Cablegate: New Indonesian Civil Aviation Law Paves the Way for Ex-Im

VZCZCXRO1845
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJA #2304 3570016
ZNR UUUUU ZZH
R 220016Z DEC 08
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 1035
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS JAKARTA 002304

DEPT FOR E, EAP/MTS, EAP/EP, EEB/IFD/OMA, E/CBA
TREASURY FOR IA/MALACHY NUGENT AND TRINA RAND
COMMERCE FOR 4430/KELLY
DEPARTMENT PASS EXIM BANK VP MORIN
DEPT PASS USTR WEISEL, EHLERS

SIPDIS

E.O. 12598: N/A
TAGS: BEXP ETRD EAIR EINV ECON ID
SUBJECT: NEW INDONESIAN CIVIL AVIATION LAW PAVES THE WAY FOR EX-IM
FINANCING FOR HUGE BOEING SALE

REF: Jakarta 1262

1. Summary. The Indonesian parliament passed a new civil aviation
law on December 17 that paves the way for Ex-Im bank to provide
financing for the sale of billions of dollars worth of Boeing
aircraft to Indonesian air carriers. The new law implements the
provisions of the Cape Town Convention on International Interests in
Mobile Equipment. Embassy and Ex-Im worked extensively with the
Indonesian parliament and government to get this outcome. End
Summary.

2. The Indonesian parliament approved a new civil aviation law on
December 17, which specifically implements the provisions of the
Cape Town Convention (CTC), an international treaty designed to
standardize the transactions of moveable property, particularly
aircraft and aircraft engines. Although Indonesia had previously
issued a Presidential decree implementing the CTC, Ex-Im's local
counsel determined that the decree did not fully implement the
convention. Without full CTC implementation, Ex-Im was unable to
proceed on a $1 billion financing agreement for the initial sale of
30 Boeing 737-900 Extended Range aircraft to Indonesia's Lion Air.
Lion Air has total orders for 178 737-900ERs with purchase rights
for an additional 50, making them Boeing's largest customer for the
craft.

3. In a series of meetings between February and June, Embassy met
with parliamentarians, Ministry of Transportation officials
including the Minister, individual airlines, and the local air
carriers association to encourage the parliament to include specific
language in the new civil aviation bill to implement the CTC.
During these meetings, the local air carriers association requested
legal assistance to draft appropriate implementing language
(reftel).

4. Ex-Im responded by hiring local counsel to advise the the
Indonesian working group (consisting of the local air carriers
association, parliament, and the Ministry of Transportation) in
drafting legislation that would be acceptable to parliament while at
the same time satisfying Ex-Im's requirement that the CTC be fully
implemented. The December 17 law was the result of this
collaborative effort.

5. The new law paves the way for possible Ex-Im financing not only
of Lion Air's substantial orders. National carrier Garuda announced
earlier this year the purchase of four Boeing 777-300ERs on top of
their existing orders of twenty-five 737-800s and seven 777-300ERs.
In addition, there are several other possible purchases of Sikorsky
helicopters that may qualify for Ex-Im financing now that the Cape
Town Convention is implemented in Indonesia.

HUME

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