JAPAN PLACING IMPORTANCE ON TIES TO INDONESIA

C O N F I D E N T I A L SECTION 01 OF 04 TOKYO 001068

SIPDIS

FOR EAP

E.O. 12958: DECL: 05/10/2019
TAGS: PREL ASEAN JA ID
SUBJECT: JAPAN PLACING IMPORTANCE ON TIES TO INDONESIA

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Classified By: CDA James P. Zumwalt for reasons 1.4 (b) and (d)


1. (C) SUMMARY: Japan sees Indonesia as the pillar of
Tokyo's foreign policy in Southeast Asia. Recent discussions
between Embassy Tokyo and Indonesia watchers suggest that
Japan sees the world's largest Muslim country as an integral
part of Japan's strategy in the region. Indonesia's large
business market, oil and gas rich geography, and its role as
potential political counterweight to China are spurring Japan
to move relations beyond the official development assistance
(ODA)-based parameters that have defined the relationship
since the 1950s. The Secretary's February visit to Indonesia
and to the ASEAN Secretariat hold particular significance for
Japan. The trip points to Washington's plans to bolster U.S.
engagement in the region and provides opportunities for
broader U.S.-Japan cooperation on the world's largest
archipelago. END SUMMARY


2. (C) Japan sees Indonesia as the pillar of Tokyo's foreign
policy in Southeast Asia. Recent discussions between Embassy
Tokyo and Indonesia watchers suggest that Japan sees the
world's largest Muslim country as an integral part of Japan's
diplomatic, security, and economic strategy in the region.
Indonesia's large business market, oil and gas wealth, and
its role as potential political counterweight to China are
compelling Japanese decisionmakers to emphasize bilateral
ties and to move relations beyond the official development
assistance (ODA)-based parameters that have defined the
relationship since Indonesia's independence. The days of
just giving ODA "are over," declared Diet member and
international affairs expert Masamitsu Naito. One year
removed from the 50th anniversary of the establishment of
diplomatic relations, Japan enjoys its "deepest and best
relationship" with Indonesia among all members of the
Association of Southeast Asian Nations (ASEAN),ruling
Liberal Democratic Party (LDP) stalwart and Japan-Indonesia
Parliamentary Friendship League chair Taku Yamasaki mentioned
recently to Embassy officers. Indonesia -- an original ASEAN
member and home to the ASEAN Secretariat -- is the "regional
linchpin," several Japanese interlocutors added separately.
These observers are quick to highlight Indonesia's unique
status as ASEAN's largest member.


3. (C) Japan views Indonesia as a country that is reassuming
regional leadership after a decade of domestic turmoil and
making positive contributions in areas such as security and
economics, Japanese Ministry of Foreign Affairs (MOFA) Second
Southeast Asia Division Director Hiroshi Ishikawa explained.
Indonesia was the only ASEAN country to attend the July 2008
G-8 Summit in Japan and is the only ASEAN member of the G-20.
Indonesia has become a viable future strategic partner for
Japan in Southeast Asia, Ishikawa broadly assessed. Yamasaki
pointed out that during a recent domestic conference
involving the LDP and roughly 30 Japanese ambassadors posted
to the Asia-Pacific region, conference organizers allotted
speaking time only for the Japanese Ambassador to Indonesia
-- as well as the representatives from China and South Korea
-- because of the importance Japan places on that country.
The changing nature of bilateral relations reflects growing
Japanese confidence in Indonesia's efforts to become a key
player on the regional and international foreign policy
stage.

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Unfettered by History
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4. (C) History does not burden Japan's relations with
Indonesia. The annals of Japan's colonial and World War II
past have little effect on current ties, Indonesian Embassy
Political Counselor Ardi Hermawan recently explained.
Indonesians are a "forgiving people," he added. Indonesia,

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of course, suffered greatly at the hands of Japanese
occupiers, whose forced labor programs and brutality sowed a
legacy of distrust toward Japan that still pervades in much
of the region. Indonesians, however, also acknowledge some
of the long-term, more positive consequences of the Japanese
colonial experience that helped expedite Indonesian
independence immediately following Japanese surrender. For
example, under Japanese rule, Indonesians ascended to
decisionmaking positions that were otherwise unattainable
under Dutch rule. Japan also provided widespread military
training that, although part of the Japanese war effort,
later proved to be an asset in Indonesia's confrontation
against reoccupying Dutch forces.


5. (C) Partly as a result, Indonesia does not harbor the same
level of resentment for Japan's perceived dismissal of
colonial-era accountability as other Asian countries, such as
China, Philippines and South Korea. Yamasaki described
Indonesian sentiment toward Japan as "pretty good," in part
because Indonesians recognize some of the aforementioned
historical nuances. Indonesians and Japanese have "no bad
feelings" toward each other, he added. He guessed that
ninety percent of Indonesians would say they "like Japan."
This neutral approach to history allows both sides to adopt a
forward-looking approach to the relationship, explained Ardi.


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Political Ties Growing
--------------


6. (C) Bilateral ties are maturing, most interlocutors agree,
in part because of increasingly favorable political
conditions in Indonesia. Japanese officials underscore the
importance of Japan's support for Indonesia's ongoing
democratization process and consolidation of the rule of law,
human rights, sound governance, and open media. They see the
nascent Bali Democracy Forum -- an annual high-level
Jakarta-initiated conference aimed toward promoting regional
and international cooperation on democratization and
political development -- as a chance for Indonesia to
showcase regional leadership and as an opportunity for Japan
and other third countries to share ideas and experiences on
efforts to strengthen democratic processes. Japan also has
focused on parliamentary exchanges. Yamasaki led a
Friendship League delegation to Indonesia in July 2008 and
broached the concept of developing a "strategic partnership."
Also last year, both sides established the Executive
Committee of the Japan-Indonesia Friendship Year and held
roughly thirty events in celebration of the 50th anniversary
of diplomatic relations. Indonesia is "moving in the right
direction," and "can not turn back," Ritsumeikan University
Associate Professor Jun Honna observed.


7. (C) Japanese credit Indonesian President Susilo Bambang
Yudhoyono (SBY) for political progress. Embassy
interlocutors universally rate Yudhoyono as a success. He
has been Indonesia's "most stable" president, LDP Diet member
Yamasaki noted. Yudhoyono is smart, clean and pro-United
States, he added. He is rational and practical, and he has
surrounded himself with a professional staff, not cronies,
Honna said separately. SBY, moreover, understands the role
of ASEAN and China in the region. Polls show that SBY has
gained public support through his efforts to promote
democracy, maintain macroeconomic stability, and expand
civilian control of the military, Honna observed. Embassy
interlocutors regularly contrasted Yudhoyono's triumphs with
the perceived failures of his predecessor, Megawati
Sukarnoputri. They expressed particular concern about her
potential comeback on the Indonesian political scene.


8. (C) Embassy interlocutors generally agree that the

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Indonesian political environment looks "quite stable" on the
eve of the country's only second direct presidential election
in July. Political challenges remain, however. Arcane and
opaque political finance laws, expensive campaign costs, and
the current economic crisis complicate any effort to groom
new, young political candidates, Honna asserted. "As an
aspiring politician in Indonesia, you can be popular with no
money, or not popular with much money."

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Economic Ties Expanding Beyond ODA
--------------


9. (C) Japan also has sought to expand trade and business
ties to Indonesia. Tokyo concluded an economic partnership
agreement (EPA) with Jakarta in July 2008 as part of broader
effort to expand trade ties to the region; Japan enjoys
individual EPAs with all original ASEAN members as well as
with the Association as a whole. The Indonesia EPA is the
first time Japan has used an EPA specifically to encourage
investment flows into the target country, officials from
MOFA's Second Southeast Asia Division recently explained. A
key challenge resulting from the EPA is developing sound
language training programs for Indonesian nurses and
caregivers working in Japan and overcoming domestic
perceptions that foreign workers will generally lead to
poorer working conditions in Japan.


10. (C) Robust business relationships and Japanese investment
are factors in the growing relationship, Yamasaki noted.
Jakarta has "done well" to improve the local investment
climate since the authoritarian regime (1966-1998) of
President Suharto. Post-Suharto, Indonesia also suffered
from inflation and rising domestic gasoline prices, which
made daily life difficult, but conditions have "stabilized,"
Yamasaki stressed. Indonesia has become more inviting for
Japanese business interests, moreover, because of Jakarta's
counterterrorism efforts, Associate Professor Honna said.
Japanese no longer see Indonesia as a terrorism "hotspot."
Indonesia has not suffered a major terrorist incident in more
than three years and many Jemmah Islamiyah members have been
arrested.


11. (C) Although bilateral ties have expanded beyond the
ODA-centric policies of the past, aid still plays a critical
role in Japan's policy toward Indonesia, historically Japan's
top ODA recipient. Japanese MOFA contacts explain that
Indonesia relies on Japan as a donor nation in part to avoid
borrowing money from the IMF. For its part, Japan has
traditionally leveraged ODA to garner support for Japanese
policy preferences and objectives, such as Japan's
longstanding bid for permanent membership to the UN Security
Council, and to back Japanese business interests. Major ODA
recipients such as Indonesia understand such "ODA politics,"
Yamasaki asserted.


12. (C) Japan, however, is using its aid programs more
effectively and in ways that compliment the United States,
particularly in areas of poverty reduction, political
stability, human security, and post-conflict development,
Honna asserted. The Foreign Ministry's FY09 ODA regional
project plan singles out Indonesia among other Asian nations,
because of its status as the pillar of ASEAN, location among
sea lanes in the Strait of Malacca, and wealth of natural
resources. The plan cites environment and climate change,
alternative energies, disaster preparedness, and
counterterrorism as key areas of focus. For FY08, Japan
committed roughly 120.5 billion yen in project aid, including
1) 18.6 billion yen, announced March 24, to promote economic
and social reform, as well as poverty alleviation under the
"Fifth Development Policy Loan," and infrastructure reform
under the "Second Infrastructure Reform Sector Development

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Program," 2) 71.2 billion yen in loans, announced March 31,
to support various social development projects in areas such
as urban flood control, dam preservation, mass
transportation, and electrical power, and 3) roughly 30.7
billion yen for climate-change related projects. In
February, Japan also agreed to guarantee Indonesia
yen-denominated government bonds and doubled its bilateral
currency swap agreement with Indonesia on the margins of the
ASEAN Plus Three Finance Ministers meeting in Thailand.

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Security Ties Important
--------------


13. (C) Littoral island issues and sea lane defense have
become critical drivers in Japan's regional security
cooperation efforts with Indonesia, Embassy interlocutors
stressed. Japan wants to participate in efforts to secure
the region's sea lanes, particularly the Strait of Malacca, a
critical shipping channel for Japan, they explained.
Indonesian Embassy officers point to Japan's decision to give
exception to arms exports laws and to provide Jakarta with
three patrol vessels in 2006. MOFA officials also highlight
Japanese assistance to Indonesian police forces. Japan has
been engaging in technical assistance to support the
reformation and improvement of Indonesian police since 2002,
they note.

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Indonesia Key to Curbing Chinese Influence
--------------


14. (C) Japanese officials see stronger ties to Indonesia as
part of a larger strategy to curb China's growing influence
in Southeast Asia. Japan faces increasing competition from
China for energy resources, for example. Indonesia remains
Japan's top LNG supplier -- providing one-fifth of Japan's
total needs -- but Indonesia's decision to cut LNG exports to
fuel increasing domestic demand leaves Japan competing for a
smaller pool of resources. MOFA contacts also point out
that, while China bases its policies only minimally on shared
international interests, Japan and Indonesia share values
grounded in democracy and rule of law. They see Indonesia as
taking a cautious approach to China, in contrast to other
ASEAN members, particularly those in the Mekong region, which
seem to be falling under China's orb of influence. Indonesia
represents the complex and varied views that ASEAN capitals
hold in general toward the Chinese, MOFA officials concluded.


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Welcomes Broader Cooperation with the United States
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15. (C) The Secretary's February visit to Indonesia and to
the ASEAN Secretariat hold particular significance for Japan.
The trip highlighted Washington's plans to bolster U.S.
engagement in the region and, to the relief and satisfaction
of concerned regional capitals, conveys a renewed, long-term
commitment to Southeast Asia, MOFA contacts stressed. There
is room for broader U.S.-Japan cooperation on the world's
largest archipelago, particularly in the realms of education,
counterterrorism, social development, democratization, and
anticorruption, our interlocutors regularly note.
Counter-radicalization, law enforcement, border control, and
counter-illegal fishing are additional potential areas for
future joint cooperation on Indonesia, Honna noted. Japan
often has the will but not the capacity to carry out efforts
in Indonesia and thus needs to work closely with the United
States, Honna concluded.
ZUMWALT