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,

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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