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UNCLAS SECTION 01 OF 03 JAKARTA 000011
SIPDIS
SIPDIS
SENSITIVE
FOR EAP/MTS; EB/TPP/IPE JBOGER
COMMERCE FOR 4430/BERLINGUETTE AND PETERS
COMMERCE PASS USPTO FOR URBAN AND FOWLER
DEPT PASS USTR FOR DKATZ, JGROVES, RBAE, CCOLLEY
E.O. 12598: N/A
TAGS: ECONETRDKIPRID
SUBJECT: INDONESIA - JANUARY 2007 IPR UPDATE
¶1. (SBU) Summary: Unannounced "training visits" by the Ministry of
Industry's (MOI) Optical Disc Factory Monitoring Team (MT) in late
November to 25 of 27 registered optical disc factories show that the
enforcement of Indonesia's Optical Disc Regulations (ODR) is still
in its infancy. Evidence that some factories had been tipped off
prior to the visits points to the possibility of collusion between
team members and factory owners, and there are also reports of
attempts by some team members to extort money from factory owners.
Despite these issues, the MTs collected important data and evidence
during their visits, including forensic samples from 100 of 127
lines at the 25 registered factories visited. The MOI agreed to
allow an International Recording Industry Association (IFPI)
forensic lab in England to analyze the samples, and already IFPI has
determined that at least six factories, with 27 lines and capacity
of up to 700,000 discs per day, are involved in piracy. Ironically,
the owner of one of six factories producing bootleg DVDs serves as
the Chairman of the Video Industry Association (ASIREVI),
Indonesia's industry group for legally registered optical disc (OD)
factories. The Embassy's two IPR technical advisors are working
closely with IFPI to pull together a comprehensive report on the
visits that we can share with key GOI officials. In order to make a
significant dent in pirate OD production in Indonesia, the USG will
need to continue to support the MT and find ways to generate greater
political will and interagency cooperation to address the OD
factories, particularly with regards to the police. End Summary.
¶2. (SBU) The Embassy's two State Department-funded IPR technical
advisors, on board with the Department of Justice's International
Criminal Investigative Training Assistance Program (DOJ-ICITAP)
since September 2006, are off to an active start. In mid-November,
the two held four days of digital photography and refresher training
for members of the MOI's OD Factory Monitoring Team. Subsequently,
with approval from MOI Director Tony Tanduk, the MT worked with the
Embassy advisors and IFPI representatives to plan unannounced
"training visits" to 27 of Indonesia's 28 registered OD factories,
the remaining one being in Surabaya. Tanduk agreed that five
experienced IFPI investigators, four of whom flew in to Indonesia
for the training visits, could help supervise and guide each of four
teams during their factory visits. Tanduk also agreed that the
visits should be unannounced.
Factories Likely Tipped-Off Prior to Visits
-------------------------------------------
¶3. (SBU) During a final briefing for MT members the Friday before
the training visits, MT Deputy Head Azwar Ratu Pengadilan handed out
a schedule for the MT to follow. The Embassy and IFPI advisors,
however, explained to Azwar that, to preclude the possibility of
tipping off factory owners, they would prefer to provide a separate
schedule the following Monday while the MT investigation groups were
en route to the factories. Azwar initially resisted but eventually
acquiesced to the approach. Following the Friday meeting, Azwar was
seen busily making and receiving telephone calls, presumably from
factory owners anxious about the inspections.
¶4. (SBU) As the teams gathered the following Monday to begin
factory visits, the four members of the MT from the police were
conspicuously absent. Those who could be reached by telephone
claimed they could not join the factory visits due to other
priorities that had unexpectedly arisen. (Comment: The INP's
Special Crimes Division has the lead on Intellectual Property Rights
(IPR) enforcement, but its efforts traditionally have been weak.
This contrasts dramatically with successful ongoing IPR enforcement
efforts of the Jakarta Metropolitan Police Special Crimes Unit,
stationed less than a mile away. End Comment.) Moreover, despite
requests that they turn off their mobile phones throughout the
course of the factory visits, many MT members were seen sending and
receiving text messages soon after the announcement of each day's
schedule of visits.
Conditions at Some Factories Highly Suspect
-------------------------------------------
¶5. (SBU) MT and IFPI representatives reported that many of the
factories visited were either not producing or appeared to have been
sanitized prior to the MT's arrival. Staff at some factories
claimed that operations had ceased due to a lack of orders,
repeating what they told MT members on previous visits months ago.
(Comment: Given the value of the machinery and the opportunity cost
of keeping it idle, their explanation seems suspect. End Comment.)
¶6. (SBU) Despite the security breaches, the MTs were able to
collect 100 exemplar samples from the 25 plants visited. Following
the visits, Tanduk agreed to allow the exemplars to be forensically
examined at IFPI's laboratory in the UK. Initial IFPI forensic
analysis suggests a high probability that six factories, with 27
JAKARTA 00000011 002 OF 003
lines and production capacity of as much as 700,000 per day, are
involved in piracy. PT Panca Surya Putera, an import/export trading
company, owns five of the factories with 21 lines, as well as a
mastering facility and broadband internet company located at the
same address. Preliminary forensics indicates that two of PT
Panca's production lines have been used to produce pirate ODs. With
a mastering facility and broadband access, it is conceivable that PT
Panca is producing its own pirate master moulds locally.
Industry Group Leader a Bootlegger Too
--------------------------------------
¶7. (SBU) The MT found two of six production lines unregistered at PT
Akeda Multimedia, the sixth highly suspect factory. One of the two
machines, a DVC line, was warm, indicating recent operation.
However, the plant manager refused to allow the MT to run the
machine, open the mould, or take samples, claiming that the machine
was broken and that their engineer in Singapore had instructed that
it should not be operated pending his arrival as otherwise serious
damage would occur. Ironically, PT Akeda Chairman Nurdin Umar is
the chairman of Indonesia's video association (ASIREVI), a group
that publicly advocates against piracy. Another shareholder of PT
Akeda, Wahadi Wiyanto, serves as ASIREVI's Secretary General and
owns a distribution company that replicates New Line Cinema and
independent movies in DVD format for distribution.
¶8. At PT Visindotama Sakti Perkasa, a factory with five replicating
machines, the MT arrived and observed a truck apparently about to be
unloaded with and estimated 10 to 15, 750 kilogram bags of
polycarbonate. However, upon seeing the MT, factory staff quickly
covered the truck and moved it off the factory grounds. A factory
caretaker later claimed the factory had not operated for three
months. However, the MT counted 80 empty and 12 full 750 kilogram
unmarked (no manufacturer or batch numbers) bags of polycarbonate.
With roughly 120 bags of polycarbonate, the factory could produce up
to three million CDs or half that amount in DVDs.
¶9. (SBU) At several factories raided in the last year by police, MT
and IFPI representatives observed the following:
-- PT Winnerstarindo: Police raided and sealed production lines at
PT Winnerstarindo several month agao. During its recent visit, the
MT found the electricity turned on and heard compressors operating.
The door to the machinery area, however, was sealed with a padlock
that factory staff claimed that the police installed. Soon after
the MT arrival at the factory, a group of threatening looking men
arrived outside the factory and stood menacingly by its entrance
doors. IFPI and MT representatives said that, without police
present, the MT felt threatened and decided to leave the factory.
-- PT Medialine: Police raided and sealed production lines at PT
Medialine around April 2006. During its visit, the MT found a
broken police seal on the main entrance gate and photographed it.
As no police were present, the MT did not enter the premises. Police
had reportedly arrested one of the factory's managers, who was
reportedly sentenced to 18 months in prison for piracy. However, in
spite of the conviction, the MOI has yet to suspend or revoke the
factory's registration.
-- PT Visora Catur Disindo: On August 1, 2006 police raided and
removed one of four production lines. The MT found the factory's
three remaining lines remained in operation. There is no further
information available on police investigations into the factory, and
MOI has yet to revoke or suspend its production license.
-- PT Takdir Jaya Abadi: Police raided the plant in February 2006.
The MT found the plants four lines still operational.
Governance Issues Swirl Around MT
---------------------------------
¶10. (SBU) In the months prior to the recent trainings and factory
visits, two factories lodged complaints that Wihadi and another
ASIREVI executive (who served as a member or the MT) had attempted
to extort money from them to ensure that their plants passed the MT
inspections. Soon after one of the factories refused to pay, the
police raided the factory and detained its director for a month on a
minor charge of failing to have proper censor documentation for one
of the film's it was replicating. The Embassy's IPR advisors
subsequently raised this matter with Tanduk, and he agreed that it
was best to remove all industry representatives from the MT.
IPR Map Out More Capacity Building
----------------------------------
¶11. (SBU) Following the factory visits, the Embassy IPR advisors
JAKARTA 00000011 003 OF 003
arranged a well-attended one day workshop for representatives of OD
factories and importers of polycarbonate to provide them with
further guidance on their obligations under Indonesia's OD
regulations and international best practices. Based on lessons
learned during factory visits, the IPR advisors have formulated the
following list of recommendations and activities for the GOI to
undertake during the coming year. They will pass the list to Tanduk
in the coming days.
-- Assign staff full-time to serve on the MT, instead of seconding
staff on a part-time basis;
-- Provide the MT's new office with full time secretarial support
which can assist in improving the OD factory database and keeping it
up to date;
-- Issue official warning letters to non-complaint factories;
-- Facilitate better cooperation and information sharing between key
agencies involved in OD regulations implementation, including case
development and prosecution;
-- Revoke licenses of factories producing pirated goods, especially
in cased where there is a successful prosecution.
-- Require prosecutors to demand the sealing and seizing of
equipment and machinery used to pirate goods.
-- Develop and implement MT security best practices to avoid
factories being tipped-off in advance of monitoring visits;
-- Encourage inspection outside regular business hours; and
-- Explore ways to better monitor production of blank CD-R and
DVD-Rs.
Comment: Where the Rubber Hits the Road
---------------------------------------
¶12. (SBU) The unannounced factory visits represent the first serious
and systematic GOI attempt to implement the ODRs, and will hopefully
be the start of a long process to build GOI enforcement capacity and
raise the costs of producing pirated ODs in Indonesia. Given
Indonesia's high rates of piracy, production over-capacity, and poor
enforcement, it is not surprising that MT visits uncovered evidence
of piracy -- in fact, any other outcome from the inspections would
not have been credible. Nor is it surprising that leaders of the
legitimate industry are dabbling in piracy and likely involved in
buying-off members of the MT. As a result of the inspections and
IFPI forensic analysis, we should soon have a compelling case of
widespread registered factory involvement in piracy. We will
present this evidence to senior GOI officials concerned with IPR,
all of whom are keen to maintain Indonesia's Special 310 Watch List
status. With so many kinks in the system yet to be worked out, our
DOJ-ICITAP advisors will continue to be critical to effectively
implementing the ODRs, providing desperately needed capacity
building and guidance, and encouraging interagency cooperation.
ANDERSON