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Trade and Investment News, 22 June 2009 |
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Highlights
National • Government freezes creation of new administrative units until year-end
Politics • Constitutional Court orders re-count on Batam
Terrorism • Former terrorism convict calls for more help with rehabilitation
Security • Finance ministry backs budget increase for Armed Forces
Law & order • Extradition treaty to be signed with China, says ambassador
Health • Climate change health impacts already being felt: Ministry
Economy • Business starts to respond to emerging recovery • Government to push ahead with financial oversight agency
Business briefs
Macroeconomy • Growth forecast for 2009 trimmed to 4.3% from 4.5% • New debt sales aims to net Rp2 trillion to fund deficit
Investment • British American Tobacco to pay $494 million for fourth-ranked Bentoel
State concerns • Government opens new export financing agency
• Potential seen for creation of production base for low-cost cars
SOEs • Fertilizer producer PT Pupuk Kaltim to issue Rp1 trillion in bonds
Private sector • Komatsu heavy equipment sales move forward 45% in May
Banks • Mandiri, ANZ Panin join move to lower interest rates
Power • Operating costs lower next year as PLN moves away from oil-fired generation
Oil & gas • Government expected to extend contract for Husky gas project
Mining • PT Indika Energy purchase of contractor PT Petrosea approved
NATIONAL
No new regions until end of year: Home Minister
Home Minister Mardiyanto said the government will not approve any bid for regional divisions until the end of the year, citing its focus on the presidential elections, Antara reported.
“We have received 20 proposals to form new regions but no new administrations will be approved until the end of 2009,” Mardiyanto said.
Mardiyanto said the government was evaluating the performance of newly-formed regions and would revoke regional divisions if it was found they failed to improve welfare within two years.
Meanwhile, all three presidential candidates said they are committed to revising the regional autonomy law, already altered twice in the last decade, to outline a clear relationship between the central government and regions.
Incumbent President Susilo Bambang Yudhoyono said despite some progress having been achieved with regional autonomy, many problems and shortcomings still have to be addressed, including a revision of the 2008 regional administration law.
While the central government will maintain its key role, governors and regents, through their administrations and local wisdom, should attract investors to boost their regional economies, he said.
Former President Megawati Sukarnoputri said the law needed to be revised because it contained too much "unclear language", which led to multiple interpretations and subsequent friction between regional heads and Jakarta.
Vice President Kalla and his running mate Wiranto also promised to revise the law, claiming they would extend regional autonomy to include villages.
The final goal should be to improve people's social welfare, rather than create positions for local elites in the executive and legislative bodies, Kalla said.
Space agency to test satellite rocket next week
The National Space and Aeronautics Institute (LAPAN) said it plans to launch its RX-420 rocket for the first time on July 2, Kompas reported.
The RX-420 rocket is the forerunner to Indonesia's next indigenous orbital satellite launching vehicle program.
The announcement was made by Research and Technology Minister Kusmayanto Kadiman in Jakarta last Monday
During a meeting with Commission VII of the House of Representatives, Kadiman said the launch of the RX-420 rocket, with a range of 100 km, will be conducted by LAPAN, which had successfully launched a RX-320 rocket in 2008.
He added that the RX-420 rocket possessed more power than the RX-320 and its range could be increased to 190 km if the rocket's weight was reduced.
"Its cruising range is equivalent to the distance between Jakarta and Bandar Lampung," said Kadiman.
Apart from the scheduled launch in July, there are plans to carry out further test launches in 2010 and 2011.
In 2014, LAPAN will have finished all its experimental rocket launches and will have already developed a rocket with a range of 300 km and speed of 7.8 km/sec allowing it to carry a small satellite into space, he said, adding that this would be a “monumental achievement.”
POLITICS
Constitutional Court orders vote re-count in Batam
The Constitutional Court on Friday ordered the Batam Regional Election Commission (KPUD) in Riau Islands to conduct vote recounts in eight sub-districts, Antara reported.
The vote recount must be carried out no later than 60 days after the verdict is issued, Constitutional Court chairman Mahfud MD said.
The verdict stems from a suit filed by the Indonesian Democratic Party of Struggle over alleged vote miscalculations.
On June 16, the same court also ordered the Rokan Hulu KPUD in Riau to hold new legislative elections in Tambusai and North Tambusai districts. Re-counts were also ordered in Yahukimo, Papua and South Nias.
The General Election Commission (KPU) said it is considering the possibility of holding the court-ordered legislative repeat polls in conjunction with the July 8 presidential election.
TERRORISM
Police should do more on terror rehab: Ex-convict
The National Police’s anti-terror unit needs to help more on the de-radicalization programs for released terrorists so that they can reintegrate into society, a former extremist said.
Many former convicts were having difficulties in finding jobs after their release as they were already labeled as terrorists, said Usman, 28.
“The police should help provide more opportunities for people like us,” he said.
Usman was released last month after serving a four-year jail term in Jakarta over his involvement in sectarian conflicts in Poso, Central Sulawesi and Ambon, Maluku.
He also acted as a courier for militant Abdullah Sunata, who was convicted for weapons ownership and withholding information about escaped terrorist mastermind Noordin M Top.
Usman said he intends to start a new life, studying at an open university and opening a poultry farm in his hometown of Sukoharjo, Central Java.
He said he has renounced his hard-line views and is now more open-minded to differences in society.
SECURITY
Jakarta ready to negotiate with Malaysia over Ambalat
Indonesia has asked Malaysia to resume talks on the issue of disputed borders, including those in the oil-rich Ambalat waters off East Kalimantan, on July 13-14, the Foreign Ministry said Friday, The Jakarta Post reported.
Ministry spokesperson Teuku Faizasyah said the government had sent a letter to the Malaysian government asking it to speed up negotiations on the decades-old dispute.
"This would be our 14th negotiation," Faizasyah said, adding Indonesia was ready to host the meeting.
Kuala Lumpur, however, has not responded to the request, Faizasyah said.
The Ambalat controversy has again fueled anti-Malaysian sentiment in Indonesia.
The Indonesian government has said it will fight for the maritime area, despite Kuala Lumpur's persistent claim it is part of Malaysia’s territory.
Finance Ministry backs defense increases: Indrawati
Finance Minister Sri Mulyani Indrawati said she has no objection to raising defense spending by up to Rp10 trillion ($1 billion) next year, but she said budget discipline must be applied in the procurement of military equipment to avoid a “shaky” state budget, The Jakarta Globe reported.
The House of Representatives budgetary committee on Tuesday agreed to raise defense spending by 8.5% next year from Rp33 trillion this year, a figure immediately criticized by Defense Minister Juwono Sudarsono, who said it was far less than he had expected.
The figure is still subject to revision as more meetings with the government are needed before the House can reach a final figure.
The Rp2.8 trillion ($274.4 million) increase is the second highest for any ministry after the Education Ministry, but far less than the Rp7 trillion ($686 million) to Rp10 trillion ($980 million) approved last week by House Commission I, which oversees defense.
On Wednesday, the Finance Minister attended another hearing with the budgetary committee, where the defense budget was among the topics discussed.
At the hearing, Indrawati said: “The Finance Ministry is ready to fully back the plan, even for Rp10 trillion, if it can be fully absorbed.”
She also agreed that the morale of soldiers must be maintained by giving support for their needs and buying new military equipment.
“I understand the intention to raise the budget and I will maximize efforts to achieve that,” she said, adding that such a huge increase could cause a wider budget deficit.
LAW & ORDER
Extradition treaty to be signed with China: Ambassador
Indonesia and China will sign an extradition treaty in Beijing next month during a meeting of the countries’ foreign ministers, Indonesian Ambassador to China Sudrajat said on Friday, Media Indonesia reported.
The treaty was made as part of a general cooperation agreement that was signed by President Susilo Bambang Yudhoyono and his Chinese counterpart Hu Jintao in April 2007.
In May 2007, the Corruption Eradication Commission also signed a Memorandum of Understanding (MoU) with China’s Ministry of Supervision in Beijing that outlined both countries’ commitment to cooperate in eradicating corruption.
Separately, the House of Representatives has suspended deliberations to ratify an extradition treaty between Indonesia and Singapore, which aims at bringing back graft convicts and suspects hiding in the neighboring country, Tempo reported.
Djoko Susilo, a member of the House of the Commission I on defense and foreign affairs, said Thursday many lawmakers refused to link the extradition treaty with a defense agreement between the two countries.
“We need an extradition treaty but not a defense agreement. Parallel deliberation of defense and extradition agreements was the initiative of Singapore, which will disadvantage us,” Susilo said.
In April 2007, Foreign Minister Hassan Wirajuda and his counterpart George Yeo signed the extradition agreement but lawmakers later raised numerous concerns over the finer details of the defense agreement that accompanied it.
Lawmaker Gayus Lumbuun said in the absence of the treaty the government could still cooperate with Interpol to track down the whereabouts of graft fugitives.
Supreme Court agrees to enforce environmental laws
State Minister for the Environment Rachmat Witoelar and the Supreme Court signed an agreement on Thursday to enforce laws in environmental cases, The Jakarta Post reported.
Under the agreement signed by Witoelar and Chief Justice Harifin A Tumpa, the Supreme Court will train judges to specialize in handling environmental cases.
“We may train 100 judges to handle all the environmental cases in the country. They could try these cases from region to region,” Tumpa said.
The need for specialized judges to handle environmental cases is critical, since the environment had long been neglected through poor law enforcement in Indonesia, Tumpa said.
Time magazine wins final appeal hearing
The Supreme Court has cleared Time magazine of charges it defamed the late former President Suharto by alleging in a cover story that his family amassed a huge fortune during his rule.
It said Thursday the publication did not have to pay $106 million in damages, The Associated Press reported.
The ruling, which marks the end of the appeals process, was hailed as a victory for press freedom.
"We have been struggling to find justice for a decade now," said Todung Mulya Lubis, the magazine's lawyer, adding that he hoped the decision would give journalists the courage to do their jobs. "It has been a long road."
Time ran a cover story in its Asian edition in May 1999 saying Suharto's family had pocketed billions of dollars during his 32-year reign — the bulk of it from oil and mining, forestry, property, banking and petrochemicals — and that they'd stashed much of the money overseas.
Lubis said the article was based on four months' reporting in 11 countries.
Suharto, who died last year at the age of 87, initially filed lawsuits against the magazine with the Central Jakarta District Court and later the Jakarta High Court, both of which ruled in Time's favor.
In August 2007, the Supreme Court overturned the decisions, prompting the magazine to demand a judicial review.
Supreme Court Judge Hatta Ali said Thursday the article "did not violate the law" or breach "the press code of conduct." He said Time owed no money to the Suharto family.
HEALTH
Climate change health impacts already being felt: Ministry
The likelihood of increases in health risks will escalate in line with rising temperatures caused by global warming, a Health Ministry official said, The Jakarta Globe reported.
“Climate change is not a distant issue. It is occurring right now and it is starting to affect the health of residents and contribute to premature deaths,” said Wan Alkadri, director of environmental health at the ministry told a World Health Organization (WHO) seminar Tuesday.
Health issues associated with global warming are going to hit developing countries and coastal populations the hardest, Alkadri said.
“Indonesia is particularly at risk because it is a tropical country where new diseases and virus often originate. As a developing country, Indonesia also has limited resources to tackle the emerging health issues,” said Alkadri
Alkadri said climate change is already starting to damage several local ecosystems and change rainfall patterns, which will likely result in potentially fatal health problems.
“In Pekalongan, Central Java, for example, rising sea levels have already flooded a number of local villages, bringing numerous water-borne diseases,” he said.
These extreme events, he said, were tied to higher health risks as they increase the number of transmittable disease vectors.
Rising temperatures, for example, contribute to more breeding places for mosquitoes.
“Mosquitoes don’t survive in cold temperatures such as in the mountains, but as the temperature there has been rising, they can now survive there and transmit more disease,” Alkadri said.
He said climate change is adding to the burden of eradicating malaria, dengue fever and other mosquito-borne diseases.
Sharad Adhikary, the environmental health director at WHO in Indonesia said the increased health risks created by climate change should be a significant cause for concern.
“No person or nation is immune to the impact of climate change on human health,” he said.
ECONOMY
Business scents recovery
A number of business sectors appear to be experiencing a boost, with higher sales in areas such as automotives and heavy equipment, while banks are starting to lower credit rates, likely increasing the momentum of recovery.
In the automotive sector, while Suzuki said it was reducing output due to lower sales, the country's largest car producer, PT Astra International, booked a 9.5% increase in car in May to 20,891 units.
Another Astra unit, PT United Tractors, said sales of Komatsu brand heavy equipment rose 45% in May compared to April to 303 units on orders from the mining and plantations sectors.
The Indonesia Life Insurance Association (AAJI) said it expects revenue to grow by 30% in the second quarter, slightly higher than first quarter growth as confidence in the economy is rising,
The government however dropped its estimate for full-year growth to 4.3% from 4.5% due to the continuing impact of the global financial crisis.
On the investment front, British American Tobacco paid $494 million for an 85% in the country’s fourth largest cigarette company, Bentoel, and cell phone manufacturers Nokia and Samsung were both considering setting up production plants in Indonesia.
The government meanwhile took a new step to boost exports by establishing the Indonesian Export Financing Agency (LPEI), to take over the role of state-owned Bank Ekspor Indonesia (BEI).
On banking supervision, Finance Minister Sri Mulyani Indrawati said the government would go ahead with plans to set up a powerful new financial services authority (OJK), The Jakarta Post reported.
On Thursday Indrawati said that while the performance of the central bank had improved, it has not done a "perfect" job.
"We see in the past 10 years or more since (the) 1997-1998 financial crisis the evolution of Bank Indonesia's efforts in supervision is not yet perfect, although it is improving," she said.
"The government and BI have agreed that we have the same aim, that is the monetary and fiscal authorities have an interest to design an economy in which the financial system can expand, but it needs to be regulated and effectively supervised," said Indrawati.
She added the government and BI were finding the best form of OJK to be implemented in Indonesia, as the government had learned lessons from the UK, whose central bank and Financial Services Authority (FSA) had experienced problems sharing information, causing flaws in financial sector supervision.
The OJK will need to focus on information sharing with other regulators, including the central bank, to prevent a possible financial crisis, said Mulyani.
"Information sharing or the flow of information needed by the two authorities should be managed accordingly to create synergy leading to reactions if there are problems," she said.
Fuad Rahmany, the head of (Bapepam-LK), and BI deputy governor Muliaman D. Hadad, who is in charge of the banking sector, are heading a team tasked to design the most suitable type or form of OJK to be established in the country.
BUSINESS BRIEFS
MACROECONOMY
2009 growth forecast lowered to 4.3%
The government officially released new macroeconomic assumptions for 2009 on Tuesday, with growth pegged at 4.3%, lower than the earlier forecast of 4.5%, The Jakarta Globe reported.
“This would be the lowest growth in three years,” said Finance Minister Sri Mulyani Indrawati. On a sector-by-sector basis, the government expects this year’s growth to be driven by agriculture, which showed resilience in the first quarter by growing by 4.8%, Indrawati said.
“We are relying on agriculture because the trade and manufacturing sectors are being heavily dampened by contracting global trade volumes,” she said.
The agriculture sector, which contributes 14.6% of Indonesia’s GDP, is expected to grow 4.1% this year. Growth is also expected from the utilities, transportation and telecommunications sectors.
The government projected that the manufacturing and trade sectors, which together account for 41.4% of the country’s GDP, would grow at a slower pace of 3.3% and 2.7% respectively, after growing 3.7% and 7.5% last year.
Indrawati also said that fuel and electricity subsidies would rise due to the rebound of global oil prices, adding that the government expects oil prices to average $61 per barrel this year, as the commodity would likely hover at about $70 per barrel in the second semester from as low as $40 per barrel in February this year.
The government had earlier assumed the oil price at $45 per barrel in this year’s state budget.
Indrawati said the exchange rate was likely to remain at about Rp10,600 per dollar as foreign capital continued to flow in to the country.
She also indicated that the deficit could be as much as 2.6% of GDP this year, above the original assumption of 2.5%, due to increasing subsidies and a drop in import value-added tax.
The economy may accelerate by as much as 6% next year from an estimated 4% to 4.5% this year, Indrawati said.
Govt. aims to raise Rp2T from debt sale
The government plans to raise Rp2 trillion ($195.1 million) from an auction of government debt paper next week to help finance the budget deficit, the finance ministry said in a statement on Thursday, Reuters reported.
The ministry plans to sell on June 23 treasury bills maturing in 2010 as well as fixed-rate bonds maturing in 2016 and maturing in 2024.
The ministry raised Rp3 trillion at its last debt auction on June 9, beating its initial target of Rp2 trillion, on expectations of improving global economic conditions.
The government has so far raised about Rp96 trillion, or more than two-thirds of its 2009 gross debt issuance target, which was increased to Rp142.3 trillion after lower interest rates fanned demand for bonds.
INVESTMENT
BAT buys 85% stake in Bentoel
British American Tobacco (BAT) said Wednesday it had bought an 85% stake in PT Bentoel Internasional Investama for $494 million to produce kretek cigarettes, Agence France-Presse reported.
"This transaction represents an excellent strategic opportunity to enter the very large and growing Indonesian kretek market and will provide a platform for future growth," BAT's Asia-Pacific director John Daly said in a statement.
BAT will also offer to buy the rest of the Bentoel shares it doesn’t own, and expects to complete the transaction by August, the company said.
Bentoel is the fourth largest cigarette maker in Indonesia, which is the world's fifth biggest tobacco market by volume, BAT said. Kretek cigarettes account for some 93% of the Indonesian market, Bloomberg reported.
London-based BAT, which makes Kent, Dunhill, Lucky Strike and Pall Mall cigarettes, said last month in its earnings statement that growth had slowed for premium brands.
Nokia, Samsung mull cellular phone plants
Electronic companies Nokia of Finland and Samsung of South Korea are exploring the possibility of building cellular phone manufacturing and assembling plants in Indonesia, a ministry official said on Tuesday, Antara reported.
Director for Telematics Affairs at the Industry Ministry Ramon Bangun said Nokia was serious with its plan to build a factory in Indonesia as the company so far controlled over 50% of the cellular phone market in Indonesia.
Samsung also saw good prospects in developing a factory in Indonesia because the company had previously built an electronics factory in the country.
"Samsung will only apply for a factory business expansion license from the Capital Investment Coordinating Board (BKPM) because they already have an electronics factory in Indonesia," Bangun said.
The cellular phone market in the country continues to increase at an average growth of 15% per annum.
It is estimated that about 80 million cellular phone units are in circulation. Bangun estimated that 20 million units are sold each year.
He said cellular phone industries would continue to grow in the future with subscribers estimated to reach 130-140 million, or about 60-70% of the population.
Bond agency to launch corporate yield curve in Q3
The Indonesia Bond Pricing Agency will launch a corporate bond yield curve, the first of its kind in the country, later this year, the agency said in a statement on Wednesday, Dow Jones reported.
The agency will publish a daily index of prices for corporate bonds with tenors between one and 10 years to provide price guidance for the secondary market, it said.
"We plan to launch it in the third quarter," director Hasan Fawsi said in a statement on the agency's web site.
The agency will monitor only investment-grade corporate bonds.
"There are currently around 220 corporate bond series outstanding in Indonesia,” Fawsi said. "Almost all of them are investment grade."
Fawsi said that bond prices will be calculated using a combination of mark-to-market and mark-to-model formulae.
Earlier this year, the agency launched a government bond-yield curve that monitors 71 series of local-currency zero-coupon, fixed-rate, variable rate and Islamic bonds, or sukuk, issued by
the state.
The current lack of an efficient pricing mechanism for corporate debt in Indonesia hampers secondary-market trading and forces corporate issuers to pay higher premiums to attract investors, analysts say.
STATE CONCERNS
Govt. sets up export financing agency
The government has taken a new step in its efforts to boost exports by establishing an Indonesian Export Financing Agency (LPEI), an official said, Asia Pulse reported on Thursday.
The establishment of LPEI would change the status of state-owned Bank Ekspor Indonesia (BEI) to a non-financial institution.
Fuad Rachmany, head of the Capital Market Supervisory Board and Financial Institutions (Bapepam-LK), said on Wednesday that Indonesia needed a special institution which handled exports.
"LPEI is not intended as a competitor for commercial banks but it is expected to fill the gap which could not be filled in by commercial banks," he said.
LPEI needs the support of Bank Indonesia (BI) because it will remain active in the inter-bank money market although its status is no longer a bank, Rachmany said.
BI deputy governor Muliaman D Hadad said with the change in the status of BEI into LPEI based on Law No.2/2009, the BEI was no longer under the supervision of BI.
"This is a progressive step. We hope that with becoming a non-bank financial institution BEI would be able to carry out its vision and mission. We also hope it could pass its transitional period well," Hadad said.
Indonesia potential market for low-cost cars
Indonesia is a potential market for low-cost cars with a selling price of not more than Rp70 million ($6,860) each, an industry executive said, Asia Pulse reported on Thursday.
Sales of low-cost cars could reach 600,000 units a year, said Johnny Darmawan, president of PT Toyota Astra Motor (TAM), the largest car maker in the country.
Indonesia has strong fundamentals to become a production base for low-cost cars, which have not been produced in the country, Darmawan told a seminar.
Car sales in the country currently average only 500,000 units a year.
The Association of Motor Vehicle Industries said car sales in the country are predicted to rise to 40,000 units a month in June and July, up from a monthly average of 34,000 units in the first five months of the year, Asia Pulse reported on Thursday.
Sales in the whole of the year are forecast to reach 450,000 units if the trend continues for the rest of the year, the association said.
In the first five months of this year, car sales in the country totaled 170,679 units, peaking at 35,818 units in May, association chairman Bambang Trisulo said.
Good opportunity for auto parts in Japan: Official
Indonesia has a good opportunity to increase its automotive component exports to Japan, particularly after both countries had signed a free trade agreement, an Industry Ministry official said, Asia Pulse reported.
"We have been exporting automotive components to Japan worth a total of $2.4 billion per annum. With the agreement, the chance to increase the exports is wide open," Director General for Transportation Industry and Telematics Budi Darmadi said on Wednesday.
Indonesia also exported 900 units of completely built-up Grandmax Toyota cars last year, Darmadi said.
A number of Japanese automotive firms had also set up car assembly plants in Indonesia which used about 75% component parts made locally in models sold in Indonesia such as the Avanza, Xenia, Terois, Rush, Inova, Forturner, Livina and APV.
He said industries using local raw materials continued to develop, particularly at Honda and Yamaha, which used 96% component parts.
"The vehicles are 96% made in Indonesia as only 4% of their component parts are made abroad. We deliberately do that because at present production is basically `global production` so that we can exchange components within Asean," Darmadi said.
Indonesia had also exported transmission components to a number of countries in Asean, Central Asia and Latin America in the hope that Indonesia would become a global component production base.
Cement market hit by property slump
Indonesia's cement consumption in May shrank 14.4% year-on-year to 3.05 million tons amid a slump in the property and construction sector, Asia Pulse reported.
It was the steepest contraction in monthly consumption from 3.56 million tons in April, the association of cement companies said.
Association chairman Urip Timuryono said private sector property projects and government infrastructure projects have been the largest consumers of cement in the country.
A 0.5 percentage point cut in the bank credit interest rate was not enough to boost the real sector, Timuryono said.
Sales in 2008 were especially high when the people in the regions enjoyed high prices of commodities like rubber and palm oil, which are unlikely to be repeated this year, he said.
SOEs
Pupuk Kaltim plans Rp1T bond issue in Q3
State-owned fertilizer company PT Pupuk Kaltim said it plans to issue as much as Rp1 trillion in bonds in the third quarter of 2009, Dow Jones reported.
The funds from the bond issue will be used to finance business expansion, including the development of a fertilizer plant in East Kalimantan, Pupuk Kaltim chief executive Hidayat Nyakman said Wednesday.
Nyakman said the company is in the process of choosing underwriters for the planned deal.
PTPN to sell 10,000 tons of sugar to maintain price
A total of 10,000 tons of sugar, produced by state-owned plantation firm PTPN XI, will soon be released to the market through state logistics agency Bulog, in order to increase stocks in the market, an official said, Asia Pulse reported.
PTPN XI Corporate Secretary Adig Suwandi said on Wednesday that the sugar, which was milled in 2009, would be sold in the market at a price of Rp7,323 to Rp7,353 per kg.
"We will release the sugar stocks to the market in an effort to respond to complaints about shortage of sugar stocks in the market that has relatively driven up sugar prices," he said.
"This decision is taken to help maintain the price of sugar at the farmers` level so that they would continue to be motivated in planting sugar cane," Suwandi said.
The distribution to the market of sugar was also done by other state-owned plantation firms, namely PTPN II, VII, IX, X, XIV and PT Rajawali Nusantara Indonesia (RNI), he said.
These companies have agreed on a price based on the latest price auction on the farmers` sugar production.
PRIVATE SECTOR
Astra books 9.5% boost in car sales
The country's largest car producer, PT Astra International, booked a 9.5% increase in car sales in May compared to April, indicating demand has begun to pick up in line with economic recovery, The Jakarta Post reported.
Astra sold 20,891 cars in May, up from 19,080 in April, a release from Astra on Monday stated.
The figures show that the industry has begun to improve after previously being hit by reduced demand during the economic crisis.
This was reflected by an increase in overall car sales in May rising to 35,818 from 34,604 in April and compared to last year, when car sales reached 50,718 in April and 51,642 in May 2008.
Astra increased its market share to 58% in May from 51% in April, maintaining position as automobile sales market leader.
The country's automotive industry posted a new record last year, selling 607,000 new cars, up nearly 40% from a year earlier with Astra then taking a 59% market share.
UT’s Komatsu sales rise 45% in May
PT United Tractors (UT), Indonesia’s biggest heavy equipment seller, said sales of Komatsu Ltd.’s vehicles rose 45% in May from a month earlier, Bloomberg reported.
UT sold 303 units of Komatsu vehicles in May from 209 units in April, the company said in an e- mailed statement Tuesday.
Sales fell 27% from a year earlier. Komatsu is the world’s second-largest maker of earthmoving equipment.
Kalbe Farma plans tender offer for unit
Pharmaceutical firm PT Kalbe Farma said on Friday it plans to hold a tender offer for 31.81% of the shares in its trading unit PT Enseval Putera Megatrading, Reuters reported.
Kalbe Farma said in a statement published in Investor Daily it had set a tender offer price of Rp870 ($0.839) per share for 725,239,000 shares in Enseval.
Based on Reuters calculations, Kalbe Farma, which currently has a 58.19% stake in Enseval, may need to set aside around Rp631 billion ($61.02 million) to buy the shares.
PT CIMB-GK Securities Indonesia on Friday upgraded Enseval's rating to outperform from neutral and raised its share target price to Rp1,050 from Rp715 previously.
Kalbe Farma plans a tender offer period of thirty days.
Insurance industry sets 30% growth target
The life insurance industry expects revenue to grow by 30% in the second quarter, slightly higher than first quarter growth as confidence in the economy is rising, the Indonesia Life Insurance Association (AAJI) said, The Jakarta Post reported.
AAJI executive director Stephen B. Juwono said Tuesday the industry's total premium revenue would likely reach Rp34.19 trillion ($3.35 billion) by the end of the second quarter, compared to Rp26.3 trillion recorded in the same period a year earlier.
"The quick recovery in the capital market has grown our investments beyond what we expected in the first quarter,” Juwono said.
Insurance companies usually reinvest their collected premium revenues in other investment instruments such as the stock market, bonds and bank deposits.
BANKS
BI signals another key rate cut
Bank Indonesia (BI) acting Governor Miranda Goeltom signaled another rate cut but also said inflation this year could fall below 5%, the bottom end of the central bank's forecast for end-2009 inflation, Reuters reported.
"It could be even lower than the bottom of the range. That could be reached earlier than later ... 5% could be reached in the next two months or even next month," she said on Thursday.
Goeltom suggested that BI would still cut rates again after a combined reduction of 2.5 percentage points since December.
"For this year, we think there is still room (to ease monetary policy), but not much anymore," she told Reuters in an interview in Seoul after speaking at a regional World Economic Forum.
“The size and timing of any move would be decided upon the latest information that we are going to collect at the end of the month," she said, adding that BI’s rate decisions would also be affected by other factors.
These included rate differentials with other economies, the health of local financial institutions and sectors of the economy, like manufacturing, which have been hit by the global downturn.
Rate differentials can impact the rupiah, which attracts some foreign investment based on Indonesia's relatively high rates compared with other countries.
The current central bank rate of 7%, for example, has a significant premium over US rates that are virtually zero.
Goeltom said the rupiah -- up 18% against the dollar since March -- had been behaving normally and the central bank was more concerned about volatility than the specific level of the currency.
BI cut its policy rate on June 3 by 25 basis points to 7% and analysts had factored in one more rate cut this year to 6.75% to support the slowing economy.
ANZ Panin, Mandiri cut interest rates
PT ANZ Panin Bank and state lender PT Bank Mandiri have decided to cut their credit interest rates to follow the lead of Bank Indonesia gradually cutting its benchmark interest rate, now at 7%, Asia Pulse reported.
Retail banking director of ANZ Bank Panin Anthony Soewandy said the bank would cut its credit interest rates by 50-125 basis points in the next two weeks from the present levels of 13.5%-14%.
Soewandy said the bank is encouraged to cut the interest rates with the increase in the amount of its third party funds.
Meanwhile, Agus Martowardoho, the president of Bank Mandiri, said the country's largest lender in assets already cut its interest rates by 50 basis points. Starting June 15 rates have been reduced to 11%-15%.
The bank has also cut its deposit interest rate by 50 basis points to around 6%, he added.
Bank Permata raises $100M from 12-year note
PT Bank Permata has raised $100 million from its 12-year subordinated medium-term notes (MTN) to strengthen its capital, the bank said in a statement on Tuesday, Reuters reported.
Increased capital will give the bank greater flexibility to take advantage of growth opportunities, Bank Permata's president director Stewart D Hall said.
The bank said Standard Chartered Bank and Astra International were the main buyers of the medium-term notes.
A consortium comprised of Standard Chartered and Astra International controls Bank Permata.
BCA maintains 15-20% credit expansion target
PT Bank Central Asia (BCA) has signed new credit agreements worth Rp16 trillion ($16 billion) this year, prompting it to maintain its credit expansion target of 15%-20% in the second half of this year, Asia Pulse reported.
“The credit commitments are being processed, therefore, credit expansion in the second half of this year will go faster,” said Jahja Setiaatmadja, the president of the country's largest private bank.
He said demand for credit in the first months of the year was lower than debt servicing by borrowers.
Large disbursements of new credits in the second half of the year will make up for the low credit expansion in the first months of 2009, Setiaatmadja said.
By March 2009, BCA's outstanding credit shrank to Rp107.27 trillion from a peak of Rp112.78 trillion toward the end of last year, but was still higher by 27.5% year-on-year.
POWER
PLN sees lower oil consumption
State power company PT PLN forecast on Thursday its consumption of oil products would fall nearly 40% in 2010 as new coal-fired power plants come on stream, Reuters reported.
"The fall in fuel consumption is because some coal-fired power plants are expected to begin operations at the end of 2009 and early 2010," PLN director Murtaqi Syamsuddin told reporters.
PLN expects combined consumption of oil to fall to around 5 million kilolitres (kl) in 2010 from an estimated 8 million kl in 2009.
Syamsuddin said that delivery of gas to power plants in Jakarta was also helping to cut oil consumption.
PLN’s 10,000 MW program to meet electricity demand which is growing at around 10% a year will reduce the use of expensive crude oil as a feedstock, officials said.
PLN's president director, Fahmi Mochtar, said previously the company consumed around 10 million kl of oil in 2008.
PLN to issue rupiah bonds in H2
State power company PT Perusahaan Listrik Negara (PLN) plans to issue rupiah-denominated bonds sometime in the second half of the year to top up funding for power projects, a company executive said Thursday, Dow Jones reported.
"We have to look at...how much we need (to raise) and the pricing before setting an issuance target,” PLN vice president director Rudiantara told reporters.
Rudiantara said that of the Rp32.37 trillion in rupiah-denominated funding that PLN needs this year for its crash program to provide 10,000 MW of generating capacity, it has procured all but Rp4.5 trillion.
Rudiantara didn't specify whether PLN would seek to fund all of that using rupiah bonds.
He also said that of the $5.8 billion dollar-denominated funding PLN requires this year for the crash program, only around $900 million has yet to be procured. He declined to comment when asked if PLN would consider issuing dollar bonds this year.
MRT, PLN sign deal to power train route
PT Mass Rapid Transit (MRT) on Monday signed an MoU with state power company PT PLN on supplying power to the project, The Jakarta Post reported.
Purnomo Willy, general manager of PLN’s Jakarta and Tangerang branch, said the company plans to construct two power plants for 12 stations along the 14.5-km route linking Lebak Bulus in South Jakarta to Dukuh Atas in Central Jakarta by 2012.
“We will use gas isolation technology that will enable us to build the power plants inside the stations to accelerate the electricity supply,” Willy said after the signing ceremony.
For the initial phase, PLN will provide 50 MW of electricity to support the MRT, which is scheduled for construction starting next year and is expected to be up and running by 2016.
PLN will use its Jawa-Madura-Bali networks to supply electricity to the MRT, he added.
The MRT is expected to be able to carry up to 340,000 passengers a day and take 28 minutes to travel from Lebak Bulus to Dukuh Atas, with an estimated headway of 4.5 minutes at each stop.
The MRT will also link up with other transportation services, including Transjakarta buses.
OIL & GAS
24 new oil, gas blocks on offer
The Energy and Mineral Resources Ministry on Tuesday officially offered 24 new oil and gas blocks in a drive to bolster energy output and investment, The Jakarta Globe reported.
Evita Legowo, Director General of Oil and Gas at the ministry, said the blocks would be awarded through tenders and direct appointments.
Seven blocks will be offered directly, while 17 will be offered through regular tenders, Legowo said.
Offshore blocks located in South Sulawesi, West Java and Central Java are among those that will be directly assigned, she said.
Most of the 17 blocks up for offer are located in the eastern part of the country, including the Tomini Basin and Bone Bay offshore blocks in Gorontalo.
The Tomini Bay and Gorontalo Tomini working areas, which include seven blocks, are seen as the most promising sites. Gorontalo and Tomini are believed to hold huge amounts of resources, Legowo said.
She said proposals for direct appointments would be accepted until July 30, while regular tender bids would be accepted until October 13.
The government expects to bring into state coffers at least $56.5 million in signing bonuses from the 24 new oil and gas blocks put on offer on Tuesday, Legowo said..
Govt. may extend Husky gas block contract
The government is considering extending a contract for a natural gas block in East Java operated by Husky Energy Inc, a ministry official said on Tuesday, Reuters reported.
"Several companies have proposed extending their contracts, including Husky, and we will look carefully at whether we will extend or not," Evita Legowo, Director General of Oil and Gas at the Energy and Mineral Resources Ministry, told reporters.
The contract for Husky and China's CNOOC, joint developers of the Madura BD field in Madura Strait, is due to expire in 2010. The field has an estimated 515 billion cubic feet of natural gas and production is slated to begin in 2012.
Husky signed a gas supply agreement in 2007 with state gas distributor PT Perusahaan Gas Negara to supply 126 trillion British Thermal units (btu). The gas is due to come from offshore Madura Strait, starting in 2012 for a period of 15-20 years.
Legowo also said the government is studying a proposal from a unit of France's Total to extend a contract for the Mahakam block in Kalimantan, which is due to expire in 2017.
"We are looking at the new terms and conditions for extending the Mahakam block, including possible participation of state-owned oil and gas company PT Pertamina in the block," Legowo said, adding that Pertamina was interested in participating in both the Madura and Mahakam blocks.
Total and Japan's Inpex each hold a 50% of stake in the Mahakam block, which supplies most of the gas for Bontang liquefied natural gas plant.
Total issues tenders to develop S. Mahakam block
Total SA has invited contractors to bid for four tender packages to develop three discoveries in South Mahakam block, off Kalimantan, Energy Business Review reported.
The first two tender packages comprise the fabrication of topsides and jackets for three tripods. Two separate packages were tendered for the transportation and installation of the three tripods and the installation of the offshore pipelines.
The three tripods are to be installed into the East Stupa, West Stupa and East Manda oil fields.
Global Industries, Ltd, Saipem SpA, PT NISCONI and Hyundai Heavy Industries Co., Ltd. are interested to participate in the pipeline installation package. Local contractors will be looking at the packages relating to the three tripods.
The fabrication and installation job is likely to occur from 2010 resulting in production start-up in 2011 or 2012.
The South Mahakam development is expected to yield 14,700 barrels per day of liquids and 114 million cubic feet per day of gas.
MINING
Indika’s plan to buy 81.95% of Petrosea approved
Coal miner PT Indika Energy Wednesday got approval from its shareholders to buy an 81.95% stake in PT Petrosea from Clough International Singapore Pte. Ltd. for an indicative purchase price of $83.8 million, Dow Jones reported.
"We expect to complete the acquisition of Petrosea by June 30, and then will make a tender offer for the public shares we don't own within three months," Indika's finance director Aziz Armand told reporters.
He said the tender offer price will be $1.01 per share. Armand expects Indika's revenue to rise to up to $400 million this year following the acquisition of Petrosea, from $220 million a year earlier.
"Excluding the acquisition of Indika, our revenue in the first half this year would only hit $100 million," he added.
Timah eyes spot tin sales on price climb
PT Timah, the world's biggest integrated tin miner, may boost spot sales if tin prices climb to $18,000-$20,000 per ton after a fall in sales earlier in 2009, Abrun Abubakar, the firm's corporate secretary, told reporters on Wednesday, Reuters reported.
"But we still have to wait and see if prices can reach that level. We don't want to push sales and then prices suddenly fall," Abubakar said.
The firm sold 46,438 tons of refined tin in 2008 with about 90% accounted for by contractual sales and the remainder by spot sales.
In trading on the London Metal Exchange last week, the price of tin MSN3, which is used in food packaging and soldering of electronic components, surged to an eight-month high of $15,870 a ton following a rally in base metals.
The price is still around 40% below an all-time high of $25,500 a ton in May last year. Tin prices stood at $15,150 to $15,350 a ton on Wednesday.
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