AMBASSADOR'S FAREWELL CALL ON VP KALLA

C O N F I D E N T I A L SECTION 01 OF 02 JAKARTA 000427 SIPDIS SIPDIS E.O. 12958: DECL: 02/16/2017 TAGS: PREL PGOV PHUM ECON EPET PINS ABLD ID SUBJECT: AMBASSADOR'S FAREWELL CALL ON VP KALLA Classified By: Ambassador B. Lynn Pascoe, Reasons 1.4 (b) and (d). Summary -------------- ¶1. (C) During a Feb. 15 farewell call, the Ambassador congratulated Vice-President Kalla on the successful election process in Aceh; expressed support for government efforts to control violence in Sulawesi; urged the GOI to open Papua to foreign visitors; raised plans to increase USG technical assistance in Papua; supported ExxonMobil's request for a standstill agreement on the Natuna gas project; raised concerns about the Richard Ness/Newmont trial; lobbied for quick passage of trafficking in persons legislation and requested Kalla's assistance on an Embassy land issue. Kalla described the issues in Aceh and Papua as primarily economic, not ideological, and praised the new Aceh governor. The GOI has decided to provide major transportation infrastructure improvements in Papua. The VP welcomed a possible visit by Congressman Faleomavaega (D-AS). Kalla said a tough approach against the terrorists in Sulawesi was necessary. Kalla stated firmly that ExxonMobil needed to provide an offer for a new revenue split if they wished to keep the Natuna concession, or else the bloc would be tendered. Kalla expressed hope that Indonesian legislators would spend more time on legislating and less on "supervising" the government. He said he would obtain an update on the Ness trial and tasked his staff to help resolve the Embassy land issue. ¶2. (C) The Ambassador made a farewell call on Vice-President Jusuf Kalla February 15. The Ambassador praised Kalla's role in creating the successful peace process in Aceh, and the government's mature reaction to the election of a former GAM member as governor as well as his speaking out in favor of restoring order in Sulawesi. Kalla responded that while some perceive violence in Sulawesi to be a big problem, he sees it as a small one requiring a tougher approach. Kalla described Governor Irwandi Yusuf in Aceh as well-educated and expressed a certain amusement that the new governor would now have to tackle the tough issues of governance. Kalla described the issues in Aceh as not really having been ideological, but centered on economics and equality. Papua -------------- ¶3. (C) The Ambassador cited the Papua region as an area where economic issues were also significant, noting his recent travel there. Kalla responded that the situation in Aceh had been much harder than the current one in Papua. He said that the people in Papua do not have a high level of expectations; they need more aid and good living conditions. The Ambassador replied that education and health were important needs there and that Papua province Governor Suebu had reached out to international donors to obtain expertise to enhance government delivery of services. The Governor says he has the funding but needs to develop implementation mechanisms. USAID representatives will be traveling next month to talk about what assistance might be provided. ¶4. (C) Kalla told the Ambassador that the government decided the previous day that it should work to increase the welfare, education and health of his people (note: a separate source later confirmed that Papua had been a Cabinet meeting topic.) The central government would need to focus on two major areas: building two major roads in the region (one east/west and the second north/south) and to provide better airports so that transport in the region would be greatly improved. Other services would be the focus of the provincial governments. ¶5. (C) The Ambassador noted that there was increased Congressional interest in events in Papua. He noted that the chairman of House Foreign Affairs Asia Subcommittee, Mr. Faleomavaega, was considering a visit. Kalla welcomed the possibility, saying that it would provide a clearer picture of the situation. Noting the strong reaction of Indonesian parliamentarians to calls for Papuan independence, Kalla added that he was less concerned about such statements. He said that he tells Indonesian legislators that if one of them called for the independence of Hawaii or Alaska from the U.S., it would have no practical effect on the ground. The U.S. would ignore it. Similarly, any such calls from an American legislator should not worry them, Kalla stated. Trafficking in Persons -------------- ¶6. (C) Citing Kalla's role as head of Golkar, the Ambassador noted the planned adoption of a new trafficking in persons bill within the legislature. It has been under consideration for several years and its passage would be helpful on an JAKARTA 00000427 002 OF 002 important issue. Kalla replied that Indonesian parliamentarians spend too much time talking about activities of the central government and need to focus more on other things. There is talk that they would spend half their time on legislation and half on the budget in the future. Kalla said the problem is that it is easier for them to try to supervise government activities than to act themselves. Newmont Trial -------------- ¶7. (C) The Ambassador reminded Kalla that the trial of Newmont president Richard Ness remains a bellwether in the business community about the investment climate within Indonesia. We had attended every session of the trial, and it was clear that the prosecution's case had no substance. The outcome of this case has to be an acquittal. Kalla replied that he would check on the situation with Minister of Law Hamid Awaluddin. ExxonMobil Natuna bloc -------------- ¶8. (C) The Ambassador told Vice-President Kalla that ExxonMobil is interested in a standstill agreement on work on the bloc until new terms could be negotiated. Kalla replied that the GOI had asked for new terms but ExxonMobil did not give its position. New conditions would be required. The previous deal that gave ExxonMobil a 100 percent to zero percent split of the revenue (note: in the early years of exploitation) was not acceptable when gas prices have risen to the equivalent of 60 USD for oil. That split could not stand. ¶9. (C) The Ambassador replied that the company was happy to negotiate a deal but that for legal reasons a standstill agreement was needed. They were frustrated by press reports quoting government officials as asserting that there are ongoing negotiations when they had not yet commenced. Kalla replied that ExxonMobil had three months to come to acceptable terms or else the bloc would be put out for a new public tender. When the company offered new terms, the negotiations could be finished within a month. They must agree to forget the original terms of the concession. ¶10. (C) Kalla emphasized his point by citing a conversation he had had with then Secretary Powell. Kalla recounted that he said that in order for democracy to work in developing countries, they had to have economic opportunities or else they would go backwards. The Ambassador replied that changing agreements signaled risks for outside investors. Kalla rejoined that politically it was impossible to back the original contract: opponents of the government would call to support a future radical president, citing the success of Presidents Chavez in Venezuela or Morales in Bolivia. If the current agreement were implemented the GOI would be open to charges that they allowed a "bad" U.S. company to cheat Indonesia of its wealth. How could the government respond? A response in favor of the U.S. firm could be much more costly down the line. The Ambassador replied that foreign businessmen looked to Kalla to understand the important role that business plays in society. There had been previous cases from a few years ago of businesses subject to arbitrary actions and that Indonesia's reputation needs still to recover from such events. Kalla expressed the belief that Indonesia could match growth rates in India or China. New Office Building for the Embassy -------------- ¶11. (C) The Ambassador closed by seeking Kalla's support in persuading the Ministry of Finance to provide a price for land situated within the Chancery compound (which directly adjoins the Vice-President's office) not owned by the USG. Obtaining such a price was important for our budget process and planned construction of a new embassy. Kalla instructed his staff to follow-up on the issue. PASCOE