Dd941c0143034c139d57bc6c6d092ebbTradeInvNews3Nov2008.doc



THE COORDINATING MINISTRY FOR ECONOMIC AFFAIRS

REPUBLIC OF INDONESIA

Main Building, Ministry of Finance, Jl. Lapangan Banteng Timur No.2-4 Jakarta 10710

Tel: (021) 351-1178    Fax: (021) 351-1186    Website:

Trade and Investment News[1], 3 November 2008

Highlights

National

• Aceh rebel founder Hassan di Tiro returns to Stockholm after two-week visit

Politics

• House of Representatives passes presidential election bill

Terrorism

• Executions of 2002 Bali bombers imminent

Security

• Only two piracy incidents reported in Malacca Strait in first nine months of 2008

Law & order

• Leaders of radical Islamic Defenders Front get 18-month jail terms

• House of Representatives passes anti-discrimination law

Health

• Slow response by donors slows fight against bird flu

Economy

• Government introduces more steps to assist businesses meet global downturn

Business briefs

Macroeconomy

• House of Representatives approves 2009 budget assumptions, including growth at 6%

Investment

• Riau Islands vows to cut red tape, stamp out illegal levies in growth zone

• Samsung considering building cellular phone factory

Economic reform

• Government introduced 10-point program to boost confidence

State concerns

• Government to make use of production cuts to boost rubber replanting

• South Korean tourists jump to fourth rank in Bali

SOEs

• Garuda Indonesia to delay IPO because of global financial crisis

Private sector

• Bakrie Group to sell 35% stake in PT Bumi Resources, resolving debt problem

Banks

• Most banks report higher profit figures in third quarter

Power

• State utility PT PLN starts operation at test crude palm oil plant

Oil & gas

• Government awards nine more oil and gas blocks

Mining

• Tin producer PT Timah sees output down by around 10%

NATIONAL

GAM founder leaves Aceh for home

After a two-week visit to Aceh, the supreme leader and founder of the disbanded Free Aceh Movement (GAM) separatist group Hassan di Tiro left Indonesia last week to return to Stockholm, Sweden, The Jakarta Post reported.

Tiro and his entourage, including senior rebel leaders Malik Mahmud and Zaini Abdulah, left Kuala Lumpur for Sweden on Monday.

Aceh Governor Irwandi Yusuf and hundreds of KPA members saw off Tiro at the airport. There was no special ceremony.

Tiro, a Swedish citizen, made a brief visit to Jakarta to meet with Vice President Jusuf Kalla, one of the brokers of the 2005 Helsinki Accords which ended almost 30 years of hostilities in Aceh.

Mass relocations planned as sea levels rise

The central government said it is preparing to relocate residents living on islands considered vulnerable to rising sea levels over the next three decades, reported The Jakarta Post.

Scientists predict that sea levels are expected to surge drastically between 2030 and 2040 because of global warming, raising fears about 2,000 islands across Indonesia will be slowly swallowed up by the sea.

"We formed a technical team to identify which islands are at greatest risk of sinking,” Maritime and Fisheries Minister Freddy Numberi said on Thursday.

"The government is also preparing a contingency plan, which includes relocation of residents off the islands."

Numberi said many of the islands are located off Sumatra, Kalimantan, Sulawesi and Papua.

The government, Numberi said, has called on the international community to join forces in anticipating the rising sea levels.

"Indonesia will only see small islands disappear, but there will be some countries at risk of completely sinking due to the rising sea levels. Therefore, all nations must take this issue seriously."

Indonesia has lost about 60 islands off western Sumatra following the tsunami in December 2004.

Prince Charles arrives for five-day visit

Britain’s Prince Charles has begun a five-day visit to Indonesia as part of a tour of several Asian countries, reported The Australian.

"Prince Charles arrived in Jakarta on Saturday and is scheduled to depart on Wednesday," said Teuku Faizasyah, a Foreign Affairs Ministry spokesman.

During the visit, the prince will focus on environmental issues, as well as interfaith and cultural interactions, according to Faizasyah.

"Prince Charles will talk about climate change, forestry issues and interfaith issues. He is also scheduled to give a presidential lecture on climate change," he said.

The Prince of Wales will also visit a forestry project at Bungku village, Batanghari, Jambi on November 2, and hold a meeting with prominent religious figures in Yogyakarta.

Before coming to Indonesia, the prince visited Japan and Brunei Darussalam. He last visited Indonesia in 1989 with the late Princess Diana.

In Jambi, Prince Charles is scheduled to visit an eco-tourism restoration project in Bungku village, Kuang Jaya, Batanghari regency.

The project is located about 100 km from Jambi city on the site of a former logging concession belonging to PT Asialog.

Covering 49,000 hectares of land in Jambi and another 52,000 hectares in South Sumatra, the site has been returned to the government for conversion into an ecosystem restoration location, according to information from the Jambi provincial administration.

POLITICS

Law on presidential elections passed

A plenary session at the House of Representatives passed a new presidential election law on Wednesday, completing legislation for next year’s poll, Tempo reported.

The vote settled a major point of contention by requiring a political party or a coalition to win at least 20% of parliamentary seats or 25% of valid votes in the legislative election before they could nominate a president or vice presidential candidate,

All 10 factions in the House voted in favor of the new legislation, but three factions, the National Awakening Party, Prosperous Justice Party and National Mandate Party, submitted objections over several articles.

E. Java rivals ready for fierce run-off poll

Governor hopeful Soekarwo and his running mate Saifullah Yusuf and their rivals, Khofifah Inda Parawansa and Mudjiono, have been fiercely competing in the last week before the second round of the East Java gubernatorial election, The Jakarta Post reported.

A number of influential clerics made a public appearance to pledge their full support for Soekarwo and Yusuf after the Indonesian Democratic Party of Struggle (PDI-P), which was defeated in the first round, declared it stood behind their opponents, Parawansa and Mudjiono.

Soekarwo and Yusuf, who won 26.43% of the first round vote, have already received endorsements from influential clerics in Kediri, Madiun, Nganjuk, Jombang, Ponorogo, Jember and Banyuwangi.

Former president and PDI-P chairwoman Megawati Sukarnoputri declared her personal and her party's support for Parawansa and Mudjiono while accompanying Parawansa on a pilgrimage to the grave of founding President Sukarno in Blitar.

TERRORISM

Bali bombers await firing squad

Three Islamist militants convicted over the Bali nightclub bombings that killed 202 people awaited execution Sunday as Indonesia stood guard against a feared extremist backlash, reported Agence France-Presse.

A source at the Nusakambangan island prison off southern Java said Amrozi, 47, his brother Mukhlas, 48, and attack strategist Imam Samudra, 38, had been placed in isolation and the execution order had been delivered.

"The letter ordering the execution was submitted last night at 9:00 PM," the source said on Saturday. He did not say whether the letter gave a precise time for the executions.

Security forces have been placed on high alert across Indonesia as a precaution against an explosion of anger at the first executions to be carried out under Indonesia's anti-terror law.

Sensitive areas like foreign embassies, tourist spots, shopping malls and ports are under close guard. On mainly Hindu Bali, 3,500 police were on the streets, officials said.

All three have said they are eager to embrace martyrdom for their radical jihadist ideology, while launching a series of failed appeals and legal challenges which have delayed their date with the firing squad.

SECURITY

Pirates steering clear of Malacca Strait

Pirate attacks in the Malacca Strait have dipped to their lowest levels in five years, reported The Straits Times.

In the first nine months of this year, pirates raided two vessels in the Malacca Strait, down from 33 during the same period in 2003, the International Maritime Bureau (IMB) said in a recent report.

The organization credited the success to enhanced cooperation between Indonesia, Malaysia and Singapore, which increased patrols in 2004.

In contrast, Somalia-based pirates launched 51 attacks in the Gulf of Aden - located between Somalia and Yemen in the Indian Ocean - during the first nine months of this year. That is 10 times more than during the same period in 2003 and more than anywhere else on the planet.

LAW & ORDER

FPI members jailed for violent attacks

Two leaders of the radical Islamic Defenders Front (FPI) were jailed for 18 months each by the Central Jakarta District Court for their role in an attack on religious freedom activists at the National Monument park on June 1, reported The Jakarta Post.

The presiding judge at both trials, Manusunan Harahap, said FPI head Rizieq Shihab had been proved guilty of instigating violence, and paramilitary leader Munarman of committing violence.

FPI members outside the court then tried to close down the nearby Al Hidayah mosque, run by controversial Ahmadiyah sect, but were stopped by police.

Both men protested the verdicts, claiming they were based on dubious evidence. Both said they would appeal, and Shihab maintained his calls for anti-Ahmadiyah actions.

Bill against racial discrimination passed

The House of Representatives on Wednesday unanimously passed a bill that terms ethnic and racial discrimination as serious crimes, reported The Jakarta Post.

Deputy Speaker Muhaimin Iskandar, who presided over the House's plenary session to approve the draft law, said Indonesia no longer had any room for racial or ethnic discrimination.

Chairman of the House's special committee deliberating the bill, Murdaya Poo, said the endorsement of the bill should put an end to the long-standing dichotomy between indigenous and non-indigenous people in Indonesia.

"A man cannot choose to be born as part of a certain race or ethnic group, and therefore discrimination must cease to exist," said Poo, who is Indonesian-Chinese.

Poo said the House proposed the bill as part of its effort to ratify the International Convention on the Elimination of All Forms of Discrimination, which was enacted in 1999.

Under the new law, leaders of public institutions found guilty of adopting discriminatory policies could face jail terms one-third more severe than those stipulated in the Criminal Code.

Poo said the law’s deliberation process had been delayed by a disagreement on whether imprisonment should be made the minimum punishment.

"We decided to set prison as the minimum sentence to deter people from committing racial or ethnic discrimination," said Poo, from the Indonesian Democratic Party of Struggle (PDI-P).

KPK grills ex-BI governor

An investigation team from the Corruption Eradication Commission (KPK) on Friday grilled former governor of Bank Indonesia Syahril Sabirin, Antara reported.

“I was questioned as a witness in the case against Aulia Pohan,” said Sabirin without giving further details concerning the probe.

Pohan, a former deputy BI governor, has been charged with allegedly approving Rp100 billion in illegal disbursements along with Burhanuddin Abdullah.

Last week, a court sentenced former BI chief Abdullah to five years in jail for embezzling the Rp100 billion which was used to bribe lawmakers and hire lawyers to defend BI officials facing corruption allegations.

Officers testify against former BIN deputy chief

Two police detectives testified on Thursday at the trial of former State Intelligence Agency (BIN) deputy head Muchdi Purwopranjono, denying pressuring witnesses and manipulating testimonies in the defendant's dossier, The Jakarta Post reported.

Sr. Comr Pambudi Pamungkas and Comr. Daniel Tifauna were summoned to the trial of Purwopranjono, charged with the murder of noted human rights campaigner Munir Said Thalib in 2004, to explain the recent denials and retractions of testimonies by several witnesses.

Tifauna and Pamungkas, from the National Police's criminal investigation division, had questioned BIN agents Kawan, Zondhy Anwar and Arifin Rahman as witnesses in the case.

During recent hearings at the South Jakarta District Court the three witnesses revoked their testimonies given to police investigators in March and June 2008.

BIN officials Suradi and Imam Mustopha also made similar moves at the same trial.

The flurry of retractions caused the panel of judges to later demand prosecutors present the police detectives to testify in the trial.

Both Tifauna and Pamungkas denied allegations the police had pressured witnesses and manipulated procedures during the questioning, as claimed by Kawan and Anwar.

"That was impossible because (the witnesses) were always accompanied by officials from the BIN's legal bureau during the questioning," Pamungkas told the court. "The witnesses told us they were in healthy condition before testifying."

Pamungkas also denied the detectives had not reread the testimonies to the witnesses for final confirmation and said all interviews including the testimonies had been recorded by video to allow for any claims that they had not been voluntary.

The trial was adjourned until November 6, when judges will decide whether to allow prosecutors to read out the testimonies of Budi Santoso and former BIN deputy head M. As'ad, after they failed to appear at court.

HEALTH

Budget shortfall slows bird flu fight

A budget deficit is still hampering the global initiative to contain bird flu from reaching a pandemic level, an official said, Kompas reported Saturday.

"So far, international donors have committed to disburse $2.7 billion for 2006 to 2008, yet the deficit still amounts to $1.2 billion," said head of the National Commission for Avian Influenza and Pandemic Preparedness Bayu Krisnamurti on Wednesday.

According to the commission, there has been a decrease in the number of countries and organizations contributing funds for the global effort.

The World Bank has estimated the global pandemic resulting from the mutation of bird flu could cost $3 trillion and could kill 71 million people worldwide, as a worst-case scenario.

When asked about the government's commitment to provide funds, Krisnamurti said the government was committed to contributing 50% of the total funds needed to tackle the issue domestically.

"We have 50% from the donor fund and 50% from the state budget," Krisnamurti said.

The US through, Under Secretary of State for Democracy and Global Affairs Paula Dobriansky, pledged an additional $320 million to the global fight against bird flu.

ECONOMY

Govt. takes more steps for business survival

The government took more steps last week to improve the prospects of businesses under threat from the effects of the global financial crisis, while the capital market improved at the end of the week in line with gains on Wall Street and regional markets.

The announcement on Saturday by the troubled Bakrie Group that it has sealed a deal with the investment group Northstar Pacific to sell its 35% stake in coal miner PT Bumi Resources for $1.3 billion was also expected to boost market sentiment.

On Tuesday, the government announced a 10-point plan that included a buy-back of government paper and on Thursday the Finance Ministry bought back Rp41 billion ($3.89 million) worth of government bonds (SUN) as part of the measures.

The ministry announced Friday that the government will also provide tax incentives valued at Rp12.5 trillion ($1.13 billion) to a range of business sectors next year to help them cope with the impact of the financial crisis.

While details remained scarce, the incentives will be aimed at reducing the costs of business for small and medium enterprises, taking the form of waived income tax and value-added tax worth up to Rp10 trillion and import duty and import tax worth Rp2.5 trillion, according to Anggito Abimanyu, the ministry's head of fiscal policy.

The waived payments will be covered by the ministry in order not to reduce the government's revenue target, The Jakarta Post reported.

Maintaining its message that the economy can withstand the external pressures, the government achieved approval of the House of Representatives budget committee for its assumptions for the economy next year, with growth targeted at 6.0%.

The assumptions include inflation at 6.2%, nearly half the present level, with October’s consumer price index figures to be released on Monday.

BI Governor Boediono said Friday that the annual inflation rate is expected to ease

from the month before, Dow Jones reported, but he did not elaborate. The September figure for on-year inflation stood at 12.14%.

A Dow Jones Newswires survey of 10 regional economists produced a median October inflation forecast of 11.83% on year.

The trade surplus was expected to have decreased moderately in September from a month earlier as machinery and equipment imports remained strong while prices of export commodities fell, according to the Dow Jones poll.

Citigroup economist Leon Hiew, who took part in the poll, said exports likely grew 27.6%, down slightly from an increase of 30.3% in August.

"We expect gradually cooling domestic demand to rein in imports and keep the trade balance at a small surplus despite the recent outpacing of import growth over export growth," he said.

The rupiah strengthened from its low for the week, a seven and a half year low of 11,800 to the dollar, to end the week at 11,000 to the greenback.

The Indonesia Stock Exchange’s composite Index rose to close the week at 1256.704, up from a 28-month low of 1,244.86 a week earlier. The rise came following steep falls earlier in the week and after the exchange introduced new regulations which brought praise from the market, raising from 10% to 20% the maximum amount a stock can gain per day.

BUSINESS BRIEFS

MACROECONOMY

House approves macro assumptions for 2009

The House of Representatives on Thursday approved macroeconomic assumptions for use in calculating the 2009 state budget, Dow Jones reported.

"We have agreed with the government that economic growth (will be assumed at) 6% and inflation at 6.2% for the purpose of calculating the budget,” House budget committee chairman Emir Moeis told reporters.

Other inputs that will be used as average assumptions are: a dollar value of Rp9,400; a yield of 7.5% on Bank Indonesia's short-term SBI notes; $80 a barrel for Indonesia's crude oil benchmark; oil production at 960,000 barrels a day; and natural-gas extraction of 7,526.3 million standard cubic feet a day.

Gross domestic product (GDP) is forecast at Rp5,328 trillion and the deficit at 1% of GDP, while fuel subsidies are assumed to cost the state Rp57,605 billion and electricity subsidies Rp45,963.7 billion.

The Finance Ministry and House update macroeconomic assumptions continually through the year.

Indonesia doesn't issue macroeconomic forecasts, and the assumptions constitute de facto predictions.

BI to consider US Fed move for rate policy

Bank Indonesia (BI) will take into account the US Federal Reserve's rate cut when it meets next week, deputy governor Hartadi Sarwono said Thursday, Dow Jones reported.

Bank Indonesia's next rate-setting meeting is on Thursday, following the release of inflation figures for October on Monday.

Analysts are split on the outcome of the meeting, with several expecting the key rate to stay flat at 9.50%. Others tip a 25-basis point increase as a likely step to help the embattled rupiah.

The rupiah fell to its lowest level since July 2001 earlier this week due to heightened global risk aversion.

Govt. lowers 2009 agricultural growth target

The Agriculture Ministry has lowered the growth target for the agricultural sector for 2009 to 4.2% from 4.6% as the exports of a number of farm commodities decline due to the current global financial crisis.

“Although demand for a number of farm commodities has been in decline, we feel it will not be a significant drop because commodities such as coffee, tea, cocoa, crude palm oil and rubber will constantly be in demand,” Agriculture Minister Anton Apriyantono said on Wednesday.

"Cooking oil, tea, and coffee will always be needed," he said, adding he was optimistic that the agricultural sector’s growth rate for 2008 would meet the government’s target of 4.2%.

INVESTMENT

Riau Islands to cut red tape

The Batam, Bintan and Karimun (BBK) Special Economic Zone Commission has ensured speedy licensing procedures free from illegal levies in a bid to attract foreign investors impacted by the global financial crisis, The Jakarta Post reported.

"We have cut the long and costly bureaucratic red tape and there won't be illegal levies demanded from officers in the field because we have provided them with proper incentives, besides monthly salaries," said head of the commission, Ismeth Abdullah, who is also Riau Islands governor.

Investors, Abdullah said, can file a complaint to the commission if licensing procedures exceed the fixed time limits and receive incentives, such as facilities in the next licensing procedures.

He said the competitive position of the area would remain advantageous, given the far higher production costs in neighboring countries such as Vietnam, Malaysia, Thailand and China.

Total investments in the Riau Islands are currently valued at $10 billion, with Singapore having the lion's share at $4 billion, followed by the US at $1.5 billion.

The BBK Zone Commission has projected further foreign investments of $5 billion over the next five years.

Samsung to build factory in W. Java: Official

Leading electronic manufacturer PT Samsung Electronics Indonesia is planning to build a factory to produce video cameras and cellular phones in Cikarang, Bekasi, West Java next year, an official said on Friday, Kontan reported.

“The investment is worth around $50 million to $100 million,” said Trade Ministry official Ramon Bangun, adding the products will be sold both locally and for export.

According to Bangun, the factory is planned to capitalize on the growing demand for electronics and especially cellular phones in Indonesia. “Indonesia’s market is promising because of its large population,” he said.

Bangun added that Samsung conveyed the plan last week during a visit to the ministry.

PT Samsung Electronics Indonesia senior marketing manager Didi Rahardja confirmed the plan but said it is still in a “study phase”.

S. Korean retailer to buy Makro stake

South Korea's Lotte Shopping Co Ltd said on Thursday it will buy a 55% stake in PT Makro Indonesia for $155.4 million, Reuters reported.

Lotte also said in a disclosure that its units in Singapore and Japan will buy the remaining 45% of the Indonesian retailer, but did not reveal the value.

ECONOMIC REFORM

Govt. introduces new measures to meet crisis

The government and central bank on Tuesday unveiled a series of measures to bolster foreign exchange reserves and market confidence as the rupiah hit a seven-year low of Rp11,900 against the US dollar, The Jakarta Post reported.

New policies to bolster reserves are:

• State-owned enterprises must place foreign currency reserves in domestic banks and regularly report foreign currency needs

• Acceleration of dollar-funded development projects

• State firms must not move funds among banks for higher gain

• Government and BI to buy back government bonds (SUN)

• If needed, exercise currency swap agreements

• Make state budget more adaptable to changes

• Prevent illegal imports by limiting imports of garments, electronics, food and beverages, toys, shoes

• Eliminate export duty on CPO and provide LCs

• Set up inter-ministerial team to monitor flow of goods

Finance Minister Sri Mulyani Indrawati said, if needed, the government might draw on currency-swap agreements with central banks in China, Japan and South Korea.

Treasury Director General Rahmat Waluyanto added that the ministry is likely to buy back rupiah government bonds on Thursday as part of the measures.

The measures helped restore confidence, and with an improved mood in regional markets, the Indonesia Stock Exchange’s composite Index rose to close the week at 1256.704.

The upswing was also influenced by the exchange’s move to raise from 10% to 20% the maximum amount a stock can gain per day. The downward limit was maintained at 10%.

"Foreign funds dominated the trade as downside risk now is likely lower and more manageable," a trader with Trimegah Securities told Dow Jones Newswires.

At the close of business on Friday, the rupiah was trading at 11,000 to the dollar, down from 10,800 the previous day.

The rupiah had rebounded from a seven-and-a-half-year low on Tuesday after President Susilo Bambang Yudhoyono told reporters that the government was preparing the policies intended to help the rupiah, hit by a retreat of foreign investors amid the global financial crisis.

Yudhoyono's pledge helped the currency cut its losses even before details of the support package were released.

An economist with PT Bank Central Asia David E. Sumual said the rupiah gains were in line with a region-wide reversal of the trend against the dollar.

On Thursday, the Finance Ministry bought back Rp41 billion ($3.89 million) worth of government bonds (SUN) via an auction as part of the measures to stabilize debt prices.

Treasury Director General Waluyanto said the ministry received a total of Rp1.25 trillion worth of selling offers from bondholders, Reuters reported.

The government had said on Monday it was ready to carry out its share buy-back program at the IDX through the Government Investment Center (PIP), Antara reported.

"The funds available at the PIP amount to Rp4 trillion, of which Rp2.5 trillion is managed by the PIP itself while the remaining Rp1.5 trillion is managed by asset management company PT Perusahaan Pengelolaan Aset," said Said Didu, secretary at the Ministry for National Development and Planning.

The funds with PPI are reserve funds for infrastructure development, he added.

PIP director Langgeng Subur said PIP had appointed security firm PT Danareksa as a buy-back broker for state-owned enterprises, Kontan reported.

Decree inked to help firms avoid mass layoffs

A joint ministerial decree limiting wage rises is expected to help labor-intensive manufacturing companies weather the impact of the global economic slowdown and prevent massive layoffs, stakeholders say, The Jakarta Post reported.

Chairman of the Indonesian Employers Association (Apindo) Sofjan Wanandi said the decree was expected to discourage local administrations from raising regional minimum wages beyond the capabilities of manufacturing firms.

"We are hoping local administrations can help the manufacturing firms cope with the global economic slowdown by not issuing policies that may burden the sector," he said.

Manpower and Transmigration Minister Erman Suparno, Trade Minister Mari Pangestu, Industry Minister Fahmi Idris and Home Affairs Minister Mardiyanto on Friday inked the joint decree, which also stipulates other efforts designed to empower the local economy against fallout from the global crisis.

Idris said the decree would not forbid wage increases agreed during negotiations between companies and workers.

Existing regulations emphasize the role of local administrations in determining adjustments to the minimum wage, meaning companies are not at liberty to set the mark based on their financial capabilities.

Wanandi said the new decree had been prompted by fears raised by business communities that certain local administrations were planning to increase minimum wages by up to 30%.

"It would be best if companies could directly negotiate with workers to set the wage because not all companies have similar performances. In a booming sector, I believe they could pay the workers more," he said.

STATE CONCERNS

Govt. to increase acreage for rubber replanting

The government will increase acreage under a rubber replanting program to 55,000 hectares in 2009, up from an average 50,000 hectares at present, a senior industry official said Friday, Dow Jones reported.

Indonesia's natural rubber output is expected to hit 2.75 million tons in 2008, but will only increase by around 1% in 2009 as a result of the replantings, said Suharto Honggokusumo, executive director of the Rubber Association of Indonesia.

Indonesia, which is currently the world's second biggest rubber producer behind Thailand, embarked on a major program in 2007 to replant 250,000 hectares of rubber plantations by 2011.

The program is funded by a lower-interest loan scheme, whereby farmers can borrow Rp19 million per hectare over a four-year period and pay 10% interest compared with the normal 14%, Suharto said.

Meanwhile, three top natural rubber producers, Thailand, Indonesia and Malaysia, have agreed to slash production by 210,000 metric tons next year by cutting down 169,000 hectares of rubber trees, The Bangkok Post reported Thursday. Old rubber trees in 55,000 hectares in Indonesia will be cut down, the report said.

Luckchai Kittipol, president of the Thai Rubber Association and International Rubber Consortium (IRCo) board member, said after a meeting between the three producers Wednesday that the countries will also reduce tapping by one-third of current operations to slow output and help boost rubber prices.

Abdul Rasip Latiff, chief executive officer of IRCo, was quoted as saying the agreements need endorsements from the governments of the three countries.

An Indonesian Rubber Association official said on Thursday that Indonesian exporters have cancelled shipments of up to 80,000 tons of rubbers after Chinese buyers failed to pay up because prices dropped.

Malaysia's Minister for Plantation Industries and Commodities said he plans to visit Indonesia this week to discuss measures that could be jointly taken by the two countries to stabilize palm oil and rubber prices.

"I will be visiting Jakarta and discuss with my counterpart there the coordination on issues relating to stock management (of palm oil) and developing alternative fuels," Peter Chin said Wednesday.

Chin said greater use of palm oil to make biofuels can help reduce stocks.

S. Korean tourist arrivals to Bali increase

The number of South Korean tourists visiting Bali has increased significantly, a Balinese businessman said on Friday, Antara reported.

During January-August 2008, around 88,848 South Korean nationals visited Bali, placing South Korea in fourth rank of foreign tourists visiting Bali, said Anak Agung Gede Agung, a hotel and travel bureau owner in Bali.

During January-August 2008, Bali received a total of 1.2 million foreign tourists, an increase of 20% from around one million visitors last year, he said

This year, Japan was the top source of visitors to Bali with 243,795 tourists, an increase from 231,555 last year, Agung said. Australia is second with 194,111.

Taiwan is third with 94,477 tourists, a drop of 7% from last year's 101,591. China is fifth with 84,106 visitors.

SOEs

Garuda may delay IPO plan on credit crunch

National flag carrier PT Garuda Indonesia may delay a plan to sell shares in an initial public offering next year because of the global credit crunch, Bloomberg reported.

“Given this financial crisis, I guess we will have to wait,'' Garuda executive vice president for finance Eddy Purwanto said in an interview in Singapore Friday. ``We'll see what happens 12 months from now.''

Garuda previously said it plans to raise Rp4.2trillion ($387 million) in an initial share sale to repay

debt and fund expansion of its fleet to replace aging aircraft.

Garuda has secured financing for 11 out of 25 Boeing Co. 737 it ordered and is seeking funding for the remainder. The purchase will be facilitated by sale and lease back agreements, Purwanto said.

The new aircraft may also help the carrier convince European regulators to lift a ban on Indonesian carriers after a number of crashes in the country.

The carrier, which this year ordered 10 Boeing 777s to start US and Europe services, is now reviewing the possibility of re- entering those markets because of the slowdown, Purwanto said.

Telkom Q3 net profit drops 18%

State owned telecommunication company PT Telkom showed an 18% fall in third-quarter net profit due to higher operating and maintenance expenses, Reuters reported.

Telkom's net profit for the July-September period was Rp2.62 trillion ($246 million), compared to Rp3.19 trillion a year ago, according to Reuters' calculations based on the firm's published nine-month and first-half results.

Third-quarter revenue fell 4.75% to Rp14.4 trillion, based on Reuters' calculations.

Analysts polled by Reuters Estimates before the results were released expected Telkom to report full-year net profit of Rp12.97 trillion, up slightly from Rp12.86 trillion in 2007.

Telkom, which is the largest capitalized company on the Indonesia Stock Exchange, said nine-month net profit fell 9.16% to Rp8.92 trillion.

Telkom's mobile phone unit PT Telkomsel on Friday reported a 36% rise in the number of mobile phone subscribers to 60.5 million.

PRIVATE SECTOR

Bakrie Group sells Bumi Stake for $1.3B

Bakrie & Brothers said on Saturday it has agreed to sell a 35% stake in coal miner PT Bumi Resources for $1.3 billion to investment group Northstar, Reuters reported.

Bakrie & Brothers, a holding company with interests in energy, property and telecoms, has been struggling to raise $1.2 billion to repay short-term debt.

Northstar Pacific is run by Indonesian banker Patrick Walujo, a former Goldman Sachs banker, and has a joint venture with US buyout firm TPG Capital. Bakrie officials declined to say whether Northstar was the sole buyer, or was leading a consortium of other firms.

Trading in the shares of Bakrie & Brothers, Bumi Resources, and Energi Mega Persada has been suspended since October 7, pending a resolution of the group's ability to repay its debt, due next April.

Astra posts slowest profit growth in six quarters

PT Astra International, Indonesia's biggest publicly traded company by sales, posted its slowest profit growth in six quarters as the rising cost of raw materials outpaced gains in the sales of cars, motorcycles and palm oil, Bloomberg reported.

Net income rose 34% to Rp62 trillion ($238.7 million) from Rp95 trillion a year earlier. The figures were derived by subtracting first-half earnings from nine-month results released on Friday. Sales rose 44.5% to Rp27.5 trillion in the period.

A 50% gain in costs, the biggest jump in more than three years driven by more expensive steel and aluminum, held back earnings growth at the company. A global tightening of credit and a rise in local auto loan rates are cutting demand for vehicles in the country.

“The market will be more challenging amid tightening liquidity,” president director Michael D. Ruslim said Friday in a statement. “Still, the company is financially resilient and is in a strong position to take advantage of any opportunity.”

Astra's cost of goods sold increased to Rp21.51 trillion in the three months to September 30, from Rp14.39 trillion a year earlier. That's the fastest pace since the first quarter of 2005.

For the nine-month period, net income climbed 61% to Rp7.37 trillion, the company said in a statement to the Indonesia Stock Exchange. Sales gained 45% to Rp73.77 trillion.

Holcim posts 257% profit increase

Cement producer Holcim Indonesia reported a 257% rise in profits in the third quarter of 2008, according to a press release from the company on Thursday, Tempo Interaktif reported.

Holcim’s profit increased to Rp547 billion on sales during the first nine months of 2008. Sales rose 26% from Rp2.72 trillion to Rp3.444 trillion, the company said.

Holcim said it is focusing on the domestic market which has resulted in a 33% decrease in export volume but produced better margins, the company said.

Sales volumes, according to Holcim, were down to 5.10 million tons in the third quarter of 2008 compared to 5.15 million tons in the same period last year.

The company's gross profit also increased as it managed to minimize costs. Operational profits also increased from 13.5% to 20.9%.

Unilever 9-month net profit up 30%

PT Unilever Indonesia, the local unit of Anglo-Dutch conglomerate Unilever Plc, reported a 30% rise in its nine-month net profit on Tuesday, thanks to strong sales and a one-off gain, Reuters reported.

Unilever -- which produces various consumer products such as soap, detergents, dairy-based foods and cosmetics -- said its net profit for January-September rose to Rp2.05 trillion ($190.7 million) from Rp1.58 trillion in the year-ago period.

Sales climbed 22.4% to Rp11.76 trillion from Rp9.60 trillion a year earlier. The firm also reported a one-off gain of nearly Rp30 billion.

Unilever, which has a market capitalization of $5.2 billion, saw its operating margin edging up to nearly 25% as of September from around 23% in the same period of 2007, as its operating income rose nearly 29% to Rp2.88 trillion.

The firm's 2008 profit is forecast at Rp2.48 trillion and revenue at Rp15.14 trillion, according to analysts polled by Reuters Estimates.

Indocement Q3 net profit up 76%

Indonesia's second largest cement maker, PT Indocement Tunggal Prakarsa , reported on Friday a 76% rise in net profit, Reuters reported.

The company, owned by HeidelbergCement AG, said its January-September net income jumped to Rp1.23 trillion from Rp699.5 billion in the year-ago period. Its sales revenue rose 36.6% to Rp7.25 trillion.

The financial statement published on the company’s website shows the company recorded lower interest charges which were believed to be the reason for the improvement in its net income.

It also reported a foreign exchange gain of Rp14.9 billion compared to a loss of Rp10.9 billion in the previous year.

BANKS

BCA to acquire PT Bank UIB

PT Bank Central Asia (BCA) has agreed to acquire all the shares of PT Bank UIB at an estimated price of Rp242 billion ($25.4 million), Bisnis Indonesia reported.

The process of acquisition is expected to be completed early next year, BCA head of marketing communications Dendi T Daninato said.

Daninato said the sale and purchase agreement was signed on October 24, adding UIB will be converted into a shariah bank a year after the acquisition is completed.

He said BCA shareholders will sanction the acquisition at a general meeting held early next year.

BCA, Indonesia's largest private bank, reported Rp105 trillion ($9.87 billion) in outstanding credits in September, exceeding its target of Rp100 trillion by the end of this year.

BCA also reported Rp4 trillion in net profit in the period from January to September, a 19% rise from the same period last year of Rp3.36 trillion, according to Detikcom.

The rise in net profit was supported by net interest income which increased by 20.6% to Rp8.553 trillion from Rp7.093 trillion a year ago and fee-based income which increased by 25.6% to Rp2.6 trillion.

BTN posts 167% rise in Q3 profit

State saving bank PT Bank Tabungan Negara (BTN) reported a 167% rise in net profit to Rp316.3 billion ($33 million) in the third quarter, Antara reported.

The surge in net profit came with a 164% increase in net interest income to Rp1.5 trillion with total outstanding credit rising 44.6% to Rp30.07 trillion, Latanro said.

Bank Mandiri Q3 net profit up

Indonesia's largest lender, PT Bank Mandiri, on Thursday reported a 24.4% rise in nine-month net profit while PT Bank Negara Indonesia (BNI) said net profit for January-September fell 47% because of higher provisions for bad debts, Reuters reported.

Mandiri posted a net profit of Rp3.96 trillion ($375 million) for the January-September period, compared with Rp3.18 trillion a year ago. Net interest income climbed 13.7% to Rp11 trillion.

Mandiri's vice president director, Wayan Agus Mertayasa, told a news conference that the bank's strong franchise could help the state lender to weather the tough market conditions.

Bank BNI Q3 performance falls

PT Bank BNI reported nine-month net profit of Rp832 billion, down from Rp1.56 trillion, despite a 33% rise in its net interest income to Rp7.16 trillion, Reuters reported.

"Going forward, things will be tough. The provisions that we have are like a shock-absorber for the bank because the road that we will pass ahead is an off-road track," Gatot Suwondo, president director of BNI, told a news conference on Thursday.

BII 9-month net profit down 11%

Indonesia's sixth-largest lender, PT Bank Internasional Indonesia (BII), on Tuesday reported a 10.7% decline in its nine-month net profit partly due to weaker consumer spending, Reuters reported.

The bank, recently acquired by Malaysia's Maybank, posted a net profit of Rp392 billion ($35.96 million) in January-September, down from Rp439 billion a year ago while its net interest income rose 12% to Rp2.1 trillion.

On September 30, Maybank sealed a long-awaited purchase of a controlling stake in BII, paying $1.19 billion to Fullerton Financial Holdings, a unit of Singapore's Temasek , and South Korea's Kookmin Bank.

BII said it is looking forward to working with its new majority shareholder.

"We are already building our remittance business by using Maybank's extensive domestic network to assist overseas Indonesian workers to remit funds home via BII," BII president director Henry Ho said.

BRI Q3 net profit up 17%

Indonesia's third-largest lender, PT Bank Rakyat Indonesia, reported on Friday a 17% rise in its nine-month net profit helped by strong loan growth and higher fee based income, according to Reuters.

The state bank's net profit for January-September rose to Rp4.24 trillion ($398.1 million) compared to Rp3.62 trillion a year ago.

Its net interest income rose by 18.7% to Rp14.7 trillion.

Bank Permata Q3 net profit up 3.4%

Bank Permata said on Thursday its net profit in the third quarter of 2008 rose 3.4% to Rp389.9 billion from the same period last year, Antara reported.

The increase in net profit was driven by strong credit growth and good performance, Bank Permata president director Stewart D Hall said.

Capital adequacy ratio (CAR) reached 11.2%, well above Bank Indonesia’s minimum requirement of 8%, Hall said.

The amount of loans extended as of the end of September 2008 recorded growth of 37% to Rp33.7 trillion from a year earlier thanks to the bank’s efforts to optimize its intermediary function to support the Indonesian economy, he said.

The bank’s non-performing loans (NPLs) in the nine-month period ended on September 30 fell to 0.7% from 2.2% a year earlier, he said.

Third party funds as of September 2008 rose 27% to Rp37.3 trillion from a year earlier.

POWER

PLN operates first CPO-fueled power plant

State power company PT PLN has reportedly started operations of a power plant fueled by crude palm oil (CPO) following a government regulation mandating the use of biofuel in all sectors, Xinhua reported.

PLN director Murtaqi Syamsuddin said the power plant, with a capacity of 10 MW, is located in Dumai, Riau.

"This is a pilot project. The power plant is operational but it is still at the commissioning stage," Murtaqi said.

The power plant was initially fueled with diesel oil but was later converted to CPO) by installing converter equipment at the plant.

Germany’s Neue Maschinenbau Halberstadt director for marketing and sales, Franz J. Komischke, said the investment to convert the diesel-fueled power plant into a CPO-fueled power plant cost between Rp22 billion ($1.9 million) and Rp29 billion ($2.5 million).

OIL & GAS

Govt. awards more oil and gas exploration rights

The government has awarded more oil and gas exploration rights on nine blocks to energy companies, Reuters reported on Friday.

Energy and Mineral Resources Minister Purnomo Yusgiantoro said the companies awarded exploration rights will spend about $465 million for the first three years.

"There are potential oil and gas reserves at those blocks but we have to wait until the companies explore the wells there before we know the amount of reserves," Yusgiantoro said.

ExxonMobil and Japan’s Inpex Corp, Japan's biggest explorer, pledged a total investment

of at least $44.5 million over the next three years on the new blocks, The Jakarta Post reported.

Exxon, through its subsidiary Esso Exploration Int. Ltd, won the rights to explore the Gunting block, which sits both offshore and onshore East Java. For the first three years of exploration, it is committed to invest $17 million.

Inpex won exploration rights in the Semai II block off West Papua. With partners Consortia Murphy Overseas Ventures Inc of the US and Thailand’s PTT EP it will invest $127.5 million in the first three years.

The government has been offering new exploration rights and financial incentives for exploration in a bid to stem its steady production decline.

Evita Legowo, a director general at the ministry, said US firm Hess was awarded Semai V block, an offshore block west of Papua province.

"Many companies bid for Semai V but Hess gave better terms for exploration," Legowo told reporters.

Legowo said the government awarded Mahakam Hilir block onshore of East Kalimantan to Singapore Petroleum.

Five other blocks were awarded to little-known domestic and foreign companies.

In October, the government awarded oil and gas exploration rights on 22 blocks to energy companies including Chevron Indonesia and Conoco Phillips.

Officials have said that Indonesia has 8.4 billion barrels of proven and potential oil reserves. Indonesia produced 846,300 barrels per day (bpd) of crude oil in October, down from 862,200 bpd in September.

Govt. to continue LNG supplies to China, S. Korea

The government will continue supplies of liquefied natural gas (LNG) to China and South Korea from the Tangguh plant in West Papua despite ongoing negotiations over prices, the energy minister said Tuesday, Agence France-Presse reported.

"The gas delivery will be on schedule even though negotiations are still ongoing," Energy and Mineral Resources Minister Purnomo Yusgiantoro told reporters.

The government secured a 25-year contract with China in 2002 to supply Fujian province with 2.6 million tons of LNG per year from Tangguh. The contract is worth $8.5 billion and comes into force in 2009, when operations are expected to begin.

The government also has a deal to sell 600,000 to 800,000 tons a year to South Korea's K-Power at $3.50 per million British thermal units (mmbtu) for 20 years, and 550,000 tons a year to Posco at $3.36 per mmbtu for an equal number of years.

The government announced earlier this year it was seeking to increase the price of LNG from Tangguh plant in order to cash in on high oil prices.

Medco expects lower income after contract expires

Oil mining company PT Medco Energi International expects a decline in its income this year after losing the potential production of 4,456 barrels of oil per day and 1.08 million cubic feet of gas per day, Medco’s planning director Larry Luckey said, Antara reported.

Luckey said Medco suffered the potential oil and gas production losses after its technical assistance contract (TAC) expired and the Tarakan oil and gas block management in East Kalimantan was transferred to PT Pertamina EP.

All three fields in the Tarakan, Samboja and Sanga-Sanga in East Kalimantan owned by Pertamina have been operated by Medco since 1992 under a technical assistance contract. Medco re-tendered for the contract earlier this year, but was unable to agree on the commercial terms before the contract expired.

"The company has transferred all liabilities and responsibilities for the areas to Pertamina," the company said. Pertamina is now operating the fields.

He said up to the middle of 2008 the TAC block had an average production of 4,500 barrels per day but during the period it had not yet produced any gas.

PGN net profit up 57%

State-owned gas distributor company PT PGN`s net profit increased by 57% to Rp2.04 trillion in the first nine months of this year, said PGN corporate secretary Heri Yusuf, Antara reported.

The increase was fueled by a sales increase of 47% to Rp9.02 trillion, Yusuf said.

"The sales volumes up to the end of September rose 41.04% to 565.83 mmscfd as compared to the same period in the previous year," Yusuf said in a press statement on Friday.

The sales increase was driven by the rise in the volumes of gas supplies and sales after the completion of the South Sumatra-West Java Natural Gas Transmission Pipeline network project.

MINING

PT Timah sees tin output down by up to 10%

Tin output from PT Timah, the world's biggest integrated tin miner, may be between 4-10% lower than initial targets due to falling prices, the company said on Thursday, Reuters reported.

"Supply from onshore mining is tight because many miners that supply tin ore have stopped operating because of low tin prices," Timah's corporate secretary Abrun Abubakar said, adding that wet weather also has hampered mining activity.

The firm may produce between 45,000-48,000 tons of refined tin this year, below the initial target of 50,000 tons, Abubakar said.

Prices for tin have fallen 40% below an all-time high of $25,500 a ton hit in May along with other metals due to concerns over a global recession. On Thursday, tin for delivery in three months on the London Metal Exchange cost $15,400 a ton.

Last week, the Bangka Belitung Islands regional government called on small tin miners to stop production temporarily until prices have recovered. PT Timah and PT Koba Tin, 75% owned by Malaysian Smelting Corporation Bhd, were asked to reduce output to a level required to meet contract agreements.

"We are sticking to our commitment with buyers. If we have a commitment, we will deliver the tin," said corporate secretary Abubakar, adding the company has contracts to sell 42,000 tons of refined tin this year.

Tin exports from Indonesia have begun recovering in the past few months after slowing down following a government clampdown on illegal mining in October 2006 in the Bangka Belitung Islands.

Indonesia exported an estimated 75,535.05 tons of refined tin in the January-September period this year. There's no comparison for the same period last year, but Indonesia exported 78,744 tons of refined tin in 2007.

PT Inco Q3 nickel output below target

PT International Nickel Indonesia (PT Inco) said Monday it produced 19,100 metric tons of nickel-in-matte during the third quarter, slightly below target because of an earlier-than-planned maintenance shutdown of an electric furnace, Dow Jones reported.

PT Inco, majority owned by Brazilian mining giant Companhia Vale do Rio Doce (Rio), is targeting output of 77,000 tons to 79,000 tons for this year, and nickel-in-matte production during the first nine months of the year totaled 56,200 tons, down 3.3% on the same period last year.

"It is anticipated that this decision will result in decreased annual production on a go-forward basis, perhaps by as much as 20%," PT Inco said in a statement.

The maintenance shutdown for one of PT Inco's furnaces was originally planned for the fourth quarter this year.

Vale's chief executive Roger Agneli said Friday it would cut output at its Indonesian operations by about 20% and in China by 65%.

Vale owns 60.8% stake in PT Inco, and Japan's Sumitomo Metal Mining Co. holds 20.1%.

===***===

-----------------------

[1] This Trade and Investment News is a publication of the Coordinating Ministry for Economic Affairs of the Republic of Indonesia. Readers are welcomed to forward it in its original form but no reproduction is allowed without permission

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download