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Trade and Investment News, 6 July 2009 |
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Highlights
National • El Nino likely to cause rainfall shortage this year, says meteorology agency
Politics • Presidential candidates hold final rallies before poll
Terrorism • Malaysia arrests three suspected of seeking terrorism revival
Security • Preparations for new Kalimantan military region nearly complete
Law & order • Govt. agrees to release 50 detained Chinese fishermen
Economy • Bank Indonesia cuts benchmark rate but says limited room for further cuts • Finance Minister warns of further impacts from global crisis
Business briefs
Macroeconomy • Indonesia graduates from Credit Market Analysis list of risky borrowers
Investment • Forestry ministry predicts $1.5 billion in production forest investment • Investment cluster planned by East and Central Java provinces
State concerns • Rice output estimate raised, but El Nino fears stop export plans
SOEs • Garuda may resume Europe flights in 2010 • PT Adhi Karya wins $42 million North Sumatra airport project
Private sector • PT Indomobil sales down, but productivity boost may see higher profits • PT Berlian Laju Tanker in $59 million rights issue
Banks • Bank Permata to return $53 million in disputed Bank Bali funds • Bank Rakyat Indonesia disburses $3 billion to SOEs
Power • Total and Inpex to sell gas to East Kalimantan power project • Germany agrees to fund Aceh power project, says governor
Oil & gas • Government pushes for on-shore plant for Inpex Masela block
Mining • New mining law to set 20% local ownership requirement PT Bumi Resources to diversify from coal, looks at gold investments
NATIONAL
El Nino this year ‘very likely’: BMG
An El Nino weather pattern will very likely affect Indonesia this year and could cause a delay of the rainy season and below-normal rainfall, said the Meteorology and Geophysics Agency (BMG) on Friday, Reuters reported.
The region is bracing for a possible return of El Nino this year which could bring dry weather to the western Pacific and Australia, putting crops at risk.
"We have made an analysis and have also discussed this at the government level that the probability of an El Nino this year is very strong," Soetamto, the BMG’s head of climatology and air-quality analysis, said.
The agency's view echoed a revised forecast by Australia's Bureau of Meteorology that an El Nino appears almost certain, raising the prospect of drought in Australia and an even weaker monsoon in India.
An Agriculture Ministry official previously warned that the government must cautiously manage its rice surplus this year, retaining the surplus for domestic stock, as El Nino could cut output in 2010 and 2011.
A prolonged drought could also threaten hopes to boost output of other key crops, such as soybean and corn.
POLITICS
Presidential candidates hold final rallies before vote
Presidential candidates held their final rallies Saturday ahead of the second direct elections for Indonesia’s head of state, Agence France-Presse reported.
Incumbent Susilo Bambang Yudhoyono is riding high after his centrist Democratic Party tripled its vote in April's general election to become the largest party in parliament.
He is hoping to win a clear majority in Wednesday's vote and avoid a run-off in September against either of the other two candidates -- opposition leader Megawati Sukarnoputri or Vice President Jusuf Kalla.
Tens of thousands of supporters wearing the blue and white colors of the Democrats were packed into the national stadium in Jakarta on Saturday to hear Yudhoyono give his last speech of the campaign.
Meanwhile Megawati warned supporters to beware of electoral fraud as she campaigned in Central Java.
Megawati, who leads the Democratic People's Party of Struggle, has a strong following as the daughter of independence hero Sukarno and was the figurehead of the opposition against Suharto's regime in the late 1990s.
She became president of the world's third-largest democracy, after India and the US, in 2001.
Kalla, the charismatic leader of the Golkar Party who has trailed in opinion polls, has proven to be a tough competitor on the campaign trail.
Kalla and his running mate, former military chief Wiranto, have championed a philosophy of economic "self-reliance".
Constitutional Court takes shackles off media, pollsters
The media can report on election-related events during the four-day "silent period" ahead of Wednesday’s presidential election and pollsters can announce the results of exit polls once voting venues close, the Constitutional Court ruled on Friday, The Jakarta Globe reported.
Constitutional Court chief Mahfud MD said articles of the Election Law that ban the media from publishing or broadcasting news, commercials or information about the candidates during the “quiet period” were unconstitutional.
The introduction of the “quiet period” was intended to give voters a chance to consider the candidates and the issues immediately before the election without being subjected to campaign events and news reports.
The articles in the law provided penalties that included the revocation of publishing and broadcasting licenses.
“(The Constitutional Court) rules that the articles cause legal uncertainty and injustice and violate the principle of freedom of expression guaranteed by the Constitution,” Mahfud said.
The verdict also stated that any prosecuting authority investigating a print or media outlet for alleged breaches of the Election Law must refer to the Press Law and the Broadcasting Law.
The case was filed by the chief editors of Vivanews.com, Tempo magazine, Tempo newspaper, The Jakarta Post, Jurnal Nasional daily, 68H radio news agency and the Voice of Human Rights Radio.
In a second hearing on Friday, the Constitutional Court overturned a ban on the release of exit poll results on the day of the election.
The challenge was filed by the Indonesian Research and Public Opinion Association (AROPI).
Mahfud said penalties, including imprisonment and fines, outlined by articles 188, 228 and 255 of the Presidential Election Law were no longer binding.
According to the Court’s verdict, concerns by some government officials and members of the House of Representatives over the publication of exit poll results were baseless.
TERRORISM
Malaysia detains three for alleged JI links
Malaysian police have detained three terror suspects under a tough security law for allegedly trying to revive the Jemaah Islamiyah (JI) militant group in that country, Malaysia’s Star daily reported.
The trio, aged between 43 and 53, are believed to have met with Singaporean militant Mas Selamat bin Kastari, who was captured in Malaysia's south in April after escaping from detention in Singapore,
Kastari is said to be the head of the Singapore cell of JI, an underground group linked to al Qaeda and blamed for the 2002 Bali bombing and other bloody attacks in Southeast Asia.
"I confirm the arrests, but I cannot reveal anything further," said police chief Musa Hassan.
The news report said the three men, believed to be ordinary JI members, were picked up by police last week in southern Johor state after months of investigation.
It said an investigation was under way into whether they recruited any more members in recent months.
BI regulates terrorism checks for new banking clients
Bank Indonesia announced new regulations on Friday requiring more thorough background checks on possible terrorist links for new customers, Kompas reported.
The regulation, which also aims to reduce money laundering, came into effect July 1.
“BI’s latest regulation is another positive measure aimed at curbing terrorism or those that finance it,” said National Police spokesman Brig. Gen. Sulistyo.
Sulistyo said other avenues pose a threat to reducing terrorism financing, including through so-called charitable organizations or money changers.
SECURITY
‘Positive’ signal on border talks with Malaysia
Malaysia had given what Indonesia regarded as a “positive signal” for settling common border issues, including disputed oil-rich waters off East Kalimantan, Foreign Ministry spokesman Teuku Faizasyah said Friday, The Jakarta Globe reported.
Faizasyah said that he expected representatives from both countries to meet in Malaysia on July 13 and 14 to discuss disputed maritime borders in the South China Sea, the Malacca Strait and the Sulawesi Sea.
“Even though Malaysia has not given any written reply to us, we are seeing positive signals for discussions on the dates proposed,” Faizasyah said.
The “positive signal” had been communicated in telephone calls between officials in Jakarta and Kuala Lumpur, he said.
The Indonesian delegation will reportedly be headed by Arief Havas Oegroseno, the Foreign Ministry’s Director General for International Treaties and Legal Affairs.
Preparation for their work started on Tuesday when Defense Minister Juwono Sudarsono and his Malaysian counterpart, Ahmad Zahid Hamidi, met in Jakarta in a bid to defuse friction over recent military maneuvers in the sensitive Ambalat area.
Sudarsono said they had agreed each country's sea patrols had to be extra cautious in determining patrol pathways, in accordance with the line that each regards as its own territory.
W. Kalimantan military command nearly complete: TNI head
The formation of a military area command (Kodam) in West Kalimantan will be complete by 2010, Armed Forces (TNI) commander Gen Djoko Santoso said last week, Media Indonesia reported.
Santoso said the new Kodam in West Kalimantan is justified due to the province's close proximity with Malaysia.
"It's impossible for a border as long as 2,000 km to be safeguarded by only a single Kodam," he said.
West Kalimantan hosted a regional command from 1958 to1985, when it was combined with other military commands to form a single command for Kalimantan, headquartered in Balikpapan, East Kalimantan.
Santoso said to support the new TNI command area, a new unit, the Brigade Infantri Khatulistiwa, is in the process of being formed.
Ministry in talks with Lockheed Martin on new transports
The Defense Ministry is in talks with American aircraft manufacturer Lockheed Martin over purchasing new Hercules transport planes, Tempo Interactive reported.
“We are still assessing the possibility of buying the aircraft,” Defense Minister Juwono Sudarsono said on the sidelines of a meeting with Malaysian Defense Minister Dato Ahmad Zaid Bin Hamidi in Jakarta.
Sudarsono said negotiations were underway to purchase H-type Hercules at a reduced price.
“We have yet to learn the price of the aircraft or the reduction value,” he said. The negotiation of the price is the responsibility of the defense contractor, Sudarsono added.
“The purchases will also depend on the amount of a possible loan from the US government to help finance the deal,” he said.
LAW & ORDER
Govt. agrees to release 50 detained Chinese fishermen
The government has agreed to free most of the 75 Chinese fishermen detained for illegal fishing last month following talks between the two countries last week, China Daily reported.
Indonesia said it will hold on to the captains and chief engineers, the newspaper reported Thursday.
Indonesia took the fishermen into custody on June 20. About 50 men will be released first, according to the report.
China claims 75 of its fishermen and their eight boats from the Guangxi Zhuang region were detained by the Indonesian Navy while they were in their fishing grounds off the Nansha islands in the South China Sea.
Indonesia maintains the fishermen were arrested while operating in Indonesia's Exclusive Economic Zone in the South China Sea off Riau Islands.
The captains and chief engineers of the captured vessels will be prosecuted and the vessels will be confiscated by Indonesia, according to the report.
The development came after a meeting between China's Vice Premier Li Keqiang and visiting Indonesian Foreign Minister Hasan Wirajuda on Wednesday.
ECONOMY
BI cuts key rate to 6.75%, little more room to move
Bank Indonesia (BI) cut its benchmark interest rate by 25 basis points to 6.75% Friday in a bid to stimulate the economy as inflationary pressures ease but central bankers said the opportunity for further cuts was limited, Agence France-Presse reported.
BI has cut its policy rate by 275 basis points since December and this month’s cut followed the fall in the annual inflation rate to 3.65% from 6.04% in May, according to the Central Bureau of Statistics (BPS).
Annual core inflation, which excludes food items and government-set prices, eased to 5.56% from 6.64% in May.
The dramatic fall from the May figure represented a full year since the first effects of sharply higher fuel prices pushed up inflation.
BI said Friday that room for further monetary easing is "getting limited" and that it would implement "more cautious" policy in the future, Dow Jones reported.
"Our policy will be directed toward boosting economic growth and at the same time maintaining macroeconomic stability," it said in statement.
"It's likely that the economic growth for the full year will be better than we initially expected," a statement from the bank said without elaborating. BI had said earlier that the economy would expand between 3.5% and 4% this year.
Commenting on the cut, acting Governor Miranda Goeltom said on Friday that the central bank is “confident” inflation will be below 5% this year. The central bank is monitoring inflationary pressures that may appear as commodity prices increase next year, she added, Bloomberg reported.
In June, inflation fell to its slowest pace in nine years, reflecting lower fuel prices and an easing in food price increases, the Central Bureau of Statistics (BPS) said Wednesday.
Finance Minister Sri Mulyani, at a lunch with the European business community on Tuesday, stressed however that the capacity for Indonesia’s economy to grow would depend on the state of the global economy and warned that the financial crisis was by no means over.
The US economy remained mired in difficulties and stress was evident in the relationships between some developed country finance ministers and central bank chiefs, with many starting to talk of measures that could represent an “exit policy” from the problem of the debt cycle that had been created.
There were severe implications of the crisis, said Indrawati, with interest rates at extreme lows and in some cases negative, where toxic assets were being absorbed. “If you expect a rapid recovery globally it’s not going to be there. This is going to take a lot more work,” she said.
While there was agreement at the highest level of global leadership that protectionism was no answer to the current problems, there remained a natural tendency to protect one’s own economy, she added.
While there were many predictions of a second global economic dip, Indonesia’s position remained favorable with signs that the bottom had been reached and recovery was now under way.
Next year would be a year of consolidation for many economies. Indonesia, she said, remained in the privileged position of still being able to expand on the fiscal side and on the stimulus side.
In other news, Indonesia graduated from the most high risk top-10 list at Credit Market Analysis (CMA), while Morgan Stanley economists said Indonesia now warranted inclusion in the BRIC grouping of the economies of Brazil, Russia, India and China.
A yen bond is to be floated in the coming week, with an agreement with Japan Bank for International Cooperation to guarantee up to $1.5 billion of the yen debt, which will be sold by private placement.
The Indonesia Stock Exchange’s composite index finished the week at 2,075.30 compared to the week-earlier close of 2,040.19.
The rupiah closed at 10,210 against the dollar compared to 10,270 at the close a week earlier.
Indicators:
April May May 09/
May 08 Cumulative 2009
Total exports $8.46 billion $9.26 billion -28.27% $49.21 billion
Non-oil & gas exports $7.20 billion $8.16 billion -15.77% $35.06 billion
May
(y-o-y) May
(m-o-m) June
(y-o-y) June
(m-o-m)
Inflation 6.04% 0.04% 3.65% 0.11%
Full year 2006 Full year
2007 Full year 2008 First quarter 2009
GDP growth 5.5% 6.3% 6.1% 4.4%
Source: Central Statistics Agency
BUSINESS BRIEFS
MACROECONOMY
Dollar volatility a threat: Minister
The US dollar is undergoing a period of volatility as it seeks a new level of stability, putting emerging countries including Indonesia at risk from this major new development in world financial management, Finance Minister and Coordinating Minister for Economic Sri Mulyani Indrawati said Tuesday, Concord Review reported.
At the present time, she said, no alternative was available for international transactions but at the same time the US economy was in critical condition. Central banks, including the US Federal Reserve, had been forced to accumulate toxic assets, a role never meant for such an authority.
Theoretically the dollar should weaken but in the current conditions, no-one wanted that to happen. There was some support for a greater balance in the International Monetary Fund’s Special Drawing Rights (SDR) but the concept had not yet evolved far.
The world is now caught in the question of how to resolve this and create a better international balance, she said.
The topic of balancing the volatility of the dollar would be top of the agenda at the global level for some time to come, she warned. The occasion, a lunch with the European business community, reinforced earlier comments by Indrawati throwing Indonesia’s weight behind moves to limit the roll of the dollar.
In an interview with Reuters on June 25, Indrawati said the growing use of alternative currencies to the US dollar for trade financing in Asia would help the region curb its reliance on the greenback and foster financial stability.
In March, the government secured a near $15 billion currency swap with China, the latest move by Beijing to use its massive foreign exchange reserves to promote financial stability in Asia.
The swap, which will allow importers to pay for Chinese goods in yuan instead of dollars, followed moves by Japan to agree the previous month to double a swap with Indonesia, a major commodities exporter, to $12 billion.
Diversification was also a watchword when managing foreign exchange reserves, she said.
"All the countries that maintain and own some reserves, definitely they are going to make sure that their reserves will be put in a quite diverse portfolio."
She predicted a continuing tough time for Indonesia’s economy, with growth this year coming it at around 4.3% and possibly a full percentage point higher in 2010. Second half growth was projected at 4.6%. Consumption was holding up well and a chart showed government consumption in the first half far higher at 19% than in 2008.
Indonesia exits riskiest sovereign debt list
Indonesia’s improving economic outlook has pushed it out of the world’s 10 riskiest issuers of sovereign bonds, according to credit-default swap prices from Credit Market Analysis (CMA), Bloomberg reported.
The perceived default risk on Indonesia’s debt fell 267.5 basis points last quarter to a level indicating it’s a safer investment than bonds of Argentina, Ukraine and Iceland, London-based CMA said in a report.
Those nations, with Lithuania, Dubai, Romania, Bulgaria, Latvia, Venezuela and Kazakhstan, have the greatest probability of default among 63 governments with credit swap contracts on their debt, the report shows.
Morgan Stanley economists drew parallels between Indonesia and India last month, saying the former now has a “strong domestic demand story” and could warrant inclusion in the BRIC grouping of the economies of Brazil, Russia, India and China.
“The strengthened political foundations will accelerate the pace of policy reforms, which together with the ongoing structural decline in cost of capital and the natural advantage from demography and commodity resources are likely to unleash Indonesia’s growth potential of 6 to 7% from 2011 onwards,” Morgan Stanley’s Chetan Ahya said.
Moody’s Investors Service listed Indonesia’s strengths as “increased political stability, the containment of budget deficits and an improving external financial position” on June 12.
The cost of protecting Indonesian bonds from default for five years fell 330.8 basis points this year and last traded at 307.5 basis points, CMA prices on Bloomberg show.
Indonesia’s debt is rated Ba3 by Moody’s, three notches below investment grade.
Govt. to hold yen bond roadshow: Source
The government will this week hold a roadshow in Japan for its first-ever yen-denominated bond and will likely price the bond within one or two weeks after the roadshow, a person familiar with the matter said Thursday, Dow Jones reported.
The government has yet to decide the size of the deal or the tenor of the bonds, but will likely do so ahead of the roadshow, the person said.
The government has an agreement with Japan Bank for International Cooperation to guarantee up to $1.5 billion of the yen debt, known as Samurai bonds.
Finance Ministry officials have said they may favor tenors of five or 10 years - or both - and that the bonds will likely be sold via a private placement rather than on the open market.
The yen deal will mark the third time this year the government has tapped the offshore debt market. It previously sold $3 billion of global medium-term notes and $650 million of global Islamic bonds (sukuk), attracting strong demand from a variety of investors in both deals.
H2 GDP growth forecast at 4.6% on year
The economy is expected to grow 4.6% in the second half of 2009 from a year ago, Finance Minister Sri Mulyani Indrawati said on Tuesday, Reuters reported.
The budget deficit is forecast to be Rp2.3 trillion ($225.3 million) in the first half of 2009, while the deficit for the year was still expected to be 2.5% of GDP, Indrawati told a House of Representatives budget committee hearing.
Indrawati also said Indonesia had a budget surplus of 0.2% of GDP as of May 29.
Indrawati said private consumption, the backbone of the economy, will likely expand 5.8% on year in the January-June period, whereas government spending will increase 17.7%.
Investment may grow 5.6% in the first half of the year from the same period last year, she said.
Exports will likely decline 16.7% on year for the same period, whereas imports will shrink 22.2%.
According to Indrawati, the economy will likely grow 4.1% on year in the first half of the year and 4.6% in the second half.
Indrawati expects the budget deficit for next year to narrow to 1.3% of GDP.
Tax revenue for 2009 is projected at Rp577.6 trillion ($56.604 billion) or 98.3% of Rp587.8 trillion set in the economic stimulus document, Asia Pulse reported Indrawati as telling the meeting.
First quarter tax revenue stood at Rp256.7 trillion, accounting for 43.7% of the target for 2009.
The lower-than-expected tax revenues were the result of the global economic slowdown, low imports, a decline in average crude oil prices and a drop in value-added tax on imports, she said.
Income tax on non-oil and gas commodities would likely reach Rp290.9 trillion or 103.6% of the target, income tax on oil and gas commodities Rp49.5 trillion or 127.7% of the target and property tax Rp23.9 trillion or 100% of the target, she said.
Value-added tax and domestic sales tax might reach Rp136.9 trillion or 98.6% of the target and luxury sales tax on imports Rp66.2 trillion or 69.8% of the target, she said.
Export figures continue low
The Central Bureau of Statistics (BPS) said exports in May dropped 28.27% to $9.26 billion from a year earlier, less than the 29.40% fall forecast by the market, after dropping 22.53% in April, Reuters reported.
Imports slumped 32.68% to $7.85 billion in May from a year ago, BPS said. Indonesia posted a 45.24% annual drop in April.
BPS is expected to announce second-quarter and first half economic data in the middle of August.
2009 capital spending may be lower than targeted
The government’s capital spending will be lower than its target for this year due to improved efficiency, Finance Minister Sri Mulyani Indrawati said, Antara reported.
Capital spending in 2009 was projected to reach Rp74.3 trillion compared to Rp79.4 trillion set in the state budget, Indrawati said.
The Rp74.3 trillion capital spending included construction of roads and bridges worth Rp20.5 trillion, buildings worth Rp14.1 trillion, machinery and equipment worth Rp19.1 trillion, IT networks worth Rp10.2 trillion and other facilities worth Rp6.2 trillion, she said.
Meanwhile, government spending on subsidies is projected to surge by up to 129.5% this year due to increasing crude oil prices, she said.
"Subsidies for 2009 are estimated at Rp160 trillion, well above Rp123.5 trillion in the 209 state budget," she said.
On Monday, Indrawati also told the House of Representatives’ members that the government will not accept overseas loans requiring commitment fees.
"The National Development Planning Board (Bappenas) has applied preparedness criteria since 2004. If the projects are not ready, the government won't take the loans and won't take the money from the state budget either,” Indrawati said.
Under the current loan management system, the government could no longer accept overseas loans outside the state budget, she added.
INVESTMENT
Forestry industry expects $1.5B in investment
The forestry industry could see up to Rp15 trillion ($1.5 billion) in investments this year, of which Rp6.1 trillion has already been realized, a senior Forestry Ministry official said Monday, The Jakarta Post reported.
"Another Rp9 trillion in investment in the sector will likely be realized later this year and we expect to draw in at least the same amount next year," Bedjo Santosa, director of production forest development at the ministry said.
Santosa said 24 investors - mostly local companies, with others from Japan, South Korea and the UK - with a total investment of Rp6.1 trillion had been approved to develop 972,000 hectares of production forests in Sumatra, Java, Kalimantan, Nusa Tenggara, Maluku and Papua.
Santosa said the ministry had targeted total investment of Rp50 trillion in the production forest sector in 2008 and 2009. Last year, he said, total realized investments reached Rp35 trillion.
He said the Forestry Ministry would also approve a number of investments to develop production forests for food, in the form of sago, breadfruit and sap trees.
Investment cluster proposed for C., E. Java
East and Central Java administrations have announced plans to develop their northern and southern border areas to improve domestic and foreign investment, an official said Thursday, The Jakarta Post reported.
East Java Investment Board chief Hary Soegiri said the investment clusters were expected to contribute around 20% of the provinces' investment realization this year.
The clusters would be developed in four regencies in the north: Blora and Rembang in Central Java and Bojonegoro and Tuban in East Java and six regencies in the south: Karanganyar, Wonogiri, Sragen in Central Java and Pacitan, Ngawi, and Ponorogo in East Java.
The clusters would be developed in various sectors including mining, forestry, seaports, agriculture and tourism, Soegiri said.
According to the East Java Investment Board, last year the province had attracted foreign investment worth a total of $2.5 billion in 93 projects and domestic investment worth Rp20 trillion ($2 billion) in 35 projects.
East Java administration also plans to develop a southern highway worth Rp4 trillion, connecting eight regencies, Pacitan, Trenggalek, Tulungagung, Blitar, Malang, Lumajang, Jember and Banyuwangi.
On Tuesday, Soegiri said the newly opened Suramadu bridge connecting Surabaya and Madura Island in East Java has attracted at least 16 local and foreign investors to start or develop businesses in the province, particularly on Madura Island.
He said the board had since May approved eight foreign and eight local investors, out of dozens of applicants, to set up businesses in Madura, adding the companies will start operating within the next four to five months, Soegiri said.
$153M likely for electronics, IT industries: Ministry
Five foreign producers of electronic and information technology products plan to invest around $153 million in Indonesia this year, the Industry Ministry said, Asia Pulse reported.
South Korea's Yu Won and Samsung through its local unit PT Samsung Electronic Indonesia, plan to build cellular phone and video recorder factories with a total investment of $110 million.
A number of other foreign companies also plan investment including PT Teco Machinery and Electronic Co from Taiwan which has a $25 million project to build a photocopier plant, Director General of Transport Equipment and Information Technology Budi Darmadi said.
Volkswagen to invest $140M in first Indonesian plant
Volkswagen AG, Europe’s largest automaker, will spend $140 million in the next two years to build its first factory in Indonesia, Muhammad Lutfi, head of the Investment Coordinating Board (BKPM), said on Thursday, Bloomberg reported.
Volkswagen plans to build a factory that can make 50,000 Touran multi-purpose vehicles a year, Lutfi said, adding that the government will provide tax incentives to Volkswagen.
Making-multi purpose vehicles in Indonesia is 30% cheaper than in other Southeast Asian nations because of government tax breaks, said Lutfi.
Volkswagen in a May 11 statement said it will use the Indonesian plant to export to countries in Southeast Asia.
Volkwagen’s Automobili Lamborghini SpA’s unit opened its first Indonesian showroom earlier this year. Carmakers in the country sold a record 607,805 cars last year.
Polish businesses eye Indonesia as business base
A number of Polish businesses are considering making Indonesia a base for their business activities, a Polish diplomat said, Asia Pulse reported.
Damian Irzyk, economic affairs chief at the Polish Embassy in Jakarta, said on Thursday Indonesia was now seen as being on equal footing with other Asian countries such as Japan, China and India and as having great potential.
He said there were many sectors that could be developed in Indonesia such as markets for Polish products and energy.
According to Irzyk, a Polish firm has invested in coal processing in Kalimantan and Sumatra since 2007, while another company was studying an investment location for the development of coal business in Kalimantan with an investment of $500 million to $1 billion.
"There will be two more Polish companies which are expected to operate in Indonesia this year. But we are not yet able to disclose the field and location of their business," Irzyk said.
Indonesia’s exports to Poland over the past two months reached $123 million, ten times Poland`s exports to Indonesia at $10 million.
STATE CONCERNS
Retail sales may grow below 10%: Survey
Weakened purchasing power in the retail sector could dampen demand, so 2009 full-year growth in sales could fall below 10%, despite double-digit growth since 2003, says a survey, The Jakarta Post reported.
The Neilsen Company said Thursday a survey showed that the global economic downturn was to blame for the forecast lower growth for the industry for 2009, although sales in 2008 were not far short of a strong Rp100 trillion (about $9.8 billion).
"This year is very tough due to weakening demand. Nielsen's most optimistic prediction is that sales will hit as high as 10% growth this year," Febby Ramaun, Nielsen Company retail associate director told a media conference.
Nielsen's survey covered the sales of 54 top brand grocery products. In five months this year, sales grew 6.5% to Rp39.8 trillion from the same period last year.
Govt. revises up 2009 rice output forecast
The government is predicting rice production this year to be higher than earlier estimates, increasing the prospect of a freeze in rice imports for a second consecutive year, Reuters reported.
The new forecast was also 3.7% higher than the 60.33 million tons produced in 2008, although below an earlier Agriculture Ministry forecast of 63.5 million tons.
In its second of three annual crop estimates, the Central Bureau of Statistics (BPS) said Indonesia was expected to produce 62.56 million tons of unmilled grains this year, or up 2.67% on its first forecast of 60.93 million tons announced in March.
Improving productivity and a bigger harvest area would help boost rice output this year, BPS said.
The government is scaling back rice imports after it last year posted a surplus of over 1.6 million tons, the first in nearly two decades.
The country is on track to increase its rice surplus this year but the government has dropped a plan to allow large scale exports citing a need to secure domestic supplies amid worries over a return of the El Nino hot weather pattern.
Tourism industry grows 1.69%
The tourism industry grew around 1.69% from January to May, with foreign tourist arrivals reaching 2.4 million, up 40,098 from the same period last year, giving optimism that the target for the Visit Indonesia Year 2009 of 6.5 million foreign tourist arrivals would be achieved, Antara reported.
"The global economic crisis has not affected our tourism very much, particularly tourist arrivals," Director General of Marketing at the Ministry of Culture and Tourism Sapta Nirwandar said on Friday.
To meet the target various strategic and promotion efforts have been intensified including sending sales missions, offering cheap tourist packages and farm trips and increasing promotion through print and electronic media.
He said the number of tourists from Australia in the first five months reached 165,137, up 26.25%.
The number of tourists from other countries such as the Middle East rose around 42.04%, Europe 10.23% and China 18.96%.
He said tourist arrivals from other Asian countries in the period such as Singapore were recorded at minus 6.72%, Japan minus 13.80% and South Korea minus 27.28%.
SOEs
Garuda may resume European flights in 2010
Garuda Indonesia is likely to resume flights to Europe in the first half of 2010 after the European Union (EU) Air Safety Committee recommends the lifting of the flight ban on four Indonesian carriers, Antara reported.
It would take nearly nine months for the national flag carrier to make preparations for flight resumption, Garuda Communications chief Pujobroto said on Friday.
He said Garuda was still undecided about the types of planes to resume the European flights.
If all the 10 Boeing 777s ordered by Garuda were to be delivered in late 2010 or early 2011, non-stop flights could be flown to a number of European cities, he said.
The European Commission (EC) first imposed a flight ban on all Indonesian carriers from entering the region, in July 2007 following a series of fatal accidents.
Comprehensive efforts have since been made to remedy the safety shortcomings in order to meet the International Civil Aviation Organization (ICAO) standards.
Adhi Karya secures $42M infrastructure contract
State-owned construction company PT Adhi Karya has secured a new infrastructure project in North Sumatra valued at Rp420 billion ($42 million), Asia Pulse reported.
Adhi Karya will build the taxiway at the new international airport at Kualanamu, North Sumatra, now under construction.
The company will team up with PT Duta Graha Indah to build the Transport Ministry project with a share split of 65:35, Adhi Karya secretary Kurnadi Gularso said.
State airport operator PT Angkasa Pura II is expected to begin operation of the new airport by the end of 2009.
The new airport will replace Medan's Polonia Airport, considered far too close to the city center.
Krakatau Steel’s 2008 net profit up to $44.7M
State-owned steel producer PT Krakatau Steel’s net profit for 2008 rose to Rp459.57 billion ($44.7 million) from Rp313.44 billion a year earlier on higher sales, Dow Jones reported
The company said its sales for the year rose to Rp20.63 trillion from Rp14.84 trillion.
Krakatau Steel said its gross profit increased to Rp2.72 trillion in 2008 from Rp1.77 trillion a year before.
The government is waiting for approval from the House of Representatives to kick off a plan to sell part of its stake in Krakatau Steel to the public.
PRIVATE SECTOR
Revenue down, profits may rise: Indomobil
Publicly listed automobile and motorcycle assembler PT Indomobil Sukses Internasional forecasts its revenue may drop about 18.8% by the year end on the back of weak purchasing power, The Jakarta Post reported.
Company head Gunadi Sindhuwinata however said net profits would probably rise due to increased efficiency.
“The economic situation might be better than that of other countries whose economies contracted in the first quarter this year,” Gunadi said late last week.
The company’s total revenue is predicted to reach Rp6.65 trillion ($652 million) by the end of the year, significantly down from Rp8.19 trillion last year.
A study from the Association of Indonesian Automotive Industry (Gaikindo) says car sales will drop from 602,744 units last year to roughly 400,000 this year.
Gaikindo’s latest report reveals car sales from early January to the end of May reached 169,462 units with Indomobil selling about 29,000.
Berlian Laju aims for $59M from rights issue
Shareholders of cargo company PT Berlian Laju Tanker approved a plan by its management to launch a rights issue to raise working capital, Asia Pulse reported.
Berlian Laju Tanker hopes to raise Rp591.73 billion ($59 million) from the rights issue by selling 1.39 million new shares, company president Widihardja Tanudjaja said.
Tanudjaja said the company has been encouraged to launch the rights issue because the market is bullish.
This year the company will receive four new ships, including three chemical tankers being built in Japan and a liquefied natural gas (LNG) tanker being built in South Korea, company finance director Kevin Wong said.
BANKS
Bank Permata releases BLBI funds to state
Bank Permata, which was formed by a consortium involving the failed Bank Bali, has finally released to the state Rp546.5 billion ($53.3 million) worth of Bank Indonesia Liquidity Assistance (BLBI) funds stashed in the bank's escrow account, The Jakarta Post reported
The deal between the bank and prosecutors from the South Jakarta Prosecutor's Office was settled after seven hours of negotiations at the Bank Permata head office Monday.
The fund is linked to two convicted criminals, jailed former central bank governor Syahril Sabirin and fugitive businessman Joko Soegiarto Tjandra.
Prosecutors have been trying to seize the money since the Supreme Court issued its verdict sentencing Sabirin and Tjandra to two years in prison, declaring the money belonged to the state.
The bank, however, insists it owns the money due to a civil lawsuit which ruled in favor of Bank Bali.
The lawyer for the bank, Pradjoto, said the money would be transferred to the Ministry of Finance's account at Bank Indonesia (BI).
Finance Minister Sri Mulyani Indrawati said she did not expect the fund transfer to cause any issues in the banking sector.
"From a legal perspective, what is important is that the parties involved acknowledge the Supreme Court's case review decision and return the money to the state," she said.
Bank Permata is Indonesia's eighth largest bank, according to BI. As of April, Permata channeled Rp34.43 trillion worth of loans, while having Rp42 trillion worth of third-party funds.
BRI disburses $2B in new credit to state firms in H1
Bank Rakyat Indonesia (BRI) said it disbursed Rp20 trillion out of Rp30 trillion ($3 billion) in new credits to other state companies in the first half of this year, Asia Pulse reported.
Bank BRI president Sofyan Basir said demand for credits was weak and the bank management was selective in disbursing new credits.
Basir said BRI has pledged new credits to 60 state companies this year, including those operating in telecommunications, electricity and cement sectors.
He said all of the credits are syndicated, involving other major state banks such as Bank Negara Indonesia and Bank Mandiri.
BI grants forex bank status to SBI Indonesia
Bank Indonesia has granted a foreign exchange license to State Bank of India (SBI) Indonesia to facilitate trade between the two countries, Antara reported.
In 2005, SBI acquired a 76% stake in PT Bank Indomonex, and subsequently changed its name to Bank SBI Indonesia. Currently, the bank has 10 branches and it plans to open 16 more branches in the next 18 months.
Bank Eksekutif, a relatively small bank with a market capitalization of $6.66 million, has 13 branches and an employee base of 491. According to Bloomberg , it posted a loss of $3.3 million last year, and a deposit base of $116.8 million.
POWER
Total, Inpex to sell gas to E. Kalimantan power plant
Total Indonesie and Inpex Corp. will supply 20 million metric standard cubic meters of gas per day to the Senipah power plant in East Kalimantan for 20 years, an executive said Wednesday, Dow Jones reported.
Ramli Akhmad, president director of regional government-owned energy company Perusahaan Daerah Kelistrikan dan Sumber Daya Energi (PKSDE), said the company will pay $3.5 per million British thermal units (mmbtu) from 2011 to 2017 and $4.5/mmtu from 2018 to 2031.
PKSDE will build the 80-MW power plant with PT Toba Sejahtera in August and expects to finish construction in 2011.
Total Indonesie, a unit of France’s Total, and Japan’s Inpex will supply the gas from their co-owned block in the Mahakam delta.
OIL & GAS
Tangguh loads first LNG to S. Korea
The first delivery of liquefied natural gas (LNG) from the BP-led Tangguh project in West Papua is set to depart soon for South Korea, an official said on Friday, Reuters reported.
"The cargo has not left yet because they are filling the LNG tanker slowly," Evita Legowo, Director General of Oil and Gas at the Energy and Mineral Resources Ministry, told reporters. She said the cargo could depart on Saturday night and was going to South Korea's POSCO.
Tangguh has several foreign supply contracts, including a 2.6 million tons per year (tpy) contract with China National Offshore Oil Corp (CNOOC).
US firm Sempra Energy also has a 20-year contract to lift 3.6 million tpy with the right to divert half to customers other than its own terminal in Mexico. The project also has a supply contract with South Korea's K-Power.
Pertamina to handle Banten LNG storage project
State-owned oil and gas company PT Pertamina will proceed to build a floating LNG receiving terminal in Banten next year on its own, canceling a plan to partner with its sister company PT PGN on the project, Pertamina president director Karen Agustiawan said Thursday, Dow Jones reported.
The government proposed the idea in order to expedite the construction of the facility, Agustiawan told reporters.
The construction of the terminal has hung in the balance as the two companies failed to reach agreement on technical aspects.
Agustiawan said the Banten terminal will have a capacity of 200 million standard cubic feet per day (mmscfd), and it will start operations in 2013.
The government has also asked PGN to build a storage facility in North Sumatra with capacity of between 100 mmscfd and 150 mmscfd.
"For now we've decided to go on our separate ways, but we open the door for partnership in the future," Agustiawan said.
ExxonMobil sells 20% stake in two Sulawesi blocks
ExxonMobil has sold a 20% stake in two offshore exploration blocks in Makassar Strait, off Sulawesi, to Malaysia's state oil firm Petronas, an official of the upstream oil and gas regulator BP Migas said on Wednesday, Reuters reported.
ExxonMobil is the operator of the offshore Surumana and Mandar blocks in the Makassar Strait.
"Exxon Mobil wants to share the burden of the exploration," said the official.
Maman Budiman, a senior vice president at ExxonMobil Indonesia, confirmed the firm was cooperating with Petronas over the blocks, but declined to elaborate.
"Exxon holds an 80% stake now in both Surumana and Mandar blocks. We are still conducting exploration in both deepwater blocks," Budiman said.
The government awarded ExxonMobil the exploration rights in Surumana block in 2006 and the Mandar block in 2007.
ExxonMobil reportedly failed to strike oil in the first exploration well in the Surumana block.
Pertamina, Arrtu Mega sign deal on DME
State-owned oil and gas company PT Pertamina has signed a deal to buy dimethyl ether (DME), a methanol derivative, from private local company PT Arrtu Mega Energie to blend with liquefied petroleum gas (LPG), Reuters reported.
"The first delivery of DME is expected in 2011," Pertamina spokesman Basuki Trikora Putra said.
Christoforus Richard, Arrtu's president director, said the company would build a DME plant in West Java near the Balongan refinery.
The plant is due to come onstream in 2011 and would have a capacity of around 800,000 tons a year and cost around $200 million, Richard said.
He said the feedstock of the plant was methanol which could be sourced domestically or imported.
Arrtu has said previously it planning to build a methanol plant in Riau to process around 6 million tons of coal a year as feedstock, he said.
The plant would cost about $1.7 billion to build and would use coal sourced from state mining firm PT Bukit Asam.
Construction is expected to start in 2010 and the plant, the country's first such facility, should be commercially operational in 2013.
MINING
Foreign miners must sell 20% of shares: Official
With the implementation of the new mining law, the government will require foreign shareholders with 100% participating interest in mining companies to sell at least 20% of their ownership to the central government, regional government, state enterprises or domestic private companies, a ministry official said on Monday, The Jakarta Post reported.
The minimum ownership for local partners in all mining firms is set at 20 % by the new Mining Law.
The obligation will be stipulated in one of the law’s implementing regulations which are under deliberation by the government, director for coal and mineral utilization at the Energy and Mineral Resources Ministry, Bambang Gatot Ariyon, said.
"The new mining law stipulates that foreign shareholders must divest themselves of their shares in mining companies five years after production. The implementation regulation will stipulate how big the required divestment should be. After discussions with stakeholders, we think 20% is the most acceptable figure for the divestment requirement," Ariyon said.
He added the 20% divestment must be done within four years, meaning that foreign shareholders must sell 5% of their shares each year from the fifth year until the ninth year of production.
Bumi to start gold mining venture
Indonesia's largest coal producer PT Bumi Resources wants to expand operation to gold venture with gold mines in Sulawesi, Asia Pulse reported on Friday.
The company may invest up to $1 billion to develop the gold mines starting this year until 2013, its president Ari Hudaya said.
The investment value will depend on the size of the reserve, which is believed to have high quality gold deposit, Hudaya told Investor Daily.
Separately, Bumi senior vice president for investor relations Dileep Srivastava said an annual $50 million budget would be allocated to exploration for copper, gold and iron ore mining projects, The Jakarta Post reported.
"Our current view is that copper, gold, iron ore are likely to add to the company's revenue around 2013," he said in an email on Friday.
According to the company's 2008 annual report, aside from developing its coal assets, the company has already been expanding its business into other non-coal activities including iron ore, gold, copper, oil, gas, zinc and lead.
On Wednesday, Srivastava said Bumi is open to a strategic partnership in its Australian unit Herald Resources Ltd, Bloomberg reported.
Herald’s management is considering offers to take up equity in the company or its debt, Srivastava said.
Bumi has also expressed its interest in the Haju coking-coal mine run by BHP Billiton Ltd., Srivastava said.
Bumi announced in January three coal-related takeovers valued at Rp6.2 trillion ($605 million).
Medco unit to buy affiliated coal companies
Oil and gas company PT Medco Energi Internasional has signed an agreement to buy two affiliated coal mining companies effectively controlled by its founding shareholder, the Panigoro family, for $719,634, the company said Tuesday, Dow Jones reported.
Medco, through its unit PT Medco Energi Mining Internasional, will buy PT Duta Tambang Sumber Alam and PT Duta Tambang Rekayasa, which are both owned by PT Medco Mining.
The acquisition value includes taking on $658,212 in the target companies' debt, Medco said in a prospectus.
Medco said the acquisitions are aimed at developing its non-oil business. The takeover targets have a combined annual coal output of 500,000 tons.
Medco Mining is controlled by the Panigoro family, which also controls Encore International Limited, which has a 60% stake in Encore Energy Pte. Ltd. The latter owns a 50.7% stake in Medco Energi International.
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