TRADE MINISTER EMPHASIZES REGIONAL ENGAGEMENT OVER

UNCLAS SECTION 01 OF 02 JAKARTA 002600 SIPDIS SIPDIS FOR EAP/MTS; EB/TPP/IPE; EB/TPP/BTA; EB/TPP; EAP/RSP COMMERCE FOR 4430/ BERLINGUETTE COMMERCE PASS USPTO JNESS DEPT PASS USTR FOR DKATZ, RBAE E.O. 12958: N/A TAGS: ETRD EINV ECON BEXP ID SUBJECT: TRADE MINISTER EMPHASIZES REGIONAL ENGAGEMENT OVER BILATERAL AGENDA REF: A. 2188 ¶B. 2351 ¶C. 2433 JAKARTA 00002600 001.2 OF 002 ¶1. (U) SUMMARY: Minister of Trade Mari Pangestu outlined the Government of Indonesia's (GOI) "multi-track" approach to trade policy emphasizing multi-lateral and regional engagement over bilateral agreements in public remarks delivered on September 12th. Pangestu also stressed the inclusion of trade capacity components in negotiated trade agreements, explained GOI's Ramadan price stabilization strategy and shared her views on Doha, APEC, and the relationship between international commitments and Indonesia's domestic reform agenda. The remarks were made during a breakfast hosted by the Jakarta Foreign Correspondents Club (JFCC). END SUMMARY ASEAN: The Name of the Game -------------- ¶2. (U) Minister Pangestu outlined a "multi-track" approach to trade policy that emphasizes engagement on the multilateral and regional levels. She described regional relationships as the "main game" and declared Indonesia's "real" trade negotiations are with ASEAN and ASEAN plus 1 (China). She also affirmed Indonesia's commitment to the Doha process and supported calls from some countries to begin negotiations from the existing draft text. Meanwhile, Pangestu downplayed Indonesia's bilateral trade agenda despite engaging in a robust program of bilateral discussions. She stated that after Japan, Australia is next for Free Trade Agreement (FTA) discussions and that all future agreements would be limited to "major trading partners." Capacity Building Key to Trade Negotiations -------------- ¶3. (U) Pangestu discussed the importance of including trade capacity components as part of negotiated trade agreements. She stated that competitiveness assistance is necessary if Indonesia is going to optimize the benefits from market access. "Lowered tariffs have little value if Indonesia can't meet the standards requirements," she explained. Pangestu acknowledged that standards are Indonesia's biggest trade challenge, encompassing customs procedures and related "trade facilitation" issues. "The institutional framework (to facilitate trade) is a very big agenda that we are just beginning to address," she conceded, "but it is also big on the ASEAN and APEC agendas as well." Pangestu explained that GOI uses international trade commitments to stimulate the domestic reform agenda. As an example, she cited how Indonesia's National Single Window initiative has been driven by desired compliance with the ASEAN Single Window Program. Passing of Baton on Investment Law -------------- ¶4. (SBU) In response to a question expressing confusion over the grandfathering provision of the new Investment Law, Pangestu directed specific concerns to the "newly revitalized" National Team for the Increase of Exports and Investment, which she said will be responsible for the proper implementation of the reform agenda. The team has a full-time secretariat and will carry out the "ground work" of addressing issues arising from the Investment Law. The team is allied with the local Chamber of Commerce in a partnership Pangestu refers to as "Indonesia Incorporated" and will work together in issuing "guidelines" intended to clarify various aspects of the law. Pangestu did not address the role of the Investment Coordinating Board (BKPM) or its relation to the National Team. JAKARTA 00002600 002.2 OF 002 APEC: "Not An Easy Animal to Understand" -------------- ¶5. (U) Pangestu admitted that APEC is an unusual forum and "not an easy animal to understand." Despite the lack of concrete deliverables, she contends it remains interesting as a platform for promoting dialogue and delivering political messages. She cited three examples: the first, President Bush's speech, which Pangestu interpreted as signaling U.S. flexibility in future Doha negotiations. The second was Chinese Hu Jintao's statement laying responsibility on the U.S. and EU for the stalled Doha process. Pangestu remarked that this was a first for a Chinese delegation and indicated an increased willingness on the part of China to play a role in the WTO despite its own recent trade controversies. Lastly, Pangestu was impressed when Australian opposition Leader Kevin Rudd delivered his remarks in Mandarin. She said it raised "interesting questions" of what effect a change of national government will have on Australia's regional engagement. Ramadan Price Stabilization -------------- ¶6. (U) Pangestu discussed the importance of price stabilization of basic goods during the "fasting month." She said the GOI will focus exclusively on rice, sugar and cooking oil and will try to implement an "enlightened" approach that is "more automatic." As Indonesia is a net importer of rice and sugar, prices will be stabilized through control of imports. With rice for example, price tripwires will replace "coordination meetings" to determine when import increases are necessary. Also, the State Logistics Company's (BULOG) function will be widened to allow direct selling of rice into the market as a means to stabilize prices. With cooking oil, Indonesia is a net exporter so price stabilization will be achieved through indexing the export tax to international crude palm oil (CPO) prices. Pangestu also announced a subsidy for consumption of cooking oil that will be undertaken at the regional government level. Pangestu did not comment on GOI strategy to address potential negative externalities (i.e. smuggling) that can accompany price distortions. Agenda for Trade Ministerial? -------------- ¶7. (SBU) Lastly, Pangestu was asked directly about Indonesia's preferred agenda for the Trade Ministerial tentatively scheduled on the margins of COP-13, however she declined to respond. HUME