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Cablegate: Anti-Corruption Reform Reshaping Indonesia

VZCZCXRO1355
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJA #1815/01 2690718
ZNR UUUUU ZZH
R 250718Z SEP 08
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 0192
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 WASHINGTON DC
RUEHKO/AMEMBASSY TOKYO 2536
RUEHBJ/AMEMBASSY BEIJING 5437
RUEHBY/AMEMBASSY CANBERRA 3087
RUEHUL/AMEMBASSY SEOUL 4946
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 JAKARTA 001815

MCC FOR AMBASSADOR DANILOVICH AND MORFORD
MCC FOR MARIA LONGI
MCC FOR DEPUTY CEO RODNEY BENT
DEPT FOR E - U/S JEFFERY
DEPT FOR EEB A/S SULLIVAN
DEPT FOR EAP DAS MARCIEL AND EB/IFD DAS DAVID NELSON
DEPT FOR EAP/MTS, EEB/IFD/OIA, INL SNYDER, INL ROESS
USAID FOR ADMINISTRATOR FORE
USAID FOR DEPUTY ADMINISTRATOR KUNDER AND ANE WARD
USAID/ODP FOR KAREN TURNER AND PETER DELP
USAID/ANE FOR STEPHAN SOLAT
TREASURY FOR A/S LOWERY
TREASURY/IA FOR RACHEL BAYLY
DEPT PASS USTR FOR SCHWAB
DEPT PASS USTR FOR ELENA BRYAN
DEPT PASS USTR FOR FRAN HEUGEL
DEPT PASS USTR FOR AUSTR BARBARA WEISEL
OMB FOR JACQUELINE STRASSER
DOJ FOR CRIM AAG SWARTZ
DOJ/OPDAT FOR ALEXANDRE/LEHMANN/JOHNSON

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV KMCA KCOR ECON KJUS ID
SUBJECT: ANTI-CORRUPTION REFORM RESHAPING INDONESIA

JAKARTA 00001815 001.2 OF 003


1. (SBU) Summary: Although corruption remains endemic, Indonesia is
making continued progress to root it out. In the past six months,
the Corruption Eradication Commission (KPK) has arrested six Members
of Parliament in six separate scandals. Challenges remain: limited
resources, legal challenges, and uncertain political will.
Indonesia is in the initial years of a long-term process to reduce
corruption throughout the country. And U.S. assistance to Indonesia
is institutionalizing anti-corruption reform successes. End
summary.

High-level corruption arrests highlight 2008 progress
--------------------------------------------- --------

2. (SBU) Indonesia apprehended several high-level corruptors in
2008. Parliament has long been considered one of the most corrupt,
yet also untouchable, institutions in Indonesia. That immunity
ended in 2008. In the past six months, the Corruption Eradication
Commission (KPK) has arrested six Members of Parliament - from both
government coalition and opposition parties - in six separate
scandals. And other senior Members of Parliament, including the
Budget Commission head, might fall soon.

3. (SBU) The KPK has also focused its attention on corruption within
the Attorney General's Office. The KPK caught Urip Tri Gunawan, a
senior AG prosecutor, red-handed with a $600,000 bribe in March.
Within six months of the arrest, the Anti-Corruption Court sentenced
Urip to 20 years in prison and sentenced the businessperson who
passed the bribe to five years.

4. (SBU) The KPK is also investigating other high-level officials,
including ministers Paskah Suzetta (National Development Planning)
and M.S. Kaban (Forestry). In mid-September, the KPK arrested a
Commissioner of the Business Competition Oversight Unit, an
independent government body that rules on monopoly cases. In
February, the KPK sentenced a former head of the National Logistics
Agency to ten years in prison. The KPK also arrested former central
bank head Burhanuddin Abdullah for corruption related to illegal
payments to Parliament. Earlier in the year, the KPK raided the Tax
& Customs office at Indonesia's largest port, exposing many corrupt
practices and cash bribes in desks.

Building institutions for anti-corruption reform
--------------------------------------------- ---

5. (SBU) Eradicating corruption remains a central pillar of
President Yudhoyono's overall governing strategy and political
agenda. And the Corruption Eradication Commission (KPK) is the
independent government institution leading this effort. The KPK has
the authority to conduct investigations and then try cases in the
specialized Anti-Corruption Court. While the KPK is the new
headline independent government body tasked to lead corruption, the
Attorney General's Office is the larger, more permanent
institutional presence. The Attorney General's Office and police
handle over 95% of all corruption cases nationwide whereas the KPK
handles fewer than 5%. Separately, President Yudhoyono has created
the Office of Government Procurement Policy to tackle the
inefficiency and problems within the government procurement system,
a major source of corruption. On the military front, President
Yudhoyono appointed former KPK Commissioner Erry Hardjapamekas to
lead the Defense Department's 150-person business divestiture unit.
Under Hardjapamekas' leadership, the initiative to divest the

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military of its businesses is moving forward after three years of
inaction, although long-term success will require significant
Defense Department budget increases.

6. (SBU) Increased personnel help to explain the rising tempo of
operations at the KPK. The KPK has nearly doubled the number of
investigators (111 now) and prosecutors (28 now) since 2005. The
KPK's long-term strategy balances prosecution and prevention. The
KPK is on track to conduct more investigations in 2008 than any
previous year and is maintaining the prosecution case load.
Regarding prevention, the KPK is leading wider government reform,
including working with the Supreme Court to better account for case
fees and promote better governance and case management with the
support of the USAID-managed MCC Threshold Program.

7. (SBU) Damaged by the Urip bribery scandal, the AGO is also moving
to strengthen its capacity. Indonesian AG Supandji inaugurated the
AGO's Anti-Corruption Task Force during AG Mukasey's June 2008
visit. This U.S.-supported task force of 50 prosecutors will
receive additional resources to investigate and prosecute corruption
cases nationwide. The task force is untested as it just began to
receive its first cases, but the task force leader has a credible
corruption prosecution record. Separately, the AGO initiated
broader bureaucratic reforms in coordination with the Ministry of
Finance in September.

Strong anti-corruption reform leadership
----------------------------------------

8. (SBU) The second group of KPK commissioners began their four-year
team in January clouded with suspicion of the new commissioners'
bona fides and reform credentials. Some activists interpreted
current KPK head Antasari Azhar's questionable confirmation hearing
comments as a sign that he would not prosecute Members of
Parliament. Quite the opposite occurred: Parliament has been the
KPK's number one target in 2008. The KPK brought corruption charges
against six Members of Parliament and is investigating others. Our
legal, law enforcement, and NGO contacts broadly agree that the
KPK's leadership is cause for optimism. In September, President
Yudhoyono appointed leading anti-corruption reform scholar and
activist Denny Indrayana to be Presidential advisor on legal
affairs. While the post has no direct authorities, bringing
Indrayana and civil society perspectives directly into the
President's Office is notable.

Passing Anti-Corruption Court bill next big marker
--------------------------------------------- -----

9. (SBU) The biggest threat to Indonesia's anti-corruption reform
agenda would be failure to pass the Anti-Corruption Court Law. If
the Anti-Corruption Court is not reauthorized by December 2009, the
KPK would prosecute corruption cases in the regular courts, which
are of uneven quality and subject to corruption. The KPK has
successfully prosecuted 100% of its cases before the Anti-Corruption
Court. The key element in the Anti-Corruption Court's success is
the continued use of independent, non-career "ad hoc" judges. With
2009 elections on the horizon, the legislative calendar is shortened
and enthusiasm by Members of Parliament is reduced due to the string
of recent Parliamentary arrests by the KPK. Human resources remain
another institutional challenge for both the KPK and AGO in
combating corruption. The KPK's human resource improvements (e.g.,

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nearly doubling prosecutors at KPK since 2005) must be placed in
perspective: there are 28 prosecutors supported by 111 investigators
for a country of 240 million people.

Corruption fight continues, trajectory positive
--------------------------------------------- --

10. (SBU) There is hardly a day when a high-level corruption scandal
is not on the front page of Indonesian dailies. Are the KPK arrests
exposing just the tip of the iceberg? Our contacts generally agree
that the government's anti-corruption drive is making progress. In
2008, Indonesia improved its score on the World Bank's "Control of
Corruption" indicator and Transparency International's Corruption
Perceptions Index. The KPK is taking a more aggressive stance
through its increased personnel, record of success, and strong
mandate. And the Attorney General's Office is taking on important
reforms, particularly the Anti-Corruption Task Force and internal
bureaucratic reforms. The government is making an impact: the
arrests of six Members of Parliament in six separate cases in 2008
speak to the growing strength and commitment of anti-corruption
reform in Indonesia.

HUME

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