governance have been
making a substantial difference, but risks abound.
Indonesians welcome USG programs aimed at ending the culture
of corruption here. Police training is increasing respect
for human rights and is fighting corruption. DOJ programs
assist prosecutors, and bilateral judicial assistance is
improving even without a specific agreement. And MCC,s
large program to support Indonesia,s anti-corruption reform
is making a real difference. ACTION REQUEST: If Indonesia
passes its policy indicators this year, it should be given an
MCC Compact with funding commensurate with its importance to
U.S. policy interests. In any case, gap funding is needed to

JAKARTA 00001779 003 OF 005


continue these valued anti-corruption programs between the
end of the threshold program and the beginning of Compact
implementation.

Economic cooperation lagging
----------------------------

8. (SBU) In part because economic reform lags in Indonesia,
U.S. business faces growing competition. For example, a
recent Chinese trade delegation from Guangzhou to Indonesia
included almost 700 participants; the upcoming U.S.-ASEAN
Business Council mission to Indonesia will have only 48
participants. The growing number of Indonesia,s free trade
agreements with other countries and regional blocks signal
Indonesia,s greater integration within Asia at the expense
of U.S. business. Indonesia prefers these less ambitious
deals to the rigorous economic agreements we seek.
Negotiations to renew the OPIC agreement and to conclude a
Bilateral Investment Treaty have stalled, and we are finding
it difficult even to get Indonesia to engage seriously in our
Trade and Investment Framework Agreement (TIFA) process.
Resource nationalism is on the rise, and progress on
improving the investment climate is slow. In the meantime,
we are looking for specific issues where we can advance our
trade and investment interests. The Embassy is working with
EXIM to secure passage of legislation to implement the Cape
Town agreement that would permit EXIM financing of a sale of
170 Boeing 737s to Indonesia,s Lion Air. We are also
working to encourage Indonesia to overturn the $100 million
libel judgment against Time magazine, an unfortunate example
of Indonesia's uncertain rule of law. Despite these
problems, we need to renew work on our economic relations.
ACTION REQUEST: Mission requests authorization to reopen
negotiations on an updated OPIC agreement.

Indonesia as an environmental "super power"
-------------------------------------------

9. (SBU) Indonesia needs the United States as a partner on
environmental issues, and vice versa. Indonesia is number
one in marine diversity, number two in land biological
diversity, but number three in greenhouse gas emissions. At
last year,s climate change conference in Bali and in the
Major Economies Meetings, the United States and Indonesia
worked constructively together. We are working on a $20
million Tropical Forest Conservation Act agreement, a Clean
Energy Fund proposal for the World Bank, and the Coral
Triangle Initiative announced last year by President
Yudhoyono.

10. (U) To launch new collaboration on the marine
environment, the Embassy is working with NOAA and USAID to
secure a positive response to Indonesia,s invitation for the
Okeanos Explorer, NOAA,s most advanced ocean research and
exploration ship, to visit Indonesia next year on its maiden
voyage. Such a visit linked to the May 11-15, 2009 World
Oceans Conference and Coral Triangle Initiative Summit in
Manado would promote science, increase Indonesian capacity to
study and manage its marine resources, and build an active

JAKARTA 00001779 004 OF 005


environmental partnership as part of the bilateral
relationship. ACTION REQUEST: Mission seeks Department,s
support for Embassy,s ongoing efforts to seize this
opportunity.

Health, science, and technology areas for engagement
--------------------------------------------- -------

11. (SBU) Indonesia has underperformed on health issues, and
the current Health Minister is a difficult partner. However,
Indonesia, with nearly half of Southeast Asia,s population,
and half of all human cases of avian influenza, will remain
the world,s largest petri dish for many infectious and
tropical diseases. The health system remains poor in many
areas, evidenced by many wealthy Indonesians flying to
Singapore for treatment. To secure the USG,s long-term
public health interests, we are pursuing four tracks. First,
Australian-brokered consultations to secure WHO approval for
a new global sample-sharing mechanism are going forward, with
November as the target date for agreement. This agreement
would be the basis for Indonesia to resume sharing virus
samples. Second, before the end of the year, we hope to
secure Indonesian signature of the already approved
Biosecurity Engagement Program agreement. Third, public
debates over renewing the agreement for NAMRU (the US Navy,s
medical research unit here) have quieted down, and we hope to
restart negotiations by the end of the year. Finally,
looking toward to a day when there is a change in leadership
in the Health ministry, we should develop long-term
professional relations through training programs,
particularly with the CDC and NIH.

12. (SBU) Indonesia has underperformed in science and
technology, with only 7,000 PhDs in the country. Success in
the 21st century for any economy requires better human
capacity. The prior bilateral science and technology
agreement expired in 2002. It is time to explore interest in
a new agreement. ACTION REQUEST: The USG should propose
concluding an umbrella science and technology agreement. The
text should include provisions for joint research projects,
institutional collaboration, and personnel exchanges with an
emphasis on environmental science, biomedical science, and
perhaps other areas.

Perceptions of U.S. in Indonesia improving
------------------------------------------

13. (SBU) Public diplomacy is critical for building the
bilateral relationship. In February 2008, the BBC reported
that U.S. "favorability" rating in Indonesia had risen from
21 percent to 32 percent in the previous twelve months, which
meant a positive opinion shift by 27 million Indonesians.
Public diplomacy programs have sped forward that progress,
and we should be building upon these successful initiatives.
Education should be central to our strategy here. We are
working to conclude an updated Fulbright agreement within the
next two months, which would provide the basis to expand
higher education cooperation. In the same timeframe we hope
to obtain agreements for the Ministry of Education to use its

JAKARTA 00001779 005 OF 005


scholarship funds to finance Indonesian Fulbright scholars to
study in the U.S. and for the use of $3 million of old PL 480
funds to fund agricultural Fulbright scholarships.

14. (SBU) Finally, the Peace Corps. In 2006 and in 2007 the
Peace Corps sent teams to Indonesia to consider opening a
program. Peace Corps decided to open a new program here, but
funding has delayed this opening. Frankly, it is time to add
a sense of priority and, indeed, urgency. Volunteers here
will be safe and welcome, and their impact will be enduring.
ACTION REQUEST: Embassy Jakarta requests that a team be sent
to open negotiations for a new Peace Corps agreement to
replace the exchange of letters dating from 1965 and to
develop concrete plans on how to re-establish a Peace Corps
program.

A Way Forward
-------------

15. (SBU) We recommend formalizing our developing bilateral
partnership through a Defense Cooperation Agreement, an
umbrella science and technology agreement, and a renewed
Fulbright agreement that provides the basis for additional
higher education cooperation. We need to continue the good
governance programs now funded by the MCC and to reopen
negotiations aimed at renewal of OPIC operations here. The
Peace Corps should implement its internal decision to open a
program. Ten years after its transition to democracy,
Indonesia is at a critical point in its development and we
have strategic opportunities to support this process.
Security cooperation is one element, but we also have
opportunities to seek closer cooperation on education,
environment, health, science and technology, and the economy.
Success in these areas would help convince Indonesians that
democracy delivers the goods and international partners are
valuable. The trajectory of reform is positive. The
challenge over the next 10 to 20 years is to institutionalize
such successes through further cooperation.
HUME

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