VZCZCXRO5760
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJS #0032/01 0651040
ZNR UUUUU ZZH
R 051040Z MAR 08
FM AMCONSUL SURABAYA
TO RUEHC/SECSTATE WASHDC 0174
RUEHRC/USDA FAS WASHDC
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHBY/AMEMBASSY CANBERRA 0088
RUEHJA/AMEMBASSY JAKARTA 0161
RUEHOT/AMEMBASSY OTTAWA 0006
RUEHPB/AMEMBASSY PORT MORESBY 0024
RUEHJS/AMCONSUL SURABAYA 0179
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UNCLAS SECTION 01 OF 02 SURABAYA 000032
SIPDIS
SENSITIVE
SIPDIS
DEPT FOR EAP/MTS, EAP/MLS, INR/ EAP, EB
E.O. 12958: N/A
TAGS: EAGR ID ECON PGOV
SUBJECT: GORONTALO: VISITING A TROPICAL NEBRASKA, INDONESIA'S CORN
CAPITAL
SURABAYA 00000032 001.2 OF 002
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accordingly.
1. (SBU) Summary: Well-known across Indonesia both for its corn
production and dynamic Governor, Sulawesi's Gorontalo Province
has gained a reputation as a showcase of public administration
best practices. In an effort to sort hype from ground truth,
Consulate General Surabaya Pol/Econ Officer and Pol/Econ
Assistant visited the province on February 19-20 and met with
the Vice Governor, representatives from the Regional Development
and Planning Board (BAPPEDA), a province-owned company Fitrah
Mandiri, the Provincial Investment Board, and the Trade and
Industry Department. Prodded by their high profile governor,
provincial officials work hard to sell foreign investors on
Gorontalo's agricultural and non-agriculture sectors. Their key
challenge remains diversifying and increasing efficiency of
Gorontalo's corn-based economy, which is still heavily
subsidized and inefficient despite higher corn prices. End
Summary.
Brand Gorontalo
---------------------
2. (SBU) The province of Gorontalo was established in 2001, in
an amicable split with North Sulawesi. Gorontalo has been a
success story and role model for other potential provinces, with
a dynamic governor Fadel Muhammad and a reputation for strong
public administration principles. The impact of Governor Fadel
Muhammad is evident everywhere in Gorontalo. His popularity
stems from his status as Gorontalo's first elected governor and
his efforts at creating a unique identity for the province.
From billboards to weekly radio speeches, the governor's efforts
on behalf of the province were under constant discussion. Even
critics of provincial policy expressed pride in the governor's
success at creating a "brand" for the province. According to
our meetings there, Fadel Muhammed's stated priorities for the
new Province have not changed since he first shared them with
Surabaya Principal Officer in 2002: developing Human Resources,
developing agriculture (principally corn), and developing
fisheries and marine products. During that 2002 meeting, he
presented the Consulate with a binder entitled "The
Entrepreneurial Administration of Gorontalo Province as Reported
by the Press." Our 2008 meeting with the Vice Governor and
provincial development officials showed a fully developed public
relations message: Gorontalo's welcome mat is out for foreign
investment.
3. (SBU) These efforts have reaped rewards according to local
officials. Gorontalo has had the largest growth in provincial
income on the island of Sulawesi: 6.45% in 2002 and 7.49% in the
first quarter of 2007. The main source of provincial revenue is
from the agriculture and mining sectors. Unlike other provinces
which frequently rely heavily on taxes, Gorontalo has eliminated
provincial levies or "retribusi" on provincial services. In
order to enhance the effectiveness of Gorontalo's large civil
service the government has instituted a performance pay plan,
with so far uncertain results.
Betting the Farm on Corn
---------------------------------
4. (SBU) While we were told that Gorontalo is the second
biggest corn producer in Indonesia after West Java, (and the
only province that currently exports corn), 2007 U.S. Foreign
Agricultural Service figures show that they are perhaps fourth
biggest producer. Whatever the truth to their claims,
establishing the perception that they are among Indonesia's
leaders in corn production is key to Gorontalo's public
relations campaign. Gorontalo's current customers are found in
Malaysia, the Philippines, and Japan. With three corn harvests
a year in most parts of the province, cheap production costs and
the potential of corn as a bio-fuel has further raised
expectations for corn-driven development. Gorontalo's
government is now focused on increasing the productivity of
farmers by providing high-yield seed corn and fertilizer. The
long term goal of Gorontalo's planning officials is one million
tons of corn production annually. Prohibitions against planting
in landslide prone areas help protect the ecosystem, according
to an agricultural department official. However, Gorontalo NGOs
told us that deforestation is still a problem and land is
continually brought under corn cultivation that should not be
SURABAYA 00000032 002.2 OF 002
due to its potential to cause erosion.
5. (SBU) Officials told us that the key to Gorontalo's success
has been a focus on both the domestic and international markets.
"Although our production is still limited in scale, we look for
markets and then export commodities to that market." Said one
BAPPEDA official. The province has established the Gorontalo
International Maize Information Center, (GIMIC) as a gateway to
foreign investment in corn. Rising corn prices have encouraged
increased investment. Gorontalo produced 87,720 tons of corn in
2001; in 2007 they harvested 584,800 tons. Through subsidies
and aggressive marketing, Gorontalo is betting the farm on the
continued rise in the price of corn to finance provincial
economic development.
Pushing the Agenda-Gorontalo's Province-Owned Company
--------------------------------------------- --------------
---------------------
6. (SBU) The 100% province-owned company, PT. Gorontalo Fitrah
Mandiri (GFM) is the guiding hand behind provincial efforts to
develop corn-based agribusiness. GFM has six divisions: corn
agribusiness, fisheries, manufacturing, rental services (mainly
tractor rental), property and trading, and Local Finance
Guarantee Agency (LPKD or Lembaga Penjaminan Keuangan Daerah).
Emblematic of the savings GFM claims to bring back to the
provincial coffers is their rental of civilian vehicles to the
province for official use, thus saving on maintenance and
regulatory restrictions. The LPKD also has cooperative
agreements with the insurance company (Askrindo) and North
Sulawesi Bank to provide loans to farmers. The LPKD has
distributed Rp. 25 billion (USD 2.75 million) in loans at 12%
interest for farmers and small scale businesses. Loans under Rp.
5 million (USD 560) are granted without collateral.
Foreign Investment Outlook
------------------------------------
7. (SBU) According to provincial figures, the amount of
investment in Gorontalo is around RP. 3 trillion (USD 330
million), mostly in medium and small scale trading, services,
and agriculture sectors. Current foreign investors include
Korean and Japanese companies. Gorontalo's provincial
government ratified local regulations on investment in 2004
giving privileges to foreign investors such as freedom from
levies, security guarantees, work force availability, and same
day permit processing. Gorontalo has signed an MOU with a
Mexican company concerning cooperation on the Gorontalo's Maize
Information Center (GIMIC). Biological research will be
conducted in Mexico while Gorontalo will become a maize
information distribution center, according to local officials.
MCCLELLAND