4e2204e7a38b446ca6b4e7b9db345db4TradeInvNews2March2009.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], 2 March 2009

Highlights

National

• Economic crisis to produce more unemployed graduates

Politics

• Emergency presidential regulation issued to smooth elections

Terrorism

• Escaped Singapore detainee Mas Selamat Kastari still on run, authorities say

Security

• Papua police in hunt for suspected separatist shooter

• Peacemaker warns of fragile peace process in Aceh

Law & order

• AGO shifts graft-tainted officials from new posts

Health

Economy

• US bond issue heavily over-subscribed

• Bank Indonesia governor says swap-arrangements ‘ammunition’ to protect currency

Business briefs

Macroeconomy

• Stimulus package approved, to come into immediate effect

• Forex reserves adequate to cover all corporate offshore debts

Reform

• Infrastructure finance company established

Investment

• Foreign investment up 61% in January, investment agency says

State concerns

• Malaysia, Indonesia to cooperate on commodity prices

SOEs

• PT Telkom to repay Rp6.8 trillion in debt during 2009

Private sector

• PT Indosat profit down 7.8% in 2008

• PT Astra International 2008 net profit up 41%

Banks

• Credit disbursement to grow by 15.6% in 2009, says central bank

• Bank Danamon to launch rights issue in April

Power

• PT Pertamina geothermal unit to invest $130 million in projects

Oil & gas

• Government expects higher investment as rigs become available

Mining

• Implementing regulations for new mining law expected by July

NATIONAL

More unemployed graduates expected this year: Ministry

The number of unemployed university graduates has risen steadily since 2004, peaking at 1.15 million people in February 2008, data released by the Ministry of National Education showed, The Jakarta Globe reported.

The picture is expected to worsen as the global economic crisis fully impacts Indonesia.

The figures show that in 2004, 585,358 graduates with either bachelor or associate degrees were listed as unemployed.

That figure inched upwards throughout 2005 and 2006 but rose rapidly in 2007 before hitting 1.15 million unemployed graduates in February 2008. That figure dropped to 961,000 in August that year when companies traditionally hire graduates.

Currently, an estimated 4.3 million students are studying at 2,800 private and 82 state universities. Each year about 300,000 students graduate, again mainly in August. The figures exclude Islamic universities.

Director General of Higher Education Fasli Jalal said many factors contributed to the sorry statistics, including the quality of university courses, economic conditions and a lack of creativity on the behalf of students themselves to find jobs.

“We are now having a closer look at the problem, and have conducted discussions to solve it,” he said.

POLITICS

Emergency presidential regulation issued

President Susilo Bambang Yudhoyono issued a government regulation in lieu of law (perpu) on Thursday for the upcoming legislative and presidential elections, The Jakarta Globe reported.

Before his departure for the ASEAN summit in Thailand on Thursday, Yudhoyono issued a perpu to allow the General Elections Commission (KPU) to amend flawed voter registration lists and to clarify the method for marking ballot papers during voting.

He did not, however, issue a regulation to support a Constitutional Court ruling striking down an article in the Election Law under which the number of votes is divided into the number of legislative seats in a given electoral district — known as a quota — rather than a majority-vote system.

The much-maligned KPU, which faces a daily barrage of criticism over botched preparations for the national polls, has been pushing the government to issue a perpu to strengthen the ruling, even though the Constitutional Court says one is not needed.

The KPU on Thursday also rejected demands by Christian groups to change the date of the April 9 national elections in East Nusa Tenggara province because it falls in the middle of the Christian holy week.

“We’re not going to change the election date in East Nusa Tenggara,” said Anshary. “If we delay the election date, it will influence the schedule for the presidential election in July.”

TERRORISM

JI leader still on the run, say regional security officials

When he was on the run, Mas Selamat Kastari could not resist getting in touch with his old networks. This weakness led to his arrest twice previously, a senior Indonesian police official told The Straits Times.

The official, involved in Jemaah Islamiah (JI) investigations and the hunt for the fugitive terrorist in his country, believes that the JI leader is not dead but on the run.

“So far, we have no information that he has got in touch with the known elements of the network after his escape,” said the official, who spoke on condition of anonymity.

“It is not clear if he got in touch with the other elements who are on the run or still unknown.'”

Kastari’s escape from detention a year ago sent alarm bells ringing in counter-terrorism circles in Southeast Asia. One of his earlier plans had been to hijack a commercial airliner in Bangkok and crash it into Singapore's Changi Airport.

SECURITY

Papua Police hunt alleged separatist shooter

Armed violence erupted again in Papua on Friday, leaving one man injured after a shooting blamed on the separatist Free Papua Organization (OPM), National Police spokesman Insp. Gen. Abubakar Nataprawira said, The Jakarta Globe reported.

Nataprawira said intelligence officers from Puncak Jaya sub-district police, along with nine Mobile Brigade officers from the provincial police, were currently in pursuit of the perpetrator.

“The shooter shot twice, first hitting a man and the second shot hitting an oil drum in a car,” Nataprawira said.

He said another man sitting in the back of a pickup truck was injured by a shot that grazed his forehead while crossing a bridge at the Kurage River in Puncak Jaya district.

“The suspect fled to the mountains after the shooting,” Nataprawira said, adding the incident was typical of separatist tactics.

In January, a group of 20 people believed to be members of the outlawed OPM attacked the Tingginambut Police station, also in Puncak Jaya district.

The group was armed with SS-1 assault rifles and stabbed the wife of an officer who happened to be at the station.

Police then shot dead two suspected group members, Yendedak Wenda Muli and Yembinas Murib, during a police patrol.

The two men were carrying guns when they ambushed the patrolling officers along with several other armed men.

Military officials in the area suspect that the attackers belonged to a group of OPM members led by Goliath Tabuni, the alleged leader of OPM in the area.

Peacemaker warns of fragile Aceh

The fragile peace in Aceh could unravel as tensions mount ahead of landmark elections, Nobel Peace Prize laureate Martti Ahtisaari warned Wednesday, Agence France-Presse reported.

The former Finnish president who helped negotiate the 2005 Helsinki agreement that ended Aceh's 30-year separatist conflict said crucial elements of the pact had still not been implemented.

He called for foreign monitors to observe the April 9 parliamentary elections amid rising political and criminal violence targeting politicians in the province.

"Much work remains to be done in developing a national system that protects, sustains and improves the quality of life in Aceh," he told about 200 delegates at the closing of a regional conference on conflict resolution late Tuesday.

"There are key challenges to be addressed if peace is to endure," he added, citing a World Bank study showing that countries that have emerged from civil war have a 50% chance of relapsing into conflict after five years.

Speaking to reporters on Wednesday, he said justice was the cornerstone of peace and the province needed a human rights court and a truth and reconciliation commission as required under the Helsinki agreement.

Ahtisaari, who met President Susilo Bambang Yudhoyono in Jakarta on Monday, also said parties contending the elections must show "extreme restraint" in the face of provocations and intimidation.

LAW & ORDER

AGO drops graft-tainted officials from new posts

The Attorney General's Office (AGO) decided on Wednesday to remove two officials, Kemas Yahya Rahman and Muhammad Salim, from their new posts as corruption investigation supervisors, in a bid to quell public criticism of their appointments, The Jakarta Post reported.

Marwan Effendi, deputy attorney general for special crimes, said the officials had been officially removed from their posts as of Wednesday morning.

“From now on, their duties and authority will fall under my supervision. I hope this will end the problems,” Effendi said.

Rahman and Salim were appointed on January 22 as coordinator and deputy coordinator of a special team on corruption.

The pair’s appointment had drawn criticism from anti-graft activists because they had previously been implicated in corruption cases and dismissed from previous posts.

ECONOMY

High demand for dollar bond issue

After a week in which the country’s first retail Islamic bond or sukuk was heavily over-subscribed, Indonesian appeared to have followed up with the sale of $3.0 billion in five- and 10-year dollar-denominated bonds, turning down orders for a further $4.25 billion.

The massive order book for the bonds provided an important psychological boost for the government as it seeks to fund its deficit, budgeted at 2.5% of GDP.

The sale involved $2 billion of 10-year bonds, with a yield of 11.75% and $1 billion of five-year bonds, with a yield of 10.5%, according to a Finance Ministry statement Friday cited by The Jakarta Post.

The yields are 8.759 percentage points and 8.474 points respectively, higher than similar-maturity US Treasuries, Bloomberg reported.

Anggito Abimanyu, the ministry’s head of fiscal policy, said the yields were within the government’s benchmark, while Director General of Debt Management Rahmat Waluyanto said the yields rose due to a “repricing of risk” pushed by global risk perceptions. He noted that Brazil had also been forced to pay a similar rate.

“We are maintaining investors’ confidence. They have a high enthusiasm, we don’t want to disappoint them,” he added.

Indonesia joins Brazil, Mexico and the Philippines in tapping international credit markets. “Countries are trying to tap debt markets as quickly as possible in case the situation deteriorates further in the second half,” said Paul Biszko, a senior emerging-markets strategist with RBC Capital Markets in Toronto. “It doesn’t surprise me that Indonesia is trying to issue.”

Before the bond sale was announced, Finance Minister Sri Mulyani Indrawati said the government would have to offer solid rates to attract buyers. “The price for dollar bonds will be high because people will only let go of their foreign currencies with the assurance that they will get a high price,” she said.

The success of the bond came as the House of Representatives approved a Rp73.3 trillion ($6.1 billion) stimulus package and endorsed the 2009 budget revisions.

Next in line to test international finance markets are a Samurai bond expected to raise a further $500 million and a global Shariah bond, Reuters reported.

Waluyanto said the Samurai bonds may be issued within three months. "It's part of our financing. It can be executed at any time, within three months at the earliest," he told reporters, adding that the issue would be “$500 million at the beginning, we're doing this one step at a time.”

On Monday, Indrawati said Indonesia might eventually issue up to $2.5 billion in yen-denominated Samurai bonds. The Japan Bank for International Cooperation will provide a guarantee worth $1.5 billion on the planned yen bond.

Waluyanto added that Indonesia's first global sukuk is still expected to be issued this year. The government raised Rp5.556 trillion ($463 million) from its first retail sukuk bond issue, well above the Rp1.7 trillion target announced by the selling agents.

Abimanyu said Friday that it made sense to tap the capital markets as early as possible in case conditions worsened and costs increased later on. "It's done in one go. It's done. This is because looking ahead, things are likely to get worse and the spread is likely to widen, which makes it more costly for the borrower,” he said.

The government plans to issue a total of Rp100 trillion ($8.35 billion) in debt this year.

Bank Indonesia (BI) Governor Boediono said Friday that Indonesia's loan and swap commitments have given 'ammunition' to the rupiah, while the high yield premiums on the dollar bond were in line with current market conditions, Dow Jones reported.

Boediono has repeatedly said that the government's $6 billion in bilateral and multilateral loans, and its expanded $12 billion swap deal with Japan, could provide dollar reserves for foreign exchange intervention by BI.

BUSINESS BRIEFS

MACROECONOMY

Stimulus package effective March 1: Minister

The government plans to start implementing the newly approved Rp73.3 trillion stimulus package on March 1 to tackle the looming impact of the global financial crisis, Finance Minister Sri Mulyani Indrawati said on Wednesday, Antara reported.

"Last night the House of Representatives approved the stimulus package. In the next five days, all the documents related to the program will be completed," Indrawati said at a state-owned companies’ executive breakfast meeting.

There was a minor change in the stimulus package, Indrawati said, as it had been raised by Rp2 trillion to Rp73.3 trillion from Rp71.3 trillion as proposed by the government previously.

The Rp73.3 trillion stimulus package consisted of taxation stimulus worth Rp56.3 trillion and state expenditure stimulus worth Rp17 trillion, she said.

The taxation stimulus consisted of reduced tax tariffs, government-borne value-added tax and import duties and incentives related to income tax under articles 21 and 25, she said.

The state expenditure stimulus meanwhile consisted of infrastructure expenditure worth Rp12.2 trillion and direct subsidies and energy subsidies worth Rp4.8 trillion, she said.

She said many countries had implemented stimulus programs as a cyclical counter policy because the global economic slowdown had affected the world including Indonesia.

The stimulus package is expected to increase the deficit to Rp139.5 trillion from Rp51.3 trillion previously or to 2.5% of the gross domestic product (GDP) from 1% of the GDP. “A stimulus package is about timing, targets and is temporary,” Indrawati said.

Forex reserve enough to meet corporate debts: BI

Bank Indonesia (BI) said it has enough funds to meet demand for foreign exchange to repay the country's maturing corporate debts of around $17.4 billion this year, Asia Pulse reported on Thursday.

The country has $51 billion in foreign exchange reserves, said Budi Mulya, a deputy governor of the central bank.

In addition, Indonesia could use financial support from the central banks of South Korea, Japan and China under bilateral swap arrangements valued at $18 billion, he said.

All the funds could be used to cope with worries over settling short-term debts, he was quoted as saying by Investor Daily.

ASEAN and the three East Asian countries have decided to increase a standby fund from $80 billion to $120 billion of which Indonesia could use up to 20%, he said.

He said the falling value of the rupiah was caused by external factors such as the negative sentiment of the US financial crisis.

REFORM

Govt. establishes infrastructure financing company

The government has established financing company PT Sarana Multi Infrastruktur (SMI) which will finance infrastructure projects, Asia Pulse reported on Friday.

SMI, which is expected to start operation in April, will provide financial support for projects especially ones failing to attract investors but considered having good prospects.

SMI will start with an initial capital of Rp1 trillion ($90 million) to be provided by the government, Bisnis Indonesia reported.

Farid Arif Wibowo, an official of the Fiscal Policy Agency of the Finance Ministry, said the government will issue bonds to increase the capital of SMI.

In the first phase the bond will be valued at Rp3 trillion, Wibowo said, adding up to Rp20 trillion more funds will be raised later from the market.

He said SMI will serve as a holding company, adding that the financing agent will be the Indonesia Infrastructure Financing Facility (IIFF), to be established by the government and donor consortiums.

The World Bank and Asian Development Bank have pledged a loan of Rp2 trillion for IIFF and Rp1 trillion in equity from other donor agencies, he said.

INVESTMENT

Foreign investment jumps 61% in January: BKPM

Foreign direct investment jumped 61% to Rp6.39 trillion ($536 million) in January from a year ago despite the global economic downturn, the Investment Coordinating Board (BKPM) said on Tuesday, Reuters reported.

BKPM head Muhammad Lutfi said the energy, infrastructure, agribusiness and agriculture sectors are the main areas expected to attract foreign investment this year.

Domestic investment rose by a third to Rp760 billion in January from a year ago, with total investment up 58% to Rp7.15 trillion.

Investment in Indonesia rose 15.5% to $17 billion in 2008, below the target of around $20 billion, reflecting the worsening global economic conditions.

Meanwhile, a total of 25 investors from Hong Kong are ready to make investments in the infrastructure, energy and food sectors in Indonesia, Lutfi said.

The plan to enter Indonesia was the subject of a memorandum of understanding between BKPM and Hong Kong and Shanghai Banking Corporation Limited (HSBC) signed on Tuesday, he said.

BKPM, he said, concluded an MoU on the investment intentions with the CEO of HSBC Indonesia, Rakesh Bhatia.

Hutchison to invest up to $1B in Indonesia

Hong Kong-based telecommunications company Hutchison Telecom International says it is committed to Indonesian and will invest up to $1 billion until 2010, Asia Pulse reported.

The statement came after reports that it would abandon projects in the country and was seeking buyers for its stake in PT Hutchison Telecom Indonesia, a joint venture with CP Group of Indonesia.

The report said Hutchison began to show frustration with business uncertainty in the country.

Suresh Reddy, chief commercial officer of Hutchison CP Telecommunications, said the report is unfounded.

A guarantee has been received from the shareholders in Hong Kong that Hutchison will maintain its telecommunications business in Indonesia, Reddy told Investor Daily.

STATE CONCERNS

Malaysia, Indonesia cooperate to boost commodity prices

Malaysia and Indonesia have agreed to work together to strengthen commodity prices, particularly palm oil and rubber prices, amid current sagging world prices, Antara reported.

Both countries in a joint statement released on Wednesday said they have also agreed to take appropriate measures to ensure stable prices in particular for palm oil.

"These measures include managing palm oil stocks and reducing supply through replanting programs," said the statement.

Malaysia and Indonesia jointly account for 85% of global palm oil production and 40% of natural rubber production.

For palm oil, the ministers have agreed to accelerate replanting of oil palm trees which are over 25 years old, implementation of biofuel programs, increasing domestic demand for crude palm oil and jointly engaging major importing countries of palm-based methyl ester to address non-tariff barriers for exports of biofuel.

Both ministers also want to exchange production and stock level data on a regular basis to facilitate stock management and promote palm oil through engaging the related legislators of importing countries.

As for rubber, both countries will accelerate replanting of rubber trees aimed at managing the supply of natural rubber.

Bulog plans to export 1M tons of rice in Q3

State logistics agency Bulog is planning to export 1 million tons of medium-type rice to the Philippines, Malaysia and East Timor in the third quarter this year, the agency chief said Wednesday, The Jakarta Post reported.

Bulog president director Mustafa Abubakar, however, added that the plan would only go ahead if the country achieves the goal of 40 million tons of rice production by around July and August.

“The Central Bureau of Statistics has predicted that the government will achieve 40 million tons of rice production in the third quarter,” he said.

Abubakar said that the 40 million tons in rice production would mean there would 3 to 4 tons of surplus in catering for national demand, so that the government could export 1 million tons of medium-type rice, which is currently sold at $400 per ton

Abubakar said Bulog would make sure there would be enough rice to cover the country's needs before making any exports.

“It's an election year. We will only export if it is really safe (to do so),” he told Tempo Interaktif.

Tourism revenue predicted to decline 10%

Earnings from the tourism sector are forecast to shrink 10% to $6.75 billion this year from $7.5 billion last year despite an expected increase in the number of visitors, an official from the Tourism and Culture Ministry said, Asia Pulse reported.

Last year, 6.4 million foreign tourists visited Indonesia and this year the number is predicted to increase to 6.5 million but with less spending, marketing development director Syamsul Lussa said.

Holidaymakers, who normally stay at five-star hotels, will likely choose to stay in three-star hotels as a result of the global financial crisis, Lussa said.

Marketing Director General Sapta Nirwandar said the opportunity is still open to attract more tourists although he agreed they might shun posh hotels and upmarket restaurants and save their money for sightseeing.

Growing airlines' direct flights to Bali are expected to contribute to increasing numbers of visitors, Nirwandar added, Bisnis Indonesia reported.

SOEs

Telkom to repay Rp6.8T in maturing debt

The country's largest telecommunications company PT Telkom said it is to repay debts totaling Rp6.8 trillion ($618 million) maturing this year, Asia Pulse reported.

The state company will use a mixture of its own funds and external funds to repay the debt, vice president Eddy Kurnia said, adding Telkom has never failed to meet its debt obligations.

Telkom also planned to issue bonds valued at Rp2 trillion this year, he said.

Based on its financial report for the first nine months of last year the company had debts totaling Rp12.93 trillion to a number of banks including Rp6.5 trillion maturing in a year and Rp6.43 trillion repayable in more than a year.

Its president Rinaldi Firmansyah said earlier the company had secured loan commitments from four local banks to refinance the debts, Investor Daily reported.

PRIVATE SECTOR

Indosat net profit down 7.8% in 2008

Indonesia's second-largest telecommunications firm, PT Indosat, reported on Thursday a 7.84% drop in its 2008 net profit amid higher operating expenses and declining average revenue from mobile users, Reuters reported.

Indosat's net profit dropped to Rp1.88 trillion ($157.6 million) in 2008, from Rp2.04 trillion a year earlier.

Its revenue rose 13% to Rp18.66 trillion, compared with analysts' forecasts of Rp18.65 trillion.

Qatar Telecommunications Co has a controlling stake in the company.

Astra International reports 2008 net profit up 41%

Indonesia's largest automotive distributor PT Astra International on Friday reported a 41% jump in 2008 net profit from a year ago, on the back of strong automotive sales, Reuters reported.

The company, controlled by Singapore's Jardine Cycle & Carriage Ltd , said its net profit climbed to Rp9.19 trillion ($766 million), from Rp6.52 trillion in 2007.

The firm also reported a 38% increase in its revenue to Rp97.06 trillion from a year ago.

Insurance industry premium income up 23%

The insurance industry recorded Rp79.1 trillion ($7.19 billion) in premium income in 2008, up 23% from Rp64.3 trillion in the previous year, Asia Pulse reported on Thursday.

Life insurance accounted for the bulk or Rp54 trillion of the income with general insurance contributing Rp24 trillion and reinsurance Rp1.1 trillion, the Capital Market and Financial Institution Supervisory Board (Bapepam-LK) said.

The figures did not include premium income recorded by semi commercial insurance companies like state-owned PT Jamsostek, PT Taspen, PT Askes and PT Jasa Raharja.

The industry was hardly affected by the global financial crisis, but it chooses to be more conservative in making predictions this year, said Isa Rachmatarwata, head of the insurance bureau of Bapepam-LK, according to Investor Daily.

This year the industry will not fare better than in 2008 amid the gloomy financial prospects, the association of general insurance said.

Matahari plans sukuk, conventional bonds

Retailer PT Matahari Putra Prima said on Wednesday it plans to raise a total of Rp500 billion ($42 million) from the sale of Islamic and conventional bonds in April, Reuters reported.

In a prospectus published in a newspaper, Matahari said it plans to sell Rp200 billion of ijarah sale-and-leaseback Islamic bonds (sukuk) and Rp300 billion rupiah of conventional bonds.

It has appointed PT HSBC Securities Indonesia, PT Indo Premier Securities, and PT Ciptadana Securities as underwriters.

BANKS

Credits to grow 15.6%: Central Bank

Credits are projected to grow 15.6% this year according to bank business plans, Bank Indonesia (BI) deputy governor Mulyaman D Hadad said at a meeting with Regional Representatives Council members on Monday, Antara reported.

He said credit growth is expected to support the country’s economic growth which is projected to drop to 4% to 5% from 6.1% last year.

According to BI, in December 2008 total bank credits reached Rp1,353.6 trillion with third-party funds reaching Rp1,939.2 trillion while the amount of bad credits reached Rp50.9 trillion or just 3.8%.

Hadad said this year banks would focus more on micro, small and medium businesses so that credit growth could reach 20%.

However, he said, until now BI had not yet revised down its forecast on credit growth set earlier at 18% to 20%.

Based on indicators, BI considers the condition of banks in the country to be strong.

BCA's consumer loans soar 51% in 2008

PT Bank Central Asia (BCA) lent Rp18 trillion in consumer loans last year, an increase of 51% from the Rp11.9 trillion extended in 2007, Bisnis Indonesia reported.

Consumer director Henry Koenaifi said housing loans also grew to Rp10.3 trillion from Rp7.8 trillion, while vehicle loans skyrocketed 87% to Rp7.7 trillion from Rp4.1 trillion in 2007.

"Our consumer credit growth in 2008 was high, despite a downturn near the year end due to the surging cost of funds," he said.

He estimated lending rates would keep declining in the next few months, leading to stronger lending expansion.

Koenaifi projected consumer loans this year could grow by at least 10% to over Rp20 trillion, driven by housing and car loans.

Slower lending growth aimed to maintain credit quality amid the current higher risk market, he said, adding that at the moment non-performing loans (NPL) in the housing loan segment were a low 0.3%.

POWER

PGE to invest $130M in geothermal power projects

PT Pertamina Geothermal Energy (PGE) said it will spend $130 million this year to finance the development of a number of geothermal power projects, Asia Pulse reported.

PGE president Abadi Poernomo said the subsidiary of state oil and gas company PT Pertamina is now developing the Ulu Belu geothermal power project in Lumut Balai and the fifth and sixth units of the Lahendong geothermal power plants in North Sulawesi.

Poernomo said PGE is carrying out feasibility studies before seeking a loan fund from the World Bank to finance the project.

Meanwhile, the German Development Bank wants to team up with PGE in carrying out the project from the upstream to downstream sectors, he was quoted as saying by Investor Daily.

OIL & GAS

Govt. expects higher 2009 oil exploration: BP Migas

The government expects oil contractors operating in Indonesia to boost exploration spending by 50% to $2.7 billion in 2009 from $1.8 billion in 2008, a senior official at the upstream oil and gas regulatory body told Reuters on Friday.

"It was very difficult to find rigs last year, oil contractors only explored 80 wells. Contractors are expected to explore about 182 wells this year," BP Migas deputy chief Achmad Luthfi said in an interview.

Luthfi said exploration last year, which fell short of a target of $2.2 billion, had been hampered by the cost of oil services and difficulty finding rigs.

Luthfi said most of exploration spending this year would be conducted in the deep waters of the Makassar Strait, where several oil companies are planning to explore including Exxon Mobil and Marathon oil Corp.

Indonesia expects output of crude oil and condensate to fall by 1.8% in 2009, hit by a drop in output by the country's top oil producer Chevron Corp .

Indonesia expects to produce 960,000 barrels per day (bpd) of crude oil and condensate this year, against an estimated 978,000 last year.

It has about 8.4 billion barrels of proven and potential crude reserves and 182 trillion cubic feet of natural gas reserves.

AKR secures $60M loan pledge to build fuel terminal

PT AKR Corporindo has secured a loan pledge of Rp720 billion ($60 million) from a syndicate of foreign banks to build a terminal of oil fuel and liquefied petroleum gas (LPG), Asia Pulse reported on Friday.

The distributor of liquid chemicals and fuel will build the terminal in Tanjung Priok, the country's largest port in Jakarta.

AKR president Haryanto Adikoesoemo said the loan will be disbursed soon to start the construction of the terminal this year to be completed in 2011.

The terminal will have a storage capacity of 250,000 kl to be expanded later to 450,000 kl, Bisnis

Indonesia reported.

Inpex to start choosing contractors for Masela block

Japanese upstream player Inpex Corp. will soon begin the process of picking contractors for the front-end engineering and design (FEED) process of its wholly owned Masela block in the Timor Sea, a company official said Tuesday, Platts reported.

The Inpex source declined to identify potential contractors, but said the company aims to start its FEED process in late 2009.

The move comes after it signed an in-principle agreement with the government in January on the proposed development of an LNG project based on Masela block.

Inpex and the government have agreed to target a final investment decision on a 4.5 million metric ton per year floating LNG project at Masela by 2011. First production from the development would be scheduled for 2016.

Inpex had previously estimated Masela held sufficient reserves to support the proposed floating LNG facility, but the company is still in the process of confirming the total volume of gas in the block.

A final reserves estimate is now expected to be released in the second half of 2009 -- before Inpex starts its FEED process -- delayed from an earlier estimate of late June, the official said.

A number of major oil companies have expressed interest in cooperating with Inpex on the development of Masela, including StatoilHydro, ConocoPhillips, Total, Shell and state-owned oil and gas company PT Pertamina.

Pertamina has previously said it would like a 30% stake, while Norway's StatoilHydro and US company ConocoPhillips have expressed interest in partnering Inpex.

Kupfec may invest up to $300M in Indonesia

Kuwait Foreign Petroleum Exploration Company (Kufpec), a subsidiary of Kuwait Petroleum Corp., may soon invest $200 million to $300 million to double its oil production capacity in Indonesia from 15,000 barrels a day at present, a senior company executive said Tuesday, Dow Jones reported.

"Our target is to double (output capacity) in the very short term. We want to acquire more production and reserves in Indonesia. We may invest $200 million to $300 million here in the very short term in the oil and gas sector," Kufpec deputy managing director for new business development Naser Al-Fulaij told reporters.

He said Kufpec is looking at two or three companies that may be purchased, but didn't specify whether they were Indonesian companies.

He added that Kufpec has so far invested more than $1 billion in Indonesia, with stakes in the Anoa and Camar oil and gas blocks.

Petrobras eyes gas opportunities in Indonesia, Australia

Brazil's state-run energy giant Petrobras is seeking opportunities for natural gas in Indonesia and Northwest Australia to expand its energy investments in Asia, a company official said on Friday, Reuters reported.

“Those are the most important countries, but we are not close to those countries," said Simone Totti Davidovich, senior adviser of E&P International Business Development of Petrobras.

"Asia can be considered a new frontier for Petrobras. Asia represents lots of opportunities for Petrobras because we need gas and there is gas in Southeast Asia," she said.

"We are talking to some companies and we have seen some blocks," she said but declined to specify the companies.

Petrobras has no oil and gas exploration deals so far in East Asia and Australia.

The company unveiled in January a huge plan to invest $174 billion between 2009 and 2013, up 55% from the $112.4 billion planned for 2008-2012, bucking the wider trend of oil firms cutting their spending amid economic downturn.

Davidovich said of the total investment, $15.9 billion would go for the international business and 20% of investment in international business would go for new business, including Asia Pacific.

"I hope it's not that far away. I hope it's in near future," she said when asked when she expects to make progress in seeking gas opportunities in Asia Pacific.

Pertamina to spend $100M to boost Cepu output

State-owned oil and gas company PT Pertamina plans to spend $100 million this year to increase output at the Cepu field in Central Java that it owns jointly with ExxonMobil Corp, Bloomberg reported.

The partners plan to boost production from Cepu field to 20,000 barrels per day (bpd) from 200 bpd in December, Ferederick Siahaan, finance director at Pertamina, said late Monday.

The government wants Pertamina to increase crude production amid declining oil prices. Cepu is estimated to have 600 million barrels of oil reserves and may produce 165,000 barrels a day at its peak.

“We’re evaluating whether to use internal cash or seek a loan,” Siahaan said.

Exxon and Pertamina each have a 45% stake in a venture to develop the field, while local governments hold the remaining 10%.

Indika buys 81.95% stake in Petrosea

Coal miner PT Indika Energy said it has agreed to buy an 81.95% stake in engineering firm PT Petrosea from Clough International Singapore Pte Ltd for $83.8 million, Reuters reported.

"Petrosea's mining capability provides us with immediate scale and depth to our becoming a leader in the energy sector," Indika's president director Arsjad Rasjid said in a statement to the stock exchange on Thursday night.

"The acquisition of Petrosea is a logical next step in our growth," he added.

Indika controls 46% of Indonesia's third-largest coal miner, PT Kideco Jaya Agung.

The firm did not give any details about when it would hold a tender offer for the remaining shares.

Last week, the Indonesia Stock Exchange (IDX) suspended trading of Indika Energy and Petrosea after a media report said Indika would buy a 77.9% stake in Petrosea. IDX lifted the suspension the following day.

MINING

Mining Law regulations expected by July: Ministry

The Energy and Mineral Resources Ministry expects implementing regulations for the recently enacted Mining Law to be ready by July at the latest, hopefully clearing the way for a resumption of investment in the sector, The Jakarta Globe reported.

“The drafts for the implementing regulations should be relatively easy to finish. We expect them by March,” Bambang Setiawan, the ministry’s Director General of Mineral, Coal and Geothermal Resources, said on Tuesday.

“After the drafts are ready, we’ll still have to talk to other relevant institutions, including the forestry and transportation ministries,” he said.

Setiawan said the ministry expected the regulations, which would also set coal reference prices, to be signed by the president in July at the latest.

“We told the House of Representatives that we would be finished by October. But we will pull out all the stops to finish ahead of deadline,” Setiawan said. “We still have to discuss the implementing regulations with the stakeholders and amend some of the contents. It could still be a long process after the drafts have been prepared, but that’s beyond our control.”

The ministry has been providing pricing guidelines for firms holding coal contracts of work since last year, he said, to prepare them for the government’s plan to regulate the prices at which companies sell their coal based on government-set reference prices, under a “coal price index.”

It only started to do this with holders of mining concessions a few weeks ago, however.

“We have no problem with the holders of coal contracts of work. The problem is with the concession holders. We will set the base prices every month and then let the local governments deal with the concessionaires, so they don’t sell their coal below the base prices,” Setiawan said on the sidelines of the OZMine 2009 mining conference in Jakarta.

The government hopes to combat transfer pricing in the coal market — a practice whereby a company sells coal to a foreign-owned subsidiary at lower prices to avoid paying taxes — and to increase state revenues from the sector, Setiawan said.

Newmont sees 2009 copper output up 60%

PT Newmont Nusa Tenggara, which operates the Batu Hijau copper and gold mine in Sumbawa Island, expects copper production to increase by 60% this year as it starts to mine higher grade ore, the company said in a statement on Thursday, Reuters reported.

Newmont expects to produce 455 million pounds of copper concentrate this year, up from 284 million pounds in 2008.

"Although copper prices are expected to decline in 2009, higher metal output due to better ore grades will cushion the impact," Martiono Hadianto, director of Newmont Nusa Tenggara, said in a statement read to the House of Representatives.

The mine has a copper concentrate grade of between 25-30%.

Hadianto warned, however, that operations at the mine may end earlier than planned if the government does not approve a land-use permit.

"If the land-use permit is not granted mining operations may end in 2011 while processing activity may end in 2017 against the planned 2027," he said.

The company had said last year that it may have to lay off as many as 700 of its 8,300 workers and cut back on operations in the first quarter of 2009 because of delays in permits.

Newmont had not been able to renew a permit from the forestry ministry that would allow it to clear an area for waste disposal, a company official said in April last year.

Newmont is currently involved in an arbitration dispute over moves to sell some of its shares in Newmont Nusa Tenggara to the local government.

Under its contract, Newmont must sell 51% of its shares to local investors, but talks collapsed last year and both the government and Newmont filed cases against each other in arbitration courts.

A decision on the arbitration process is expected on March 31 this year.

"We will follow the decision of the arbitration court," Hadianto said.

Adaro targets 30% rise in revenue

The country’s second largest coal producer, PT Adaro, aims to increase its revenue by 30% this year because of higher sales and prices, a company official says, The Jakarta Post reported.

Adaro revenue is targeted to jump to $2.08 billion this year from a forecast of $1.6 billion.

“We are optimistic that the (30%) target is achievable,” Adaro president director Boy Garibaldi Thohir said on Monday, adding that this is backed by the fact that the firm has already secured 90% of its targeted sales contracts for this year with local and foreign buyers.

Company sales volume will reach 45 million tons this year, from 38.5 million tons in 2008, Thohir said without mentioning production volume.

The selling price will be higher, between $52 and $65 a ton, up from $39 per ton last year, he added.

Another coal firm, Berau Coal, would produce up to 15 million tons in 2009, higher than the 13.5 million tons produced last year, said its president director Bob Kamandanu.

He forecast that the company will reach $1 billion in revenue and $200 million in net profits this year.

The company’s 2008 revenue and net profit stood respectively at $640 million and $90 million.

The company has decided to cut its capital expenditure for expansion and infrastructure spending down to $27 million from an originally proposed $40 million, citing bad market conditions.

INCO shareholders appoint new CEO

An extraordinary general meeting of PT International Nickel Indonesia (INCO) shareholders Thursday approved the appointment of Tito Botelho Martins as its chief executive and president, replacing incumbent Murilo Ferreira, the company said in a statement, Dow Jones reported.

It said Martins, its executive director for the non-ferrous business who was appointed CEO January 1, will continue to serve as director of that operation.

INCO is 60.8% owned by Vale Inco Ltd. with 20.1% held by Sumitomo Metal Mining Co. Ltd.

Thai coal miner Banpu Q4 net profit down

Thailand's top coal miner, Banpu, reported a 12% fall in quarterly earnings on Thursday, worse than analysts had expected, Reuters reported.

Banpu, which is Indonesia's number four coal company, posted an October-December net profit of $48.7 million, down from $55.3 million a year earlier.

It posted a $86.6 million net profit in the third quarter, its best quarter of 2008. Its full-year profit of $256.97 million was up 39% from a record $185.64 million in 2007.

The company did not say why fourth-quarter earnings fell, despite higher sales.

Indian GMR Energy acquires coal mining firm

India's GMR Energy through a subsidiary company has acquired 100% ownership of PT Barasentosa Lestari (PT BSL), a coal mining company in South Sumatra, RTTNews reported.

In a release issued to the Bombay Stock Exchange, the company said that PT BSL holds a coal mining license under a contract of work issued by the Indonesian government.

The license provides 30-year mining rights over two separate coal blocks in South Sumatra.

GMR Group is a Bangalore-headquartered global infrastructure major with interests in airports, energy, highways and urban infrastructure.

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[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.

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