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Cablegate: Indonesia's 100-Day Plan: 15 Priority Programs

VZCZCXYZ0016
PP RUEHWEB

DE RUEHJA #1901/01 3211100
ZNR UUUUU ZZH
P 171100Z NOV 09
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC PRIORITY 3848
INFO RUEATRS/DEPT OF TREASURY WASHDC
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/USDOC WASHDC 1583
RUEAIIA/CIA WASHDC

UNCLAS JAKARTA 001901

SENSITIVE
SIPDIS

DEPARTMENT FOR EAP/MTS, EEB, OES, INL, S/CT, ECA, USAID
TREASURY FOR IA - T.RAND
ENERGY FOR PI-32 CUTLER AND COLOMBO
USTR FOR EHLERS
COMMERCE FOR 4430 NADJMI
USAID FOR DEPUTY ASSISTANT ADMINISTRATOR ASIA MARGOT ELLIS

E.O. 12958: N/A
TAGS: ECON EAID EFIN ETRD EINV ENRG KCOR PREL PTER SENV
ID

SUBJECT: INDONESIA'S 100-DAY PLAN: 15 PRIORITY PROGRAMS

1. (SBU) Summary: President Susilo Bambang Yudhoyono (SBY) has
identified 15 priority programs for his second administration in the
government's 100-day plan. The heated dispute between Indonesia's
police, Attorney General's Office and the Corruption Eradication
Commission (KPK) prompted the president to move countering
corruption and combating legal mafias to the top of his 100-day
list. Two other notable priorities include establishing a new
Counter-Terrorism Coordinating Agency and streamlining land
acquisition regulations to facilitate stalled infrastructure
development. Several of the 15 priority programs may facilitate our
continuing efforts to build a broad-based partnership to advance
progress on shared challenges such as global climate change, food
security and reform in education and health. End summary.

Removing Constraints to Higher Growth
- - - - - - - - - - - - - - - - - - -

2. (SBU) The SBY-Boediono administration began work on an initial
100-day plan for the new administration in the weeks before the
inauguration. Advisors close to Vice President Boediono worked to
identify low-hanging fruit which could be harvested early and
longer-term action needed to remove bottlenecks in physical
infrastructure, soft infrastructure (including bureaucratic reform),
social infrastructure (including providing a stronger social safety
net with better targeting), and creative infrastructure. A
three-day National Summit held October 29-31 launched a wider
discussion between national and regional governments, the private
sector and a variety of academic and other experts regarding
national priorities, primarily relating to economic development.
Significant consensus exists on the need to remove key obstacles to
higher economic growth, such as inadequate infrastructure, weakness
in governance and an educational system which does not provide the
results needed to compete in a global economy. The current
corruption-related political controversy has, however, shifted
public attention away from SBY's wider economic growth agenda to the
need for governance reform.

Plan's Details Still Emerging
- - - - - - - - - - - - - - -

3. (SBU) Coordinating and line ministers are currently developing
the government's first 100-day plan, and more comprehensive one and
five-year plans. Details which have emerged so far indicate a
variety of planned actions, including establishing a new
Counter-Terrorism Coordinating Agency, revising government laws and
regulations to streamline land acquisition for public projects, and
increasing operation of port and customs services to 24 hours per
day. The Presidential Work Unit, headed by Kuntoro Mangkusubroto,
is responsible for monitoring progress on implementation of the
100-day plan. Analysts have said some elements of the plan are
promising steps to address impediments to clean governance and
higher growth. However, they caution that other suggested measures
remain vague, could deter investment and/or will require significant
political support that may not be forthcoming.

President's 15 Priorities for 100-Day Plans
- - - - - - - - - - - - - - - - - - - - - -

4. (U) President Yudhoyono announced fifteen priorities for his
second administration's 100-day plan: combating legal mafias in all
state institutions and law enforcement agencies; revitalizing the
defense industry; overcoming terrorism; providing electricity; food
production and security; revitalizing fertilizer and sugar
industries; rectifying inconsistencies in land-use and spatial
planning; developing infrastructure; empowering small, medium and
micro-enterprises; financing investment and development; climate
change and the environment; reforming health services; reforming
education; preparedness of disaster relief; and improving synergy
between the central and regional governments. Brief overviews below
describe possible opportunities for advancing U.S. interests in
these areas.

Priority Areas: An Overview
- - - - - - - - - - - - - - -

5. (SBU) COMBATING "LEGAL MAFIAS": President SBY, who was reelected
partly on his positive reform record, immediately made combating
'legal mafias' his top priority for his first 100 days in office.
By legal mafias, SBY was referring to those seeking to use influence
in legal cases to harm others for personal gain. These practices,
which are pervasive in national and regional government institutions
and law enforcement agencies, include case brokering, bribery,
extortion, threatening witnesses and other parties, charging
unofficial fees, and other rent seeking behavior. SBY said this
mafia undermines justice and the rule of law, creating an uncertain
investment climate in the nation. His focus on this issue came to a
head during recent national attention to allegations of case
brokering, extortion, and conspiracy in a dispute between the
Indonesian National Police (INP), the Attorney General's Office
(AGO), and the Corruption Eradication Commission (KPK) (see Jakarta
1845). SBY's initial response to this controversy was to designate
a team of 8 respected academicians, attorneys, and civil society
leaders to investigate the controversy between these organizations
and to direct the public to report Mafioso-like behaviors in legal
matters to a post office box. President SBY's focus on these issues
provides opportunities to increase US-Indonesia collaboration in
promoting good governance and the rule of law and establishing a
better climate for foreign investment and entrepreneurship.

6. (SBU) REVITALIZING INDONESIA'S DEFENSE INDUSTRY: This has been a
goal of the GOI for some time, although its inclusion in the 100-day
plan elevates it to a higher priority. The sector's lack of
development stems in part from the state-owned enterprise (SOE)
status of producers such as small arms maker PT Pindad and
shipbuilder PT PAL. Defense Minister Yusgiantoro told the press
that as a first step to increasing those producers' capabilities and
competitiveness, the GOI must clarify under which ministry they
fall. The Indonesian defense industry's lack of ability to produce
sophisticated armaments has resulted in a very small volume of
third-country sales and what the GOI believes is an over-reliance on
foreign manufacturers, particularly for the Navy and Air Force. A
recently concluded Memorandum of Understanding between Bell
Helicopters and an Indonesian SOE presents an opportunity for
possible win-win collaboration in this sector.

7. (SBU) OVERCOMING TERRORISM (THE INCREASE OF CAPACITY IN THE
RESTRUCTURING OF COUNTERTERRORISM INSTITUTIONS TO FURTHER INVOLVE
ALL LAYERS OF SOCIETY): The government has proposed the
establishment of a Counterterrorism Coordination Agency which would
coordinate GOI CT policy and activities, and serve as a central
crisis center in the event of a terrorist attack. The agency would
be composed of governmental and social components, including most
GOI Ministries, the Attorney General's Office, the National Police
(INP), the National Intelligence Body (BIN), and the Armed Forces
(TNI). The Coordinating Minister for Political, Legal, and Social
Affairs would head the body and answer directly to the president.
It has not yet been determined whether the agency would have
operational capacities. In addition to ongoing U.S.-GOI CT
cooperation between law enforcement agencies, elements of the agency
would also coordinate with the Religious, Education, and Information
Affairs Ministries to implement counter- and de-radicalization
programs, another U.S.-GOI area of cooperation. Since the July 17
bombings, we have seen GOI efforts to tighten interagency law
enforcement cooperation, including proposed amendments to existing
counterterrorism law that would allow the TNI and BIN to work more
closely with police on CT activities. The establishment of a CT
Coordination Agency could enhance CT operational capabilities and
intelligence sharing across GOI agencies if it is structured in such
a way that participating agencies' responsibilities are clearly
defined and there is an information sharing mandate that applies to
all agencies.

8. (SBU) CLIMATE CHANGE AND THE ENVIRONMENT AND RATIONALIZING
LAND-USE AND SPATIAL PLANNING: SBY's priority programs on climate
change and environment, and harmonizing land-use and spatial
planning, are consistent with his G20 commitment in Pittsburgh to
reduce Indonesia's emissions - primarily from forestry and peat
lands. The administration seeks to protect forests, combat illegal
logging and fires, and protect marine habitats. It also seeks to
address underlying land-tenure and governance ambiguities that
undermine sustainable forest and land-use management. USAID is now
concluding a highly successful year-long effort to establish the
regional spatial plan for Papua, which the Governor touts as the
"blueprint for development" of his Province. We expect to
strengthen our partnership in these areas during the coming years.

The new Minister of Forestry Zulkifli Hasan has declared that forest
rehabilitation, peat land conversion, and spatial planning were
among his short list of priorities for the ministry. The new
Minister of Environment Gusti Muhammad Hatta has stated that

resolving overlapping and conflicting spatial and land-use plans in
coordination with other ministries is a priority, and the Minister
of Agriculture has made similar statements. This is a promising
start to what could be a whole-of-government effort to address
climate change mitigation, with U.S. and international partners'
support. Next year we will significantly increase USG support for
forest management initiatives and GHG emissions reduction from
deforestation.

Although the Ministry of Marine Affairs and Fisheries has not yet
spelled out its 100-day plan, it is likely to continue work on the
Coral Triangle Initiative, of which the U.S. is the largest
bilateral supporter. The new Minister Fadel Muhammad says SBY
instructed him to focus on the livelihoods of fishermen,
particularly small-scale, traditional ones. Next year, we will have
a major effort involving USAID, NOAA and DOJ that will collaborate
on these priorities as well as coastal community resilience, GOI
capacity building, reducing illegal fishing, marine protected areas
management, alternative livelihoods and sustainable fisheries in the
face of climate change.

9. (SBU) PROVIDING ELECTRICITY: The SBY administration recognizes
the hardships that electricity shortages are creating, but its
proposed solutions offer little new and nothing that will rapidly
solve the problem. The Minister of Energy and Mineral Resources has
reiterated a commitment to the country's two 10,000 MW accelerated
electricity development programs, Phase I (coal powered) and Phase
II (geothermal, hydro, gas, coal). Phase I is behind schedule due
to problems with financing and delays attributed to the Chinese
contractors who are building most plants. The government has not
yet begun Phase II due to pricing uncertainty and the inadequacy of
the regulatory and tendering mechanisms that will be needed to bring
in independent power producers. The Indonesian government has
already approached the U.S. and other countries for help on many of
the policy obstacles it faces. The only innovation suggested by the
Ministry is contract renegotiations for about 50 independent power
producer (IPPs) projects that have been stalled in the financing
stage for years. Most of the 50 IPPs bid unrealistically low in the
public tender phase, making their business models non-viable.
Industry observers oppose contract renegotiations for these IPPs,
believing that allowing these companies to get more favorable prices
now would reward anti-competitive practices in future bids. To
assist in these priorities, USAID will initiate a large new clean
energy development program next year.
10. (U) FOOD PRODUCTION AND SECURITY: In October 2009, newly
appointed Minister of Agriculture, Minister Ir. H. Suswono, stated
that Indonesia will work to identify the regions most vulnerable to
food insecurity through the development of a Food Security and
Vulnerability Atlas (FSVA). Data from the FSVA will serve as a
monitoring and early warning system the Government of Indonesia
(GOI) will use to identify and target food insecure regions. GOI
officials have told us their priority areas for food security
include: the need for human resource development, focusing on
research, education and extension; the need for investment in hard
infrastructure (including irrigation facilities, ports and rural
roads) to reduce the 40% loss rate from poor distribution and soft
infrastructure, to include broadband links to agricultural
universities and research centers; and Maternal and childhood
nutrition targeting both rural and urban poor. The Embassy seeks to
collaborate with Indonesia to address these priority areas. One way
forward would be to establish Centers of Excellence on research,
education and extension through partnerships with Land Grant
Universities or Sea Grant Colleges. These University Partnerships
could be based on principles outlined in the Global Food Security
Act, introduced to the U.S. Senate in February, 2009 by Senator
Richard G. Lugar. Any Center of Excellence would build on existing
institutions or programs. Suggested research areas include Marine &
Fisheries, AgroForestry, and Food & Agriculture.
11. (U) REVITALIZING FERTILIZER AND SUGAR INDUSTRIES: Mission will
encourage the GOI to explore U.S. sources for fertilizers and farm
equipment. Furthermore, we will encourage the GOI to address
concerns regarding sugar production by exploring the use of
biotechnology in its own sugar production system.
12. (SBU) DEVELOPING INFRASTRUCTURE: President Yudhoyono has vowed
to invest in development of the country's infrastructure, an
important part of his strategy to promote better economic
integration nationwide. Experts here stress that the cost of
transporting goods within Indonesia is well over the average in
Asia, and double the cost in Europe. An improved road network is
critical for linking provinces and major islands, but plans are
complicated by contradictory regulations between multiple
ministries. The new administration plans to build twenty-two toll
roads by 2014 in collaboration with private investors. Also slated
for improvement are port facilities, harbors, airports and
infrastructure for transportation and fisheries. These are key
areas for continued U.S. - Indonesia cooperation to promote the safe
and secure movement of people and goods both domestically and
internationally. Prioritizing civil aviation may help advance U.S.
- supported improvements in the sector. Infrastructure development
could spur more competitive logistics services, a key factor in
attracting new investment in manufacturing and resources.
Investment in infrastructure overall also has the potential to
create a wealth of business opportunities for U.S. firms.

13. (U) EMPOWERING SMALL, MEDIUM AND MICRO-ENTERPRISES: The GOI has
said it intends to increase the availability of financing to this
important sector. The government of Indonesia, including members of
the new legislature, appears receptive to U.S. efforts aimed at
promoting entrepreneurship and engaging local entrepreneurs in
Muslim-majority countries. Mission has facilitated contacts between
Indonesian government officials and the private sector with U.S.
entrepreneurship organizations, has requested Public Diplomacy
entrepreneurship-focus speaker programs and is exploring with
EEB/CBA possible entrepreneurship activities in Indonesia. There is
also interest here for the possibility of Indonesia as host of a
regional entrepreneurship summit.

14. (SBU) FINANCING INVESTMENT AND DEVELOPMENT: The government of
Indonesia seeks to promote the financing of and investment into
Indonesian infrastructure, electricity and food security activities.
The U.S. continues negotiations with the GOI on an OPIC Investment
Incentive Agreement which would allow OPIC to provide expanded
financing, insurance, private investment fund and other services to
those investing in Indonesia. We will also follow up on the
interest expressed by Vice President Boediono to Ambassador Hume
regarding a possible Bilateral Investment Treaty. Mission is also
engaged in policy discussions with the Indonesian government
regarding regulatory changes needed in order to encourage investment
in Indonesia's energy sector, particularly in the area of clean and
renewable energy.

15. (SBU) REFORMING HEALTH SERVICES: Indonesia's priority is no
longer free medicine, but rather free health for the poor, therefore
public health facilities must be given stronger capacity. Equitable
access to quality health care for all is an important endeavor. A
strong health system meeting the needs of an entire nation requires
six fundamental building blocks: leadership and governance, human
resources, medical products, financing, service delivery, and
information systems. While stronger capacity to provide uniform
standards of quality care must be built in the public health
facilities, more attention must also be paid to engage private
sector providers. The private sector's role has grown dramatically
over the past decade and there is an overall wide acceptance among
Idonesian consumers to use private sector providersfor a range of
health services - even among the oorest socio-economic groups.
Decentralization pses another challenge to equitable access to
quality health care. There is little coordination between district
health officials and central health officials or between the
district health providers and private providers. A coordinated
effort must include changing provider incentives, promoting
partnership with private providers, and providing support to
district and provincial health officials to focus on a limited set
of critical health priorities. Through a variety of health
programs, USAID is focused on building replicable models for quality
services to increase access to quality health care. Mission will
also continue to engage in policy discussions to encourage the GOI
to ease market access restrictions and regulatory uncertainty which
discourage foreign investors from investing in the health care
sector.

16. (SBU) REFORMING EDUCATION: Innovation and critical thinking are
essential to this era's knowledge-based, high-tech economy - and
what educational institutions teach must be linked to the needs of
the economy and workplace. The GOI has recognized this imperative
in its priority for reforming education. Indonesian students must
have the teaching and the technology they need to fulfill their
personal potential as well as contribute productively to the
economic advancement of their country. Our education partnership
will help Indonesian students develop in these critical areas - by
encouraging linkages with U.S. universities in priority areas such

as science and technology, supporting English language teaching and
learning, and exposing more Indonesian students to education in the
U.S. Our efforts to expand science and technology cooperation and
generally to encourage public-private partnerships, such as those to
support U.S. IT in the classroom, will also support the GOI's
efforts to improve education. As the new Minister's policies and
plans evolve, we expect more explicit attention will be given to
higher education reform, including policy changes that would
encourage more private sector involvement, allow foreign investment
in higher education, and increase the number of GOI-funded
scholarships to U.S. universities. Mission will continue to
encourage GOI to ease market access restrictions and regulatory
uncertainty which discourage foreign investors.

17. (U) PREPAREDNESS OF DISASTER RELIEF: For many years the GOI
focused its efforts on effective disaster response, but the
frequency, damage and human/financial costs of natural disasters in
Indonesia demonstrate on a continuing basis the importance of
disaster preparedness. The lessons from the past few years
including the recent Tasikmalaya and Padang earthquakes have clearly
shown that disaster preparedness is the most effective and least
expensive way to minimize financial and human losses from disasters.
The National Disaster Management Agency (BNPB) that was formed in
2007 is slowly but surely increasing its capacity in disaster
response and wishes to play a larger role in disaster preparedness.
The USG has been one of the main donors in disaster response,
including both civilian as well as military resources that have
filled critical needs such as medical services water/sanitation,
shelter and transportation logistics. Furthermore, the Embassy
signed an MOU with the American Chamber of Commerce to augment
existing USAID/OFDA emergency response capacity. We have also
designed a disaster risk reduction program that will complement
climate change adaptation activities in vulnerable coastal areas
that we plan to initiate next year.

18. (SBU) IMPROVING SYNERGY BETWEEN THE CENTRAL AND REGIONAL
GOVERNMENTS: The recognition of the need to improve synergy between
the central and regional governments is a welcome one, especially if
it results in greater clarity on the roles and responsibilities of
the different levels of government. The prioritization of this
issue could potentially be helpful in USAID's program providing
assistance to regional governments to improve public service
delivery by improving coordination between the different levels of
government. However, it is unclear what can realistically be
accomplished within 100 days to turn this priority into action.

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