Cablegate: President's Annual National Day Address Focuses On

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OO RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJA #1570/01 2320132
ZNR UUUUU ZZH
O 190132Z AUG 08
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9825
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS PRIORITY
RUEHBJ/AMEMBASSY BEIJING 5308
RUEHBY/AMEMBASSY CANBERRA 2914
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RUEHKO/AMEMBASSY TOKYO 2376
RUEHWL/AMEMBASSY WELLINGTON 2960
RUEHHK/AMCONSUL HONG KONG 2889
RUEHPT/AMCONSUL PERTH 1050
RHEHNSC/NSC WASHDC
RHEFDIA/DIA WASHINGTON DC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 02 JAKARTA 001570

SIPDIS

DEPT FOR EAP, EAP/MTS, EAP/MLS, INR/EAP
NSC E. PHU

E.O. 12958: N/A
TAGS: PGOV ECON ID
SUBJECT: PRESIDENT'S ANNUAL NATIONAL DAY ADDRESS FOCUSES ON
EDUCATION, POVERTY ALLEVIATION

REF: JAKARTA 1555 AND PREVIOUS

JAKARTA 00001570 001.2 OF 002

1. (U) SUMMARY: President Yudhoyono delivered his annual
National Day speech on August 15. The speech was given in
Parliament and the Ambassador attended. Before the
President's speech, the Speaker--an influential figure in his
own right--addressed the gathering, underscoring his support
for more education spending.

2. (U) SUMMARY (Con'd): Yudhoyono pledged to increase
education spending in order to reach the constitutionally
mandated 20% of the total budget. He highlighted the results
of his economic development strategy and outlined efforts to
alleviate poverty through improvement of basic services and
rural development, and accelerating economic growth through
infrastructure. He also mentioned agriculture and energy
development, and said he would intensify his anti-corruption
drive and bureaucratic reform efforts in order to solidify
democracy, defense and domestic security. The speech was an
important one for the President as he gears up for his
re-election effort next year, but it did not break new
ground. END SUMMARY

SPEAKER'S REMARKS

3. (U) Speaker of the House Agung Laksono gave opening
remarks pledging support to the President's commitment to
reach the 20% of the State Budget requirement for education
as mandated by the Indonesian Constitution. That said, he
was critical of SBY's energy policy with regard to shifting
working hours in the manufacturing industry to the weekend in
order to alleviate the electric power crisis, calling it
ineffective and a deterrent to investment.

4. (U) The Speaker touched on foreign affairs, mentioning a
recent letter sent by some 40 members of the U.S. Congress
calling for the release of two Papuans charged with sedition
for raising a separatist-linked flag. Laksono said the
Indonesian Constitution provides for basic protection of
human rights and "we do not wish to have excessive
intervention by foreign parties in Indonesia's internal
affairs, which would belittle Indonesia as a sovereign and
democratic state."

SBY HIGHLIGHTS HIS EFFORTS

5. (U) Taking the stage, the President highlighted the
results of his government's "growth with equity" economic
development strategy and the tripling of poverty alleviation
program budgets over the past four years. He pointed to a
rapid decline in unemployment (from 10.5% in February 2006 to
8.5 percent in February 2008) and to reduced poverty levels
(from 17.7% in 2006 to 15.4% in March 2008, a ten-year low).

KEY POINTS

6. (U) The speech also focused on education, poverty
alleviation, subsidies, infrastructure investment, and
corruption eradication. Key details included the following:

--Education remains the top priority and will receive the
greatest percentage of the 2009 budget (20%) in order to
raise the quality of education and make Indonesia more
competitive in the 21st century. This development was
prompted by an August 13, 2008, Constitutional Court
decision, which ruled that the 2008 state budget violated the
Constitutional requirement that at least 20% of central and
regional government budgets be directed to education. SBY
acknowledged the difficulty of carrying out this extra
spending, given extremely tight budget constraints. Because
of this, the budget deficit would increase to Rp. 99.6
trillion, or 1.9% of GDP. (Note: Key 2009 budget
assumptions include growth of 6.2%, inflation of 6.5%, and an

JAKARTA 00001570 002.2 OF 002

exchange rate of Rupiah 9100:1USD.)

--Improving Basic Services in the health, education and rural
development sectors receive Rp. 142.8 trillion. The poverty
alleviation program receives a budget allocation of Rp. 66.2
trillion, with rural development receiving Rp. 17 trillion.
It's four main targets are: lowering the poverty level to
12%-14%, raising basic education, extending free health
services to the poor, and widening the accessibility of
affordable transportation services.

--Subsidies remain a significant portion of the budget and
are projected to total 27.8% of the budget. This rate could
rise if world oil prices exceed the $100/barrel budgetary
assumption. Subsidies are to be allocated as follows: fuel
- Rp. 101.4 trillion, electricity - Rp. 60.4 trillion; and
food, fertilizer and seedlings - Rp. 32 trillion.
Acknowledging that energy subsidies disproportionately
benefit those who own cars and high wattage houses, SBY said
the GOI will continue to amend its subsidy policy, based on
developments in global oil prices, in order to reduce budget
leakage and prevent misdirection of budgetary resources.

--Infrastructure funding, which had increased from Rp. 21.9
trillion in 2005 to Rp. 58 trillion in 2008, would receive
Rp. 39.5 trillion.

--Eradicating corruption through bureaucratic reform remains
high on SBY's priorities. He will allocate Rp. 16.7 trillion
to the 2009 general elections to ensure they are conducted in
a fair, impartial and peaceful fashion.

--National defense remained a priority in the budget.

7. (U) Mission will provide the text of the speech to
EAP/MTS.

HUME

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