Yup, Indonesia was downgraded to Category 2, since 2007. But Indonesia's new President is determined to improve transportation safety, so getting back to Category 1 (full ICAO compliance) is currently one of the highest priorities for the Minister of Transport.
Garuda presently operates into the US and code shares with Delta (I believe Garuda being the only Indonesian operator currently operating into the US). So can I assume the FAA gave them some sort of exception based on their record?