CALL BY SENATOR ERNEST HOLLINGS AND SENATOR RICHARD SHELBY ON TRADE MINISTER ARIFIN SIREGAR

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90M00005R001400010009-2
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 8
• Document Creation Date: December 27, 2016
• Document Release Date: October 17, 2012
• Sequence Number: 9
• Publication Date: August 25, 1988
• Content Type: MEMO

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Memorandum of Conversation / 48'
V
Participants: Senator Ernest Hollings
Senator Richard Shelby
Ambassador Paul Wolfowitz
#W &f
ZA 0C+
Trade Minister Arifin Siregar OCA 3306/88
Junior Minister of Trade Soedradjad Djiwandono
Robert Sneed, Staff Member, Senate Commerce
Committee
Karen S. Brown, Economic Officer, U.S. Embassy
Jakarta
Time: August 25, 1988
#0Aff
Subject: Call by Senator Ernest Hollings (D., S.C.) and
Senator Richard Shelby (D., Ala.) on Trade Minister Arifin
Siregar
Senators Hollings and Shelby called on Trade Minister Arifin
Siregar and Junior Minister for Trade Soedradjad Djiwandono on
August 25. The discussion focused on textile legislation
introduced by Senator Hollings in the U.S. Congress.
Senator Hollings said he expects the Senate to vote on the
legislation in earlySeptember. Once Congress has completed
action the bill will be sent to the President for his
signature. 'Chances are ' the President will veto this
legislation and 'chances are' his veto will not be overridden
by the Congress. Nevertheless, the Senator added he will
continue his efforts to enact a new textile law.
Senator Hollings summarized economic conditions in the U.S.
textile industry for the Indonesian Trade Ministers. At
present the U.S. industry is doing quite well, growing at 4.5
percent compared to aggregate GNP growth of 2.6 percent. Since
1981 over USD 17 billion has been invested for modernization in
the industry. Even so, 21,000 jobs have been lost since,
January and plants continue to close. The textile indusryis
a national industry, second only to steel in terms of national
security. Changes in textile policy must occur for the U.S. to
have a viable industry: his bill represents survival of an
industry and not protection.
Minister Siregar stated Senator Hollings' view on trade
appeared quite different from the view expressed the day before
by visiting U.S. Agriculture Negotiator for the Uruguay Round
Ambassador Daniel Amstutz. The U.S. agricultural proposal
called for elimination. of trade barriers and Ambassador Amstutz
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had argued it was in the best interest of Indonesia to support
the U.S. initiative. The Trade Minister asked Senator Hollings
how he should reconcile these two U.S. views.
Senator Hollings replied the United States has been trying for
years to bring about free trade. The most open market in the
world is the U.S. market. For example, the United States buys
over 40 percent of Indonesia's textiles, but Indonesia sells
less than two percent to Japan. Rather than talk about free
trade, attention should focus on reciprocal free trade which is
a realistic and sound policy. Unfortunately sometimes to
remove trade barriers it may be necessary to erect a new
barrier before both can be removed. In the past the United
States permitted foreign countries access to its markets far in
excess to what these countries granted U.S. products. This
policy can no longer continue; the U.S. must resolve its budget
and trade deficit problems.
The Trade Minister explained the Indonesian textile industry
provides employment for over 1.8 million Indonesians. Labor
intensive industries are very important for Indonesia, since
the labor force grows by 2 million annually. Both Senators
Shelby and Hollings expressed understanding for the Indonesian
Government's problems in creating an environment capable of
generating sufficient employment opportunities. Senator
Hollings added employment is an important aspect of the textile
issue in the United States. In the late 1950's over four
million Americans worked in the U.S. textile industry. Today
the work force totals 2.1 million. Junior Trade Minister
Djiwandono said job creation should be seen from a national
perspective rather than by looking at only one sector. During
the past few years the United States has created more jobs than
any other country. Senator Hollings responded the jobs created
are sub-standard jobs in the service sector where wages are
low. The truth is American industries have been exported.
Minister Siregar explained Indonesia imports 90. percent of its.
cotton used in the textile industry, a large percentage from
the United States. Indonesia also imports wheat and soybeans
from the States. Both Senators Shelby and Hollings expressed
appreciation for Indonesian purchases. Senator Hollings stated
his textile bill includes a provision whereby countries which
buy American agricultural products would receive a higher quota
and this could benefit Indonesia.
Senator Shelby added he has been impressed with the remarkable
progress Indonesia has made. He emphasized he and Senator
Hollings come to Indonesia as friends and want U.S. trade with
Indonesia to continue. it is in-our mutual interest to expand
trade, break down barriers, and increase our respective
national security.
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OCA 3306/1 88
Jakarta, August 25, 1988
MEMORANDUM OF CONVERSATION
PARTICIPANTS: President Soeharto
Widodo Sutyo, Interpretor
Col. Eddy Tumengkol, Chief of Protocol
Col. Maryono, Military Aide
Senator Hollings, D-SC
Senator Shelby, D-ALA
Robert Snead, Senator Holling's Staff
Ambassador Wolfowitz
Tim Carney, Political Counselor
DATE/PLACE August 25, 1988, Istana Merdeka
SUBJECT Senators Hollings and Shelby Call on
President Soeharto at Istana Merdeka, Jakarta
DISTRIBUTION: AMB, DCM, POL, ECON, FCS, DAO, RA, EAP/IMBS,
INR/EAP, INR/DB, BIO, USIS, CHRON
The President, who was suffering from a bad cold, entered
on an exchange of pleasantries while photographers took
pictures. He expressed his pleasure and honor to receive
the Senators. He asked them to broach any issue they
wished with him. Senator Hollings replied that the honor
was theirs and reminded the President they had met fifteen
years ago in Jakarta. The Senator said he is impressed by
the tremendous progress and development since then.
Jakarta is cleaner and more dynamic. The Senator
understands that from a consumer, Indonesia has become
self-sustaining in rice production and that indicates it is
growing. He reaffirmed a commitment to freedom in
Southeast Asia. He underscored the desire to work with
Indonesia on trade and security matters.
President Soeharto began an extensive exposition of
economic, domestic and foreign policy developments by
noting that Senator Hollings is able to make comparisons
using a fifteen-year base. He explained that economic
5~86f61 -7? Ff
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development extends nationwide; it has not just touched
Jakarta. He briefly mentioned the five-year development
plans as the-instrument for realizing Indonesia's
development strategy. The long term goal is to create a
situation and conditions for political, economic and social
life to be soundly based on. The economy will be used to
establish a just program for a Pancasila-based society.
Such an economy would have a strong industry which is
sustained by the agricultural sector. Having reached rice
self-sufficiency, Indonesia will continue to develop
agriculture to sustain its industrialization.
Describing Indonesia's industralization, the President
noted that Indonesia seeks simultaneously to develop raw
materials into basic goods and then process basic goods
into manufactured goods. That process has succeeded, and
Indonesia now seeks to create industries that make
machinery and industrial goods. Thus, the upstream and
downstream parts of the system are practically completed.
Only the uppermost stream remains to be brought into
existence. That has been delayed because of the drop in
oil prices and fluctuations in exchange rates which have
incapacitated Indonesia's financial capability. The
President illustrated by explaining the inability of the
steel industry to turn iron sands into pellets which causes
the nation to import 3-4 million tons of pellets each year.
Indonesia is also preparing other factors of the economic
infastructure. Communications on air, sea and land are
particularly important as is a national telecommunmications
network. The latter, which has been effected with U.S.
Government assistance through communication satellites was
required to ensure national unity and to have geographic,
political and national defense cohesiveness. President
Soeharto noted that therein lies the importance of the
earlier USG role in introducing domestic satellite
communications. He added that this is also of use to
Indonesia's neighbors in Southeast Asia. The President
also cited electricity as another economic infrastructure
element. It is vital for the development'of industry. He
recalled that GOI policy is to use "non-exportable"
electricity at home, naming hydro-electric and geothermal
power. Most coal is exported although some is used, and
gas and oil are exported as much as possible.
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National development also exists in the political field.
The President explained that only political stability can
sustain development in other sectors. Therefore, Indonesia
carries out political development alongside economic
development, but this is not so easy to grasp. Before the
New Order, Indonesia had political and religious strife.
Now, the government tries to prevent the outbreak of
ideological, political or even religiously-based
conflicts. The foundation of these policies derive from
the 1945 national consensus which included both Pancasila
and the 1945 constitution. Political development tries to
follow these genuine principles strictly. He listed the
five tenets of Pancasila: belief in one God; a just and
civilian humanity; national unity; democracy; and social
justice. They must be proclaimed by the whole of the
Indonesian people -- the society, the state and the nation.
The President noted that in conformance with the national
desire to simplify political life, the previous structure
of nine political parties has been changed and now two
political parties and one functional group exist. He
recalled that it was only in 1983 that Pancasila, the
foundation of the state, was actually embraced by all mass
and social organizations and political parties. The
peoples representatives (DPR) passed a 1983 law which made
Pancasila the sole basic principle; they aimed to prevent
ideological, religious or regional conflicts. In the
context of political development, the government now holds
upgrading courses to teach Pancasila so that people
understand its real meaning. The objective is to instill
understanding of popular rights and of responsibilities.
The President explained Indonesia's government structure
noting finally that the Parliament controls the President
himself.
This
mechanism of national leadership, in
accordance
with
the 1945 constitution, is being inculcated
to become
part
of the national culture. The President
indicated
that
the goal is so that changes in national
leadership
will
not depend on one person but on the entire
people.
Political stability, the President said, is a major
contributor to the national stability of ideology, culture,
defense and military. With economic growth, Indonesia has
the ability to make more equitable distributions. The
basic foundation of economic development is a trilogy of:
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-- stability
-- economic growth
--.equitable distribution of the gains.
While carrying out development to increase economic growth
and enhance living standards, Indonesia is reinforcing
national resilience. Only with national resilience can
Indonesia ward off dangers from within and without to its
territory, integrity and independence. Indonesia seeks to
create instruments to realize national resilience that also
positively contribute to regional resilience. The
President recalled that he has said that Indonesia's
basic principle is to carry out peaceful coexistence
with its Southeast Asian neighbors through
-- mutual respect for sovereignty,
-- non-interference in internal affairs and
-- mutually beneficial cooperation.
The emphasis and focus of cooperation is to reinforce the
respective national resiliences of Southeast Asian
countries. Because one of the weakest links of national
resilience in this region is in the economic field,
Indonesia stresses regional economic cooperation.
ASEAN, the President noted, has aspirations to create a
zone of peace,, freedom, and neutrality. This does not seek
to make of ASEAN a political or military pact, but rather
to create each nation with strong national resilience. if
each ASEAN member has national stability, then there will
be regional stability and, therefore, regional resilience.
The President concluded that in carrying out national
development to reinforce national resilience, cooperation
with other friendly countries is important. US-Indonesian
bilateral relations are-'very encouraging indeed." The
President sounded a cautionary note about possible effects
on the Indonesian economy, especially of protectionism. He
also observed that the efforts of the seven industrialized
countries to improve their own living standards ultimately
caused foreign exchange fluctuations which were damaging to
developing countries like Indonesia. He cited an increase
in Indonesia's debt servicing of 1.5 billion dollars as due
to such currency fluctuation, mainly of the Japanese Yen
but also of the Deutsche Mark and European currencies.
.This money could have been used to finance other projects,
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but as a result Indonesia has now had to appeal to IGGI
members to provide even the rupiah costs for local
financing of development projects. This burden of debt the
President described "as a very great challenge for
Indonesia;" but he underscored that 'Indonesia is pleased
that we can honor our debts." He affirmed that Indonesian
policy is to use loans to the maximum to finance
development projects. The results of those projects enable
Indonesia to further develop and to service the debt.
The President observed that the economic resilience of
Indonesia is solely due to agricultural successes. But he
sounded a warning hereby adding that demands for wheat,
soybeans, and for cotton for textiles are increasing.
These three imported commodities are substantial import
expenses.
Senator Hollings thanked President Soeharto for the
comprehensive overview. He expressed admiration for the
President's personal role in 1965 and for Indonesia's
position as a democracy balancing Soviet and Chinese
Communism. The Senator then expressed his view of the
American economic situation which includes transformation
of the United States into a debtor from a creditor nation.
The U.S. now owes 2.5 trillion dollars and interest costs
alone are greater than social security. The Senator
maintained that policies are not protectionist. He
recalled that his legislation does not propose rolling back
imports, but rather insuring the survival of U.S.
industries. He noted that his bill conforms to bilateral
agreements with Indonesia, to GATT and the Multi-Fiber
arrangement. He concluded that Indonesia is fully capable
of diversifying, finding new markets and using its very
productive economy to compete.
Senator Shelby voiced his respect for what President
Soeharto accomplished first in 1965 and then, through his
leadership, in the following years. He believed that
Indonesian policies bolstered the strength of Malaysia and
Thailand when Indonesia "drew the line." The Senator
affirmed that the U.S. would continue to trade with
Indonesia and enjoy mutual security and economic interests
for the' future.
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The meeting concluded and the Chief of Protocol offered a
gift to Senator Hollings of books about Indonesia as the
party departed. Senator Hollings left a gift for President
Soeharto with the Chief of Protocol.
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