NATIONAL
Indonesia to Narrow 2010 Budget Deficit amid Signs of Recovery
The budget shortfall is expected to narrow to 1.6 percent of gross domestic product in 2010 from 2.5 percent this year, President Susilo Bambang Yudhoyono told parliament in Jakarta today reported by Bloomberg. The economy will grow 5 percent “or even more” next year and “even faster” in subsequent years, he said.

“Indonesia certainly cannot disengage itself from the impact of the downturn of global economic activities,” Yudhoyono said. “Nevertheless, due to rapid and appropriate action, Indonesia has been relatively speaking far better off than other countries.”

Indonesia’s economy has out-performed its neighbors this year as it relies less on exports than most other Asian nations. Last month’s bomb attacks on the Ritz Carlton and JW Marriott hotels in Jakarta may do little to harm consumer spending, which accounts for almost two-thirds of the $433 billion economy.

Yudhoyono, elected for a second five-year term last month with support from more than 60 percent of the nation’s 176 million voters, said the 2010 budget deficit target was “quite safe and appropriate.”

Indonesia’s economy grew at the fastest pace in Southeast Asia in the first quarter, expanding 4.4 percent from a year earlier. Growth could accelerate to “significantly” more than 7 percent if President Yudhoyono fulfils his election pledge to fix the nation’s congested roads, neglected ports and ageing power plants, according to the World Bank.

“A strong emphasis on infrastructure and good implementation will generate higher growth without the fear of adding to inflation,” said Winston Sual, a director at Jakarta- based PT Panin Securities, which manages about $202 million. “Infrastructure can be a prime mover for the economy as a whole because it has a large multiplier effect.”

Inflation next year is expected to average 5 percent, Yudhoyono said. Consumer prices rose 3.65 percent in June from a year earlier, the smallest increase in nine years.

Govt. agencies should prepare for El Nino: SBY   
President Susilo Bambang Yudhoyono called on all government agencies to prepare for drought and food supply disruption caused by the El Nino weather phenomenon, Antara reported.

"There are several steps government ministries and local governments should implement to mitigate the El Nino threats,” said Yudhoyono. 

First, steps must be taken to secure rice supplies at the State Logistics Agency (Bulog), he said.

Dr. Yudhoyono said the government will continue to provide free rice for 17.5 million poor households. “An emergency fund is also being prepared to tackle food shortages during El Nino,” the president said.

He said regional administrations must also ensure all irrigation systems and dams are functioning.

“The administrations of Riau, South Sulawesi, Jambi, North Sumatra, West Kalimantan, Central Kalimantan and East Kalimantan must be ready to fight increases in forest fires,” he said.
 
A senior economic official said the government has no plan to import rice because it has sufficient stocks to meet domestic demand, even if the El Nino weather pattern affects the harvest and hits rice production, Reuters reported.

Indonesia's rice stocks, managed by state procurement agency Bulog, currently amount to 1.6 million tons, said Bayu Krisnamurthi, deputy to the coordinating minister for the economy.

“There is no urgency to import rice," Krisnamurthi said, adding that the rice stock was expected to dip to 1.5 million ton from 2.3 million tons by year-end.

Challenges in Aceh as post-tsunami activity diminishes: WB
After the economic boom from rebuilding projects in the wake of the 2004 earthquake and tsunami, growth in the non-oil and gas sectors in Aceh has dropped as reconstruction activities draw to a close, said the World Bank, The Jakarta Globe reported.

The Aceh Economic Update report was compiled by the World Bank and Bank Indonesia, supported by the Multi-Donor Fund, a consortium under the World Bank tasked with collecting funds from donor countries for post-tsunami reconstruction in Aceh and Nias.

World Bank research analyst Harry Masyrafah said Aceh’s non-oil and gas gross domestic product growth had dropped to 1.9% in 2008, far below the national figure of 6.5%.

“Sectors related to the reconstruction process, which has been the driving force behind Aceh’s economic growth since 2005, now show limited or negative growth,” he said.

The Aceh economy enjoyed a boom during the four years of reconstruction, as large sums of money poured into the province leading to a high employment rate. From 2005 through 2008, at least $6 billion was allocated to Aceh.

As the reconstruction process winds down, related sectors including construction and transportation have shown deceleration or negative growth.

Masyrafah said the Aceh economy was still propped up by revenues from the oil and gas sectors, but a reduction in gas output on Aceh’s eastern coastline has hurt the bottom line.

The agricultural sector, which was expected to be the motor behind the growth of alternative sectors after the reconstruction phase, has not been able to maintain its previous year’s growth, he said.



POLITICS
KPU to go ahead with legislator decision
The General Elections Commission (KPU) announced Saturday a recent Supreme Court decision would not change the allocation of legislative seats, The Jakarta Post reported.

KPU chairman Abdul Hafiz Anshary said the court decision, which had sparked criticism for giving big parties extra seats at the expense of minor parties, would not change the decision made by the KPU and its local branches regarding party seat allocation in both central and regional legislative councils.

"The KPU really appreciates, respects and is ready to implement verdicts (regarding the elections) from authorized institutions, in this case the Supreme Court," Anshary told a press conference after a marathon meeting discussing the court verdict.

"The court verdict, however, is non-retroactive, thus all other decisions or rulings the KPU had earlier made are valid."

He said the inauguration of regional legislative council members-elect should go ahead as planned.

KPU member I Gusti Putu Artha said the allocation of House of Representatives seats would remain unchanged.


No second presidential vote: KPU
The General Elections Commission (KPU) said it would not conduct a re-run of the presidential election, despite protests from the losing candidates over the legitimacy of the vote, The Jakarta Globe reported.

“The election law does not allow for the possibility of an election re-run,” said I Gusti Putu Artha, a KPU member.

Vice President Jusuf Kalla and former President Megawati Sukarnoputri, the two candidates who lost the July 8 election to President Susilo Bambang Yudhoyono, had filed complaints with the Constitutional Court to demand a fresh vote.

Dr. Yudhoyono on Tuesday said he welcomed the challenges, adding that government institutions were designed to handle them.

Artha said the law only outlined the conditions required to stage a second vote on a limited scale, but not at the national level.

“The Election Law allows for a vote re-run at the polling station level, and only under strict conditions,” he said.

Bambang Eka Cahya Widodo, a member of the Elections Supervisory Board (Bawaslu), also said an election re-run was out of the question.

“An election re-run would mean repeating the entire election process,” he said. “The only thing the court could rule on would be a vote re-run in certain locations, but that would also be under strict conditions. We would need proof that the election was not conducted fairly in specific places,” he said.

If the losing candidates are concerned about inaccuracies in the voter list, they need to conclusively prove that certain individuals voted several times under multiple names registered on the final voters list, or provide evidence of people who were not registered, said Widodo.



TERRORISM
Top JI figures deplore Jakarta blasts
Two alleged leading Jemaah Islamiyah (JI) leaders have said they are against the deadly July 17 hotel bombings, believed to have been the work of one of their leading members, Noordin M. Top, The Straits Times reported.

Clerics Abu Bakar Ba’asyir, 70, and Abu Rusdan, 48, made clear their disagreement with whoever was behind the attacks that left nine people dead.

“It was wrong for them to bomb a place that is not a declared war zone,” said Ba’asyir.

Rusdan sought to distance JI entirely from the bombings, saying that the organization had nothing to do with the attacks as it had been inactive since 2000.

“Since the death of JI founder Abdullah Sungkar in 1999, the organization has been leaderless and without any direction,” he said, adding that splinter groups could have been behind the latest terrorist strike.

Both men stopped short of confirming suspicions that Top was behind the suicide bombings at the JW Marriott and Ritz-Carlton that left nine people dead.

The reactions of the two clerics highlighted the split within the JI that, analysts say, has created splinter cells operating independently of the main group.

Analysts say the cells can be divided into two groups: the non-violent group that focuses mainly on dakwah, or spreading message through peaceful means, and another which espouses violence, with the most prominent cell being the one headed by the 44-year-old Top.



SECURITY
Jakarta’s security back to ‘normal’: Governor
Security conditions in the capital have returned to normal following the bombings of the luxury hotels on July 17, Jakarta Governor Fauzi Bowo said, Detik.com reported.

“Activities in all locations have returned to their previous condition,” Bowo said.

Bowo added that the number of visitors to Jakarta had not been affected by the bombs.

Signifying the ‘back to normal’ status, Bowo closed the Jakarta Media Crisis Center, the temporary information center used to provide information about the bomb attacks.

In another sign of a return to normalcy in the capital, both of the luxury South Jakarta hotels attacked by suicide bombers re-opened on Wednesday, staff said.

On Wednesday, Jakarta Police chief Insp. Gen. Wahyono called for building managements to install closed circuit television (CCTV) systems in an attempt to beef up security in the wake of the attacks.

“Building managements are responsible for implementing their own security measures, including installing CCTV systems and devices to detect suspicious materials in an effort to prevent future terrorist attacks,” Wahyono said.



LAW & ORDER
Papua: Charges filed for Freeport shooting suspects
Police have charged two more suspects in a spate of deadly shootings at Freeport McMoRan Copper & Gold’s massive mine area in Timika, Papua but the motive for the attacks remains a mystery, officials said Friday, The Associated Press reported.

Police said on Friday that five more suspects had been arrested on Thursday in Timika in connection to the recent violence.

National Police spokesman Insp. Gen. Nanan Sukarna told a news conference the five were “identified as civilians and four of them are Freeport employees.”

Sukarna did not provide further details about the detainees, their alleged roles in the attacks or what evidence police might have obtained from them, The Jakarta Globe reported.

The latest arrests take to 14 the number of people facing charges of premeditated murder and illegal weapons possession for the series of ambushes that left three dead in July at the Grasberg complex, the largest gold mine in the world.

A 29-year-old Australian, a Freeport guard and a police officer died in the attacks, the worst violence at the site since three schoolteachers, two of them Americans, were killed in 2002.

Papua Police chief Bagus Ekodanto said it is still unclear if the culprits are members of the Free Papua Organization, which has waged a low-level insurgency against the government in Papua for the past 45 years or a different armed group.



HEALTH
Swine flu infections top 500: Health Ministry   
Twenty-five confirmed new swine flu cases have brought the country’s total to 520, a Health Ministry official said on Saturday night.

Director General for Disease Control Tjandra Yoga Aditama said new cases were found in Bali, Jakarta, Banten, West Java, East Java, South Kalimantan and Riau, Kompas reported.

Aditama said H1N1 infections in the country have so far been found in 17 out of 33 provinces.

“All of the new patients appear to have contracted the H1N1 virus locally and not from overseas,” said Aditama. Two of the patients were known to have traveled to Malaysia.

On July 25, the Health Ministry confirmed the country’s first death linked to swine flu after a six-year-old girl who had severe pneumonia died in a Jakarta hospital.



ECONOMY
Govt. to continue fiscal stimulus in 2010: President
President Susilo Bambang Yudhoyono has promised to continue providing fiscal stimulus next year to help the economy recover, Dow Jones reported.

"What we have done this year by providing Rp70 trillion in fiscal stimulus will be done again next year," Yudhoyono said in a conference call with governors of 33 provinces late on Thursday.

"Because of that we must prepare ourselves to have a 1.6% (of GDP) deficit (in the government's budget for 2010)."

The government and House have agreed on preliminary basic assumptions - such as targeting economic growth between 5% and 6% and inflation between 4.5% and 5.5% - to base next year's budget.

The International Monetary Fund Wednesday urged the government to increase spending on infrastructure, bolster tax collection and cut energy subsidies.

On Tuesday, vice president-elect Boediono said Indonesia is aiming for annual growth of 7% by the time Yudhoyono completes his second term in 2014, Agence France-Presse reported.

Boediono also said the government will announce initiatives to spur investment, improve infrastructure and enhance social safety nets within the first 100 days of the next administration taking office.

The economy is expected to expand by 4% this year and 5% next year, said Boediono.

The public continued to regard economic prospects as rosy, with the consumer confidence index reaching 112.1 points in the second quarter, up 8.5% from the previous three-month period, The Jakarta Post reported.

Nielsen Company Indonesia consumer research director Catherine Eddy said Thursday that “2009 has been a good year for consumers from a price perspective, especially compared with 2008, when households were really doing it tough with double digit increases in many categories.”

A number of factors contributed to strengthening the consumer confidence indicator, notably benign inflation, smooth-running elections and a growing economy, the survey found.

The figure is the highest among 28 countries surveyed by the company, as well as being higher than China’s — the world’s fastest-growing economy, — at 94.4 points in the second quarter. The survey polled 14,029 online consumers in 28 countries late June.

The survey also stated the robust consumer confidence was reflected partly in the relatively healthy growth in retail trade and a significant rise in household spending.

“The value of the retail market on a year-to-date basis to May 2009 grew close to 7% compared to the same period last year. Our Household Consumer panel shows a double digit growth in household expenditure,” said Eddy.

“Consumer confidence in Indonesia is highly correlated with inflation. When we have high inflation, consumers tend to react with low confidence ratings,” she said.

Year-on-year inflation in June fell to a nine-year low hitting only 3.65% according to Central Bureau of Statistics data, with the government expecting full-year inflation to reach a meager 4.5%.

Overall, the survey found Indonesia had been left relatively unscathed by the global financial crisis.

“The Indonesian economy is more heavily reliant on domestic consumption than many of its neighbors in the Association of Southeast Asian Nations (ASEAN), so this has provided some protection from the impacts of slowing export figures,” she said.



BUSINESS BRIEFS
MACROECONOMY
Indonesia annual inflation eased to 2.71 percent
Indonesia's annual inflation eased to 2.71% in July from 3.65% in June, the official Central Statistics Agency said today as reported by Dow Jones, which will likely prompt the central bank to cut its policy rate by another 25 basis points later this week.

The statistics agency said that compared with a month earlier, inflation rose to 0.45% from 0.11% in June, mostly due to increases in basic food prices and education costs.

Basic food prices rose by 1.1%, while education costs were up by 1.21% in July.

The agency said that core inflation in July, however, slowed to 4.91% from 5.56% in June.

The median forecast of 10 regional economists polled recently by Dow Jones Newswires was for annual inflation to fall to 2.66%, due to higher-base prices resulting from the government's move to increase fuel prices in May last year, which led to higher prices overall in subsequent months.

Nine economists who gave month-on-month inflation forecasts expect the rate to be 0.38%.

Bank Indonesia is expected to cut its overnight policy rate to 6.5% when it meets Wednesday, the 10 economists predicted. The majority of them expect the rate will remain at that level for the rest of the year as recovering commodity and energy prices globally may stoke inflation again in the near term.
Govt. eyes more tradeable bonds: Minister
The government is considering turning non-tradeable government bonds into paper that can be traded in the market, Finance Minister Sri Mulyani Indrawati told Reuters on Friday, potentially increasing supply in the market.

Finance ministry data showed there were Rp254 trillion ($25.62 billion) of non-tradeable conventional bonds and Rp2.7 trillion of non-tradeable Islamic bonds (sukuk), as of June. Most of the debt was held by the central bank. This compared to Rp705 trillion in tradeable government bonds.

Indrawati did not give a specific timeframe but told Reuters that the government was taking steps to maintain a deep and liquid bond market in order to absorb the additional bond supplies.

As part of the plan, Bank Indonesia (BI) may start trading the bonds in the market and thus help accelerate its efforts to rely more on the debt market in its monetary operations rather than, as is currently the case, on short-term central bank debt (SBI), which only has three different maturities -- one month, three months and six months.

Bank Indonesia (BI) absorbed Rp1.25 trillion ($125.6 million) through a 21-day reverse repo auction on Thursday, beating its target of Rp1 trillion. BI also held a 63-day reverse-repo auction, but received no bids.

Indrawati also indicated that the government did not rule out the possibility of issuing more bonds in the overseas market later this year, saying that it would depend on the timing and the size of the debt in line with the budget requirements.

The Finance Ministry said after a successful sale of 35 billion yen ($367.3 million) worth of samurai bonds in mid July that it would focus more on the local debt market to fund its budget deficit, prompting talk that it may not issue any more debt overseas for the remainder of the year.

The yen bond was part of a total of an equivalent $1.5 billion in samurai bonds expected to be issued by the government in 2009-2010. The ministry has so far raised around three quarters of its 2009 full year gross bond issuance target.

Rupiah appreciation remains positive: Official
The rupiah exchange rate, which strengthened to Rp9,935 against the US dollar at the end of last week, still has a positive impact on the Indonesian economy, a central bank official said, Antara reported.

“The rupiah’s current appreciation is still within the limits of propriety as a result of investors` growing interest in local securities, particularly in the stock market,” Bank Indonesia (BI) deputy governor Hartadi A Sarwono said on Friday.

The positive sentiment was also fueled by the bullish market, which showed good prospects for the Indonesian economy, he said.

The dollar’s weakening against a range of foreign currencies including the rupiah was due to a surge in the deficit of the US state budget.

Indonesia’s shariah market to overtake Malaysia: Cleric   
Indonesia's Islamic market is set to overtake Malaysia's thanks to the growth in shariah-compliant lending, one of Indonesia's top Muslim clerics said on Monday, Reuters reported.

Indonesia, the world's most-populous Muslim country, currently lags neighboring Malaysia, the Islamic financial hub for the region, in terms of the market for shariah financial products, but that should change given stronger government support and demand in the domestic market, he said.

Ma'ruf Amin, head of the Indonesian Ulema Council's (MUI) commission in charge of issuing edicts including on Islamic markets, also said he expected more conventional banks to be turned into Islamic lenders in the near term.

Indonesia's shariah banking assets accounted for just about $5 billion, or 2% of the country's total banking assets in 2008, far lower than in Malaysia where Islamic banking accounted for some $68 billion, or 17%, of total banking assets in late 2008.

"We will be bigger because the potential is much bigger," Amin said. "The political will from the government is there; from the president, the ministers. The government has also issued sukuk (Islamic bonds)."

The government raised Rp5.56 trillion ($559 million) from its retail, Islamic-compliant bonds in February and made a debut sale of $650 million worth of global Islamic bonds in April. Both issues attracted strong demand from investors.



INVESTMENT
Peugeot plans to resume production in Indonesia
French automaker Peugeot is considering resuming car production in Indonesia, Peugeot's Indonesian partner said on Thursday.

"We plan to set up an assembling plant in Indonesia. The plant would commence operation no later than 2012," Constantinus Herlijoso, president director of Astra Indonesia Peugeot (AIP), told Detik.com.

The assembly plant produced small and middle sized Peugeot sedans before the economic crisis of the late 1990s slashed demand for the vehicles.

Speaking on the sidelines of the launch of the new Peugeot 407, Herlijoso said that Peugeot's Indonesian plant is expected to become the production basis for the Southeast Asian market.

Siemens Indonesia invests $12.23M on expansion   
PT Siemens Indonesia is investing $12.23 million this year to expand its power generation plant in Cilegon, Banten, The Jakarta Post reported.

The expansion includes the installation of new machines and equipment to accommodate international orders awarded by parent company Siemens AG, company officials said.

"Capability and reliability with quality standards of our power-generation factory in Cilegon have become the most important considerations in obtaining orders from projects of Siemens AG, Germany," said Hans Peter Haesslein, president director and CEO of Siemens Indonesia.

The factory is a feeder plant located on 43,000 square meters of land, with a 24,000-square-meter production facility, the company said Wednesday in a statement.

It is being considered for one of the feeder plants in the global manufacturing network of Siemens Power Generation.

China automaker to set up assembly plant   
China-based automotive manufacturer Beiqi Foton Motor plans to set up an assembly plant in Indonesia to support its aim to enter the Asia Pacific market, Xinhua reported on Tuesday.

Dong Haiyang, vice president of Beiqi Foton Motor Co. and general manager of Foton International Trade Co. Ltd., said the automaker regarded Indonesia as an important market in the region.

“As a newcomer in the bus, truck and heavy duty vehicle market in Indonesia, we have set a target to secure 2% market share in our category within three years and to improve to 3% in the following two years," Haiyang said on the sidelines of the launch of a Foton Multi Purpose Vehicle (MPV) at the 2009 Indonesia International Motor Show.

The Beijing-based manufacturer has set up cooperation with two domestic firms, PT Foton Mobilindo and PT Foton Indonesia, that will handle distribution and import of heavy duty trucks.

It has allocated some $300,000 to develop after-sales service and secure spare parts supplies.

Haiyang said the investment in Indonesia would make it a production base for Foton market in the region, Bisnis Indonesia reported.



STATE CONCERNS
2009 exports to contract 15%-20%: Minister   
This year’s exports will contract less sharply than the official forecast due to a likely recovery in Asian economies in the second half, Trade Minister Mari Pangestu told reporters Monday, Dow Jones reported.

Exports will likely fall by between 15% and 20% this year, compared with the government's forecast of a 30% decline, Pangestu said.

"We expect our exports in the second half of this year to improve," Pangestu said.

She said that Indonesia will focus on key export markets that will likely record strong economic growth, such as China.

She didn't give a forecast for total export value for 2009.

SMEs upbeat about economy in H2: Survey   
Small and medium enterprises (SMEs) in Indonesia are upbeat going into the second half of the year, with over 80% expecting to increase spending in the second half of the year, a survey revealed, The Jakarta Post reported.

The survey by HSBC showed that most of the small and medium businesses surveyed expect the economy to perform even better in the second half of the year.

"The key drivers of business confidence are the nation's economic growth, SME's smaller reliance on exports and SMEs' ability to produce quality products that meet local demand," HSBC senior vice president of business banking Jeffrey C. Tjoeng said on Tuesday.

The survey, which is based on the bank's business deals with SMEs during the first six months of the year, involves 301 SMEs with a turnover of less than $10 million in Greater Jakarta, operating in sectors ranging from import and export, finance, manufacturing and transportation.

Around 60% of the SMEs surveyed are confident the country's GDP will continue growing, as they believe local demand will rise as a result of people's strong purchasing power.

Fifteen percent of the SMEs surveyed are even aiming to boost their employee numbers, while 77% will try to at least maintain employee numbers in the second half.


SOEs
Govt. seeks more dividends from SOEs   
The government is considering collecting higher dividends from state enterprises this year, including state oil and gas company PT Pertamina, senior officials revealed Tuesday, The Jakarta Post reported.

"There is a plan to increase Pertamina's dividend payment. We already have the figure, but I need to carry out further analysis on this matter," secretary to the State Minister for State Enterprises, Muhammad Said Didu, said.

Pertamina, the biggest dividend contributor to the state coffers, was earlier required to pay dividends of as much as 45% of the company's net profit.

The dividend paid by Pertamina usually represents about half of the total dividends paid by state enterprises. For the 2008 fiscal year, Pertamina's dividend has been earmarked at Rp13.59 trillion, up from Rp11 trillion in 2007.

Didu said the government had to ask Pertamina for higher dividends because the overall tax revenue was decreasing.

"In the 2009 revised state budget, the state enterprises must increase their dividend payment to the government, because the target from tax has decreased slightly," he said.

State Minister for State Enterprises Sofyan Djalil confirmed the government's plan to ask for higher dividends from state-owned companies.

"We have talked with the House's budget committee. The state companies' dividend payment will be increased to between Rp28.5 and Rp29 trillion," Djalil said, adding the government would decide which state firms would be required to pay more dividends in the third quarter. Initially, the dividend had been set at Rp26.1 trillion.

Jamsostek books returns of Rp4.6T from investments   
State insurance company PT Jamsostek posted returns of Rp4.6 trillion ($460 million) during the first half of this year, from a total investment of Rp70.5 trillion, a senior executive said on Tuesday, The Jakarta Post reported.

"The largest portion of the return was from investments in bonds," Jamsostek investment director Elvyn G Masasya told journalists on the sidelines of a MoU signing between Jamsostek and state-owned Bank BNI.

He said the company's investments in bonds reached Rp33 trillion, or 47% of its total investments in the first semester.

According to Masasya, the company was targeting to put 50% of its investments in bonds, 20% in time deposits, 15% in stocks and the rest in mutual funds as well as capital injection.

"We are targeting to invest Rp72 trillion this year," Masasya said.

Last semester, the company disbursed Rp3.2 trillion toward claims or 79% of the Rp4.82 trillion allocated to the payment of claims in 2009, said Jamsostek president director Hotbonar Sinaga, adding the high amount of claims was boosted by a high level of layoffs at the beginning of 2009.

Telkom posts biggest quarterly profit in seven years
State-owned telecommunication company PT Telkom posted its biggest quarterly profit in almost seven years, Bloomberg reported.

Net income in the second quarter this year advanced 16% to Rp3.59 trillion ($361 million) from Rp3.09 trillion a year earlier, the highest since the third quarter of 2002. Sales rose 5.3% to Rp15.97 trillion, according to figures announced by the company on Friday.

Telkom’s profit may rise 12% this year to Rp11.78 trillion, according to a median estimate of 25 analysts surveyed by Bloomberg News.

The company added 10 million new phone users in the first half of the year, Bisnis Indonesia reported on Wednesday.

Revenue from the company’s mobile phone services unit, PT Telkomsel, which is 35% owned by Singapore Telecommunications Ltd., rose 13% to Rp7 trillion in the quarter.

Telkom’s first half profit declined 4.1% from a year earlier to Rp6.04 trillion, the company said. Sales rose to Rp30.67 trillion from Rp30.21 trillion.

Meanwhile, Telkom said it will use around $50 million of its total investment of Rp21 trillion ($2.1 billion) planned for this year to build a new satellite Telkom-3 which will be built by Russia's Retshesnev at a total cost of around $200 million, including launching cost, under an agreement signed in February.

Semen Gresik H1 net profit up 33%   
Indonesia's largest cement producer, PT Semen Gresik, said on Tuesday that first-half net profit rose 33.2%, despite a drop in sales due to reduced demand, Reuters reported.

Semen Gresik said net profit for January-June rose to Rp1.51 trillion ($152 million) from Rp1.14 trillion in the year-ago period, while revenue climbed 18.8% to Rp6.767 trillion from Rp5.697 trillion.

The company earlier reported a 5.7% decline in cement sales in the first half of this year to 8.39 million tons on weak domestic demand.



PRIVATE SECTOR
Astra's Q2 net profit down, expects better H2
PT Astra International on Thursday said it sees scope for a recovery in the second half with improving consumer confidence potentially helping businesses ranging from cars to plantations, Reuters reported.

"Consumer confidence tends to increase along with the positive outlook on inflation, interest rate and currency," president director Michael D Ruslim said in a statement.

"The firm is expected to continue to withstand a challenging market in the second half, especially in the motorcycle business."

Astra, controlled by Singapore's Jardine Cycle & Carriage Ltd., owns firms specializing in heavy machinery used in the mining industry, finance, coal, palm oil plantations, and cars and motorbikes.

One of Astra's subsidiaries, PT Astra Honda Motor, recently revised up its motorcycle sales forecast to 2.45 million units this year, from a previous forecast of 2.1-2.4 million units, indicating a pick-up in consumer demand.

Astra’s plantation subsidiary PT Astra Agro Lestari, on Tuesday said net profit fell 51.8% to Rp769.85 billion ($77.6 million) in the first half as palm oil prices fell.

Its revenue for the January-June period fell 23.8% to Rp3.538 trillion from Rp4.645 trillion in the year-ago period.

Astra’s heavy equipment maker and coal mine contractor PT United Tractors posted net profit in the first half of this year at Rp1.87 trillion, an increase from Rp1.2 trillion in the same period a year ago.

Sales revenue was recorded at Rp13.88 trillion, up from Rp12.59 trillion in the first half last year.

Unilever H1 net profit rises 9.5%   
PT Unilever Indonesia, the local subsidiary of the Rotterdam-based consumer goods giant, posted a 9.5% increase in net profit in the first half of this year on the back of currency gains, The Jakarta Post reported.

Unilever's net profit rose to Rp1.49 trillion ($150.4 million) in the first six months of this year from Rp1.36 trillion in the same period a year earlier.

The rise in the net profit is mostly due to currency gains, posting a profit of Rp998 million against losses of Rp8.9 million a year earlier.

Sampoerna, Gudang Garam post higher H1 net profits   
The country’s two leading cigarette manufacturers, Sampoerna and Gudang Garam, both recorded improved profit in the first half of 2009.

 PT HM Sampoerna said Thursday that first-half net profit rose 29% from a year earlier on increased sales, Dow Jones reported.

The country’s second largest cigarette producer by output and assets said net profit for the January-to-June period rose to Rp2.52 trillion from Rp1.96 trillion a year earlier.

Sales rose 12% to Rp18.66 trillion from Rp16.70 trillion a year earlier.

Sampoerna is 98.04% owned by PT Philip Morris Indonesia.

Meanwhile, another tobacco firm, PT Gudang Garam, reported its first-half net profit rose to Rp1.43 trillion from Rp891.36 billion in the same period last year, Reuters reported.

Sales rose to Rp15.065 trillion from Rp15.056 trillion in the first half last year.

Indocement H1 net profit Rp1.17T   
PT Indocement Tunggal Prakarsa Thursday said first half net profit rose to Rp1.17 trillion ($117 million) from Rp772.32 billion a year earlier, supported by higher revenue, Dow Jones reported.

The country’s second largest cement producer in terms of output said revenue increased to Rp8.96 trillion from Rp7.62 trillion a year earlier.

Operating profit edged up to Rp2.07 trillion from Rp1.92 trillion.



BANKS
BCA books Rp3.3T in H1 net profit   
Bank Central Asia (BCA) posted a net profit of Rp3.3 trillion ($303 million) in the first half of this year, a 35.9% increase from Rp2.4 trillion in the same period of 2008, The Jakarta Post reported.

"Amid this global crisis, we are pleased our profits have increased," BCA president director Djohan E. Setijoso said Wednesday.

Setijoso attributed the profit rise to the increase of interest and fee-based income as well as lower taxation.

He added BCA’s interest income rose by 42.7% year-on-year to Rp7.7 trillion, while the tax applied to it was reduced to 23% in 2009 from 30% in 2008.

Mid-sized banks report robust profit growth
Two of the country’s medium-sized banks on Thursday announced strong first half profit growth and healthy liquidity positions, The Jakarta Globe reported.

PT Bank CIMB Niaga, the country’s fifth-largest bank, reported unaudited net profit of Rp696 billion ($70 million) for the first half, up 20% from a year ago, thanks to higher net interest income and revenue from foreign exchange (forex) and commercial debt paper.

The bank’s net interest income for the first six months hit Rp2.9 trillion, up 28% from a year ago, while its forex earnings stood at Rp156 billion, up from Rp87 billion. Its fixed-income revenue, however, fell to Rp44 billion from Rp 245 billion.

The bank’s lending grew 3% year-on-year to Rp72.6 trillion. “The positive performance of the bank gives us hope, despite the fact that business conditions at the moment are relatively challenging,” said Arwin Rasyid, CIMB Niaga’s president director.

The bank reported that its third-party funds ¬— mainly customer deposits and checks in clearing ¬¬— remained relatively stable during the first six months of the year, even though liquidity did tighten somewhat. It held Rp82.6 trillion in third-party assets at the end of the first half, little changed from Rp82.5 trillion a year ago.

PT Bank Permata, the country’s ninth-largest bank by assets, announced an after-tax profit of Rp325 billion for the first half, an increase of 17% from the same period in 2008.

Permata’s net interest income rose 15% year-on-year to Rp1.4 billion, while its outstanding loans grew 18% from the first half of 2008 to Rp36.7 trillion.

“We not only posted sound improvement in our profitability, but also optimized our intermediation function in supporting the Indonesian economy while still offering a wide range of innovative banking solutions in conventional and shariah banking,” Stewart D. Hall, Permata’s president director, said.

The bank’s third-party funds rose 29% year-on-year to Rp43.1 trillion in the first half. Demand deposits and savings recorded healthy increases of 13% and 9%, to Rp8.9 trillion and Rp7.8 trillion, respectively. Time deposits increased 45%, from Rp18.2 trillion to Rp26.4 trillion.

PT Bank OCBC NISP reported a net profit of Rp162.3 billion for the first six months, a 10% rise from a year ago. The bank’s net interest income grew 26.6% to Rp829 billion, but its outstanding loans shrank 6%.

The bank said in a statement that it had been very selective in channeling credit, considering the unstable global economic conditions that are having an impact on Indonesia’s economy.

OCBC NISP’s third-party funds increased from Rp21.3 trillion in June 2008 to Rp27.3 trillion last month.



POWER
PLN to call tender for Muara Tawar add-on project   
State power company PT PLN will call a tender for the construction of the Muara Tawar add-on thermal power plant with a capacity of 1,200 MW early in August, PLN planning and technology director Bambang Praptono said on Monday, Antara reported.

He said the company was in the middle of finalizing details of locations for projects which would be built in the second phase 10,000 MW capacity expansion program.

PLN operations director for the Java-Bali grid Murtaqi Syamsuddin said the company was waiting for a presidential regulation which would lay a legal basis for the construction of the second phase.

PLN would call a tender for the engineering, procurement and construction (EPC) of the Muara Tawar Add-On project after the finance minister had endorsed the company’s proposal for export credits to finance the project, he said.

The Muara Tawar power plant was called an add-on project because it would make use of heat residue to increase electrical power capacity, he said.

The Japan Bank for International Cooperation (JBIC) had earlier expressed an intention to finance the project. EPC contractors expected to take part in the tender include Sumitomo, Mitsui, Mitsubishi and Siemens.

The other power plant to be put to tender in the near future will be the Upper Cisokan hydro power plant with a capacity of 1,000 MW. The World Bank is expected to finance the project.

Provisional data show PLN has prepared 78 different locations for the power plants to be built in the second phase. Most of the power plants with capacity of 5,685 MW will be built in Java and the rest outside Java.



OIL & GAS
H1 transactions at local banks reach $1.8B
Oil and gas contractors have so far made $1.8 billion worth of transaction commitments through local banks, or 64.29% of the companies’ total expenses in the first half of the year, The Jakarta Post reported.

As of June, oil and gas contractors operating in Indonesia have made a total of $2.8 billion worth of banking transactions, of which $1.8 billion was made using domestic banks, upstream oil and gas regulator BP Migas’s general deputy Hardiono told reporters Thursday.

“I am confident that about $11 billion will be spent using domestic bank services,” Hardiono said. BP Migas demanded oil and gas contractors use local bank services to help boost the liquidity of the country’s banking sector.

Local banks used by oil and gas contractors included Bank Mandiri, Bank Negara Indonesia, Bank Rakyat Indonesia, and Bank Syariah Mandiri, he added.

Hardiono believed the amount of transactions the contractors made using domestic banks would significantly increase in the second semester as the oil and gas contractors normally make most of their purchases in the third quarter.

Oil and gas contractors plan to spend a total of $15 billion this year for their exploration and production activities.

Hardiono said the requirement to use domestic banks only applied to oil and gas companies in the production stage. This obligation only applies to contracts signed from 1995 onwards, after Indonesia ratified the UN Convention on the Law of the Sea (UNCLOS).

Pertamina signs $700M capex loans
State-owned oil and gas company PT Pertamina on Friday signed syndicated loans worth $400 million and Rp3 trillion ($302.6 million) with local and foreign banks to fund upstream and downstream projects, Reuters reported.

The dollar loan involves 16 banks, including Citigroup unit Citibank NA, Bank of Tokyo-Mitsubishi UFJ and Sumitono Mitsui Banking Corporation, a statement from local lender PT Bank Mandiri said. Citigroup is lead arranger for the loan.

"We believe this loan facility can speed up Pertamina's expansions and business developments in the future, in line with the strategic target set by the company," Karen Agustiawan, Pertamina's president director, said in a statement.

The $400 million loan has a maturity of three years and would pay 338 basis points above the London inter-bank offered rate (LIBOR), Pertamina Finance Director Ferederick Siahaan said.

Mandiri is lead arranger for the rupiah loan and will lend Rp1.25 trillion, while Rp750 billion comes from PT Bank Negara Indonesia (BNI), Rp500 billion from PT Bank Rakyat Indonesia (BRI) and Rp500 billion from PT Bank Central Asia (BCA).

Siahaan told reporters Pertamina planned to spend Rp22 trillion on capital expenditure in 2009, with 65% allocated for upstream activities and 35% for downstream. The firm is estimated to have invested Rp17 trillion in 2008.

"There are many Pertamina projects that need to be financed, including upstream and downstream. Upstream projects include Cepu and the offshore North West Java block," he said.

Pertagas to build $27M W. Java LPG plant   
PT Pertamina Gas (Pertagas), a subsidiary of state oil and gas company PT Pertamina, has allocated about $27 million to build a liquefied petroleum gas (LPG) plant in Bekasi, West Java, The Jakarta Post reported.

"We expect the plant to be on stream in December 2010," the company's president director Suharyanto told reporters Tuesday. The company is tendering the project, he said.

The plant would process 15 million standard cubic feet per day (mmscfd) of gas and produce 130 tons of LPG per day.

The gas for the plant would be supplied by PT Pertamina EP, another subsidiary of Pertamina.

BP to start second train LNG output at Tangguh in Q3
BP Plc said it planned to start liquefied natural gas production at the second unit of its Tangguh plant in West Papua late in the third quarter, Bloomberg reported.

“There is no deliberate process to slow it down” because of lower global demand for LNG, said Andy Inglis, BP chief executive for exploration and production, on Wednesday.

“So you shouldn’t expect that we get anywhere near the full output from Tangguh before the end of the year.”

BP and its partners shipped the first LNG cargo from Tangguh on July 6, after the start of the first production unit. LNG is gas chilled to a liquid to aid transport and storage.

Meanwhile, China National Offshore Oil Corp.’s Fujian terminal has received its first LNG cargo from Tangguh, the company said on Wednesday. 



MINING
Bukit Asam more than doubles H1 net profit   
State coal miner PT Tambang Batubara Bukit Asam enjoyed a strong first-half performance with six-month net profit more than double the amount booked in the same period last year, The Jakarta Post reported.

“Revenue and profit soared as a result of higher volume sales and a better selling price for coal,” president director Sukrisno said on the sidelines of a meeting at the Office of the State Minister for State Enterprises Monday.

Sukrisno told reporters net profit during the January-June period jumped to Rp1.59 trillion (around $160 million), as higher sales volume and prices bolstered revenues. Revenue soared 56% to Rp4.6 trillion.

During the first quarter, the company managed to sell its coal at $90 a ton on average, higher than the $60 and $70 a ton selling price in the same period last year.

“We predict that revenue in the second semester will also be good but who knows, because the coal price remains uncertain,” he said.

“It depends on the market price, but I am quite sure our sales volume will increase [from last year] by perhaps around 40%,” he said of the company’s full-year revenue estimates.

The company gained Rp1.7 trillion in net profit last year, and paid the government Rp555.2 billion in dividends. It allocated a total of Rp853.9 billion toward shareholder dividends in 2008.

The company, which controls about a quarter of Indonesia’s coal reserves, is also launching an aggressive expansion by preparing several mine takeovers.

It is currently conducting feasibility studies for the purchase of two coal mines in Kalimantan, which have an estimated investment value of Rp1.5 trillion.

According to Sukrisno, the company produced 5.8 million tons of coal in the first semester. The company is aiming to produce 13.5 million tons this year.

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