VICE PRESIDENT-ELECT BOEDIONO CONFIDENT INDONESIA

C O N F I D E N T I A L SECTION 01 OF 02 JAKARTA 001601 SIPDIS DEPT FOR D,P,E,EAP,EAP/MTS,EAP/MLS,EAP/RSP E.O. 12958: DECL: 09/24/2019 TAGS: BEXP EAID ECON ETRD ID KJUS PGOV PREL SENV KCOR, EINV SUBJECT: VICE PRESIDENT-ELECT BOEDIONO CONFIDENT INDONESIA WILL ADDRESS CORRUPTION EFFECTIVELY REF: JAKARTA 1575 Classified By: Ambassador Cameron R. Hume, Reasons 1.4 (b) &(d) ¶1. (C) Summary: In a September 24 meeting with Ambassador and DCM, Vice President-elect Boediono (one name only) welcomed the strengthening of bilateral relations, urged continued deepening of people-to people ties, asked whether U.S. companies wanted to invest in clean energy in Indonesia, and inquired about Millennium Challenge Corporation assistance. Boediono stated that President Yudhoyono was sincere about strengthening the Corruption Eradication Commission (KPK), adding that the main theme of Yudhoyono's presidential campaign - clean governance - was "non-negotiable." End Summary. Relationship "better than at any time" in recent years -------------- -------------- ¶2. (SBU) The Ambassador reported progress in many areas of the relationship, highlighting: 1) creation of the Indonesia-U.S. Center for Biomedical Research and Public Health, advanced by the September 15 meeting of HHS Secretary Sebelius and Minister of Public Health Supari; 2) near completion of an agreement on the Peace Corps' return; 3) strengthening education links, including university partnerships; 4) environmental partnerships, including to preserve Sumatran forests via a Tropical Forest Conservation Act agreement and proposed EPA air quality and lead monitoring; 5) a growing Science and Technology relationship; and 6) possible collaboration on food security, with an emphasis on sustainable fisheries. The Ambassador noted ongoing work on a Plan of Action and declaration of a Comprehensive Partnership between the U.S. and Indonesia. Boediono thanked the Ambassador for "concrete accomplishments," noted that the election of President Obama had provided a boost to relations, and stated that the climate of the relationship was "better than at any time" in recent years. Clean governance "non-negotiable" for the Yudhoyono Administration -------------- -------------- ¶3. (C) Asked by the Ambassador about recent turmoil involving the Corruption Eradication Commission (KPK - see reftel), Boediono replied that, while President Yudhoyono was "sincere" about strengthening the KPK, he would not intervene in an ongoing police investigation. Boediono predicted that "credible" names would be put forward to replace the three KPK commissioners now under investigation, and that the Commission's interim acting leadership would be effective. President Yudhoyono, he assured, was very focused on strengthening the KPK and ensuring clean governance in Indonesia. The U.S., he said, could help in implementing reform. The Ambassador noted that the U.S. had programs to support each organization involved in the current controversy: the KPK, the Criminal Investigations Division of Indonesia's National Police, the Attorney General's Office, and the Judiciary. Millennium Challenge Corporation -------------- ¶4. (SBU) The Ambassador reminded Boediono that clean governance is a key criterion for Millennium Challenge Corporation (MCC) Assistance, and that the current turmoil over corruption could affect Indonesia's rating. Boediono's assistant, Dr. Mohamad Ikhsan, credited U.S. assistance with Indonesia's original breakthroughs in microfinance. He asked if the MCC could make new investments similar to those made by the U.S. in the 1970s. The Ambassador explained that the MCC sought to support projects which remove impediments to economic growth. Finance Minister Mulyani had floated two ideas: 1) modernizing the financial framework for water distribution; and 2) building a credible regulatory framework for Reducing Emissions from Deforestation and Forest Degradation (REDD) funds. He noted that he will meet next week in Washington with the MCC Vice President. U.S. involvement in the energy sector -------------- ¶5. (SBU) Boediono said Indonesia wanted to promote more U.S. investment in clean energy, including geothermal. Recalling the recent visit by Commerce Assistant Secretary Steve JAKARTA 00001601 002 OF 002 Jacobs, the Ambassador cited two impediments to such investment: 1) a negative investment list makes it difficult to invest in projects smaller than 10 MW, and many clean energy projects are small in scale; and 2) the pricing structure for electricity makes it more difficult to purchase from cleaner energy sources. The Export-Import Bank is interested in supporting U.S. investments in this area, the Ambassador assured Boediono. ¶6. (SBU) The Ambassador raised Natuna, where he said agreement on a pending deal would boost U.S. investment by $50 billion, thereby dramatically changing perceptions of investment in Indonesia. Student Visas -------------- ¶7. (SBU) Boediono discussed the importance of strengthening people-to-people ties. The Ambassador noted that restrictive visa policies present an obstacle to more Americans learning about Indonesia. Boediono took the point. HUME