Indonesia/East Java: PRC Consulate Offers

C O N F I D E N T I A L SECTION 01 OF 03 JAKARTA 001424

SIPDIS

FROM AMCONSUL SURABAYA 0051

DEPT FOR EAP, EAP/MTS

SIPDIS

E.O. 12958: DECL: 05/21/2017
TAGS: PREL PGOV PNAT PINR KISL EINV ID CH TW
SUBJECT: Indonesia/East Java: PRC Consulate Offers
New Investment and Headaches

Classified by Pol/Econ Officer David Williams,
reasons 1.4 (B) and (D).


1. (C) SUMMARY. The recently established PRC
Consulate General in Surabaya (ConGen China) is
actively promoting Chinese interest in
infrastructure and natural resource investment
projects in Eastern Indonesia. Chinese Consul
General Fu Shuigen (CG Fu) has worked hard to
connect Chinese investors with influential local
leaders to discuss their high profile "pet"
projects. ConGen China is also reaching out to
prominent ethnic Chinese Indonesian (Tionghoa)
business leaders, encouraging investment in China.
Some Tionghoa see risk in associating themselves too
closely with ConGen China, given the uneasy history
of ethnic Chinese in Indonesia. CG Fu recently held
a "China Peace Conference", enlisting several
prominent East Java political and religious leaders
as Advisory Board members for impromptu speeches to
the large crowd. The participants were shocked when
the conference ended with proclamations denouncing
Taiwanese leader Chen Shui-Bian and calling for the
rapid reunification of Taiwan with China. Several
of our contacts expressed anger at being tricked
into associating themselves with the Taiwan
political issue and ConGen China will have to work
hard to regain their trust. Additionally, CG Fu and
his staff have been working hard to cultivate
members of the Surabaya Consular Corp, in particular
U.S. and Japanese Consulate staff. END SUMMARY.

Chinese Diplomats Arrive in Eastern Indonesia
--------------


2. (SBU) Diplomats from the People's Republic of
China (PRC) began arriving in Surabaya in April 2006
to open a new Consulate General; it opened
officially on November 9, 2006, under Consul General
Fu Shuigen. The Consulate covers East Java, Bali
and West and East Nusa Tenggara provinces. Opening
with at least 12 officers, it is now the largest
consulate in eastern Indonesia. According to the
Chinese Ambassador, the Consulate's primary purpose
is to promote economic and trade cooperation in
eastern Indonesia. CG Fu has traveled extensively
throughout his district discussing investment
projects with provincial leaders.

Setting the Trap - The FDI "Charm Offensive"
--------------


3. (SBU) Our contacts tell us CG Fu has been making
the rounds meeting local political leaders and
offering assistance with infrastructure development.
According to newspaper reports, CG Fu met with Bali
Governor Dewa Beratha touting Chinese interest in
the development of a Serangan/Nusa Dua Bridge,
Beratha's pet infrastructure project. CG Fu met
with the East Nusa Tenggara governor Piet Tallo to
discuss Chinese investor interest in developing
their fisheries and oil and gas reserves. According
to contacts present at the meeting, CG Fu personally
arranged the investor meetings while sitting with
the governor. CG Fu traveled to West Nusa Tenggara
to discuss mining opportunities in Sumbawa (where
Newmont Corp. has their huge Batu Hijau copper and
gold mine) and has had several meetings with East
Java governor Imam Utomo about reviving the Chinese
funded Surabaya/Madura Bridge project, an
infrastructure priority of the governor and
President Yudhoyono. (Note: Work on the bridge was
stopped after more than 25% of the $170 million in
funds and materials donated went "missing".)

4 (SBU) Chinese investors have, at least initially,
focused on high profile (read politically connected)
economic development projects. Our contacts tell us
that the "political" meetings all eventually led to
meetings with investors from Hong Kong or southern
China. However, local leaders have been frustrated

JAKARTA 00001424 002 OF 003


by the slow pace of actual commitments by Chinese
investors.

ConGen China Also Targets Tionghoa Business Leaders
-------------- --------------


5. (SBU) Our business contacts tell us that the
Chinese Consulate is reaching out to the over
500,000 ethnic Chinese Indonesians living in the
province. Tionghoa own most of the large
businesses, the large tracts of plantation land and
the major real estate developments in East Java.
Many of East Java's wealthiest residents and
industrialists are Tionghoa. Many prominent
Tionghoa businessmen are being assiduously wined and
dined by CG Fu, who often uses the events to pitch
for greater Indonesian investment in China. Our
contacts remain reluctant to discuss any additional
"overtures" made by Chinese Consulate officials at
the dinners.


6. (SBU) Sentiments are running strong as two camps
are forming in the East Java Tionghoa business
community: those that believe they can receive
economic advantages from a close relationship with
the PRC and those that remember the 1998 anti-
Chinese violence and fear political or other
reprisals from any contact with the Consulate.
(Note: While there have been no incidents for 9
years and Indonesia is arguably a much different
place now, a number of our contacts still keep the
majority of their liquid assets outside of Indonesia
and keep their visas current in case Tionghoa become
targets for violence again.)

Springing the Trap - The China Peace Forum
--------------


7. (C) In March, ConGen China hosted a "China Peace
Forum" (CPF) in Surabaya. The lavish event was held
in the ballroom of a five-star hotel and attended by
an estimated 1,500 predominantly Tionghoa guests and
included many of East Java's most prominent
political, religious and military leaders, all non-
Tionghoa. Attendees included East Java Governor
Imam Utomo, Ali Maschan Moesa, Chairman of East Java
Nadhlatul Ulama (NU) and possible 2008 East Java
governor candidate, Syafiq Mughni, Chairman of East
Java Muhammadiyah, Maj. General Syamsul Mappareppa,
East Java Military Commander and Br. General
Sumaryono, East Java Deputy Police Chief. According
to Moesa and Mughni, the dignitaries were approached
during the event by CG Fu and several local Tionghoa
business leaders who asked them to join the
"Advisory Board" of the CPF and speak briefly to the
audience. Several accepted the invitation, seeing
both an opportunity to address the top business
(i.e. moneyed) elite in East Java and frankly having
no polite way to refuse. Muslim leaders Moesa and
Mughni told us they spoke at the meeting about
promoting world peace, good relations between
Indonesia and China and non-violent conflict
resolution. They both specifically mentioned their
intention that the CPF would focus on issues other
than Taiwan.


8. (SBU) At the end of the meeting however, the
Chairman of the Advisory Board Henry J. Gunawan (a
wealthy real estate developer) announced, to the
surprise of its newest members, three proclamations
made by the CPF:

a. The CPF supports the Indonesian government's one
China policy;

b. The CPF condemns the opinion of Taiwanese leader
Chen Shui-Bian supporting the separation and
renaming of Taiwan as dangerous and destabilizing to
the region; and

c. The CPF urges the PRC government to hasten

JAKARTA 00001424 003 OF 003


reunification with Taiwan.

CG Fu commented to reporters that "the proclamations
are evidence that both countries love peace and do
not want to lose their territories. This is
evidence of Indonesia's agrement with China onn this
issue."

Local Leaders nger"ed
--------------


9. (C) The announcement and the next days lead
newspaper articles and photographs with cptions
proclaiming their "agreement" with the Tawan
statement angered an*d embarrassed our contacs, who
told us they felt they were caught in a "rap". NU
leader Moesa expressed to us his disappintment that
the CPF became a "loudspeaker" for RC government
Taiwan policies. He was upset tha local Tionghoa
business"men he trusted told him hat the forum would
address a variety of social nd political issues.
Moesa said that the Chinese pproach fooled him and
he will be wary in any fuure dealings with ConGen
China. Muhammadiyah leder Mughni told us
privately, "I thank God my name was not mentioned in
he paper. Muhammadiyah members would be very
cofused as to why I was involving myself in
interntional politics. I think Tionghoa
businessmen edanger themselves if they become
involved in poliics with the Chinese. The Chinese
Consulate realy took advantage of us that night."

Comment - olitical Capital Spent
--------------


10. (C) ConGen China's ultimate goal wih the CPF
was unclear. Their misstep could be frm a lack of
understanding of the local culture o a need to use
any means necessary to promote pulic statements of
support for PRC policies. What is clear is that the
good will and political capital ConGen China earned
over the last year courting local politicians and
arranging investor meetings was spent in one night.
ConGen China succeeded in trapping a number of local
dignitaries into publicly supporting reunification
with Taiwan, but at a cost. Our contacts uniformly
stated they would not attend another CPF meeting and
no longer trust the motives or intentions of ConGen
China. The CPF also drove a wedge in to the East
Java Tionghoa community publicly creating a
controversy where none had previously existed. Many
of our Tionghoa contacts fear openly supporting PRC
political goals, possibly alienating Indonesian
nationalists and making Tionghoa targets for future
violence.


11. (C) True to form, soon after the first wave of
ConGen China staff arrived in Surabaya, they began
to "reach out" aggressively to members of the
Consular Corps, many of whom are wealthy Tionghoa.
In particular, they targeted the only two full
diplomatic Consulates in Surabaya, the Japanese and
the U.S. Early on, ConGen China staff approached
U.S. consular and administrative staff regarding
internal procedures and seeking access to the
Consulate compound. Our Japanese colleagues
reported similar experiences with their staff.
ConGen Surabaya RSO briefed both local and American
staff regarding contact with ConGen China staff and
those initial efforts have tapered off as most
contacts now come at the Principal Officer level.

HEFFERN