DRAFT MOU ON ILLEGAL LOGGING - EMBASSY JAKARTA

UNCLAS SECTION 01 OF 03 JAKARTA 011474

SIPDIS

SENSITIVE
SIPDIS

DEPT PASS USTR FOR KATZ AND BROOKS
DEPT FOR OES/IET; OES/ETC/TED
DEPT ALSO FOR EAP/IET
USDA/FAS FOR US FOREST SERVICE-MACKEY

E.O. 12958: N/A
TAGS: SENV ECON ETRD PREL PGOV ID
SUBJECT: DRAFT MOU ON ILLEGAL LOGGING - EMBASSY JAKARTA
COMMENTS


1. (SBU). Embassy Jakarta supports the conclusion of a
properly-structured MOU on illegal logging between the U.S.
and Indonesia. Reducing widespread illegal logging is one
of Indonesia's top development challenges, and the issue
touches on several core areas of our assistance program,
including improving governance, supporting effective
decentralization, and habitat preservation. However, given
the very high expectations on the part of the Government of
Indonesia (GOI),and the reality of scarce foreign
assistance dollars, we are concerned that USG implementation
plans for the MOU may fall short of GOI desires and fail to
make a measurable impact on Indonesia's illegal logging
problem. We accordingly recommend USTR develop a clear
interagency workplan for activities in 2006-07 given current
funding levels prior to passing the draft MOU text to the
GOI--if presented in tandem with the draft MOU, this
document help attenuate inflated GOI expectations. At the
same time, we recommend dropping the annex from the text to
further reduce expectations. The proposed MOU is the
highest profile USG intervention on illegal logging in many
years, and unless we are able to release a credible workplan
for the MOU when we announce it, we face a very real risk of
negative press coverage from Indonesia's feisty media and
environmental NGOs. If current funding levels do not permit
a robust workplan at this time, we recommend scaling back
the MOU to reflect only those areas for which financing is
available. End Summary.

Implementation is Key
--------------


2. (SBU) Widespread illegal logging causes major ecological
problems in Indonesia and stands as one of Indonesia's core
development challenges. The scale of the problem is
enormous: illegal logging occurs over broad swaths of
Indonesia, involves a complex array of political and
economic forces including the military, police, and local
governments, and has an equally complex international
component involving Southeast Asia, China, the U.S. and
other end destinations for products made from Indonesian
timber. At least a half dozen GOI agencies have a role in
combating illegal logging, but none does it effectively.


3. (SBU) A number of international donors have active
programs on illegal logging in Indonesia, most notably the
EU, Germany, the UK and Japan. The GOI has also shown
renewed commitment to combat illegal logging under President
Susilo Bambang Yudhoyono (SBY),with Presidential
Instruction 4/2005 serving as an umbrella directive to all
GOI agencies involved on the issue. However, by most
accounts, there has been very modest progress to date
reducing the volume of illegally harvested timber, and
public pressure on the GOI to show results is rising.


4. (SBU) In this context, many of our interlocutors in the
Ministry of Forestry (MOF) and other agencies have seized
upon USTR's proposed MOU as an important new tool in their
fight against illegal logging. This perception has been
fueled by the lengthy bilateral discussions about the MOU to
date, and the considerable amount of press attention it has
received. The GOI clearly wants a substantive MOU with the
U.S. that will make a real difference and can be leveraged
to generate broader international support and resources--
goals the Embassy strongly supports.

Existing MOUs Set Poor Precedents
--------------


5. (SBU) GOI officials do not hesitate to express their
disappointment with existing GOI illegal logging MOUs or
joint announcements with the UK China, Japan and Malaysia.
They characterize the agreements as general and lacking in
specific concrete commitments and programs. At a January 18
conference for the diplomatic community on combating illegal
logging, Ministry of Forestry (MOF) Director General for
Forest Protection and Nature Conservation Arman Malolongan
dismissed these MOUs as ineffective and chided China
specifically for lacking political will and capacity to
follow through. During our June 22 illegal logging MOU

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digital video conference with Indonesia, MOF Director
General for Forest Production Hadi Pasaribu restated these
complaints. A recent article in the Far Eastern Economic
Review noted that "unfortunately, little action has
resulted" from Indonesia's illegal logging MOUs.


6. (SBU) We need to keep our MOU from being put in the same
box. The Indonesian environmental NGO community is
monitoring our MOU negotiations closely and has its own high
expectations. For instance, a June 2006 Environmental
Investigation Agency/Telapak report gives some praise to
draft preliminary U.S. objectives for the MOU, but stresses
that they need to be "backed by US funds and technical
support."

Competing Foreign Assistance Priorities
--------------


7. (SBU) The USG has not been a major donor in illegal
logging for the last five years. In FY 2007 and 2008,
Jakarta-programmed assistance funds managed by USAID will
flow to a number of equally (or more) pressing development
issues, several of which are also Presidential Initiatives
in their own right. These include basic education, water
for the poor, health (infectious diseases--including Avian
influenza, HIV-- and maternal and child health) democracy,
and economic growth. In fact, the overall assistance budget
(all accounts) does not include funds for activities such as
those outlined in the MOU text or previous annex.


8. (SBU) The only existing mission program related to
combating illegal logging is the congressionally directed
program to safeguard currently viable wild orangutan
populations in Indonesia. A portion of the program
addresses law enforcement as it relates to immediate and
urgent threats to orangutans, including from illegal
logging, in selected high priority habitats. The $2 million
program in FY 2007 (of the total $8 million program over
three years),will include communities residing in and
around protected area boundaries as important partners in
law enforcement and will explore potential opportunities to
effectively address law enforcement issues at the national
level given resources available. However, this program
focuses on specific habitat areas and does not address the
complex, nationwide issues related to illegal logging.

Importance of Managing Expectations
--------------


9. (SBU) Given the very modest USG assistance in areas
related to illegal logging in FYs 2007-08, and high GOI
expectations, it will clearly be a challenge to identify a
credible package of low-cost activities that could take
place after the MOU is signed that would in turn make a
measurable impact on Indonesia's illegal logging problem.
Embassy Jakarta, as well as several Washington agencies,
objected to an annex attached to an earlier draft of the MOU
because it contained a number of "unfunded mandates." A
blank annex is also not a solution for managing
expectations, because its presence reinforces the impression
that the USG has ambitious implementation plans up its
sleeve that to our knowledge, do not exist.


10. (SBU) Given current funding levels and the very general
nature of the obligations in the draft MOU, we see the
development of a focused and practical workplan of low-cost
initiatives as a crucial exercise for Washington agencies to
undertake prior to passing the draft MOU to the GOI. We
encourage Washington agencies to give special consideration
to activities that have assured funding and that would
benefit the MOF, the lead GOI agency on the MOU.
Nevertheless, time is of the essence. Unless we are able to
present an initial draft of a workplan in tandem with the
draft MOU, and finalize it by the time we conclude the MOU,
we see a risk that this worthwhile initiative could
backfire. Indonesia has a very active and critical
environmental NGO movement that is deeply involved in the
fight against illegal logging and has shown itself capable
of garnering favorable press coverage. Once the draft MOU

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is passed to the GOI, the risk of leaks to the NGO community
will rise, with which the GOI has not consulted.

HEFFERN