Cablegate: Trade Minister Emphasizes Regional Engagement Over

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UNCLAS SECTION 01 OF 02 JAKARTA 002600

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E.O. 12958: N/A
TAGS: ETRD EINV ECON BEXP ID
SUBJECT: TRADE MINISTER EMPHASIZES REGIONAL ENGAGEMENT OVER
BILATERAL AGENDA

REF: A. 2188

B. 2351
C. 2433

JAKARTA 00002600 001.2 OF 002

1. (U) SUMMARY: Minister of Trade Mari Pangestu outlined
the Government of Indonesia's (GOI) "multi-track" approach to
trade policy emphasizing multi-lateral and regional
engagement over bilateral agreements in public remarks
delivered on September 12th. Pangestu also stressed the
inclusion of trade capacity components in negotiated trade
agreements, explained GOI's Ramadan price stabilization
strategy and shared her views on Doha, APEC, and the
relationship between international commitments and
Indonesia's domestic reform agenda. The remarks were made
during a breakfast hosted by the Jakarta Foreign
Correspondents Club (JFCC). END SUMMARY

ASEAN: The Name of the Game
---------------------------

2. (U) Minister Pangestu outlined a "multi-track" approach
to trade policy that emphasizes engagement on the
multilateral and regional levels. She described regional
relationships as the "main game" and declared Indonesia's
"real" trade negotiations are with ASEAN and ASEAN plus 1
(China). She also affirmed Indonesia's commitment to the
Doha process and supported calls from some countries to begin
negotiations from the existing draft text. Meanwhile,
Pangestu downplayed Indonesia's bilateral trade agenda
despite engaging in a robust program of bilateral
discussions. She stated that after Japan, Australia is next
for Free Trade Agreement (FTA) discussions and that all
future agreements would be limited to "major trading
partners."

Capacity Building Key to Trade Negotiations
-------------------------------------------

3. (U) Pangestu discussed the importance of including trade
capacity components as part of negotiated trade agreements.
She stated that competitiveness assistance is necessary if
Indonesia is going to optimize the benefits from market
access. "Lowered tariffs have little value if Indonesia
can't meet the standards requirements," she explained.
Pangestu acknowledged that standards are Indonesia's biggest
trade challenge, encompassing customs procedures and related
"trade facilitation" issues. "The institutional framework
(to facilitate trade) is a very big agenda that we are just
beginning to address," she conceded, "but it is also big on
the ASEAN and APEC agendas as well." Pangestu explained
that GOI uses international trade commitments to stimulate
the domestic reform agenda. As an example, she cited how
Indonesia's National Single Window initiative has been driven
by desired compliance with the ASEAN Single Window Program.

Passing of Baton on Investment Law
-----------------------------------

4. (SBU) In response to a question expressing confusion
over the grandfathering provision of the new Investment Law,
Pangestu directed specific concerns to the "newly
revitalized" National Team for the Increase of Exports and
Investment, which she said will be responsible for the proper
implementation of the reform agenda. The team has a
full-time secretariat and will carry out the "ground work"
of addressing issues arising from the Investment Law. The
team is allied with the local Chamber of Commerce in a
partnership Pangestu refers to as "Indonesia Incorporated"
and will work together in issuing "guidelines" intended to
clarify various aspects of the law. Pangestu did not address
the role of the Investment Coordinating Board (BKPM) or its
relation to the National Team.

JAKARTA 00002600 002.2 OF 002

APEC: "Not An Easy Animal to Understand"
----------------------------------------

5. (U) Pangestu admitted that APEC is an unusual forum and
"not an easy animal to understand." Despite the lack of
concrete deliverables, she contends it remains interesting as
a platform for promoting dialogue and delivering political
messages. She cited three examples: the first, President
Bush's speech, which Pangestu interpreted as signaling U.S.
flexibility in future Doha negotiations. The second was
Chinese Hu Jintao's statement laying responsibility on the
U.S. and EU for the stalled Doha process. Pangestu remarked
that this was a first for a Chinese delegation and indicated
an increased willingness on the part of China to play a role
in the WTO despite its own recent trade controversies.
Lastly, Pangestu was impressed when Australian opposition
Leader Kevin Rudd delivered his remarks in Mandarin. She
said it raised "interesting questions" of what effect a
change of national government will have on Australia's
regional engagement.

Ramadan Price Stabilization
----------------------------

6. (U) Pangestu discussed the importance of price
stabilization of basic goods during the "fasting month."
She said the GOI will focus exclusively on rice, sugar and
cooking oil and will try to implement an "enlightened"
approach that is "more automatic." As Indonesia is a net
importer of rice and sugar, prices will be stabilized through
control of imports. With rice for example, price tripwires
will replace "coordination meetings" to determine when import
increases are necessary. Also, the State Logistics Company's
(BULOG) function will be widened to allow direct selling of
rice into the market as a means to stabilize prices. With
cooking oil, Indonesia is a net exporter so price
stabilization will be achieved through indexing the export
tax to international crude palm oil (CPO) prices. Pangestu
also announced a subsidy for consumption of cooking oil that
will be undertaken at the regional government level. Pangestu
did not comment on GOI strategy to address potential negative
externalities (i.e. smuggling) that can accompany price
distortions.

Agenda for Trade Ministerial?
------------------------------

7. (SBU) Lastly, Pangestu was asked directly about
Indonesia's preferred agenda for the Trade Ministerial
tentatively scheduled on the margins of COP-13, however she
declined to respond.
HUME

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