INDONESIA SEEKS COMPACT ELIGIBILITY, APPRECIATES

UNCLAS SECTION 01 OF 02 JAKARTA 012939

SIPDIS

SENSITIVE
SIPDIS

AIDAC

DEPT FOR SECRETARY RICE
AID FOR ADMINISTRATOR TOBIAS
TREASURY FOR SECRETARY PAULSON
DEPT PASS USTR FOR AMBASSADOR SCHWAB
MCC FOR AMBASSADOR DANILOVICH

E.O. 12958: N/A
TAGS: EAID EINV ECON KMCA ID
SUBJECT: INDONESIA SEEKS COMPACT ELIGIBILITY, APPRECIATES
THRESHOLD PLAN APPROVAL

REF: Jakarta 12687

Embassy Jakarta received on November 1 the following letter
from the Indonesian Minister of Finance and the Minister of
State for National Development Planning/Chairman of National
Development Planning Agency.

BEGIN TEXT

Ref No.: S-462/M.K.010/2006
Ref No.: 6462/M.PPN/10/2006

H.E. Ambassador John J. Danilovich
Chief Executive Officer
Millennium Challenge Corporation
875 Fifteenth St. NW
Washington, D.C. 20005
USA

Excellency,

On behalf of the Government of Indonesia, please allow us to
express our sincere appreciation regarding your support for
Indonesia's Threshold Program. The Threshold Program will
bolster our ongoing reforms and its approval is a welcome
recognition that our hard work in the areas of Ruling
Justly, Investing in People and Economic Freedom is on the
right track. We also welcome the Threshold Program as one
more example of the strengthening ties between Indonesia and
the United States that have seen such great progress over
the past two years.

To build upon these accomplishments and help maintain the
momentum of reform and growth in Indonesia, we hope that on
November 8th the Board will look favorably upon Indonesia'
Compact qualification. The Government has now successfully
completed almost two years in office, with tangible progress
in its principal national development missions to realize a
Safe and Peaceful Indonesia, a Just and Democratic
Indonesia, and a Prosperous Indonesia through
transformational reforms and development programs. We have
progressed on our reform agenda against a backdrop of
extraordinary circumstances in 2004-2006. The devastating
natural disasters in Aceh, Nias, Yogyakarta, and South
Central and West Java, while posing enormous challenges,
have not deterred us from moving ahead on national economic
and social priorities. In parallel, the Government has also
made marked progress on the governance front, by
strengthening key institutions and considerably enhancing
transparency.

We are proud to have already achieved significant progress
in the areas of ruling justly, investing in people and
economic freedom. It will, however, take time for those
performance indicators to be reflected in internationally
published statistical data, particularly as the
decentralization process, which has enhanced governance and
service delivery throughout Indonesia, complicates the
capture of key MCC data at the national level. We would
like to take the opportunity therefore to highlight some of
our recent key accomplishments and demonstrations of
commitment towards those goals reflected by the MCC
framework:

-- Our 2007 budget proposes record increases in spending in
the areas of education, health and investing in people.
This is in addition to our social spending and anti-poverty
program being financed through our fuel subsidy decreases.

-- We have increased our allocations for anti-corruption
efforts, building upon our commitment to combating and
controlling corruption in Indonesia and strengthening those
lasting institutions dedicated to this goal.

-- Our National Medium-Term Development Plan for 2004-2009
is a comprehensive, realistic strategy for enhancing
sustainable growth, alleviating poverty and combating
corruption which is being implemented across the Government.

As our significant efforts during the last two years to
promote good governance, combat corruption, enhance poverty

JAKARTA 00012939 002 OF 002


alleviation, invest in people by significantly increasing
education and health spending and encourage economic reform,
produce positive outcomes for all Indonesians, we will
continue to build upon these accomplishments.

The Threshold Program will bolster existing efforts in the
areas of immunization and control of corruption, and we are
committed to fully taking advantage of the Threshold
opportunity. Additionally, we look forward to Indonesia's
consideration for Compact status that would provide
additional means for our continued transformative
development efforts that support our shared vision for a
stable, democratic and economically vibrant Indonesia.

Please accept the assurance of our highest consideration, we
remain.

(Signed)
Sri Mulyani Indrawati
Minister of Finance

(Signed)

H. Paskah Suzetta
Minister of State for National Development Planning/
Chairman of National Development Planning Agency

Cc.:

1. H.E. President of the Republic of Indonesia

2. H.E. Vice President of the Republic of Indonesia

3. H.E. Ms. Condoleeza Rice, US Secretary of State (Chair,
MCC)

4. Coordinating Minister of Economic Affairs, the Republic
of Indonesia

5. Minister of Foreign Affairs, the Republic of Indonesia

6. Mr. Henry M. Paulson, Jr., Secretary of Treasury (Vice
Chair, MCC)

7. Ms. Susan C. Schwab, US Trade Representative

8. Mr. Randall Tobias, USAID Administrator

9. H.E. Ambassador of the Republic of Indonesia to the
United States of America

10. H.E. Ambassador of the United States of America to
Indonesia

END TEXT

HEFFERN