Indonesian Trade Minister Visit to Washington

UNCLAS SECTION 01 OF 02 JAKARTA 000811 SIPDIS SENSITIVE DEPT FOR EAP/MTS, EEB/IFD/OIA USTR FOR KELHERS, BWEISEL E.O. 12598: N/A TAGS: ECON EINV ETRD ECON ID SUBJECT: Indonesian Trade Minister Visit to Washington ¶1. (SBU) Summary: Trade Minister Mari Pangestu's visit to Washington offers an opportunity to identify specific goals for the trade and investment pillar of the proposed U.S.-Indonesian Comprehensive Partnership. Although they stress the importance of this pillar, Indonesian officials have not yet articulated a substantive agenda to pursue. Indonesia has made good progress in resolving a number of bilateral issues including the Time court ruling and the resolution of Intel's intellectual property rights grievance. However, a series of protectionist policies have overshadowed these measures. We see two areas where we can advance U.S. interests during next week's trade and investment framework discussions: investment and the film industry. Comprehensive Partnership -------------- ¶2. (SBU) President Yudhoyono proposed the idea of a U.S. - Indonesian comprehensive partnership in November 2008. Secretary Clinton endorsed the idea during her February visit to Indonesia. Both sides expect to announce the launch of the partnership during a possible President Obama visit to Indonesia in November. The proposed comprehensive partnership consists of three baskets: political and security cooperation; sociocultural, educational, and technological cooperation; and economic and development cooperation. We have not yet agreed on any concrete goals. We should ask Minister Pangestu for her ideas. ¶3. (SBU) Recent protectionist moves have overshadowed Indonesian progress in resolving several long-term issues. The Indonesian government helped Intel resolve its fifteen-year old trademark dispute. The Indonesian Supreme Court overturned its earlier ruling against TIME magazine in a libel case brought by former President Suharto. And, working closely with the Embassy and Ex-Im, the Indonesian parliament passed a new civil aviation law implementing the Cape Town Convention, paving the way for more than a billion dollars of Ex-Im financing of Boeing aircraft. APP reached an out-of-court settlement with Oaktree Capital to resolve a long-term financial dispute. ¶4. (SBU) Indonesia has simultaneously instituted a string of protectionist measures in the wake of the global economic crisis. Regulations on import licensing, pharmaceutical licensing, local content for telecommunications projects, use of domestic banks for letters of credit, restrictions on the sale of offshore financial products and local print requirements for films have all created hurdles for U.S. companies seeking to do business in Indonesia. We have fought these measures with some success. Indonesia has delayed implementation of some of the measures and offered exemptions for specific U.S. companies in other cases. On the import licensing regime and the local content requirements, we have worked with other countries to raise questions at the World Trade Organization. ¶5. (SBU) While we must continue to vigorously defend U.S. companies' interests where there are trade and investment barriers, we should also use the potential comprehensive partnership to explore areas of mutual benefit. We suggest two topics, both of which will be discussed in next week's trade and investment framework agreement talks: investment and the film sector. Investment -------------- ¶6. (SBU) Indonesia has lowered its foreign direct investment projections as a result of the global economic crisis. Two bilateral agreements could help attract U.S. investment: a renewal of the OPIC agreement and a possible bilateral investment treaty. Both agreements will be discussed at the working level during Minister Pangestu's visit. Our ambitious goal should be to use President Obama's potential visit to attract U.S. investment to Indonesia. We should aim to use a possible POTUS visit to sign an updated OPIC agreement and announce the launch of formal negotiations toward a BIT. Simultaneously, we could announce an OPIC-sponsored regional investment conference for spring 2010. Film Cooperation -------------- ¶7. (SBU) Minister Pangestu is personally dedicated to developing Indonesia's creative industries, especially the country's film sector. There is also renewed interest from U.S. companies to invest in film in Indonesia. Minister Pangestu will be meeting with officials from Newscorp/20th Century Fox and the Motion Picture Association during her trip to Washington. They will discuss a gala event/film festival that Newscorp plans to sponsor in early October to advance their interest in pursuing film sector opportunities in Indonesia. Meanwhile, the Ministry of Tourism recently suspended a decree which required that all theatrical movie prints exhibited in Indonesia be processed locally. Lastly, many domestic film industry stakeholders welcome the prospect of increased foreign investment, JAKARTA 00000811 002 OF 002 in contrast to the protectionist reflex that characterizes most other business sectors. We should push Indonesia to remove all foreign ownership restrictions in the film sector and to establish a "one-stop shop" film service agency to facilitate foreign companies considering Indonesia as a filmmaking destination as important first steps in attracting Hollywood's interest. HUME