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December 14th, 2011 WW Staff | NikeLeaks Cables: Asia
 

GOI PROMISES SWIFT RESPONSE TO NIKE TRADE DISPUTE

     
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Reference ID: 07JAKARTA1957    
Created: 2007-07-19 06:05    
Released: 2011-08-30 01:44       
Classification:  UNCLASSIFIED//FOR OFFICIAL USE ONLY    
Origin: Embassy Jakarta
             

VZCZCXRO6777
RR RUEHCHI RUEHDT RUEHHM
DE RUEHJA #1957/01 2000605
ZNR UUUUU ZZH
R 190605Z JUL 07
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 5475
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHKL/AMEMBASSY KUALA LUMPUR 2354
RUEHBK/AMEMBASSY BANGKOK 8045
RUEHGP/AMEMBASSY SINGAPORE 6085

UNCLAS SECTION 01 OF 02 JAKARTA 001957
 
SIPDIS
 
SINGAPORE FOR SUSAN BAKER
 
SIPDIS
SENSITIVE
 
DEPT FOR EAP/MTS, EAP/RSP, EB/TPP, EB/TPP/BTA
COMMERCE FOR SBERLINGUETTE
USTR FOR DKATZ, RBAE
TREASURY FOR IA-BAUKOL
 
E.O. 12598: N/A
TAGS: CASC ASEC EINV ECON KCOR ID
SUBJECT: GOI PROMISES SWIFT RESPONSE TO NIKE TRADE DISPUTE
 
¶1. (SBU) Summary.  On July 18, Ambassador Hume met with Muhammad
Lufti, Chairman of the Government of Indonesia (GOI) Investment
Coordinating Board (BMPK)at Lufti's request to discuss the
escalating trade dispute between U.S.-based Nike Corporation and
their local business partner, Central Cipta Murdaya (CCM).  Lufti
was designated by the GOI to resolve the situation and promised both
security guarantees and CCM cooperation if Nike representatives
would consider returning to Indonesia.  Both Ambassador and Lufti
agreed that a swift GOI response to resolve the dispute was in the
interest of all parties.  End Summary.
 
SBY is in the Loop
-------------------
¶2.  (SBU) Lufti explained that President Susilo Bambang Yudhoyono
(SBY) directed Lufti, the GOI Minister of Trade, Minister of
Industry, and Minister of Manpower to meet with Vice-President (VP)
Kalla to discuss Nike's case.  SBY designated Lufti to coordinate
GOI response.  Lufti acknowledged GOI fell short in key areas,
notably security, but assured Ambassador that SBY was personally
engaged on the issue.  Lufti promised GOI security for all employees
and gave his personal guarantee that Nike executives would not be
detained by authorities even in the event of civil litigation. Lufti
offered to fly to Singapore to meet with Nike executives personally.
 He asked Ambassador to call Nike to encourage them to return to
Indonesia.
 
¶3.  (SBU) Ambassador Hume agreed to call Nike executives, but
reminded Lufti that security assurances must come from GOI directly.
 He explained that Nike executives were likely less anxious in the
immediate sense, but still wary of entering a litigation trap upon
return to Indonesia. Lufti responded that he would "escort them to
the airport and put them on a plane myself before allowing that to
happen."  Both Ambassador and Lufti agreed on the need to handle
disputes quietly and not in the press or the streets.
 
¶4.  (SBU) The Ambassador asked Lufti about CCM's culpability and
willingness to participate in a resolution.  Lufti responded that he
already spoke with CCM and promised Murdaya family cooperation.
Lufti claimed GOI is pressuring the family to fulfill CCM's
financial obligations and accept a "reasonable and fair" phase-out
proposal from Nike.  While promising to play a facilitating role,
Lufti hinted that Nike concessions on the terms of the phase-out
would be helpful.  Ambassador offered to make a public statement
once a negotiated agreement is successfully realized.
 
Background
-----------
¶5.  (SBU) Four Nike executives abruptly departed Jakarta for
Singapore on July 16 after thousands of protesters descended upon
their Jakarta headquarters, instigated by one of Nike's estranged
local business partners, CCM.  Nike executives informed CCM on July
6 that Nike would end their business relationship with CCM at the
end of 2007. Nike explained the decision was based on the factory's
inability to meet the company's minimum contractual product quality
and delivery standards.  CCM responded by ceasing all Nike factory
production and directing disgruntled employees to Nike's downtown
offices. CCM also made veiled personal threats directed at the Nike
executives.  The ensuing protest alarmed Nike executives, who
received Embassy assistance in obtaining protection from local
police and safe passage to the airport.  Ultimately, the crowd
dispersed peacefully and Nike executives were able to leave their
offices.  Nike executives, accompanied by the FSN Investigators,
were then taken to Soekarno-Hatta airport via police escort where
they departed the country.
 
An Infamous Local Partner
-------------------------
¶6. (SBU) COMMENT:  Business contacts tell us that the Murdaya family
"plays hard ball" and has been known to use their money and
influence to harass foreign investors, even having them arrested in
some cases. According to Forbes, Siti Hartati Murdaya is ranked 16th
among the 40 richest people in Indonesia.  Hartati's husband,
Murdaya Poo, is a Member of Parliament from the Indonesian
Democratic Party of Struggle (PDI-P) representing East Java.  GOI's
Cabinet level response to this latest incident reflects growing GOI
awareness of the need to reassure foreign investors already spooked
by the Newmont Mining and Asian Pulp and Paper (APP) scandals.  END
COMMENT
 
 
JAKARTA 00001957  002 OF 002
 
 
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