Indonesia's economy probably expanded 5.1% in 2004

JAKARTA (Bloomberg): Indonesia's economy may have expanded as much 5.1 percent last year, near the government's earlier forecast of 5 percent growth, boosted by consumer spending and investment, a senior minister said on Tuesday.

"Growth has been supported by slowing inflation, and the rise in consumer demand," Coordinating Minister for the Economy Aburizal Bakrie. Still "economic growth needs to accelerate so that it can create more jobs and reduce unemployment."

Faster growth may create jobs for the fifth of Indonesians without full-time work and help the country get higher debt ratings, boosting foreign investment. Interest rates at six-year lows are stoking consumer spending which makes up 65 percent ofthe US$208 billion economy. The economy is forecast to grow 5.5 percent this year, the most since 1996.

The government also said it needs as much as $150 billion of investment in roads, power plants and other infrastructure projects to create more jobs and accelerate the pace of economic growth over the next five years.

"Investment and exports need to increase," Aburizal said. "We cannot rely on consumer spending to continue supporting growth."

The government estimates growth of 7.6 percent in 2009 and to increase the ratio of investment to gross domestic product to 28.4 percent in 2009 from 20.5 percent in 2004, he said.

Indonesia's approved foreign direct investment more than tripled in January from a year earlier to $872.1 million, the country's Investment Coordinating Board (BKPM) said on Monday. (***)

Wohoo...5.1 % , i was thinking 4.9% - 5% but this is better! :cheers:

Indonesian economy beats expectations, grows 5.1 percent in 2004

Indonesia's economy grew a surprising 5.1 percent in 2004, bolstered by growth in investment and exports, the Central Statistics Bureau said Wednesday.

The brisk expansion suggests the economy is on track to reach the government's 5.5 percent growth target this year, an analyst said.

The impact of December's devastating earthquake and tsunami on growth was insignificant _ happening just days before the end of the year, the statistics bureau said.

In the last quarter of 2004, the economy expanded 6.7 percent on year, although it contracted 1.6 percent from the July to September period due to shorter working days, the bureau said.

The government had projected that the economy would grow 4.8 percent in 2004, after a revised growth figure of 4.9 percent for 2003.

The average forecast of six economists polled by Dow Jones Newswires put Indonesia's economic growth at 4.9 percent for all of 2004, and 5.1 percent on year during the fourth quarter

It was the highest growth in investment since 1997, showing that the investment climate improved as the government managed to safe guard security and social stability during elections," said Juniman, senior economist with Bank Internasional Indonesia. "A 5 percent to 6 percent growth this year is within reach."

Rising investment and stronger exports offered evidence of improving fundamentals underlying the economic growth, which has largely been consumption-driven over the last four years. The bureau said investment grew 15.7 percent in 2004, whereas exports rose 8.5 percent from 2003.

Analysts are generally optimistic that investment will continue rising as President Susilo Bambang Yudhoyono's government works to cut bureaucratic red tape, and steps up efforts to fight endemic corruption.

The government last month offered 91 infrastructure projects to local and domestic investors. The government hopes to attract US$150 billion (€115.24 billion) in infrastructure projects to support a 6.6 percent annual growth target over the next five years.

Still, economists add that amicable solutions on high profile business disputes with the U.S.-based Exxon Mobil Corp., Mexico's cement producer Cemex S.A. and power company Karaha Bodas Co. will be crucial to attract foreign investors.

4th quarter growth of 6.7%? :eek2: There's no reason full-year growth for 2005 can't be 6%. The exact figure for 2004 is 5.13%. Totally awesome!

I agree, Yama. Since 4th quarter growth is 6.7%, this year's forecast should lie somewhere around 6%. (taking account of higher inflation due to fuel rises, etc etc.) The current official forecast of 5.5% is very modest, which is good in a way too. Most of us don't like to be overconfident. :)

But personally i'm very upbeat on this one. If government reform on business practices (from taxes to investment law) are successful, and the infrastructure programs becomes reality, I think we'll see higher growth figure in 2009 than the forecasted 7.6%. What do you guys think?

Oh, and about the new government, I think SBY is trustworthy. I'm not too sure about the rest of the cabinet tho (esp the VP and holders of several key economic position).

Yeah guys, its great news for the economy.
I bought the latest copy of 'Asia Inc' mag which had a cover story on SBY's plans for Indonesia's recovery...the article mentioned that Singapore's DBS Bank recently published a report on the Indonesian economy and said that there is "a good probability that GDP growth may exceed 6%" this year, despite its forecast of 5.6%.

On the flipside, apparently the Economist Intelligence Unit has revised down its projection from 5.7% to 5.4% due to the tsunami, while the government is sticking with 5.5%.

Personally with all the positive momentum at the moment (which partly, ironically, arose from the tsunami disaster) I think we could see 6% growth this year...hopefully. :)

As for Fir3blaze's comment, I personally think that 7.6% in 2009 is already itself a highly ambitious target which probably can be achieved only if everything goes right for Indonesia in the next 5 years. Apparently the government's Medium-Term Economic programme document which outlines targets for the next 5 years has revised down 2009 growth target to 7.2%. The biggest problem holding back Indonesia from growing at 7%+ atm is that it lags behind compared to its neighbours, in infrastructure. thanks to no investment in infrastructure in the last 5-6 years. so its growth is constrained, in my opinion, to about 6-6.5% in the next 5 years. But...if the govt. manages to get all those US$150 billion worth of projects running in the next 5 years then it'll be a different story from 2009 onwards, where I think 7-8% growth is possible.

Indonesia could see upsurge of investment from Malaysia

KUALA LUMPUR (AFP): Malaysian businessmen, wary in the past of security threats and a weak legal system in neighboring Indonesia, are giving the thumbs up to new President Susilo Bambang Yudhoyono's leadership.

Some 45 Malaysian businessmen met the visiting Indonesian president this week for an hour-long discussion and emerged to say they would seriously consider new investment in Indonesia.

They said palmoil plantations, energy, toll roads and infrastructure were among the sectors they were interested in.

Moehamad Izat Emir, president of the Malaysian MalayBusinessmen and Industrialists Association, praised Susilo's leadership.

"He is very honest, frank and genuine. It is obvious the new president means business," he told AFP.

Moehamad said Indonesia had taken measures to improve rules and regulations which in the past had caused "a lot a concern to us.

"I think Malaysians should take advantage to invest in Indonesia as we are now being invited (in) by the president," he said.

Moehamad, who runs two factories producing cardboard in Indonesia with investments totaling 12 million ringgit (US$3.15 million), said Indonesia's huge population offered the biggest regional market after China and India.

The World Bank puts Indonesia's population at 214 million.

Steel tycoon William Cheng, chairman of the Lion Group, said the climate in Indonesia was now suitable for investment.

"Politically everybody believes this new president is firm and security is improving," he said.

In the past, fear of riots, especially against minority ethnic Chinese businessmen, had made some Malaysian investors shun Indonesia.

Cheng, who has steel factories and palmoil plantations in Indonesia, said that after the talks with Susilo the company would seriously consider boosting its investments.

Metro Kajang Group of Malaysia deputy executive chairman Alex Chen said his property company would now look for opportunities in Indonesia.

"The meeting was very positive. I think now is a good time to invest in Indonesia. The president has new ambitions and ideas. We should not lose out now."(**)

Indonesian president vows to curb red tape, corruption

SINGAPORE (AP): Indonesia's president vowed Wednesday to clear away red tape, corruption and other obstacles that have long deterred foreign investment in his vast nation.

President Susilo Bambang Yudhoyono also said his government planned to achieve annual growth of 6.6 percent over the next five years, with a planned investment of US$150 billion (euro115 billion) in infrastructure. Growth was 5 percent in 2004.Susilo, a former military general who won Indonesia's first direct presidential election last year, spoke in English and projected confidence.

One businessman who organized international conferences on the Indonesian resort island of Bali said business had dropped off by 90 percent since terrorist bombings there in October 2002. He asked if Susilo could push for the repeal of foreign traveladvisories warning of the danger of travel to Indonesia.

Susilo did not specifically address the advisory issue, but said his government would "do our best to maintain our political stability and security," adding that his government would "continue conducting very intensive operations to combat terrorism."

The operator of a company that delivers goods by air express to Indonesia said he feared planned changes in customs regulations would lead to"additional restrictions."

Another man said he spoke for everyone in the room when he appealed for an end to red tape for investors who face time-consuming visa requirements when they travel to Indonesia. The audience applauded.

Susilo acknowledged the problems, but said they could not be solved "overnight."

"We intend to streamline the bureaucracy in many key areas, including customs," he said. "We believe that increasing transparency and reducing red tape is the necessary first step to address corruption." (**)

VOA:
Indonesia Posts Good GDP Growth
By Tim Johnston
Jakarta
16 February 2005

Johnston report - Download 315k
Listen to Johnston report


Indonesia says that its economy grew by 5.1 percent last year, slightly above expectations. Analysts say that while the underlying figures give some reason for optimism about future growth, there is still much work to be done if the investors who are desperately needed to keep the economy on track are to return.

Indonesia is Southeast Asia's largest economy, but it is an economy beset by problems, the legacy of years of corruption and mismanagement. The 5.1 percent growth in gross domestic product in 2004 is marginally ahead of most expectations, but still short of the 6.5 percent growth that is needed to absorb newcomers into the labor force.

Most of the growth was driven by domestic consumption, but there are some indications long-term investors are slowly returning.

More people are putting money into factories and manufacturing machinery, and although imports have risen by almost a quarter, most of the growth is in capital goods and raw materials.

President Susilo Bambang Yudhoyono, who took office last October, says he wants to see an average of 6.6 percent growth during the next five years. Speaking in Singapore, he set out an ambitious plan.

"My government is adopting what I call the triple-track strategy," he said. "First, to promote growth through export and investment; secondly, to promote employment by stimulating the real [industrial] sector; and thirdly to reduce poverty by promoting agriculture and rural development."

Mr. Yudhoyono's short time in office has been dominated by December's devastating earthquake and tsunami. Although the catastrophe has had relatively little direct effect on the economy, the president's capable handling of the crisis has given investors hope that he will prevail in the battle against the country's deep-seated problems of corruption, legal uncertainty and labor militancy.

Fauzi Ichsan, vice president of global research at the Standard Chartered bank in Jakarta, says there is much work still to be done.

"The government has been doing the right things within its capacity, but unfortunately it requires a lot more to convince investors that the government is serious in the long term," he said.

Indonesia, with a huge population, abundant natural resources and a key geographical position, has the potential to be Southeast Asia's economic powerhouse, and Mr. Yudhoyono says he intends to see that potential fulfilled.

Indonesia sets bold plan for growth
By Wayne Arnold International Herald Tribune
Thursday, February 17, 2005
In visit to Singapore, prime minister bids to attract investment

SINGAPORE In his first state visit to this financial hub since taking office four months ago, President Susilo Bambang Yudhoyono of Indonesia on Wednesday gave business leaders and investors a glimpse of the kind of cleaner, more dynamic economy they have been hoping he will introduce to their sprawling southern neighbor.
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Speaking to an auditorium filled with executives, government officials and journalists, Yudhoyono laid out what he called a "triple-track strategy" for his impoverished nation. It is intended to achieve economic growth of at least 6.6 percent a year during his five-year term, creating jobs and improving the lives of Indonesia's 220 million people.
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"Upon assuming office, my immediate priority was to make sure that change be given direction, that change have a target and a plan and that change have relevance to the lives of the people," Yudhoyono said in a lecture organized by the Institute of Southeast Asia Studies in Singapore. "The first challenge is ensuring that Indonesia's present macroeconomic stability leads to real improvement of the living standards of average Indonesians."
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Driven by strong consumer spending, the Indonesian economy already appears to be moving in the right direction. The government said on Wednesday that gross domestic product grew 6.7 percent in the fourth quarter from a year earlier, completing a year in which the economy expanded 5.1 percent, its fastest pace since 2000.
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Yudhoyono said his government would promote exports and investment, job creation and agricultural and rural development to reduce the poverty rate to 8.2 percent from the current 16.6 percent and to cut unemployment to 5.1 percent from 9.5 percent by 2009.
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"We want growth to be coupled with equity, and we want to ensure that prosperity to eradicate poverty," he said.
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Economists say Indonesia must grow at least 6 percent a year to absorb new entrants into its job market. Where the nation has fallen short is in attracting foreign investors, who have been discouraged by bureaucracy and corruption. In a breakfast meeting with investors, Yudhoyono reportedly reiterated promises to clean up the government and streamline bureaucracy.
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Investors have already gained confidence from such assurances, as well as from Yudhoyono's more businesslike style. Gone, it seems, are the lackadaisical days of his predecessors, Abudurrahman Wahid and Megawati Sukarnoputri, when meetings were held barefoot and had to be scheduled around presidential naps. Yudhoyono is a former general with a doctorate in agronomy. Although he lacks a parliamentary majority, he is the first Indonesian president directly elected by the people.
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"There's a more businesslike attitude, of 'Let's get things done,"' said Cheong Kum Hong, chief investment officer at Commerzbank Asset Management in Singapore. "Instead of going 30 kilometers per hour, you're going 90 now."
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After falling more than one-third in 2004, to $10.28 billion, foreign direct investment approvals more than tripled in January to $872.1 million, and economists say private domestic investment has also improved.
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"Now I think investments will take over from consumption," said Manu Bhaskaran, head of economic research at Centennial Group Holdings in Singapore. "Indonesia is back on the map."
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To spur investment, Indonesia signed an agreement with Singapore on Wednesday aimed at giving investors greater protection. The agreement ensures that investors from Singapore receive compensation in the event their investments are expropriated or nationalized and provides for disagreements to be referred to the World Bank International Center for Investment Disputes.
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Yudhoyono said that Indonesia and Singapore had also agreed to discuss cooperating in tourism and air services as well as in fighting cross-border crime, corruption and terrorism.
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Yudhoyono's visit coincides with generally warming relations between his vast nation and wealthy Singapore, which one former Indonesian president once dismissed as a "little red dot."
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Relations between the two nations were aided by Singapore's rapid deployment of military forces to Indonesia following the tsunami of Dec. 26.
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Political analysts in Jakarta have cited Singapore's contribution to humanitarian assistance in Indonesia's Aceh Province as having helped dispel Indonesians' long-standing mistrust.
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Yudhoyono used his lecture to make a renewed call for peace in Aceh, which before the tsunami was virtually closed to foreign visitors while government troops battled a Muslim separatist group, GAM.
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"I call on GAM at all levels, wherever they are, to terminate this conflict, to come to permanent peace with dignity and to work together to rebuild Aceh under the framework special autonomy," he said. "The time for peace - real peace, permanent peace - is now."
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Finally, a news search of "indonesia" in Yahoo yields an image of Jakarta's mini-construction boom, rather than the disaster in Aceh! PS: It is Bellagio Mansions, btw.

http://us.news1.yimg.com/us.yimg.com/p/rids/20050216/i/r1457403201.jpg

Indonesian workers carry building materials at a construction site, one of many sites sprouting up around the city as economic growth steadily picks up, in Jakarta February 16, 2005. Indonesia's economy grew 5 percent in 2004, its fastest pace since 2000, and growth will accelerate to 5.5 percent this year, President Susilo Bambang Yudhoyono said on Wednesday. REUTERS/Crack Palinggi

I agree that it is good to be conservative, especially in the case of the government budget. If the economy ends up growing slightly faster than predicted, it just means the budget deficit will be less. Here is a story a few days old that wasn't posted here. Pretty cool.


Indonesia Jan FDI approvals 872.1 mln usd, up 235 pct yr on yr - UPDATE

(Updating with breakdown of leading investment by value, country of origin)

JAKARTA (AFX) - Foreign direct investment (FDI) approvals in January increased 235 pct year on year to 872.1 mln usd, largely due to inflows for new projects, according to the National Investment Coordinating Board (BKPM).

In the same month, new projects also saw domestic investment approvals rise to 1.89 trln rupiah from 1.64 trln in January last year, BKPM added.

BKPM said it approved last month 95 new FDI projects involving investments of 716 mln usd, compared to 53 projects worth 65.9 mln in Jan 2004 and 14 new domestic investment projects worth 1.57 trln as opposed to seven projects worth 937.8 bln previously.

In its monthly report, BKPM said it also approved last month 31 FDI expansion projects worth 140.3 mln usd against 21 involving 27.2 mln last year.

Meanwhile, only eight domestic companies with investment values of 15.8 mln usd were allowed to change their status to FDI firms in January, compared with 10 worth 167.1 mln usd in the corresponding period last year.

The data on approvals excludes investments in the oil and gas sector, banking, non-bank financial institutions, insurance and leasing, mining in terms of contracts of works, investments licensed by the technical agency, portfolios and household investment, the repor added.

The report said in terms of investment value, the leading sector in FDI approvals last month was chemical and pharmaceutical with three worth 553.4 mln usd.

Food industry was second with six projects worth 88.9 mln, followed by metal, machinery and electronic with six worth 81 mln and hotel and restaurant with four worth 34.9 mln.

By country of origin, Canada topped the list with one project worth 532.4 mln usd, followed by Japan with seven worth 64.9 mln, Britain with six worth 51.1 mln and Taiwan with four worth 49.6 mln.

As for domestic investment projects, the leading sector in value was electricity, gas and water supply with two worth 739.8 bln rupiah.
Food industry was second with five projects worth 573.6 bln, followed by food crops and plantations with one worth 333.2 bln and rubber and plastic industry with one worth 67.4 bln.

Indonesia saw a further decline in investments over the past few years due to a poor investment climate.

Last year, FDI approvals dropped 27 pct to 10.28 bln usd from the 14.05 bln registered in 2003. In the same period, domestic investment approvals declined to 36.75 trln rupiah from 50.75 trln previously.

A World Bank study says it takes 151 days to start up a business in Indonesia, much longer than in neighboring countries, such as Thailand where it takes 33 days, Malaysia 30 days and China 41 days.

The government of President Susilo Bambang Yudhoyono, who took office last October, is mulling options to fast-track investment procedures through moves such as requiring investors to simply register investment plans and undertake environmental impact tests when necessary.

In line with this plan, the government has been considering transforming BKPM into a promotion agency.

However, after more than three months in office, the new government has yet to take concrete steps to reform investment procedures.

Here is more good news...on Indonesia rating

Moody's ups Indonesia's outlook to positive

HONG KONG, Feb 18 (Reuters) - Global ratings agency Moody's Investors Service upgraded the outlook on Indonesia's B2 foreign and local currency ratings to positive from stable on Friday, boosting plans for a $1 billion sovereign bond issue.
"The outlook change was prompted by the continuing improvement in Indonesia's debt ratios, both in terms of foreign currency debt and the government's overall debt position," Moody's said in a statement.

Indonesia's 2014 bonds have made strong price gains in recent months, reflecting an improved political and economic outlook.

Analysts say the first direct presidential election last year has helped reduce the risk premium demanded by investors putting money into the country and the move by Moody's was no surprise.

"Moody's has been a laggard on Indonesia in terms of upgrading the sovereign rating ... We are expecting a BB range for Indonesia sometime this year, given the strong showing in the economy and reduced political uncertainity after the elections last year, said Lloyd Ong, senior credit analyst at BNP Paribas in Hong Kong.

Indonesia is expected to launch marketing of a $1 billion global bond issue in March, a market

It will be the country's second sovereign bond offering since the 1997/98 Asian financial crisis. Jakarta last sold $1 billion of 10-year bonds in March last year.

"The bonds will be met with a very good reception. This is going to make it even better," said Dilip Parameswaran, head of Asia credit research at Calyon Corporate and Investment Bank.

"I think the challenges are more long-term ... improving the legal system, eliminating corruption ... But for 2005, there is a good window for the president to do something about those things. The economy is faring quite well."

Moody's said Indonesia's ratio of government debt to gross domestic product had improved a lot in recent years, as had the ratio of external debt to current account receipts -- although this latter measure was still high.

Global rating agency Fitch Ratings last month upgraded Indonesia's long-term foreign and local currency ratings by one notch to BB-minus, still three notches below investment grade, citing reduced political risk and strong economic growth.

Analysts are also expecting S&P to react soon on its positive outlook and B-plus rating and there was little reaction to the Moody's move in Indonesia's financial markets.

"We don't see any significant impact from the ratings news. (Rupiah) bond prices continue to remain weak as investors are worried that a planned fuel price hike will push up inflation," said a senior fund manager with a large foreign fund management firm in Jakarta.

The government of President Susilo Bambang Yudhoyono has indicated it wants to raise fuel prices to cut subsidies and trim its budget deficit. Prices could go up by as much as 40 percent, government officials have said.

Indonesia's dollar bonds maturing in 2014 traded at 103/103.50 in price after the Moody's announcement, unchanged from earlier levels.

"The bonds have always had strong support from investors, but valuation is looking a little stretched for BB-minus, even if you look at the upgrade story," said BNP's Ong.

(Additional reporting Gde Anugrah Arka in Jakarta and Dominic Lau in Hong Kong)

Alright folks, it's time for your 2005 Indonesian economic estimates. I'm predicting GDP growth of 5.8%. There are a lot of reasons, namely India and China (yes) both looking like less attractive FDI targets, which may result in rocketing foreign investment levels in Indonesia. FDI could grow around 60% in Indonesia this year. Maybe I'll say more later.

Yea,
I agree with you Yamauchi. I think FDI will eye Indonesia this time.
I am also expecting a 5.5 - 6.0% growth for this year.
And will grow as new infrastructure finished.
Indonesia really need more airport, bigger seaport and bigger & longer highway.

I'm pretty optimistic. I was thinking 5.8%, but Yamauchi, I want to distinguish my estimate from yours so I'll go for 5.9%.
When you say 60% growth do you mean FDI approvals?

oh btw,
as we know, indonesia economy is being driven by local consumption.
Which is good. Means drop in export will not affect the economy too much.

I am predicting 5.8 %. its true that the FDI influx will be positive for the economy but there is still obstacle, where i think the fuel price hike will affect other basic commodities prices. Thus it will reduce domestic consumption, but the impact is limited though. So i pretty much bullish with the economy.

cheers

remember that GDP is not the only measure of prosperity, so hopefully the funds released by removal of subsidies (around Rp40 trillion) will be used wisely, particularly to increase the standards of living of those who are behind, particularly in education and basic infrastructure such as water and health.

You can say that i'm VERY bullish about the Indonesian economy. Like what you all have said, i think the fuel hike will probably slow down domestic consumption by a bit, and FDI will probably increase by a big percentage. However, I don't think FDI will be the major component for GDP growth this year, not yet.

What's important for the government now is to really kickstart all infrastructure projects with a bang. We need that acceleration in the economy. I hope that there won't be any problem with the infrastructure projects.

My prediction for GDP growth this year is 5.9% (I'm quite confident it can grow by 6.0%, but just to account for occasional trouble with local and international economy, I made a more conservative prediction).

I don't just mean approvals. The projects that have been recently approved as well those that are sure to follow in light of the improved economic situation will start to flow into the economy around the 3Q of this year. Especially if the government can shorten the approval process, the impact will be quite significant. The relatively weak rupiah means outside investment will go further, and it also means that Indonesian exports will be more competitive as confirmed in a recent IMF article. Also, the billions of dollars in aid that will be used to start rebuilding Aceh will flow into Indonesian companies, and much of this rebuilding will take place in areas that were previously part of the unregistered informal sector.

As far as other "professional" predictions are concerned, they are usually very inaccurate. The IMF's initial 2004 estimate was off by more than half a percentage point and the government's was initially the same. Groups such as Dow Jones and The Economist, as much as I love them, are always off. They were all off by more than a percentage point for their initial predictions of Taiwan's 2004 GDP growth, which ended the year at 6%.

So, those are just my thoughts, but I think Indonesia has a bright year ahead.

Thursday February 24, 5:37 PM
UPDATE: Small Protests, Impact From Indonesia Fuel Hike
By Phelim Kyne
Of DOW JONES NEWSWIRES


JAKARTA (Dow Jones)--The government of Indonesia's President Susilo Bambang Yudhoyono will likely avoid the social unrest his predecessor suffered when long-planned fuel price hikes are implemented as early as March 1, analysts said Thursday.

Although massive street demonstrations forced former President Megawati Sukarnoputri to abort a reduction in fuel subsidies in 2003, the average 29% increase in fuel prices is expected to prompt only small-scale protests this time around, and have a short-term impact on the economy mainly through higher inflation, sovereign analyst at ABN Amro, Irene Cheung said.

"I wouldn't rule protests out altogether because there always pockets of people who will come out (to demonstrate)," Cheung said.

"But I wouldn't think it would be anything large scale that would force the government to hold back (the price increases) because they've been talking about it since before the election (last year)."

The majority of Indonesians are now psychologically prepared for the fuel price increase and the knock-on effect it will have on food, transportation and housing costs for two or three months following, said Citibank economist Anton Gunawan.

"I think the sooner the better," Gunawan said. "Some traders have already increased prices and producers are also waiting for the fuel price increases to be implemented."

Yudhoyono made the politically unpopular move to raise fuel prices in order to reduce the crippling pressure of the subsidies on the cash-strapped government's revenues and to meet a budget deficit target of 1% of gross domestic product in 2005.

Rising global oil prices drove up fuel subsidy costs to IDR69 trillion ($7.47 billion) in 2004, or about 3% of total GDP in the same period.

Indonesia desperately needs the funds now swallowed by fuel subsidies to help pay for a national infrastructure upgrade program considered essential to lure back foreign investors.

Government ministers have estimated that Indonesia requires up to $150 billion in infrastructure investment over the next five years in order to meet an official target of 6.6% annual average GDP growth from 2004 to 2009.

The fuel price increase will deliver a short, sharp inflationary shock to consumers that will ease by the second half of the 2005, Standard Chartered economist Fauzi Ichsan said. Indonesia recorded higher-than-expected 7.32% year-on-year inflation in January.

Inflation Impact Small, Temporary

The fuel price hike will power a rise in inflation to up to 8.5% in the three to four months following, but inflation will likely stabilize around 6.5% in the second half of 2005, Ichsan said.

"It will be painful, especially for the poor," he said, " But (that impact) won't be long-lasting."

To mitigate that pain, the government plans to continue subsidizing the fuel that the country's poor are most dependent on - mainly kerosene - and allow gasoline products to carry the brunt of the increase, Minister of National Development Planning, Sri Mulyani Indrawati said recently.

Industry sources indicate that the price increase will drive up food prices by 1% to 5%, Minister of Trade Marie Elka Pangestu told reporters Thursday. Pangestu's ministry is cooperating with food and beverage production associations to ensure that supplies are uninterrupted and prices unaffected by possible hoarding or panic buying either prior to or following the fuel price increase.

Successful implementation of the fuel price increase and avoidance of protests in the aftermath requires the government to convince the public that the poor aren't shouldering an unreasonable proportion of the new fuel costs, a Jakarta Post editorial Thursday said.

"Public acceptance...will depend on whether the reform can be promoted as fair," the editorial said. "It must be introduced in a package with other programs to ensure fairness in sharing the burden and to build a conducive environment for rational public opinion."

News Poll
Q. What do you think of Malaysia's move to use civilian volunteers (armed with truncheons and handcuffs) to arrest illegal immigrants?
It's a good idea that will aid the police
It's going to result in unnecessary violence
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HK-Based China Resources Takes Stake in Indonesian Property Firm

JAKARTA, Feb 25 Asia Pulse - Hong Kong-based China Resources Group (CRC) has acquired a 15.44 per cent stake in property company PT Lipp Karawaci (JSE:LPKR) for Rp680 billion (US$75.5 million).

President of PT Lippo Karawaci Viven G. Sitiabudi said the investment by CRC in his company is part of a long term strategy.

With the acquisition made recently, Lippo Karawaci will serve as the basis for the business expansion of the CRC Group, the majority shares of are held by the Chinese government, Viven said.

On the other hand a greater opportunity will be open for Lippo Karawaci to expand business in China, he added.

After the acquisition, Lippo Karawaci is 27.02 per cent owned by the Lipo Group, 15.44 per cent by CRC, 7.76 per cent by RZB, a subsidiary of Lippo Group and 49.78 per cent by investing public.

Viven said Lippo Karawaci posted around Rp290 billion in net profit in 2004 and is expected to chalk up a 20 per cent increase in sales in 2005 from Rp1.6 trillion in 2004.

Around Asia's Markets: Rates pose obstacle for stocks in Jakarta New Feature

Naila Firdausi and Sara Webb Bloomberg News
Thursday, February 24, 2005
The rally in the Jakarta Composite index, which has tripled to a record over 28 months, may falter this year as interest rates rise, company earnings slow and the government fails to deliver policies to bolster the economy, according to Michael Chambers of CLSA.
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"Indonesia has had three great years," Chambers, CLSA's Indonesia research head since 2002, said in a telephone interview last week. Now he is "cautious for several reasons."
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The Jakarta Composite has risen 226 percent since Oct. 14, 2002, and on Tuesday completed its longest winning streak in 10 months to close at a record 1,099.91. Chambers said the index might end this year at 1,000, partly because the prospect of rising interest rates is "a very difficult environment" for stocks.
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The economy grew 6.7 percent in the three months that ended Dec. 31 from a year earlier, the government said last week. Gross domestic product expanded 5.1 percent last year, the most since 1996.
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"You're looking at 5.5 percent to 6 percent growth this year," Chambers said. Strong economic growth "won't necessarily translate into strong earnings growth."
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Earnings-per-share may grow by between 11 percent and 12 percent this year on average, he said.
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The rally has driven valuations on the index to levels that make it relatively expensive, he said. The benchmark index trades at almost 17 times earnings, close to the highest level for the ratio in the past year. In Thailand, the SET index trades at 11 times.
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"We're in panic-buying mode," Chambers said. "Valuations are no longer particularly cheap."
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CLSA, an emerging-markets brokerage firm based in Hong Kong, was ranked the best firm for Indonesian research and strategy by investors in a 2004 Asiamoney poll.
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Some investors who avoided the Indonesian stock market while it was cheaper are now allocating money to buy its shares because of optimism about policy changes following last year's elections, Chambers said.
.
Susilo Bambang Yudhoyono was elected president last year. At a conference in Singapore last week, Yudhoyono said that he aimed to bolster economic growth to an annual average of 6.6 percent.
.
The government has pledged to curb corruption, attract foreign investment and cut fuel subsidies so that money can be spent on infrastructure, health and education.
.
Chambers said he favored Indonesian consumer stocks like Ramayana Lestari Sentosa, Unilever Indonesia and cigarette companies, because this industry group has underperformed on concern that the government would cut fuel subsidies. Higher fuel costs erode the spending power of consumers.
.
A sub-index of consumer goods stocks is the second-worst performing industry index out of nine in the Jakarta composite so far this month. The Jakarta consumer goods index has risen 4.3 percent this month, as the wider benchmark rose 5.2 percent.
.
Shares in Ramayana, Indonesia's second-largest retailer by sales, have risen 3.2 percent this year. Unilever, the country's biggest maker of food and soap, rose 8.3 percent.
.
Chambers also likes some of Indonesia's smaller banks, such as Bank Niaga, Lippo Bank and Bank Panin, because of their attractive margins.
.
Success in pushing through economic policies could add more fuel to the stock rally, pushing the index to between 1,200 and 1,250 by the end of this year, Chambers said.
.
However, if Indonesia is not "more aggressive" in its reform efforts, he said, fund managers might switch to markets like Thailand. Yudhoyono's "delivery on his promises has been very weak," Chambers said. "Increasingly that's in contrast to Thaksin," the Thai prime minister.
.

So far, as 19:19 AEST (GMT +11). JSX has dropped 18 point due to fuel hike and profit taking.

I think its because of profit taking, investors locking in profit after 2 weeks in the green zone. Fuel hike is just an excuse as they already know and expect the government to raise fuel prices long before january 2005 anyway.

cheers

Press Release Source: businessinfo


Businessinfo: New report: Will Indonesia Capitalise on Its Growth in Mobile Telephony?
Friday February 25, 4:38 am ET


LONDON--(BUSINESS WIRE)--Feb. 25, 2005--New research from www.businessinfo.ws (http://www.businessinfo.ws/archive/BIAABNRA.htm) notes that Indonesia, with its population of 220 million people, the world's fourth largest country, is one of the strategic growth markets in Asia. However, Indonesia's population is also one of the least connected in the region with only 4.4%, 12.4% and 0.4% fixed, mobile and Internet telephone penetration respectively at the end of September 2004. Its connectivity level compares poorly with neighbouring countries like Singapore, where fixed and mobile penetration are as high as 44.9% and 87.5% and Malaysia with fixed and mobile penetrations of 17.8% and 48.5%.
This new report, offered by www.businessinfo.ws, notes that the rapid growth before of the early 1990s was temporarily suspended during the 1997-98 crisis, however it has since resumed. With the total number of mobile subscribers growing by 59.3% in 2003 and by 44.6% in the first 9 months of 2004, Indonesia is now viewed as one of the top mobile growth markets in the industry. The country's mobile market is estimated to have reached 26.9 million subscribers at the end of September 2004. Telkomsel, Excelcom, and Indosat (through Satelindo and IM3) dominate this sector, collectively controlling over 98% of Indonesia's mobile customers. As of November 2004, the Indonesian government had allocated four 3G licenses. The first going to PT Cyber Access Communications (an affiliate of Telecom Asia Orange, a leading operator in Thailand) in October 2003, followed by three further licenses awarded to Natrindo, Indosat and Telkom in 2004. However, these four companies are yet to announce a launch date for their 3G service.

For more information visit http://www.businessinfo.ws/archive/BIAABNRA.htm



--------------------------------------------------------------------------------
Contact:
businessinfo
Matthew Tapson, +44 1494 771734
Fax: +44 1494 778994
matthewt@cmsinfo.com



--------------------------------------------------------------------------------
Source: businessinfo

Indonesia's 2005, 2006 GDP growth forecasts raised to 5.3, 5.9 pct - Citigroup

JAKARTA (AFX) - Citigroup (NYSE: C - news) said it has raised its projections for Indonesia's economic growth for this year and 2006 to 5.3 pct and 5.9 pct respectively, from its earlier forecasts of 5.0 and 5.5 pct, following official revision of old data.
Despite the upward revision, Citigroup's forecast for 2005 GDP growth is still lower than the official forecast of 5.4 pct and other analysts' forecasts of over 5.5 pct.
'We still maintain our view that economic growth may gradually increase this year, and, thus, we revised our GDP growth forecast up to 5.3 pct for 2005 and 5.9 pct in 2006,' Citigroup economist Anton Gunawan said.
He said private consumption and investment will continue to be the main drivers of growth.
'Many revisions of data from previous quarters, which went back to 2002, make it difficult to assess the precision of our forecast. However, if we look at the incremental increase in 2004 GDP growth, which was 0.25 pct, our real GDP
forecast looked close enough,' he said.
Indonesia's GDP grew 5.13 pct in 2004, beating Citigroup's forecast which was at the lower end of analysts' forecasts of 4.8-5.0 pct.
When announcing the 2004 GDP data earlier this week, the Central Bureau of Statistics (BPS) also said that it has further revised the 2003 GDP growth upwards to 4.88 pct from the earlier-revised figure of 4.51 pct and the original figure of 4.1 pct.
Gunawan said his house is less upbeat about the 2005 prospects compared to other research firms or brokerages, because it believes an infrastructure push by the government -- which will help support an increase in investment expenditure -- may only start after the third quarter of this year.
He said his projections assume that increasing pressure on inflation due to a hike in energy prices and possible drought this year may push interest rates up, but at a gradual pace.
'Thus, there is no risk of a decline in bank and finance company lending for consumption.'
aloysius.bhui@xfn.com

IMA Asia - renowned economic forecast/consulting group - predicts GDP growth for 2005 and 2006 of 6.0% and 7.0% respectively.

check this out:

http://www.imaasia.com/Asia%20Briefs/AB%202005/Regional%20and%20Global%20Outlook.pdf

Indonesia Scenario Analysis

Scenario 1: “Optimistic” (10% probability)

Political assumptions

• Stable global geopolitics with minimal cross-border military conflicts, an environment that is conducive to rapid global economic recovery and cross-border investment.
• Stable domestic politics with minimal terrorist attacks and regional conflicts, followed by the election of a strong government that has majority parliamentary support in 2004.

Economic assumptions

• Rapid improvement in investment climate, through reduced legal, political and security uncertainties.
• Strong trade and current account surpluses, supported by capital inflows attracted by the government’s privatization program.
• Strong current account surplus and capital inflows help strengthen the IDR, reducing inflation.
• Lower inflation accelerates interest rate cuts.
• Stronger IDR, lower interest rate, improved investment climate and global economic recovery accelerate investment and therefore domestic consumption.
• Higher investment, domestic consumption and exports generate faster economic growth.

Economic forecasts

2002 2003 2004 2005 2006 2007 2008 2009
Inflation 10.0% 5.0% 4.0% 4.0% 4.0% 4.0% 4.0% 5.0%
Interest rate (1-month SBI at YE) 12.9% 7.0% 6.0% 6.0% 6.0% 6.0% 6.0% 7.0%
Spot USD/IDR at year-end 8,950 7,800 7,500 7,250 7,000 6,750 6,500 7,000
Spot USD/IDR yearly average 9,275 8,200 7,650 7,375 7,125 6,875 6,625 6,750
GDP growth 3.7% 4.0% 5.0% 6.0% 7.0% 7.0% 7.0% 7.5%


Scenario 2: “Muddle-through” (70% probability)

Political assumptions

• Some instability in global geopolitics (international terrorism, non-combat cross-border tensions in the Korean peninsula, etc), but without much effect on global economic recovery.
• Some instability in domestic politics (separatism in Aceh, terrorist attacks and central-regional autonomy issues), but the central government remains in control.
• The election of a coalition government (supported by the two largest political parties PDI-P and Golkar for instance) in 2004.

Economic assumptions

• Slow improvement in investment climate. While political uncertainty is gradually reduced after the 2004 general election, legal uncertainty remains high.
• On the positive side, strong trade and current account surpluses, supported by capital inflows attracted by the government’s privatization program.
• Strong current account surplus and capital inflows help strengthen the IDR, reducing inflation.
• Lower inflation induces interest rate cuts.
• Stronger IDR, lower interest rate and global economic recovery gradually revive investment and therefore domestic consumption.
• Gradually higher investment, domestic consumption and exports generate higher economic growth, but by less than potential due to the poor investment climate.

Economic forecasts

2002 2003 2004 2005 2006 2007 2008 2009
Inflation 10.0% 6.0% 7.0% 7.0% 7.0% 7.0% 7.0% 8.0%
Interest rate (1-month SBI at YE) 12.9% 7.5% 8.5% 9.0% 9.0% 9.0% 9.0% 10.0%
Spot USD/IDR at year-end 8,950 8,200 7,800 7,500 7,500 7,500 7,500 8,000
Spot USD/IDR yearly average 9,275 8,600 8,100 7,650 7,500 7,500 7,500 7,750
GDP growth 3.7% 3.8% 4.3% 4.8% 5.0% 5.0% 5.0% 5.5%


Scenario 3: “Pessimistic” (20% probability):

Political assumptions

• Serious global military conflicts, resulting in global economic recession and shrinking cross-border investment.
• Worsening domestic political crisis, with increasing terrorist attacks and a breakdown in law and order.
• Worsening armed separatist conflicts in Aceh and Papua, with negative effects on regional autonomy and Indonesia’s geographic integrity.

Economic assumptions

• Deteriorating investment climate, with higher political, legal and security uncertainties.
• Shrinking trade and current account surpluses, due to weakening exports, worsened by capital flights.
• Weakening current account surplus and capital outflows weaken the IDR, increasing inflation.
• Higher inflation and weaker IDR trigger interest rate hikes.
• Weaker IDR, higher interest rate, poorer investment climate and global economic slowdown reduce investment and therefore domestic consumption.
• Lower investment, domestic consumption and exports reduce economic growth.

2002 2003 2004 2005 2006 2007 2008 2009
Inflation 10.0% 8.0% 9.0% 10.0% 11.0% 11.0% 11.0% 12.0%
Interest rate (1-month SBI at YE) 12.9% 11.0% 13.0% 15.0% 16.0% 16.0% 16.0% 17.0%
Spot USD/IDR at year-end 8,950 9,000 10,000 11,000 11,000 11,000 11,000 12,000
Spot USD/IDR yearly average 9,275 8,800 9,500 10,500 11,000 11,000 11,000 11,500
GDP growth 3.7% 3.3% 3.0% 2.8% 2.5% 2.5% 2.5% 2.0%


with all the encouraging developments, looks like there's a chance we might be heading closer to the 'optimist' scenario. :)

It'll be interesting if IMA Asia's predictions are correct regarding a weaker rupiah as economic growth speeds up. That would put Indonesia in a very competitive position internationally without having to maintan the massive currout account surpluses and foreign exchange reserves like other East Asian economies. It would also give the economy a chance to become more export-oriented which means a lot more productivity-based cash as well as a lot more FDI. Lastly, it means my money would go further if I move there in 2007. :cheers:

Let's hope it all goes well, and that things remain stable and continue to improve.

We all share your hopes, Yamauchi...

Year of Microfinancing campaign launched
Muninggar Sri Saraswati, The Jakarta Post, Jakarta

The government officially kicked off on Saturday the Year of Microfinancing, a campaign to empower micro, small and medium-sized businesses (SMEs).

In his speech to mark the launc( of the nationwide campaign, President Susilo Bambang Yudhoyono stressed the significant role the sector would play in the drive to reduce unemployment and poverty.

With small-scale businesses numbering at an estimated 42 million across the country, he said, "if each business in this program manage to absorb just one extra worker, then this sector alone would be able to employ an additional 42 million workers."

Under the campaign, in line with the United Nations-led Year of International Microfinancing program, some Rp 50 trillion in bank loans is to be distributed to businesses across the country.

The government hoped the loans would reduce the current unemployment and poverty rate, from 16.6 percent to 8.2 percent, and from 9.7 to 5.1 percent, respectively.

At the ceremony Coordinating Minister for the Economy Aburizal Bakri said the banking sector had set aside about Rp 60.4 trillion this year in total loans for micro, small and medium business -- part of a planned credit expansion totaling Rp 106 trillion.

"The empowerment of micro, small and medium businesses is crucial to our economy as a whole. Annually, (the sector) contributes between 2 to 4 percent to GDP growth," Aburizal said.

Saturday's ceremony was also marked by the signing of the first loans, amounting to Rp 164.62 billion, between 11 businesses and several banks.

Elsewhere, Susilo urged Bank Indonesia and the banking sector to find ways to lower loan interest rates gradually to boost SMEs' access to financing.

Among the main problems faced by small-scale businesses are access to financing, a high-cost economy, lack of technological capabilities, lack of good management and entrepreneurship, unfair competition from larger businesses and a lack of industry associations.

The campaign will also include exhibitions in about 12 host cities across the nation, which will involve hundreds of SMEs.

I'm glad that SBY has the backbone to make the unpopular decision which will help the country later on. It's unfortunate that Megawati didn't have the backbone to cut the fuel subsidies. However, we need to cut it in order to help finance infrastructure projects all over Indonesia. If I could advised him on anything, I would advise SBY to have a forensic auditor go over Pertamina's book for any hint of corruption. I've read reports that the money that was taken from Pertamina alone could pay the national debt.

The corruption in state owned enterprises is HUGE business (to those taking part), and cleaning them up is the difficult part. I'd hope that SBY can take up those steps to clean up the country from corruption. We don't have to be the cleanest government in the world, but if we can cut corruption to say 25% of the current level I'd already be satisfied with SBY.

Just assume that corruption in pertamina is very very deep and un-fixable.
Can it be the actual reason why the goverment was rumoured going to sell pertamina?

Agree. 25% cut is amazing already. Plus what I want to see from SBY goverment is not only less coruption. But also profesionalism ;).

Monday February 28, 11:01 AM
INTERVIEW:Merrill Exec:Indonesia Invest Needs Legal Boost

By Phelim Kyne
OF DOW JONES NEWSWIRES

JAKARTA (Dow Jones)--Foreign investors are unlikely to pour money into Indonesian infrastructure projects unless the government delivers on promises to rectify a thicket of perceived investment-unfriendly regulations, a senior Merrill Lynch & Co. Inc. (MER) executive said.

ADVERTISEMENT


The Indonesian government is hoping to lure $90 billion in foreign and domestic investment to help pay for up to $150 billion in infrastructure projects ranging from toll roads to power plants over the next five years. Indonesia desperately needs to improve its creaking national infrastructure, but the government can afford to pay for only up to 17% of that total.

"There's a lot of private capital coming to Asia...(and) if Indonesia can provide the right regulatory body of case law, you'll see a lot of it come here," PT Merrill Lynch Indonesia president director designate Roger Suyama said in a recent interview with Dow Jones Newswires.

The government held an infrastructure investment summit in January at which it unveiled 91 infrastructure projects to investors, and promised changes to regulations including labor and tax laws that analysts have blamed for contributing to a 26% year-on-year decline in approved foreign direct investment to $10.3 billion in 2004.

The government's current focus on drawing up strong regulations to protect investors is positive for its ambitions to draw investment.

Even after legislation is in place, investors will likely tread cautiously and initially participate in Indonesia's infrastructure upgrade program with local partners, Suyama said.

"How those joint ventures go and whether they return a profit is going to have an impact on the amount of money that's going to come in (to Indonesia) in the next few years," he said.

Merrill Lynch recently organized $200 million in structured equity financing for the founders of Medco Energi International (MEDC.JK), the Panigoro family, to buy back a controlling stake in the firm.

More Indonesian deals were in the pipeline, Suyama said, without elaborating.

"I think we'll see more listings, more IPOs, maybe dual listings and I think we'll see more capital raisings in Indonesia over the next year," he said.

-By Phelim Kyne, Dow Jones Newswires' Jakarta Bureau; 62 21 3983 1277; phelim.kyne@dowjones.com
-Edited by Lim Mui Khi

http://www.ide.go.jp/English/Publish/pdf/2005_indne.pdf

Japan Keen To Help Indonesia Build Support Industries
JAKARTA (Dow Jones)--Japan is keen to help Indonesia build its support industries to boost the Southeast Asian country's businesses, which have been crippled since the 1997-98 Asian financial crisis, Senior Economics Minister Aburizal Bakrie said Tuesday.

"Jetro (Japan External Trade Organization) has offered to help us build support industries because the weakness of our automotive and electronic industries lies in the weak support industries," Bakrie said on the sidelines of a seminar sponsored by Jetro.

Jetro is a government-related organization that works to promote trade and investment between Japan and other countries.

Support industries usually produce accessories for key products, such as air conditioners for cars. In many countries, such goods are manufactured by small and medium-sized enterprises.

Jetro's chairman and chief executive Osamu Watanabe said Japanese companies are closely watching developments in Indonesia as President Susilo Bambang Yudhoyono and his government have pledged to improve the business environment here.

"They are very expectant about (measures) the government under President Yudhoyono (will take)," Watanabe told Dow Jones Newswires.


" (Indonesia's) economy has suffered for seven years; in seven years, the circumstances of East Asia have changed dramatically, and (Indonesia's) economy is far behind other countries, but (its) potential is very high," he said.

Watanabe said Japanese investors are ready to help Indonesia improve its infrastructure, but the government must take concrete action to fight entrenched corruption and revise the labor law, which makes it difficult for companies to fire incompetent employees.

Japan has been the top foreign direct investor in Indonesia for decades. Companies such as Toyota Motor Corp. (TM), Daihatsu Motor Co. (7262.TO) and Matsushita Electric Industrial Co. (MC) have large investments here.

However, some Japanese companies like Sony Corp. (SNE) have closed their manufacturing facilities in the last few years after being dogged by prolonged labor strikes.

Bakrie said he told Japanese company executives in the seminar that the government will amend the labor law and cut down on administrative processes to encourage the entry of new businesses. He didn't elaborate.



Note: News just in, there was a deflation of 0.17% in February...weird, hardly ever happens!

Yeah, deflation in feb...what a shock..

Anyway, indonesia january trade surplus is $2.12 Billion and forex reserves up to $36.6 Billion.

http://www.bps.go.id/releases/New/

cheers

Yeah, deflation in feb...what a shock..

Anyway, indonesia january trade surplus is $2.12 Billion and forex reserves up to $36.6 Billion.

http://www.bps.go.id/releases/New/

cheers


we will see next month after the fuel price hike if this can be maintained..

It's quite strange though this issue has not been discussed in this forum. Remember that what triggered the big demonstration in 1998 was after Soeharto announced fuel price increased. This is also seemingly a taboo for other presidents before SBY.
Let's see if he can pass this tough exam....

No, this one is different, The protests has been relatively small....not even thousand...only 100 -500 max...but the media is making it as a big event. The responds from the demonstration is limited as people using cars/motorcyle are angry with the students blocking the way. I think most of indonesian people is tired of demonstration eventhough they disagree with the fuel hike decision.

cheers

That inflation (or should I say deflation) rate won't be maintained. It's really significant in the fact that it will help the government achieve it's year-end estimates for inflation in the face of fuel price hikes.

Wednesday March 2, 01:55 PM

Indonesia Posts 4.84% Month-On-Month Drop In Jan Exports

JAKARTA, March 2 Asia Pulse - Indonesia's exports fell 4.84 per cent in January to US$6.13 billion from US$6.45 billion in the previous month but rose 21.63 per cent from the same month last year.

The Central Board of Statistics (BPS) said the month-on-month decline was caused by a 4.13 per cent decrease in the exports of non-oil/gas commodities to US$4.91 billion and a 7.56 decline in the exports of oil and gas to US$1.2 billion.

Exports of oil products shrank 33.83 per cent to US$66.9 million and exports of gas dived 18.94 per cent to US$620.6 million, but exports of crude oil rose 17.31 per cent to US$536.1 million, BPS chief Choiril Maksum said on Tuesday.

Maksum said the increase compared with the same month in 2004 was attributable to 27.8 per cent rise in the exports of non-oil/gas commodities and a 1.92 per cent increase in the exports of oil and gas.

Meanwhile, imports were valued at US$4.01 billion in January, down 16.67 per cent from December, 2004, but rose 19.87 per cent compared with the same month last year.

(ANTARA)

Economic revival around Asia?

SINGAPOREANS are still talking about it: the diplomatic love-fest between their leader and Indonesia's.
It's not what Southeast Asians are used to. Petty squabbles with neighbors? Yes. Hollow pledges of economic cooperation? Absolutely. Grand visions of Asia taking on the West? Oh yeah. Genuine teamwork between leaders? Nope.

Yet that's precisely what Singaporeans observed last week when Susilo Bambang Yudhoyono made his first trip here as Indonesian president.

Such warmth toward a key neighbor like Singapore indicates how much has changed in Indonesia since President Suharto was toppled in 1998. Yudhoyono noted, for example, that Singapore Prime Minister Lee Hsien Loong sometimes calls him with barely 10 minutes notice. It makes the tensions of the Suharto era seem like distant history.

In office since October, Yudhoyono also is pledging to tackle some huge impediments to foreign investment: corruption and cronyism. The same thing comes from the Malaysian leader, in office since late 2003, and the recently re-elected ones of the Philippines and Thailand.

The common thread is a determination to end the legacy of graft that's left an enduring impression on foreign investors. While Southeast Asia has made progress in rooting out so-called "crony capitalism," much remains to be done. That a critical mass of Asian leaders is intensifying the effort is a plus for economies and markets.

Detecting seminal moments in Southeast Asia is based more upon gut feeling than science. The region's new leadership could end up being a head fake, just like previous periods of optimism. A healthy dose of skepticism is always advisable.

Asian markets, among the world's best performers in 2004, are already on a roll. Having them under new — and, hopefully, more transparent — leadership could be an additional tailwind, resulting in lower bond yields and higher stock prices in the years ahead.

It's a far cry from the past two years, when a slew of elections, tensions between China and Taiwan and a failed effort to impeach South Korea's president roiled markets. Many of the biggest surprises in markets have come not from economics, but politics. And that's still a risk amid recent developments in North Korea.

Yet the mood change in Southeast Asian leadership shouldn't be ignored.

Gone, for example, is controversial Malaysian Premier Mahathir Mohamad, with his market-shaking comments about currency traders, Jews and Asian neighbors. His successor, Abdullah Ahmad Badawi, worked quickly to present a kinder, more investor-friendly face to bring Malaysia's economy to the next level.

In Indonesia, the Suharto-cronies-run-the-show dynamic of the past is giving way to a more entrepreneurial environment. It's unclear whether Yudhoyono can clean up an economy that watchdog group Transparency International lists among the most corrupt. He's saying the right things, though, and investors are responding. Indonesian stocks are up more than 9 percent so far this year.

Philippine President Gloria Arroyo is promising to tackle the daunting problems of tax evasion and swelling government debt. Skepticism on whether she will succeed prompted Moody's Investors Service recently to lower the Philippines' credit rating two notches to B1, four levels below investment grade.

Still, it's heartening to see the leader of one of Asia's most fragile and geopolitically important economies working to narrow an out-of-control budget deficit that's spooking investors.

Perhaps just as important, Asia is increasingly looking inward — not to the West — for solutions to the corruption, scandals and poverty of the past. Leaders are pursuing a policy of Asian self-sufficiency, and bonds are part of it.

Prior to the 1997 Asian crisis, economies pursued a purely mercantilist strategy of exporting cheaply produced goods to richer nations. They also lived off lots of foreign direct investment.

Abdullah, Arroyo, Thai Prime Minister Thaksin Shinawatra and Yudhoyono personify the new breed of Southeast Asian leaders who are less interested in serving the West and parking money in U.S. Treasuries. Hence efforts to create an Asian bond market. Such an entity would enable Asia to keep more of its savings at home to pay for infrastructure, education and health care so critical to progress in developing nations.

It's a vital effort, and it's heartening to see Asian leaders taking it seriously. A regional bond market would give companies more opportunities to raise capital and deepen transparency. It would lower debt yields in a region that has traditionally paid more to borrow than the West, often from banks rather than from capital markets.

Increased foreign direct investment is always desirable, too. Renewed interest among institutional investors is obvious in rising equity values here. Boosting the kind of long-term investment in companies and factories that creates jobs and raises living standards is also on the agenda in Southeast Asia.

Consider Thailand, which, during Thaksin's four years in office, has shown modest interest in foreign direct investment. Thaksin's re-election on Feb. 6 and a strengthened mandate may accelerate privatization. That could go a long way toward Asia's ninth-biggest economy winning more attention and foreign capital.

The same holds true for the rest of Asia, which is constantly grappling with how to avoid getting lost in China's boom. Now that a new crop of leaders is on board to complement some reform-minded ones already in power, Asia's economic revival may prove to be even more sound.


William Pesek Jr. is a Bloomberg News columnist.

Bright future ahead of us?? see below...

Analysis: Indonesia bites the bullet; economy to reap benefit

SINGAPORE: Name a country where annual automobile sales are rising by 50 percent, monthly approvals for foreign direct investment are tripling and the benchmark stock index is setting a record almost every week?

No, it’s not China or India. The answer is Indonesia. More than seven years after Southeast Asia’s biggest economy was hobbled by massive capital flight during the Asian financial crisis, Indonesia is re-emerging under a new president on the radar screens of global investors.

President Susilo Bambang Yudhoyono has raced to get businessmen back to Indonesia despite the distraction of the Dec. 26 tsunami, which left more than 236,000 dead or missing. This week he took arguably the toughest decision by any Indonesian president: he raised fuel prices by an average 29 percent to cut budget subsidies. Analysts say Yudhoyono may not only get away with the unpopular move, he may even earn kudos from investors eyeing Indonesia’s upcoming $1 billion bond sale.

“He’s likely to survive,” said Fauzi Ichsan, an economist at Standard Chartered’s Jakarta office, who called Yudhoyono’s move a “a bold political act” in a report titled “The government finally bites the bullet”.

“Fiscally it’s the right thing to do. It is what the market wants, it is what the international investors, the World Bank and IMF have been asking for,” Ichsan wrote.

Although previous governments have collapsed while trying to raise fuel prices, Yudhoyono has a strengthening economy on his side and the democratic mandate that comes from his convincing victory in last year’s first direct presidential election. Many economists who wrote off Indonesia when the crisis sent investors fleeing and buried banks under a mountain of bad loans are now paying tribute to the economy’s new-found resilience.

“Indonesia will be the only Asian economy which will grow faster in 2005 compared to 2004,” said DBS Bank economist Wong Chee Seng, who expects growth to exceed 6 percent this year.

“Rising infrastructure investment, greater trade deregulation and continued efforts to lower business costs will make Indonesia an exception in 2005,” Wong said in a recent report. The economy grew 5.1 percent in 2004, the fastest since 1996. Domestic vehicle sales jumped almost 50 percent in January, after a 36 percent rise in 2004. Foreign direct investment approvals surged to $872.1 million in January, compared with $260.2 million a year earlier.

Yudhoyono boost: Jakarta’s benchmark stock index, which has more than doubled in two years, has hit a record high almost every week since October on optimism Yudhoyono will keep his promise to bring strong governance to a country long stained by corruption. The spread between Indonesia’s government bond yields and comparable U.S. yields, a measure of a country’s attractiveness to investors, has fallen sharply since Yudhoyono came to power.

Indonesia has had a series of weak governments since President Suharto was ousted amid street protests in the aftermath of the 1997 crisis. Net foreign direct investment has been negative each year since then. Yudhoyono, a former general, has promised 6.5 percent annual growth over the next five years by cutting red tape, streamlining the country’s often conflicting federal and regional laws and lifting millions out of poverty.

Ichsan, who expects the rupiah to appreciate almost 8 percent this year to 8,600 per dollar, said all this could augur well for the proposed $1 billion bond sale.

The issue will be a reprise of a 10-year international bond last March that raised $1 billion at a yield of 6.85 percent, or 277 basis points over U.S. Treasuries. Since then the spread has narrowed to 195 bp or 1.95 percentage points. Ichsan said an improved economic outlook and fiscal prudence — the government lowered its budget deficit to 1.3 percent of GDP in 2004 from 1.8 percent in 2003 — will help boost Indonesia’s credit ratings and lower its borrowing costs.

Rating agency Fitch rewarded Yudhoyono for the changes he has initiated by upgrading Indonesia’s debt rating to BB- in January, while Moody’s Investors Service raised its rating outlook to positive last month. “Corporates are on a stronger note, net profits are rising,” said Ai Ling Ngiam, associate director at Fitch Ratings, which has left open the possibility of further upgrades.

“The corporate surpluses will lead to business expansions, dividends or more mergers and acquisitions. Banks are beginning to lend to the bigger corporates in Indonesia after they reduced bad loans through debt restructuring,” Ngiam said.

Gross fixed capital formation surged 15.7 percent in 2004, compared with 2 percent in 2003, on the back of strong demand for Indonesia’s coal, gold, copper and iron ore from China and India. JPMorgan economist Sin Beng Ong is less optimistic than Ichsan on the rupiah, which he expects to weaken to 9,800 per dollar by the end of the year. Ironically, Ong is bearish on the currency because he is bullish on the economy: he is forecasting 15 percent fixed asset investment growth this year, which will suck in imports. —Reuters

Home | Business

http://www.dbs.com/researchasset/mktoutlook/2005/1Q/mos_q2005q1id.pdf

other markets: http://www.dbs.com/research/mktoutlook/

Yeah, I see bright future for Indonesia. After this few weeks if everything goes smooth and inflation data on march is lower than expected, then we will see more equities investment to Indonesia.

cheers

lets all hope so.
wow, if this happens i.e. 6% growth in 2005 - and if the government can sustain and work on close to 7% growth in 2006, then it'll be a miracle. just two years ago, who would've thought that Indonesia could achieve 6%+ growth in such a short period of time?? Many analysts back then had permanently scrapped indonesia off the list of Asian tigers, forecasting that it will continue to "muddle through" with a growth rate of about 5% till 2009..

hey economics forumers - one question. What scenario, do you think, would Indonesia now be facing instead had Megawati won a second term in 2004?? same, better or worse? and why?

Oh man i couldnt imagine that. But for sure, Finance minister Budiono will be in his post right now, that means very tight fiscal policy which lead to a modest growth between 4 to 5 %. In conclusion, as much as i love Budiono, i think hes not in the right position for Indonesia this coming years, if the country wants to get 7% growth achieved. Because his view is to strengthen his tight fiscal policy and stability in monetary policy, which lead to small current account/budget deficit.


cheers

its not totally black and white though, Jusuf Anwar also generally favours an IMF/Worldbank school of tight monetary policy and prudent fiscal. ANd also, credible rumours that Budiono was actually SBY's first choice for Finance Minister again? I say the crucial difference between SBY and a re-elected Megawati govt. would be in the composition/proportion of business-people/entrepreneurs in the cabinet , which in turn affects how well the govt cooperates with business interests.

I must say that , based on what I've read and what I know, Mega's appointment of Jacob Nua Wea as labor minister was possibly the single biggest mistake that she made (in the area of economic recovery). Why would anyone appoint a former labor union leader to be Minister of Labor when the overall direction of government is towards free market, privatisation, deregulation etc which requires a flexible labor market ? James Castle - a renowned indonesian economic expert - commented 2 years ago that Indonesia's labor laws is one of the most Anti-Business in Asia...

err.. abit OOT..
i think this is time to lock this thread and put it to the resipotory?
its pass 500 post marks already.

err.. abit OOT..
i think this is time to lock this thread and put it to the resipotory?
its pass 500 post marks already.

well, I kinda disagree with it Sanhen, we have some thread pass 500 posts and I don't know how to access them. Besides, I saw in some other forums there are threads with more than 1000 posts and still open.
That's only my opinion though, final decision would leave it to all you guys.

Can anyone with a subscription to The Economist give an overview of the latest issue's article entitled "Overhauling Indonesia's Economy"? I'm sure it is quite good.

hmm ... I'll try to get hold of this magazine and let you know.

It's no big deal Alvin, I can buy it if I have to. Actually, I'm sure I could find it at a library. It was just a thought for anybody that might already have a subscription. Here is the really good cover though:

http://www.economist.com/images/20050305/20050305issuecovUS400.jpg

JAKARTA, March 4 (Reuters) - The French government has offered Indonesia $65 million in debt relief in exchange for investing in some areas of the country, such as the tsunami stricken province of Aceh, an Indonesian minister said on Friday.
"The French have offered a debt swap against investment in some regions, such as Aceh, with a total value of $65 million," Chief Economics Minister Aburizal Bakrie told reporters.
He said some French companies were interested in investing in Indonesia because economic conditions had become more stable. He gave no further details.
In November, Germany agreed to 23 million euros ($30.53 million) in debt relief in exchange for Jakarta's promise to use the funds for education and for fighting poverty.
Such deals could be increasingly attractive for Indonesia as it is no longer able to reschedule its debt under the Paris Club after deciding not to extend a programme with the International Monetary Fund when it expired at the end of 2003.
Some analysts have said that although such amounts were small compared to Indonesia's total foreign debt of around $80 billion, the deals could pave the way for similar arrangements with other countries.

(Adds background)
JAKARTA, March 4 (Reuters) - Indonesia will offer two trillion rupiah ($214 million) of treasury bonds in an auction on March 29, a senior finance ministry official said on Friday.
The government plans to issue 43 trillion rupiah of bonds this year to finance the budget deficit. It has so far sold eight trillion rupiah of paper.
"We plan to hold an auction on March 29. The indicative target will be two trillion rupiah," Mulia Nasution, the ministry's director for debt issues, told reporters.
A lack of attractive alternative investments, with bank deposits yielding around five percent, some two percentage points below the inflation rate, and the relatively small amount of bonds scheduled for issue this year have underpinned demand for Indonesian bonds recently.
($1=9,335 rupiah)

Indonesia opens tender for infrastructure projects

JAKARTA - The Indonesian government will start opening tenders this month for 15 infrastructure projects to be financed by private investors, Chief Economics Minister Aburizal Bakrie said.

Aburizal said the tenders will be a follow-up to the infrastructure summit held here in January.

Six of the projects are toll roads, while there are two gas pipeline, two oil pipeline, two drinking water supply and two airport projects and one sea port project.

Aburizal said funds for the six toll-road projects are expected to be available by the end of this year, meaning construction could start in 2006.

Construction of other projects is expected to follow in the middle of next year, he said.

Earlier the government said a number of consortiums involving local and foreign companies, were eyeing the six toll road projects valued around US$1.33 billion.

The government said altogether the country needs around Rp1,305 trillion (US$1.415 trillion) to build and modernize its infrastructure, but it could only put up only around Rp495 trillion.

Private investors, therefore, are expected to take part in the development of the country's infrastructure, it said.

(Asia Pulse/Antara)

Yamauchi, got a few quesitons here..
1. ok, when they say the economy grew 6.7% in Q4, 2004, what does this figure mean? Which two GDP figures did they derive this 6.7% figure?
2. Apply the above question to the the annual rate of 5.13%?

I've been uncertain about this,, hope you would shed some light on it :)

When they say the economy grew 6.7% in Q4 2004 it doesn't really mean it grew that much during that quarter. They compare the GDP in Q4 2004 to Q4 2003, and in this case the economy was 6.7% larger than it was in 2003. In reality, the economy actually slowed down a bit in Q4 2004 compared to Q3 2004, but that's not bad or anything. It's just cyclical, it happens every year in every economy. It's pretty complicated, but what it means is that in Q4 2003 the economy slowed down quite a lot, whereas in Q4 2004 it didn't slow down much at all. So we get the number that year-on-year the Indonesian economy expanded 6.7% in the fourth quarter of 2004.

The 5.13% figure is simply comparing the entire output of the economy, or GDP, for the entire year of 2004 to the year 2003. When the numbers are finished, they got that the economy grew 5.13% over the previous year. That means the GDP growth rate is 5.13%.

Ok, I understand your points, but still remain slightly confused. when you say 'the GDP in Q4 2004/2003' , does that mean the GDP figure as it stood on 31st December 2004/3? If that's the case, what difference would it be with comparing the "for the entire 2004/3". Wouldn't the GDP figure for the entire 2004 be measured as the GDP on the 31st December 2004 as well?

I think how they count GDP is similar with how they does with the inflation data. For example, YoY inflation in jan was 7.1(?) with jan(1-31 jan) inflation alone is 1,3%(?)

Anyway, Bonds lovers, here is good news for you.

Indonesia to start marketing global bonds next week

JAKARTA, March 8 (Reuters) - Indonesia expects to start marketing a $1.0 billion global bond in Hong Kong and Singapore next week, its second sovereign offering since the Asian financial crisis, a government official said on Tuesday.
"It will likely be around (March) 16, in Hong Kong and Singapore. The road show will last until around (March) 23," Mulia Nasution, the director general in charge of treasuries at the finance ministry, told reporters.

He declined to elaborate.

Citigroup , Deutsche Bank and UBS are the lead underwriters of the planned issue, while Credit Suisse First Boston and JP Morgan are the co-lead underwriters.

Jakarta raised $1 billion from a 10-year bond issue in March last year.

Indonesia has said the new bonds would be used to help plug the state budget deficit at a time when investor confidence in the country is improving.


Global rating agency Fitch Ratings upgraded Indonesia's long-term foreign and local currency ratings by one notch to BB-minus in January, still three notches below investment grade, citing reduced political risk and strong economic growth.

Moody's Investors Service upgraded the outlook on Indonesia's B2 foreign and local currency ratings to positive from stable in February.

GDP 2004 percapita. Well, Indonesia GDP percapita is back to pre-crisis level in 1997 :cheers2:


http://www.imf.org/external/pubs/ft/weo/2004/02/data/dbcoutm.cfm?SD=2005&ED=2005&R1=1&R2=1&CS=3&SS=2&OS=C&DD=0&OUT=3&C=914-446-612-666-614-672-311-946-213-137-911-962-193-674-122-676-912-548-313-556-419-678-513-181-316-682-913-684-124-273-339-921-638-948-514-686-218-688-963-518-616-728-223-558-516-138-918-353-748-196-618-278-522-692-622-694-156-142-624-449-626-564-628-283-228-853-924-288-233-293-632-566-636-964-634-182-238-453-662-968-960-922-423-714-935-862-128-716-611-456-321-722-243-965-248-718-469-724-253-576-642-936-643-961-939-813-644-199-819-184-172-524-132-361-646-362-648-364-915-732-134-366-652-734-174-144-328-146-258-463-656-528-654-923-336-738-263-578-268-537-532-742-944-866-176-369-534-744-536-186-429-925-178-746-436-926-136-466-343-112-158-111-439-298-916-927-664-846-826-299-542-582-443-474-917-754-544-698-941&S=NGDPDPC&CMP=0&x=19&y=10

cheers

Alvin, I'm not exactly sure what you are asking. Here is my attempt to illustrate how they get the growth figures. I doubt it helps much. These are all made up numbers by the way.

http://img100.exs.cx/img100/9533/gdp7wv.jpg

I can see it clearly now..Thanks man! :okay:

Bank Indonesia Plans to Raise Rates to Stem Inflation (Update3)
March 9 (Bloomberg) -- Indonesia's central bank said it will raise interest rates because a government decision this month to increase fuel prices threatens to stoke inflation.

The yield on one-month central bank bills, the benchmark interest rate, will be raised in ``a gradual and measured manner during 2005,'' Erwin Riyanto, Bank Indonesia's head of public relations, said in a statement late yesterday after a meeting of the bank's board of governors.

The government of President Susilo Bambang Yudhoyono decided on March 1 to reduce fuel subsidies in a bid to narrow the budget deficit. The central bank said it's concerned the decision may spur increases in consumer prices, which rose 7.2 percent from a year earlier in February, close to the fastest pace in 21 months.

``To mitigate inflationary pressure due to the fuel-price increase, there is a need to make more preventative and other efforts,'' the central bank statement said.

The yield on one-month Bank Indonesia bills was 7.43 percent at the March 2 auction, unchanged from the previous sale on Feb. 16. Anton Gunawan, an economist at Citigroup Inc. in Jakarta, predicted the rate might rise by as much as 1 percent this year.

``I don't think the central bank will increase the rates drastically,'' Gunawan said.

The central bank repeated its forecast for economic growth of between 5 percent and 6 percent in the first quarter.

The rupiah rose 0.1 percent to 9,370 to the dollar as of 9 a.m. in Jakarta. The currency has declined 1.1 percent this year, the worst performer among the 15 Asia-Pacific currencies tracked by Bloomberg News.

Indonesia's government, moving to reduce its $3.1 billion budget deficit, last week scrapped most subsidies, leading to an average 29 percent rise in the cost of fuel.



To contact the reporter on this story:
Wahyudi Soeriaatmadja in Jakarta wahyudi@bloomberg.net; Naila Firdausi in Jakarta at nfirdausi@bloomberg.net.

To contact the editor responsible for this story:
Adrian Kennedy at adkennedy@bloomberg.net.
Last Updated: March 8, 2005 21:30 EST

UPDATE 2-HTIL to pay $120 mln for stake in Indonesia carrier

HONG KONG, March 9 (Reuters) - Hutchison Telecommunications International Ltd. (HTIL), the emerging markets phone arm of conglomerate Hutchison Whampoa Ltd. , said on Wednesday it would pay US$120 million for a 60 percent stake in a start-up cellular carrier in fast-growing Indonesia.
HTIL , controlled by Asia's richest businessman, Li Ka-shing, is buying control of PT Cyber Access Communications, which it said may launch services in 2006.

It will be playing catch-up to established carriers including the country's largest phone company, PT Telekomunikasi Indonesia Tbk , and number-two group PT Indonesian Satellite Corp. Tbk (Indosat) .

The initial start-up cost will be about $300 million, which HTIL and its 40 percent partner, a unit of Thai agribusiness conglomerate CP Group, will fund in proportion to their holdings.

Total investment in building the second-generation cellular business, which will begin with service in densely populated Java, should not exceed US$1 billion, HTIL said.

The deal follows HTIL's recent approval to enter the Vietnam cellular sector, and gives it access to a market that the government expects will grow by 40 percent this year to roughly 41 or 42 million users

Indonesia had about 30 million cellular customers last year out of a population of 220 million, a penetration rate of roughly 14 percent. In China, the world's largest mobile market, more than a quarter of the population has a cellphone.

The Indonesian market grew by more than 40 percent last year.

"Together with CP Group ... we are well-positioned to establish a leadership position in a telecoms market with tremendous growth potential," HTIL Chief Executive Dennis Lui said in a statement.

Cyber Access has nationwide licences to offer both second and third-generation services, but HTIL said the company only plans to offer 2G services in the near-term.

The deal requires regulatory approval.

Indonesia is a lower-income market, where pre-paid users, making up the vast majority of customers, typically spend just $8 or $9 a month on cellular services, HTIL said.

By comparison, average revenues per user (ARPU) for pre-paid customers at Hutchison's cellular affiliate in fast-growing India were about $7.27 a month in the fourth quarter of 2004.

Shares in HTIL have jumped 30 percent since the company's US$890 million initial public offering in October, which was received coolly by Hong Kong retail investors. The stock closed down 1.89 percent at HK$7.80 on Wednesday.

HTIL has cellular phone holdings in markets including Hong Kong, India, Thailand, Israel, Ghana and Paraguay.

Mazda May Make Indonesia South East Asian Production Base

JAKARTA, March 14 Asia Pulse - Japan's Mazda Motor Corp is considering to make Indonesia the production base for a multi purpose vehicle (MPV) product as part of its marketing strategy in southeast Asia.

Frans C. Harsono, chief executive officer of PT Unicor Prima Motor, the exclusive distributor of Mazda in the country said Mazda Motor had decided to build assembling plants in ASEAN.

In Indonesia, Mazda plans to assemble a number of MPV models such as Mazda-5 New Premacy, which sees marketing success in Japan, Frans said last weekend, adding the plan is being studied.

He said the key to success in market competition in this region is by producing cars locally.

He said in ASEAN, Mazda has assembling facilities in Indonesia, Thailand and the Philippines.

(ANTARA)

Wow...I am surprised...no one is posting this news...This is Indonesia biggest FDI in all time. The whole JSX was so excited today..thus it breaking the record high.

Philip Morris offers to buy Indonesia's Sampoerna for 5.2 bln dlrs

JAKARTA (AFP) - Marlboro maker Philip Morris said it is offering 5.2 billion dollars for one of heavy-smoking Indonesia's largest cigarette firms to expand its share of one of the world's biggest markets.

The US firm agreed to acquire a 40 percent stake in Sampoerna for 10,600 rupiah a share -- 20 percent higher than the closing price of 8,850 last Thursday -- and said it wanted to buy the remainder for the same amount.

Sampoerna's shares rose sharply on the offer, which Philip Morris International -- the operating arm of the Altria Group -- hopes to complete within 90 days, paying cash for the stock.

In what will be one of the largest tobacco industry acquisitions in recent years, Philip Morris will be able to tap into an expanding market, offsetting losses due to anti-smoking laws and costly health-related litigation elsewhere.

Some 70 percent of Indonesia's 213 million people smoke and 57,000 deaths a year are blamed on tobacco but there is little legislation to protect users.

Indonesia is the world's fifth largest cigarette market, after China, the United States, Russia and Japan.


"Our investment in Sampoerna is a great opportunity to significantly expand our business in the world's fifth-largest and growing cigarette market," Andre Calantzopoulos, president of Philip Morris International, said in a statement.

"Today's announcement reflects our confidence in the economic future of Indonesia and its tobacco industry, and positions us for profitable future growth by partnering with a well-managed and successful company that has an outstanding distribution and manufacturing infrastructure."

Sampoerna, which makes the notoriously strong-smelling and tasting kretek or clove cigarettes, including the Dji Sam Soe and A Mild brands, produced sales of nearly 1.0 billion dollars in 2004, making it Indonesia's third biggest tobacco firm with 20 percent of the market.

Cigarette firms are steady earners on Jakarta's stock exchange, which has enjoyed mixed fortunes in its efforts to recover from the 1997-98 Asian financial crisis, dogged by corruption, other abuses and high political risk.

Sampoerna, whose shares almost doubled in value over the last year, was up a sharp 16 percent at 10,300 rupiah in morning trade Monday on news of the deal.

Rival manufacturer Gudang Garam was up 2,300 rupiah or 14.11 percent at 18,600.

"This is an excellent development for our shareholders and employees," said Putera Sampoerna, the Indonesian firm's president.

Traders were caught off guard by the announcement, which comes just months after a Sampoerna subsidiary struck a deal to distribute Marlboro and other leading Philip Morris brands across Indonesia.

"It is surprising because we did not think of this scenario before," said Prayoga Triyono, an analyst with brokerage firm PT Henan Putirai. "I don't think Putera Sampoerna is in need of money."

Despite the substantial figures involved, the Philip Morris investment is unlikely to be viewed as the financial reversal of fortunes promised for Indonesia by new President Susilo Bambang Yudhoyono.

The government's priority is to attract 150 billion dollars of investment in infrastructure projects and the president has announced a war on graft red tape in an effort to attract foreign cash.

Malaysia's Astro to Set up JV in Indonesia

KUALA LUMPUR, March 14 Asia Pulse - Astro All Asia Networks plc (KLSE:5076) and the Lippo Group of Indonesia have agreed to set up a joint venture to provide multi-channel satellite pay-television and multimedia services in Indonesia.
The joint venture company, to be named PT Astro Nusantara, will have an initial paid-up capital of US$30 million, Astro said in a statement.

The joint venture is expected to start operations within the next four months, utilizing satellite transponders on Measat-2 intially with progressive migration to Measat-3, upon its launch later this year.

Astro will hold an effective 51 per cent stake in the joint venture with the balance held by PT Broadband Multimedia of the Lippo Group.

Astro also will provide shareholder loans of US$35 million repayable on the third and fourth anniversary of the loan drawdown.

Peak funding is estimated at US$200 million after four years of operations and the additional funding of US$135 milion is expected to be raised through a combination of third party loans, and equity and quasi-equity instruments.

The joint venture is expected to be profitable in the fourth year of operations.

It is estimated that Astro will have to account for operating losses of RM100 million, representing primarily market entry and start-up costs, for the current financial year ending 31 January 2006.

Astro Group Chief Executive Officer Ralph Marshall said the group is very pleased to be able to work with the Lippo Group, the pay-TV leader in Indonesia.

"We have been very focused on expanding our digital multimedia platform into Indonesia as it is a natural market extension for us," he said.

Azran Osman-Rani, Astro'S Director of Business Development said current penetration in Indonesia is only 0.8 per cent of the estimated 30 million television households against the 25-35 per cent penetration in neighbouring countries.

The target addressable Pay-TV market has the potential to grow up to some 10 million homes, representing about 25 per cent of the total TV homes, within the next five years, he said.

"We expect to achieve a 30-40 per cent share of this target segment, or some 3.5 million homes."

ASIA PULSE

Wow...I am surprised...no one is posting this news...This is Indonesia biggest FDI in all time. The whole JSX was so excited today..thus it breaking the record high.



David, I did post this news in the Industries thread! :)

Mar 15, 2005


Kyocera in Japan's exodus from Indonesia

JAKARTA - Indonesia is set to lose another Japanese company, with Kyocera Corp moving to close down its electronics parts manufacturing unit in late March.

Discouraged by increasing lawlessness and rising labor costs, a number of Japanese businesses have left the Southeast Asian nation, including Sony Corp, which exited the country in 2003, and Asahi Kasei Corp and Kanebo Ltd, which retreated from the market in 2004.

Kyocera began electronic parts manufacturing operations at a factory on Batam Island in 1995. The operations employ around 500 and produce thermal printer heads and other electronic parts. But Kyocera now plans to close the factory and dissolve the unit at the end of the month and transfer production to China.

Japanese companies have expanded into Indonesia since the 1980s. But the nation, which was once touted as the leader of the Association of Southeast Asian Nations, lost some of its luster after the collapse of the Suharto regime in 1998.

In addition to deteriorating public order and rising wages, frequent regime changes, a complex tax code, and rampant bribery are cited as among the reasons why Japanese firms have been pulling out of the country.

Reviving foreign investments is regarded as one of the urgent priorities of Indonesian President Susilo Bambang Yudhoyono.

(Asia Pulse/Nikkei)

LOL, sorry Alvin. my fault.

cheers

Indonesia to Accept Paris Club Moratorium Offers

JAKARTA, March 15 Asia Pulse - The Indonesian government will accept Paris Club moratorium offers on debts totalling US$2.6 billion which are due this year because doing so will be economically beneficial, a senior Finance Ministry official said.

"Economically, the moratoriums will benefit us because they will give us discounted interest rates," Mulia Nasution, the ministry's director general of state treasury affairs, said Monday.

Britain, France, Germany and Italy had agreed to implement debt moratoriums on Indonesia's debts without charging extra interest or imposing zero per cent of interest while Japan would lower its interest rate from 2.4 per cent to 1.3 per cent a year on the delayed payment of principal and interest, he said.

At its meeting last week, the Paris Club agreed to give Indonesia a five-year debt moratorium with a grace period of one year on US$2.6 billion of it debts.

Under the agreement, Indonesia would only pay principals plus interest from 2007 to 2010 while in 2006 it would only have to pay interest.

The moratoriums would also cover debts to Japan amounting to US$1.578 billion which comprised US$1.041 billion in principals and US$536 million in interest.

They would also apply to debts to Germany totaling US$274 million, to France totalling US$163.7 million, to British totalling US$132 million, and to Italy totalling US$3 million.

The debt moratoriums are expected to change the government's plan to issue additional state bonds from the current bonds of Rp43 trillion (US$4.6 billion).

State budget funds that had been allocated to pay the debts could then be used to finance Aceh reconstruction as requested by Paris Club, Mulia said.

(ANTARA)

Indonesia Jan-Feb FDI approvals at 3.24 bln usd - UPDATE

JAKARTA (AFX) - Foreign direct investment (FDI) approvals in January and February rose by 293 pct year-on-year to 3.24 bln usd from 826.4 mln a year earlier on a surge in new foreign investment projects, said the National Investment Coordinating Board (BKPM) in its monthly report.

BKPM said it approved 187 new FDI projects worth a total of 2.44 bln usd, 62 expansion projects worth 229.1 mln and 26 projects worth 571.7 mln, whose status was changed from domestic to foreign investment.

Meanwhile, domestic investment approvals in January and February rose by 112.3 pct to 6.71 trln rupiah from 3.16 trln a year earlier, also on the back of new projects approved, BKPM said.

It said it approved 29 new domestic investment projects worth 5.98 trln rupiah, 17 expansion projects worth 721.8 bln rupiah and one project worth 4.7 bln rupiah, whose status was changed from foreign to direct investment.
BKPM said its report does not include investments in the oil and gas sector, banking, non-bank financial institutions, insurance and leasing, mining in terms of contracts of works, investments licensed by the technical agency, portfolios and household investment.

It said that in February the chemical and pharmaceutical sectors attracted the highest FDI, in terms of value, of 2.21 bln usd with five projects, followed by the mining sector with 490.5 mln usd and four projects, the food industry with 102.6 mln usd and eight projects, and then the construction sector with 89.7 mln usd and 15 projects.
By country of origin, Britain topped the list of investors last month with 12 projects worth 550.9 mln usd, followed by Canada with one project worth 532.4 mln usd, Singapore with 38 projects worth 126.3 mln usd, Japan with 12 projects worth 114.6 mln usd and South Korea with 44 projects worth 58.6 mln usd.

The leading sectors among domestic investment projects in February was the service sector, which attracted two projects worth 2.89 trln rupiah followed by the food industry with eight projects worth 1.63 trln rupiah, the food crops and plantation sector with four projects worth 849.0 bln rupiah, the electricity gas and water sector with two projects worth 739.8 bln rupiah and the chemical and pharmaceutical sector with two projects worth 108.3 bln rupiah.

FDI approvals have been low over the past few years mainly because of Indonesia's poor investment climate. But analysts said investment activity began to pick up in the second quarter of last year, as indicated by the rise of imports for raw material and capital goods.

They said Indonesia's stable macroeconomic and the smooth passage of general elections last year led to renewed investor confidence.
(1 usd = 9,375 rupiah)

293% y-o-y rise in FDI approvals??? wow........... Hope this trend continues... :)

I can't remember the figures. What was the y-o-y increase in FDI approval in January? Just wanna know if the Jan-Feb average is higher (indicating an upward trend)

They were up 235% y-o-y in January. So, there is an upward trend. It'd be nice if it could be maintained.

Man, once this FDI starts to flow into the economy along with the infrastructure projects we're going to see a serious expansion of the GDP.

Analysis: Indonesia rupiah could rebound


By Sonia Kolesnikov-Jessop
UPI Business Correspondent


Singapore, Singapore, Mar. 15 (UPI) -- In a strong vote of investor confidence, Philip Morris International has agreed to a mega-deal in Indonesia, potentially worth $5.2 billion. This is good news for the rupiah which has been underperforming other Asian currencies in the region in spite of the U.S. dollar weakness. With the government about to issue $1 billion of sovereign bonds and the Paris Club of official creditors considering a one-year moratorium on debt service, the rupiah's outlook could finally be perking up.
On Monday, Philip Morris agreed to buy 40 percent of Indonesian tobacco company PT HM Sampoerna and made a public tender offer for the remaining 60 percent of shares at a 20 percent premium over last Thursday's closing price, putting the offer value at $5.2 billion.

The deal gives Philip Morris Internationals, part of the Altria Group Inc., a strong footstep in the kretek cigarette market, a type of clove cigarette which makes up 92 percent of the total Indonesian cigarette market.

If the deal is completed, Philip Morris will become the second-largest cigarette maker in the country after PT Gudang Garam with a 23.5 percent share of the fifth largest cigarette market in the world with some 210 billion units sold annually.

Importantly, Indonesia is viewed as a growth market for tobacco, with analysts predicting a percent compound average annual growth over the last 25 years.

According to Altria Chairman and Chief Executive Louis Camilleri, there is also an opportunity to export Sampoerna's kretek cigarette brands to other Asian markets.

Positively for Indonesia, the price tag paid for Sampoerna is seen as 'somewhat steep' by analysts.

"The deal reflects positively on Indonesia, in our view. That a foreign company is willing to invest around $5 billion in Indonesia surely indicates a vote of confidence in the country, especially in the consumer sector," said Laksono Widodo, economist at Macquarie Research.

"We expect this deal to also have a positive impact on the equity market, as investors may see this as a sign that foreign investment -- especially the non-portfolio type of investment -- has started to come to Indonesia," he added.

Despite market expectation the rupiah would strengthen after the year-end seasonal demand for debt repayment subsided, the Indonesian currency has continued to weaken since the start of the year from 9,250 level against the dollar to 9,370 this week.

This, despite a rally in the equity markets, which has added 11 percent since the end of 2004. "Net foreign equity purchases surged to a high of $280 million per month in November and is still running at about $150 million a month as of February," noted Teh Kwee Chin, economist at UOB Group.

Economists believe that what could have exaggerated the recent bouts of rupiah weakness is probably the recent surge in crude oil prices. Despite the recent partial removal of fuel subsidy, any rise in oil prices still flows directly into the subsidy of domestic fuel consumption and a $1 increase in crude oil prices translate into a $300-$400 million in annual subsidy.

"As the reform measures taken by President Yudhoyono continue to take hold, there is a good chance that foreign capital inflow will stream in, providing support to the currency. Philip Morris planned acquisition for Sampoerna is definitely a first sign of greater foreign investor confidence in the domestic economy. The next test will come in April if the planned $2 billion foreign currency sovereign issue proves to be well received," Teh noted.

There was further good news from investors this week in the form of the Paris Club news that about $2.6 billion out of the $3.3 billion principal payment due this year could be rescheduled.

The details of the rescheduling period have yet to be worked out, but there are some indication the principal payment of $2.6 billion could be spread across 2006-2010.

Total external debt payments due this year are worth around $19.5 billion.

"Combining a current account surplus (net of interest payments) of $5-6 billion, FDI flows of $2-3 billion, intra-firm debt payments of $4-5 billion, multilateral funds of $3 billion and sovereign bond issue of $2-3 billion, the shortfall for external debt payment in 2005 is around $1.5 billion. This

explains why the rupiah has barely moved in the last three to four months in spite of general dollar weakness," noted CSFB in a recent research note.

"If Paris Club debt relief of $2.6 billion does materialize, the rupiah could fall beyond our current forecast of 9,200 by year-end," CSFB said.

UOB Teh is even more optimistic saying that ruling out major missteps by the new government the rupiah could reverse its course of weakness and move towards the 9,000 level during the course of the year.





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Copyright 2005 United Press International

I've always thought that CHina presented Indonesia and SE Asia with competition in terms of attracting FDI...this study seems to prove otherwise?


UN study: China economic growth helps neighbors attract investment


A study released by the UN Conference on Trade and Development (UNCTAD) on Monday shows that China's industries, while attracting more foreign investment, are also helping other high-tech manufacturers in East Asia and Southeast Asia to attract more investment.

The UNCTAD report says the facts have proved the worry untenable cherished by some China's neighboring countries that the FDI they urgently need from foreign high-tech industries might divert to China.

The report says: "China has little impact on FDI inflows into other Southeast Asian countries."

The report stressed that as a matter of fact China has the greatest attraction for foreign investment among developing countries. Its economic growth is helping neighboring countries to attract more FDI and enter the integrative production network.

China's efficient manufacturing base strengthens rather than weakens neighboring countries' productive capabilities, enables them to give play to their respective productive advantages, the report added.

The report invoked statistics from China, Indonesia, Malaysia, the Philippines, Singapore, S. Korea and Thailand to reach the conclusion that no relationship of competition exists among the various countries in terms of attracting FDI to their own region.

By People's Daily Online

More potential FDI...


Malaysian Investor Offers to Build Indonesian Airport

JAKARTA, March 16 Asia Pulse - Malaysia's Trident Hill Sdn Bhd offered to build the Kualanamu airport in Medan with an investment of Rp13.5 trillion (US$1.5 billion), which also includes a toll road and other infrastructure.

The government has long planned to build a new airport to replace the old Polonia airport in Medan.

The Malaysian company promised to finish the construction of the project in three to four years.

Trident Hill chairman Dato's Sharma told the North Sumatra Governor Rizal Nurdin yesterday that his company would provide all the funds needed to build the project under the build, operate transfer (BOT) scheme.

Nurdin said in principle he agreed with the proposal and promised to arrange a meeting between the prospective investor and the airport development body set up by the communications ministry.

(ANTARA)

JAKARTA, March 16 (Reuters) - Indonesian vehicle sales, an indicator of economic activity in Southeast Asia's largest economy, were 34.6 percent higher in February than a year earlier, the country's largest automotive distributor said on Wednesday.

PT Astra International Tbk <ASII.JK> said 45,718 vehicles were sold in Indonesia in February, bringing sales for the first two months of 2005 to 91,199.

Astra's domestic sales in February grew 35.7 percent from a year earlier to 20,894 cars, trucks and vans, giving the company, partly owned by Singapore's Jardine Cycle & Carriage Ltd <JCYC.SI>, 45.7 percent of the domestic market.

The industry has a 2005 sales target of 520,000 vehicles. Last year, 483,283 vehicles were sold in Indonesia, up 36 percent from 2003.

Bisnis Indonesia newspaper on Wednesday quoted the secretary general of a local automotive industry association as saying that expectations of higher fuel prices did not harm sales in February.

The government raised domestic fuel prices by an average 29 percent on March 1 to help cut costly fuel subsidies.

Consumption has been the main driver of economic growth in Indonesia in recent years.

((Reporting by Harry Suhartono, editing by Rodney Joyce; harry.suhartono@reuters.com; Reuters Messaging: harry.suhartono.reuters.com@reuters.net; +62 21 384 6364)) Wednesday, 16 March 2005 15:22:38RTRS [nJAK56317 ] {C}ENDS

Man, that car sales data is amazing!

Anyway..here is more for you coffe lovers. Btw which one you prefer? coffebean or starbucks?

INDONESIA PRESS:Sari Coffee To Open 4 New Starbucks Units

JAKARTA (Dow Jones)--PT Sari Coffee Indonesia will open four new Starbucks outlets in the country this year, on top of the current 28, reports the Bisnis Indonesia daily.

"Within the next three months we will open four new outlets," the newspaper quotes Sari Coffee's General Manager Anthony Cottan as saying.

Sari Coffee is a unit of the listed PT Mitra Adi Perkasa (MAPI.JK). It opened its first Starbucks store in Jakarta in 2002 after obtaining a franchise license from the Seattle-based Starbucks Corp. (SBUX).

I prefer Starbucks, just because I've been there more often than Coffee Bean.

Altria to Boost Output of Indonesia's High-Tar Clove Cigarettes
March 16 (Bloomberg) -- Altria Group Inc.'s Philip Morris division, the world's biggest cigarette maker, may increase production of cigarettes with higher tar and more nicotine as the company enters Indonesia's $7.4 billion market for clove-flavored ``kretek'' cigarettes.

Philip Morris International Inc.'s $5.1 billion offer for PT HM Sampoerna, announced March 14, would give the New York- based company 19 percent of the Indonesian market for kreteks, the type favored by nine out of 10 of the country's 141 million smokers. Altria Chief Executive Officer Louis Camilleri said he plans to invest in increasing kretek production capacity.

As U.S. sales of tobacco decline amid lawsuits and health concerns, Philip Morris is expanding in the world's fifth-largest cigarette market, where there is no age limit and few other restrictions on smoking. Sampoerna's top-selling Dji Sam Soe brand, an unfiltered, hand-rolled kretek, has more than twice the tar and nicotine of Philip Morris's Marlboros.

``Everyone's had a look at them (Sampoerna) in the last 15 years,'' said Michael Chambers, who heads research for Indonesia, Thailand and the Philippines at CLSA Ltd. in Jakarta. ``No one has pulled the trigger because'' the company's cigarettes ``have very high nicotine and tar, and lots of clove.''

Sampoerna, the nation's third-biggest cigarette maker, PT Gudang Garam, the biggest, and PT Djarum control more than 80 percent of the market in Indonesia, according to Gappri, the Indonesian association of kretek producers. Only 8 percent of Indonesia's smokers prefer Western brands such as Marlboro, which Philip Morris this week said accounts for 50 percent of the non- clove cigarettes sold in the country.

`Part of the Fabric'

``I wish we had the power to change the consumers,'' Matteo Pellegrini, Philip Morris's president for Asia Pacific, said on March 14 in Jakarta. But ``in Indonesia, kretek are part of the fabric and the tradition. The kretek market is growing.''

Kretek cigarettes deliver more nicotine, carbon monoxide and tar than conventional cigarettes, the U.S. Center for Disease Control said in a July 2004 fact sheet on its Web site. Dji Sam Soe contain tar levels as high as 39 milligrams per stick and deliver as much as 2.3 milligrams of nicotine. That compares with 14 milligrams of tar and 1 milligram of nicotine in Philip Morris's top-selling Marlboro brand in Indonesia.

``With regard to kretek and whether cloves have more harmful compounds than tobacco, our internal assessment suggests that there is no difference whatsoever,'' Altria Chief Executive Camilleri said on a March 14 conference call.

Cloves contain eugenol, a chemical used as a dental anesthetic that numbs the effect of smoke in the throat for kretek smokers.

No `Safe' Cigarette

``We have been very clear in every country in which we do business that there's no such thing as a safe cigarette,'' David Davies, senior vice president for Philip Morris, said yesterday by telephone from Jakarta. ``A low-tar cigarette is no safer than any other cigarette and consumers should simply be guided by an understanding that there is no safe cigarette.''

Indonesia produced 214.6 billion cigarettes last year, 196.2 billion of which were kreteks, according to the industry association.

Sampoerna sold 41.38 billion cigarettes last year, a 13 percent increase from a year earlier. Sales of its A Mild brand rose a quarter to 16.68 billion, while sales of Dji Sam Soe rose 4 percent to 16.81 billion.

``Dji Sam Soe is the oldest kretek brand in the market. It's the great equalizer in Indonesia,'' said Mark Hanusz, author of the book ``Kretek: The Culture and Heritage of Indonesia's Clove Cigarettes'' and a former analyst for the industry. ``The CEO and the taxi driver both smoke it, it's at every level of society.''

Hand-Rolled Cigarettes

Sampoerna was started in 1913 by Liem Seeng Tee, a Chinese immigrant, making hand-rolled cigarettes. In 1932 the company's name changed to Sampoerna. The company has four plants in East Java province, including three that produce hand-rolled sticks.

By Sept. 30, 2004, the company's assets were valued at 11.8 trillion rupiah. Sampoerna's sales of cigarettes last year rose 15 percent to 14.5 trillion rupiah.

Indonesian cigarette companies are benefiting from an economy that's growing at the fastest pace in at least four years, giving people more money to spend on cigarettes. Vendors often sell by the stick in Indonesia, where more than half the population earns less than $2 a day, according to the World Bank, and a packet of 12 cigarettes costs about 53 U.S. cents.

Philip Morris plans to increase Sampoerna's manufacturing capacity to boost its share of the kretek market, Altria's Camilleri, 50, said on March 14. Demand for conventional cigarettes will ``continue to be contained'' by Indonesian smokers' preference for kreteks, he said.

Big Employers

Kretek makers benefit from government support for an industry that provides employment for about 600,000 people, from tobacco growers to the women specially chosen by Sampoerna to roll its Dji Sam Soe cigarettes. Sampoerna has about 26,000 workers.

The tobacco industry also provides most of the excise taxes the government collects each year, estimated at about 29 trillion rupiah, or 1.3 percent of gross domestic product.

The importance of the industry has helped manufacturers resist pressure to raise cigarette duties and reduce the amount of tar and nicotine in kreteks.

A 1999 law to limit the levels of chemicals in kreteks was abolished in 2003 because of concern it may hurt the country's smaller cigarette makers.

The government doesn't plan to increase tobacco taxes this year, Eddy Abdurahman, director general of excise and custom, told reporters last month.

Philip Morris this week said the 40 percent stake it bought in Sampoerna came mostly from shares owned by the Chairman Putera Sampoerna, 57, a grandson of the founder. Philip Morris said it is offering 10,600 rupiah a share for the remaining 60 percent, and plans to complete the purchase within 90 days.

Putera Sampoerna took control of the business from his father in 1980. One of his first actions was to buy Philip Morris's production facilities in Malang, according to Hanusz's book. Michael Sampoerna, 25, the youngest son of Putera Sampoerna, is the company's chief executive.



To contact the reporters on this story:
Sara Webb in Singapore at swebb5@bloomberg.net;
Soraya Permatasari in Jakarta at soraya@bloomberg.net.

To contact the editor responsible for this story:
Adrian Kennedy at adkennedy@bloomberg.net.
Last Updated: March 16, 2005 00:29 EST

Anyway..here is more for you coffe lovers. Btw which one you prefer? coffebean or starbucks?


I prefer coffee from small coffee shops in France... real expresso or ristreto of Italy. That's the real coffee. Or Kopi Tubruk di Jakarta... hmmmm smell good.

Wow...I am surprised...no one is posting this news...This is Indonesia biggest FDI in all time. The whole JSX was so excited today..thus it breaking the record high.

Philip Morris offers to buy Indonesia's Sampoerna for 5.2 bln dlrs




apparently Sampoerna is leaving cigarette business

Debt Moratorium Set To Reduce Indonesia's Budget Deficit



JAKARTA, March 17 Asia Pulse - The finance ministry of Indonesia said the debt moratorium offered by the Paris Club of official creditors could reduce the deficit in the 2005 state budget to 0.9 per cent .

The government estimates that the deficit in the state budget is 1.07 per cent after the slashing of subsidy on fuel that cause a 29 per cent hike in the oil fuel prices on March 1. ADVERTISEMENT

Director General for Budget and inter-governmental fiscal balance Achmad Rochjadi said the debt moratorium is given to ease the government burden in the reconstruction of tsunami ravaged Aceh and part of North Sumatra.

However, the fund set aside for the debt interest will be used for other expenditures .

France has agreed to free Indonesia from paying interest during the moratorium. The government hopes that other members of Paris Club would follow. .

The Paris Club has agreed to delay for a year payment of a US$2.6 billion debt maturing this year to help finance the reconstruction of Aceh and part of North Sumatra.

(ANTARA)

apparently Sampoerna is leaving cigarette business

Rumours said it..they are now looking for Merpati airlines..which i think is really risky.

I always remember this quote. "The fastest way to become millionare is to become billionare and start an airlines company"

cheers

Another record high...I've lost count of how many the stock exchange have broken new records since the SBY govt. was elected last year.......


Indonesia Shares End At Record High; Garam, Unilever Gain
JAKARTA (Dow Jones)--Indonesian shares surged to a new record close Friday, driven by gains in cigarette maker Gudang Garam on bargain hunting and in consumer goods maker Unilever Indonesia on dividend hopes, dealers said.

"The market quickly recovered from yesterday (Thursday)'s losses," said a trader with a local securities firm. Expectations that many companies will perform better this year and gains in other regional bourses fueled buying in the session, he noted.

The Jakarta Stock Exchange Composite Index ended up 13.283 points, or 1.2%, at a new high of 1147.874. The index fell 0.3% Thursday on profit-taking.

Gainers led decliners 125 to 31, with 66 stocks unchanged.

Volume amounted to 7 billion shares valued at IDR23.1 trillion, compared with 4.5 billion shares valued at IDR2.8 trillion Thursday.

Dealers attributed the sharply higher value and volume Friday to a block sale of shares in cigarette maker Hanjaya Mandala Sampoerna, which were bought by Philip Morris International. Earlier in the week, Philip Morris said it would buy a 40% stake, or 1.75 billion shares, in Sampoerna for IDR1.8 trillion.

ADVERTISEMENT


Another cigarette maker, Gudang Garam, jumped 6% to IDR18,250 on bargain hunting following recent declines, as well as renewed expectations for improved 2005 sales. Garam's rival Sampoerna added 0.5% to end at IDR10,350.

Also up was Unilever Indonesia, by 4.8% to IDR3,825, on hopes that the company will distribute a higher 2004 dividend.

It was also a good day for food company Indofood, which rose 5.6% to IDR1,320 ahead of its plan to sell a stake in flour unit Bogasari Flour Mills in the second quarter of this year.

But profit-taking hurt shares of nickel miner International Nickel Indonesia, which fell 1.6% to IDR114,950, and Bank Mandiri, which lost 1.7% to IDR1,730.

Dealers expect the market to trade higher Monday on further buying in consumer blue chips.

Inditex To Open Zara Stores In Indonesia, Rest Of Asia
MADRID (Dow Jones)--Spanish fashion retailer Inditex SA (ITX.MC) said Friday it has reached an agreement with Indonesian retailer PT Mitra Adiperkasa to open the first Zara clothing stores in Indonesia, starting with the opening of two outlets in the capital Jakarta later this year.

Inditex said in a press release it also plans to open eight new stores in Japan, two new outlets in Hong Kong and the fourth Zara store in Singapore, increasing its number of boutiques in the region to 30 by the end of the year.

The company is aiming to double in size over the next five years through an ambitious strategy of new store openings. Inditex runs more than 2,000 clothing stores in 50 countries.

Indonesia's February cement consumption jumps
JAKARTA, March 18 (Reuters) - Indonesia's cement consumption, an indicator of economic activity, rose 13.7 percent by volume in February, compared to the same month of 2004.
Southeast Asia's largest economy used 2.32 million tonnes of cement last month, up from 2.04 million tonnes a year before, according to cement association data on the Web site of PT Semen Gresik Tbk , the country's largest cement maker.

Domestic sales of Semen Gresik grew 14.9 percent to 1.06 million tonnes over the period, or 45.6 percent of national consumption.

Including exports, Gresik sales rose 18.5 percent to 1.18 million tonnes.

Analysts had said demand for cement was expected to increase this year after the government unveiled billions of dollars worth of infrastructure projects.

Gresik is 25.5 percent controlled by Mexican cement giant Cemex SA .

http://www.imaasia.com/AFSINDOQ1.htm - Check this out. I'm sure it was interesting.

Thanks for the link, Yama.

I got one question for those of you in Indonesia at the moment. How's the economy going in your personal opinion? For example, comparing today with a year ago, do you see changes in the living conditions / buying power of the average Indonesian?

I've personally met that Richard Martin guy two years ago at a conference that I was involved in, he's an impressive guy...friendly and so knowledgeable about economic issues.

Inditex To Open Zara Stores In Indonesia, Rest Of Asia
MADRID (Dow Jones)--Spanish fashion retailer Inditex SA (ITX.MC) said Friday it has reached an agreement with Indonesian retailer PT Mitra Adiperkasa to open the first Zara clothing stores in Indonesia, starting with the opening of two outlets in the capital Jakarta later this year.

Inditex said in a press release it also plans to open eight new stores in Japan, two new outlets in Hong Kong and the fourth Zara store in Singapore, increasing its number of boutiques in the region to 30 by the end of the year.

The company is aiming to double in size over the next five years through an ambitious strategy of new store openings. Inditex runs more than 2,000 clothing stores in 50 countries.

good news! I like Zara, not expensive (cheaper than GAP), quality and trendy ;)

Time is GMT + 8 hours
Posted: 20 March 2005 1320 hrs

Huge cigarette investment lights up prospects of Indonesian economic revival





JAKARTA : Suwarno drags deeply on his kretek cigarette, the scented fumes swirling lazily in the Indonesian sunshine. Strong and cheap, the exotic smoke leaves him a little dizzy, but each lungful could take his country nearer its long overdue economic recovery.



The popularity of kretek, a clove and tobacco mix enjoyed by millions of Suwarno's compatriots, last week prompted US giant Philip Morris to make a 5.2 billion dollar bid for Indonesian cigarette firm Sampoerna.

With anti-smoking laws squeezing their profits in the West, the makers of Marlboro admit they see Sampoerna as a stepping stone into Asia, where cigarette markets are still growing despite increasing awareness of health issues.

But with such a substantial sum being injected into Indonesia, the Sampoerna deal also represents a change of gear for the country's troubled economy, prompting speculation that an end to financial woes could be around the corner.

"As long as there is a strong investment inflow into Indonesia like this, it is going to be positive," said Wong Chee Seng, an analyst with DBS Securities in Singapore.

"People are getting more confident because of the strong government which is giving more attention to planning. There is a feeling that the new president has been able to control his cabinet with a movement towards opportunity and greater transparency."

When he took office last October, new President Susilo Bambang Yudhoyono pledged to build on economic stability achieved by his predecessor Megawati Sukarnoputri after the 1997-98 Asian financial crisis.

Yudhoyono has declared a war on the endemic corruption and bureaucracy that has scared away many foreign investors while rolling out the red carpet for overseas involvement in overhauling the country's battered infrastructure.

Though improvements have been slow, initial reaction is positive, with markets recording a succession of record highs. On Friday the Jakarta Stock Exchange climbed 1.17 percent to a new peak of 1,147.874.

Miranda Goeltom, the deputy governor of Bank Indonesia, said last week the rupiah was expected to strengthen against the dollar through the rest of 2005 on inflows bolstered by foreign interest on the heels of Philip Morris.

"We are confident that the rupiah can still go up," she said, forecasting rates of up to 8,600 to the dollar compared to the current 9,370. "There is an expectation that the entry of investors can still happen," she said.

Tim Condon, chief regional economist for ING Barings, says Indonesia's vast untapped reserves of oil, gas and other natural resources are likely to be the main draw as investors return to the archipelago.

"Despite all the problems, Indonesia is endowed with enormous resources and the world, particularly China, is interested in its potential," he said, predicting a gradual economic improvement.

"People have been waiting to see the recovery and I think it's a safe bet that there's going to be a steady pickup of inflows into the balance of payments, every year clawing back towards the levels before the Asian financial crisis."

Indonesia still remains an unknown quantity for the foreign ventures with legion examples of investment gone awry.

Accusations over pollution by US gold mining giant Newmont in a coastal bay in Sulawesi island have left six company executives facing criminal charges although proof that the firm dumped deadly toxins is inconclusive.

Mexican cement firm Cemex has been locked in a protracted compensation battle after the Indonesian government reneged on a 1998 agreement to allow Cemex to increase its 25.5 percent stake in Semen Gresik to 51 percent.

Citigroup economist Anton Gunawan says that while the Sampoerna deal strikes a positive chord, Indonesia remains a corporate minefield.

"Of course it can help confidence, but I do not think the investment climate is good enough yet," he said.

"There is interest in specific industries, the automotive and electronics sectors are expanding, but this is not the situation overall. Oil and gas still have some problems.

"This deal with Sampoerna can help, but there are still structural problems related to general regulation, labour, relationships with companies and infrastructure."

Nevertheless, he said predicted good returns for Philip Morris, with kretek smokers such as Suwarno ensuring steady demand.

"As long as they understand the situation in Indonesia and the local government and they stick to making changes at the top rather than shaking the whole boat, they should be fine."

- AFP

Sales Of Ford Cars Surge In Indonesia In February

JAKARTA, March 21 Asia Pulse - PT Ford Motor Indonesia (FMI) recorded sales totaling 683 units in February or an increase of 95 per cent from the same month last year.

FMI General sales Manager Bambang Soendoro attributed the increase in its car sales to strong demand for commercial cars especially from the plantations and mining sectors.

Bambang said demands for FMI's Ranger pick-up and Everest sport utility vehicle (SUV) were strong.

The strong demand in February could be as a result of realization of corporate projects in a number of regions, he said, adding, therefore, sales in March may not be as good as in February.

Indonesia Plans To Increase Cigarette Taxes -FT

SINGAPORE (Dow Jones)--Indonesia said it plans to raise its cigarette taxes, just days after Philip Morris announced its proposed $5.2 billion acquisition of local producer HM Sampoerna (HMSP.JK), the Financial Times reported on its Web site Monday.

The FT reported Indonesian Vice President Jusuf Kalla praised the investment by Philip Morris International - part of Altria Group (MO), the world's largest tobacco group - as an act of "very big confidence" in the Indonesian economy.

But he warned that the government was working on a plan to increase excise taxes on cigarettes, a move he said was necessary to increase government revenues and "for health."

Jakarta has been reluctant to raise cigarette taxes because of pressure from the indigenous clove cigarette industry which Altria is seeking to join by acquiring Sampoerna, the No. 3 producer. Anti-tobacco activists argue that reluctance has helped make Indonesia one of the most smoking-friendly countries in the world, with 217 billion cigarettes expected to be sold there this year.

According to the World Bank, taxes now make up just 33% of the average retail price of cigarettes in Indonesia, compared with 75% or more in many developed countries. Kalla said the government of President Susilo Bambang Yudhoyono plans to change that, although it has yet to determine a timeframe for any cigarette tax increases. He said the government planned to make any changes "step by step" and "not dramatically."

Jakarta's decision is unlikely to affect Altria's interest in Indonesia, one of the few growing cigarette markets worldwide. After announcing the deal last Monday, the company said it expected taxes eventually to increase.

But Kalla's announcement caught the company off-guard with a spokeswoman for Philip Morris International saying: "We are not aware of any planned increases."

Indonesia's Bimantara Takes Control Of Another TV Station

JAKARTA, March 21 Asia Pulse - The shareholders of PT Cipta TPI have agreed to a takeover of 75 per cent of the shares of the operator of television broadcasting company, by Bimantara Citra (JSX:BMTR) through debt conversion.

Bimantara Director A Edwin Kawilarang said the company became a 75 per cent owner of Cipta TPI after its subsidiary, PT Berkah Karya Bersama, took over a debt of Rp500 billion (US$55.5 million) of the operator of TPI television station last weekend to be converted into shares.

The debt included Rp350 billion in convertible bond owed to telecommunication company PT Indosat.

Bimantara already owns two other television broadcasting companies including PT Rajawali Citra Televisi Indonesia, the country's first private television company, which operates RCTI and PT Global Informasi Bermutu, the operator of Global TV.

(ANTARA)

Indonesia mulls hike in cigarette taxes - report
HONG KONG (AFX) - Indonesia plans to increase cigarette taxes to boost revenues and for health reasons, the Financial Times quoted Vice President Jusuf Kalla as saying.
The vice president's remarks, made in an interview with the newspaper, were reported just days after Altria Group (NYSE: MO - news) 's Philip Morris unit announced the biggest takeover in the country's history -- the proposed 5.2 bln usd acquisition of local producer HM Sampoerna.
The vice president also praised the investment by Philip Morris International as a show of very big confidence in the Indonesian economy, according to the newspaper's online edition.
Altria's proposed acquisition follows years of declining foreign direct investment in Southeast Asia's biggest economy amid concern over the country's high levels of corruption and regulatory risk.
Jakarta has been reluctant to raise cigarette taxes because of pressure from a powerful indigenous clove cigarette industry which Altria is now seeking to join by acquiring Sampoerna, Indonesia's number three producer.
Anti-tobacco activists argue that reluctance to raise taxes or impose other restrictions has helped make Indonesia one of the most smoking-friendly countries in the world, with 217 bln cigarettes expected to be sold there this year.
According to the World Bank, taxes now make up just 33 pct of the average retail price of cigarettes in Indonesia, compared with 75 pct or more in many developed countries.
Kalla said the government of President Susilo Bambang Yudhoyono, which took office last October, plans to change that, although it had yet to determine a timeframe for any cigarette tax increases and planned to make any changes step by step and not dramatically.
It was also still considering how it could sign on to the World Health Organization's Framework Convention on Tobacco Control, which took effect this month and has 58 signatory countries. The convention calls for strict limits on advertising and prominent health warnings on cigarette packs.
Jakarta's decision is unlikely to affect Altria's interest in Indonesia, one of the few growing cigarette markets worldwide.
After announcing the deal last Monday, the company said it expected taxes eventually to increase.
But Kalla's announcement caught the company off-guard with a spokeswoman for Philip Morris International quoted as saying: We are not aware of any planned increases.
Altria's acquisition is seen as remarkable in Indonesia because it has the blessing of the family that has controlled Sampoerna for almost a century.
As in many parts of Asia, the country's family-owned conglomerates have traditionally been reluctant to cede control to outsiders.
The US company has already acquired 40 pct of Sampoerna, mostly from the family, and has made a tender offer for remaining shares. wk

Ekonomi dan Bisnis

Putera Sampoerna Jajaki Bisnis Pertanian dan Infrastruktur
Selasa, 22 Maret 2005 | 03:06 WIB

TEMPO Interaktif, Jakarta:Teka-teki di balik penjualan saham PT HM Sampoerna Tbk. ke Philip Morris International Inc. mulai tersingkap.

Putera Sampoerna, cucu Liem Seeng Tee, pendiri perusahaan rokok kretek terbesar ketiga di Indonesia itu, menyatakan, kerajaan bisnisnya akan banting setir ke sektor pertanian dan infrastruktur.

Dalam siaran pers yang dilansir kemarin, Putera menyatakan, transaksi seperti ini---keluarga menjual mayoritas saham pada saat perusahaan sedang berkembang dan pemiliknya tidak sedang kesulitan keuangan---memang jarang terjadi di Asia.

Namun, kata pemimpin keluarga Sampoerna ini, anggota keluarga dapat menerima alasan yang dikemukakan. "Kami memang akan diversifikasi usaha," ujarnya. "Bahkan sebelum Philip Morris melakukan pendekatan tahun lalu."

Putera menegaskan, keluarganya akan tetap berbisnis di Indonesia. "Sampoerna adalah keluarga Indonesia dan akan selalu hadir di Indonesia."

Karena itu, Komisaris Utama HM Sampoerna ini pun menyatakan, keluarga Sampoerna sedang menjajaki berbagai kemungkinan investasi, seperti pertanian dan infrastruktur, yang diyakininya merupakan sektor-sektor yang dibutuhkan Indonesia saat ini.

"Indonesia sudah bergerak ke arah yang tepat," katanya. "Dan sekarang saat yang tepat untuk berinvestasi kembali."

Putera juga menegaskan tidak akan memutuskan keterlibatan dengan HM Sampoerna. Dia bersedia duduk sebagai penasihat senior di dewan direksi selama dibutuhkan.

"Perusahaan ini membawa nama keluarga kami, saya tidak mungkin meninggalkan begitu saja."

Philip Morris telah membeli 40 persen saham HM Sampoerna, termasuk milik keluarga Sampoerna yang dikuasai lewat DuBuis Holdings Limited, seharga Rp 10.600 per lembar atau senilai total US$ 2 miliar (Rp 18,6 triliun).

Philip Morris akan membidik 60 persen sisanya lewat penawaran tender dengan harga yang sama. Bisik-bisik bakal beralihnya keluarga Sampoerna ke bisnis infrastruktur memang sudah mulai terdengar begitu kabar transaksi itu tersiar.

Seperti diberitakan Koran Tempo, Selasa (15/3), menurut sumber Tempo yang berhasil mengorek informasi dari "orang dalam" Sampoerna, bisnis infrastruktur dinilai lebih menjanjikan ketimbang bisnis rokok.

"Mereka melihat fenomena di Malaysia," ujarnya. "Dengan uang US$ 2 miliar, power keluarga Sampoerna di bisnis ini akan luar biasa besar."

Di sisi lain, pertumbuhan industri rokok sudah sangat terbatas dan prospeknya suram dalam jangka panjang(dying company) karena pola hidup masyarakat akan semakin menjauhi rokok.

Putera tidak memungkiri kenyataan ini. Dia menjelaskan, meskipun tahun lalu HM Sampoerna membukukan penjualan tertinggi dalam 10 tahun terakhir, perkembangan industri rokok di Indonesia semakin sulit. "Untuk dapat mempertahankan pertumbuhan tersebut, perusahaan harus memperluas pasar di luar negeri," ujarnya.

Showa invests US$3.8 mln in Indonesian shock absorber plant

Tuesday March 22, 2005, 6:53 pm

TOKYO, March 22 Asia in Focus - SHOWA CORP. (TSE:7274) will invest 400 million yen (US$3.8 million) in its Indonesian plant with the aim of boosting production capacity of motorcycle shock absorbers by 40 per cent. It will install a painting line and two shock absorber cyliner manufacturing lines at the Jakarta facility.

* It has a 55 per cent stake in the local subsidiary which makes shock absorbers for automobiles and motorcycles.

* The new facilities will start operating in April, initially increasing production capacity to 3 million units from 2.5 million units at present.

SUMMARY

Showa invests US$3.8 mln in Indonesian plant to boost production capacity of motorcycle shock absorbers by 40 pct

ASIA IN FOCUS

Dhaka Jakarta railway accord signed


Tuesday March 22 2005 11:16:53 AM BDT

Bangladesh railway will be equipped with 50 modern broad-gauge carriages at a cost of Tk 86.94 crore to improve its passenger service, reports UNB.

The passenger carriages, including air-conditioned sleeper, AC chair car and Shovon chair car, will be imported from Indonesia with government’s own finance.

The passenger carriages will reach Dhaka in next few months, said an official announcement on a deal singed in Dhaka on Monday between Bangladesh Railway and Indonesian state-owned railway industry PT Industri Kereta Api. Communications Minister Barrister Nazmul Huda witnessed the signing of the agreement.

Among others, Indonesian ambassador Warmas Hasan Saputra, Director General of Bangladesh Railway A F M Mostafizur Rahman and high officials of Indonesian Embassy, Communications Ministry and Bangladesh Railway attended the signing ceremony.

President of PT Industri Kereta Api Roos Diatmoko and Additional DG (infrastructure) Md Abdullah signed the agreement on behalf of their respective side.

Ambassador Warmas Hasan said, “The cooperation of Indonesia in modernizing Bangladesh Railway and improving its passenger service would continue and be increased in future.”

The modern carriages will pr
ovide better passenger service in rail communications between Dhaka and the northwestern districts through the Jamuna Bridge

Good News!

Really glad to see that INKA gains new orders for their products. At least it'll keep the company alive.

Indonesia to grow at 6-7 percent if reforms continue: IMF

WASHINGTON (AFP): Indonesia's economy could expand by six to seven percent in the medium term if the government continues with economic reforms, the IMF said Tuesday.

It warned however that a government plan to provide a tax amnesty could dampen revenue based heavily on oil exports.

"Maintaining stability, while broadening reforms to attract private investment, will be key for placing Indonesia on a high and sustained growth path," the Washington-based International Monetary Fund said in its annual review of Southeast Asia's largest economy.

Over the medium term, it said, Indonesias economy "could grow in the 6-7 percent range, provided that the government follows through with its economic agenda."

The economic performance of the world most populous Muslim nation is expected to improve in 2005 with growth projected at some 5.5 percent, underpinned by continued strong growth in consumption combined with a recovery in investment, the Fund said.

Last year, Indonesia's Gross Domestic Product (GDP) grew roughly at five percent.

The IMF said a December 26 tsunami disaster that struck Indonesia's Aceh province had little impact on overall economic growth of the vast archipelago.

At least 126,000 people were killed and more than 93,000 missing in the province in northern Sumatra island.(*)

Susilo warns global economic slowdown could affect RI


Rendi A. Witular, The Jakarta Post, Jakarta

President Susilo Bambang Yudhoyono warned on Tuesday that the country's economic growth might remain sluggish unless the government and the business community managed to anticipate the impact of a projected global economic slowdown this year.

Speaking in front of the Indonesian Economists Association (ISEI) at the State Palace, Susilo quoted the World Bank's 2005 Global Economic Prospect report, alerting the country to seek smart ways to improve the economy.

"There is a worrying projection from the World Bank over a possible slowdown in the global economy which may affect us. We are currently trying to make the economy competitive and efficient to help reduce the impact of the slowdown," he said.

According to the World Bank, global economic growth is expected to slow in 2005 and 2006 -- expanding by 3.2 percent each year from 4 percent in the previous years on average -- due to a number of factors.

Indonesia expects its economy to grow by 5.5 percent this year, and 6.6 percent on average over the next four years, with investment and exports being the engines of this growth.

Since the 1997 economic crisis, the country has been relying heavily on domestic consumption to push economic growth, as investors and exporters remain wary due to the poor business climate here.

"Our efforts to make the economy efficient is to combat corruption, prevent illegal fees and smooth bureaucratic procedures. Without such efforts, we can't compete with the emerging economic powers of China and India," said Susilo.

Previous surveys have ranked Indonesia's bureaucracy as corrupt and inflexible, with the country being one of the most difficult places in the world to do business.

While admitting that bribery and corruption were still rampant within the bureaucracy, the President promised to reduce it by making the government more transparent, efficient and accountable to the public.

But an evaluation of his first 100 days in power showed that his government has yet to successfully tackle the one issue that businesspeople constantly complain about: rampant corruption.

Susilo underscored the importance for Indonesia to be "smart" in marketing its products on global markets, and to use alternative energy sources, such as gas, to reduce production costs.

"The government and the business community should be smart in marketing the country's manufacturing products overseas amid a slowdown in demand," he said.

At the meeting, Susilo also warned of the economic and social problems resulting from the rapid growth in the country's population, which is increasing at the rate of 1.45 percent, or about three million people, annually on average.

The country's population this year is estimated to reach 230 million.

"I am worried that our natural resources and economy can no longer support such huge population increase. That is why I have taken the initiative to revive the National Family Planning program to help reduce birth numbers," said Susilo.

The government has allocated some Rp 600 billion (US$64 million) this year for birth control programs. The funds will be taken from the government's low-income assistance funds derived from the slashing of fuel subsidies.

Drivers for global economic slowdown

1. Investment cycle in the United States has likely peaked, implying a slowdown in the world's largest economy.

2. World demand has outstripped supply, resulting in substantial increases in oil and other commodity prices that have cut incomes -- moderating demand in many countries.

3. Higher interest rates will slow investment growth as central banks continue shifting monetary policy from a loose to a more neutral stance.

4. The large fiscal impulse that has helped propel the U.S. economy in recent years will weaken, although the deficit remains high; and in Europe, budgetary policy is expected to tighten as countries seek to regain control over deficits.

5. Efforts in China to bring growth down to a more sustainable pace may also contribute to weaker, but still strong, demand over the medium term.

Source: World Bank's 2005 Global Economy Prospect

Tax amnesty offers more gain than pain: Govt
Rendi A. Witular, The Jakarta Post, Jakarta

Despite concerns about violating the public's sense of justice, the government is optimistic a planned tax amnesty will bring more gain than pain to the country's ailing economy.

Coordinating Minister for the Economy Aburizal Bakrie estimated that once the amnesty was implemented, the government could earn Rp 50 trillion (US$5.3 billion) in revenue from penalties imposed on tax evaders in return for immunity from prosecution.

"The government will earn revenue from penalties imposed on parties that have evaded their taxes for years," he said at the State Palace on Tuesday.

Apart from imposing penalties, the tax office, according to a 2001 regulation, is allowed to jail tax evaders for up to a year without trial.

The tax office has detained at least three tax evaders.

"This policy (tax amnesty) will, at the same time, lure Indonesian conglomerates to reinvest money currently parked overseas back in the country," Aburizal said.

Indonesian conglomerates are estimated to have parked billions of dollars overseas in the aftermath of the mid-1997 financial crisis to avoid paying taxes.

Aburizal said that if the conglomerates brought the money back, the new investment would help revive the sluggish corporate sector.

"Those funds could revive the real sector and eventually absorb some of the unemployed. In addition, the government would also reap more tax revenue from the vibrant corporate sector," he said.

The tax amnesty is part of the government's efforts to expand the taxpayer base by encouraging parties that have not paid taxes for years to begin paying their taxes in return for immunity from prosecution for tax evasion.

As of last year, the tax office collected Rp 238.9 trillion in revenue -- about Rp 300 billion more than had been targeted.

The planned tax amnesty is one of the government's top priorities, initiated by Aburizal, who is a former chairman of the Indonesian Chamber of Commerce and Industry (Kadin).

Kadin, the country's most powerful business lobby, has been promoting the idea of a tax amnesty for the past two years as part of a comprehensive tax reform proposal that it submitted to the government.

Vice President Jusuf Kalla acknowledged recently that the government was preparing a draft bill on the tax amnesty, to be forwarded to the House of Representatives for deliberation.

However, Aburizal denied the government had discussed the amnesty plan in detail.

Sources at the Ministry of Finance said the amnesty would cover both individual and corporate taxpayers, and they would be able to settle unpaid tax bills by paying between 10 percent and 20 percent of their total tax arrears.

For corporate taxpayers, the proposed amnesty would cover unpaid taxes between 1995 and 2003. The government is still undecided on the time period for individual taxpayers.

Indonesia May Postpone $1 Bln Bond Sale as Rates Rise (Update2)
March 23 (Bloomberg) -- Indonesia may postpone plans to sell as much as $1 billion of bonds today, as borrowing costs for developing nations increased after the U.S. Federal Reserve raised interest rates, bankers advising the government said.

Indonesia, which is betting on an improvement in its credit ratings and the fastest economic growth in nine years to lure investors, should wait for price fluctuations in emerging market debt to stabilize before setting terms for its offering, the bankers said, asking not to be identified.

Finance Minister Jusuf Anwar today declined to comment on whether the sale will be delayed, saying that the government will monitor a U.S. government report on consumer prices that's scheduled to be issued today before deciding whether to proceed with the offering. Mulia Nasution, the director-general of treasury at Indonesia's finance ministry, said on March 21 the nation plans to price the bonds on March 23 in New York.

``They have a good credit story, but the timing's unfortunate,'' said Desmond Soon, who may buy the new debt to add to the $200 million of bonds he manages at Pacific Asset Management Ltd. in Singapore. ``They may want to wait for the market to stabilize so they won't end up paying a higher spread.''

The yield on Indonesia's 6.75 percent bonds maturing in March 2014 widened by about 20 basis points, or 0.20 percentage point, to 6.90 percent today, according to data provided by Deutsche Bank AG at 1:04 p.m. Singapore time. The yield has widened from a low of 6.23 percent on Feb. 9.

Pricing

Indonesian government officials in Jakarta discussed the progress of the bond sale earlier today in a conference call with their colleagues who are in New York to meet investors.

``Market response was extraordinary,'' Anwar told reporters in Jakarta. ``We are not talking about pricing. We are talking about the roadshow.''

Officials at Citigroup Inc., Deutsche Bank AG and UBS AG, the sale's underwriters, declined to comment.

The government plans to price the bonds to yield less than 6.85 percent, the level at which the nation priced its 10-year dollar-denominated debt more than a year ago, Anwar said yesterday.

``It will be rich if Indonesia tries to price the bonds at the yield they paid last year,'' said Dilip Shahani, head of Asian fixed-income research at HSBC in Hong Kong. ``If it is delayed, it won't hurt them because they are not in dire need for funding.''

Postponed

A rise in emerging market bond yields led Bangkok-based Thai Military Bank Pcl and Seoul-based National Agricultural Co- operative Federation last week to postpone the sale of $650 million of bonds. Dacom Corp., South Korea's second-largest long- distance phone carrier, hasn't announced the target yield on its planned $300 million bond sale after completing investor presentations on March 21.

Indonesia's $1 billion bond sale last year, the first since the 1997 financial crisis, drew demand for more than eight times the amount offered.

The $222 billion Indonesian economy, Southeast Asia's largest, is forecast by the government to expand 5.5 percent this year, after growing 5.1 percent in 2004.

The outlook on the nation's debt rating was revised to positive from stable in February by Moody's Investors Service, which cited progress made by the government in cutting the budget deficit. Indonesia's debt is rated B2, five levels lower than investment grade, by the New York-based credit assessor.

Ratings Raised

Standard & Poor's in December lifted the nation's long-term foreign-currency rating one level to B+. Indonesia's debt rating will probably be lifted by one level to BB- this year, which would lower its borrowing costs, HSBC's Shahani said.

Indonesia on March 1 cut fuel subsidies, in effect raising domestic fuel prices by an average 29 percent, and trimming the forecast budget deficit to 1 percent of gross domestic product from 1.3 percent.

The yield on the benchmark 10-year U.S. Treasury note rose yesterday to its highest since June, after the Fed lifted rates and said inflation pressures have increased. The yield on the 4 percent note rose to 4.65 percent in intra-day trading yesterday. The Fed raised its benchmark rate a quarter-point to 2.75 percent yesterday, the seventh increase since June.

Consumer Prices

The U.S. February consumer price index excluding food and energy probably rose 0.2 percent for a fifth month, according to the median estimate of 76 economists in a Bloomberg News survey. Overall prices rose 0.3 percent, the most since November, the survey showed. The data will be released by the government at 8:30 a.m. New York time.

The average spread, or extra yield, for holding emerging market bonds over comparable maturity U.S. Treasuries, has widened to 373 basis points, or 3.7 percentage points, from an average of 330 basis points on March 8, the lowest spread ever, according to JPMorgan Chase & Co.'s EMBI+ Index.

Surging oil prices and rising government bond yields in the U.S., the world's biggest economy, curbed investor appetite for higher-risk assets, which were among the best performers in 2004. Concern deepened after General Motors, the world's third-largest seller of company bonds, on March 16 forecast its biggest quarterly loss since 1992, prompting Standard & Poor's to say it may cut the Detroit-based automaker's BBB- rating to junk.



To contact the reporter on this story:
Netty Ismail in Singapore nismail3@bloomberg.net.

INTERVIEW:Indonesia Software Piracy Stunts Econ:Industry
By Phelim Kyne
OF DOW JONES NEWSWIRES

ADVERTISEMENT


JAKARTA (Dow Jones)--Indonesia's rampant computer software piracy is stunting economic development and costing foreign firms millions of dollars in lost revenue, a software industry lobby group representative said recently.

Piracy cost the industry $157 million in lost sales in Indonesia in 2003, losses that aborted the creation of new jobs and deprived Indonesia's cash-strapped government of needed tax revenue, said Tarun Sawney, anti-piracy director of the Business Software Alliance, or BSA.

BSA is an industry lobby group whose members include Microsoft Corp. (MSFT), Adobe Systems Inc. (ADBE) and Oracle Corp. (ORCL).

"Things are still very serious here in Indonesia with the fourth highest piracy rate in the whole world and the third highest in Asia," Sawney said.

An estimated 88% of software in use in Indonesia is pirated, the worst in the region after China and Vietnam, where an estimated 92% of software is pirated in both countries. Ukraine rounds out the top four global software piracy centers with 91% of computer programs in the country consisting of illegal copies.

Progress in reducing Indonesia's software piracy by ten percentage points could add $1.9 billion and more than 4,000 high technology jobs to the country's economy from 2002 to 2006, a BSA statement said without elaborating, citing statistics of the International Data Corp.

That's lost revenue and employment opportunities that Indonesia's government can ill afford. President Susilo Bambang Yudhoyono's government is seeking to jump-start economic growth that's fallen behind that of regional neighbors by improving the foreign investment climate to create badly-needed jobs.

Indonesia's government has projected average yearly economic growth of 6.6% from 2004 to 2009, outpacing the 5.1% economic expansion last year.

Sawney said Indonesia's software piracy problem is perpetuated by end-users, including "companies with 4,000-5,000 computers" as well as local "entrepreneurs" who crank out pirated programs for sale on the street or in shopping malls.

"It's the end-user that causes the greatest damage, (but) if people are overtly selling (pirated software), it breeds a certain disrespect for the law (that perpetuates the problem)," he said.

Foreign computer software firms seeking official protection from intellectual property right, or IPR, violations in Indonesia face the same obstacles they encounter in China: widespread piracy, lax legal enforcement and a judiciary that fails to adequately penalize offenders.

Consumers in Indonesia's urban centers can purchase pirated software along with music and movie disks at locations ranging from neighborhood street stalls to entire floors of up market shopping malls.

Vigilant Policing,Stiffer Penalties Needed

While the industry's estimated $3.8 billion in losses in China in 2003 dwarf those it suffers in Indonesia, authorities in the Southeast Asian nation must take stern and prolonged action against software pirates to put a dent in their illegal activities, Sawney said.

Although Indonesia's Copyright Law No. 19 of 2002 outlines punishments for IPR violators of up to five years imprisonment, software pirates convicted in connection with BSA-assisted police raids on several shopping malls in Jakarta last year got away with suspended sentences.

"There needs to be a greater amount of resources, constant enforcement against those who are selling pirated software...and deterrence sentencing (so) when (suspects) get arrested there's not just a fine, but an element of accountability," Sawney said.

BSA is intensifying its own battle against software piracy in Indonesia with the Tuesday launch of a new telephone hot line where consumers can both source information about the issue as well as submit anonymous tips about suspected software IPR violations. The lobby group is offering rewards of up to IDR45 million (US$4800) for such information.

Sawney said Indonesian authorities should follow the successful anti-piracy measures implemented by regional neighbors Singapore and Hong Kong to help turn the tide against Indonesia's rampant software IPR violations.

"Police (in Hong Kong and Singapore) constantly raided sellers of pirated software...to the point that the cost of doing business became too expensive," he said.

Indonesia Seeks $80 Billion as It Fights Corruption

March 24 (Bloomberg) -- Bill Long says he thought that, after 10 years, he knew all the pitfalls of working in Indonesia, where his employer, Newmont Mining Corp., operates a $2.2 billion copper and gold mine.

Then last September, he and four other executives were thrown into a rat-infested, unair-conditioned jail for 32 days on suspicion of polluting the sea near a former mine site where Long, 58, was general manager.

While Long hasn't been charged with any wrong-doing, he is still barred from leaving the country. And Newmont, which denies the accusations, is facing a $100 million lawsuit.

``That has to put shivers through all potential foreign investors,'' says Dan Desjardins, 42, Newmont's finance director at the company's mine headquarters on remote Sumbawa island.

Seven hundred miles (1,127 kilometers) away in Jakarta, Indonesian President Susilo Bambang Yudhoyono says he's listening to Newmont and other investors who say they've fallen foul of a corrupt, incomprehensible legal system. ``I have to fix my country,'' says Yudhoyono, 55, a retired general who became the country's first popularly elected leader on Sept. 20. ``I have to change the bad image of Indonesia to a good one. I will improve the legal framework, fight corruption, ensure transparency.''

Tsunami

To boost the economy, which grew 5.1 percent last year, he plans to build toll roads, power plants and telecommunications networks that will cost some $150 billion over the next five years -- more than $80 billion of it from foreign and domestic investors. Yudhoyono is also spending $4.5 billion to rebuild the devastated Aceh province, where the tsunami in December killed 220,000 people in what Yudhoyono describes as ``the most trying moment in the history of Indonesia.''

The World Bank says the tsunami will reduce Indonesia's economic growth this year by 0.5 percent and add 1 million more unemployed to the 40 million who don't have full-time work.

To finance all of the building projects, Yudhoyono is wooing foreign contractors and investors. He also planned to announce in March the sale of $1 billion of bonds, although bankers said on Wednesday the sale had been postponed because borrowing costs for developing nations had increased. "I will make an announcement tomorrow," Finance Minister Jusuf Anwar told reporters in Jakarta on Wednesday.

Yudhoyono also plans to increase oil and gas production, which has been falling in the only East Asian member of the Organization of Petroleum Exporting Countries. Oil output has dropped below 1 million barrels a day from a high of 1.64 million barrels in 1977 after exploration investment hit a 36-year low in 2004, according to Hans Vriens, managing director of Apco Indonesia, an energy and mining consulting firm.

Slashing Subsidies

In March, Yudhoyono slashed by 34 percent subsidies that had long given Indonesians cheap gasoline, a move that will narrow the $3.5 billion budget deficit by $805 million. The last time a government tried to cut the subsidy, two weeks of street protests ensued, and the measure was withdrawn.

Many investors and Indonesian consumers are betting Yudhoyono will reach his goal of lifting gross domestic product growth in the world's fourth largest country to 7.2 percent in 2009. After his election, the Jakarta Composite Index rose 40 percent to a record 1152 on March 22 before falling back to 1142 on March 23. That compares with a 4 percent rise in the Standard & Poor's 500 Index in that period.

GDP jumped 6.7 percent in the final quarter of 2004 -- the most in nine years -- from a year earlier as Indonesians bought more products ranging from cars and motorcycles to clove cigarettes.

Credit Rating Improves

In December, S&P raised Indonesia's long-term foreign- currency credit rating to B+ from B, putting it one level above Venezuela, though still four levels below investment grade. On Feb. 18, Moody's Investors Service raised its B2 debt rating outlook to ``positive'' from ``stable.''

``Investors are coming back,'' says Kenneth Courtis, Tokyo- based vice chairman for Asia at Goldman Sachs Group Inc. ``The stock market is hot, people want to buy the currency and Yudhoyono has commodities -- copper, iron, oil and gas and timber -- for which there's an insatiable demand.'' On March 14, New York-based Altria Group Inc. offered $5.1 billion for PT HM Sampoerna, Indonesia's third-largest cigarette maker.

More cautious is Mark Mobius, 68, Singapore-based managing director of Templeton Asset Management Ltd., who oversees $17 billion of emerging-market securities. Mobius says he's not adding to his Indonesian investments yet. ``So far, so good, but actions speak louder than words,'' he says of Yudhoyono's plans.

Expensive Stocks

Emil Wolter, 30, who helps manage $2.5 billion at London- based Polar Capital Partners Ltd., says stocks are too expensive. ``Indonesia is a lot more stable and has better prospects than a few years back, but this is largely reflected in share prices,'' says Wolter, who sold all of his Indonesian holdings in December. ``People's expectations are quite elevated. I'm struggling to identify cheap first- or second-tier companies.''

A long list of woes still plagues Indonesia, which has a population of 238.5 million -- including more Muslims than any other nation -- that's spread over 18,000 islands.

In addition to the effects of the tsunami, the country is facing secessionist revolts in the provinces of Aceh and Papua. Indonesia has also been the site of three al-Qaeda-linked terrorist attacks on Western targets: a 2002 nightclub bombing on the resort island of Bali that killed at least 202 people, the 2003 bombing of Jakarta's J.W. Marriott Hotel that killed 12 and the September 2004 bombing of the Australian embassy, in which 11 died.

Legal Battles

Then there are the legal battles that have ensnared companies, including Newmont. ``This kind of thing is more dangerous for Indonesia's reputation than a bomb in front of the Australian embassy or Marriott hotel,'' says James Castle, 59, a Jakarta-based business consultant and governor of the American Chamber of Commerce in Indonesia who has been based in Jakarta for 28 years. ``Personal security is an issue here, but it's not a deterrent to investment.''

Still, Castle says, if anyone can fix Indonesia, it's Yudhoyono. ``This is the first Indonesian government that has come to power with a pro-business agenda,'' he says. Indonesians are more optimistic since Yudhoyono's election, says Kevin O'Rourke, author of Reformasi: the struggle for power in post-Suharto Indonesia (Allen & Unwin, 2002).

``It's almost entirely because of him that the atmosphere has changed, says O'Rourke, 33, a New York-born former investment banker who has lived in Indonesia since 1994. ``He's politically astute, and he has a clean reputation. He's almost alone among the national political elite in terms of his ability to communicate with the public.''

Top Student

The son of an army lieutenant, Yudhoyono grew up in the small town of Pacitan in eastern Java. After finishing first in his class in high school, he won a place at the national military academy, where he again graduated at the top. ``I needed to compete, to fight really hard to achieve these things,'' says Yudhoyono, a thickset 6-footer.

After three years as an army platoon leader and commander of airborne troops, Yudhoyono made the first of five visits to the U.S. for language and military training in 1976. ``He was very studious,'' says Jim Filgo, 56, a Jakarta-based former U.S. Army major who attended one of the courses with him and took him fishing for a weekend in Florida.

``He wasn't interested in partying. He remained a good Muslim, didn't drink or smoke. He had a dry sense of humor. I assumed this guy was going to be a quick mover as long as promotion was on merit.''

In 1991, Yudhoyono spent a year at the Command and General Staff College at Fort Leavenworth, Kansas. He then moved to Kansas City, Missouri, where he earned an MA in organizational management at Webster University.

UN Role

In 1995, when he was 45, Yudhoyono was appointed commander of United Nations peacekeeping operations in the former Yugoslavia, leading officers from 32 countries. Back in Jakarta the following year, he was named chief of staff for territorial affairs, a role in which Yudhoyono says he began lobbying the government to reduce the army's role in politics.

In 1998, he played a behind-the-scenes role in the removal of Indonesian dictator Suharto, another former general who had seized power 32 years earlier, author O'Rourke says. Yudhoyono then quit the army to serve as minister of mines and energy, then politics and security minister in the cabinet of Abdurrahman Wahid, who was elected by parliament in 1999.

The next president, Megawati Soekarnoputri, named him politics and security minister. He quit in March 2004 to run against her and another former boss, ex-army commander Wiranto. After Wiranto was eliminated on the first of two ballots, Yudhoyono easily won a runoff with Megawati, gaining 61 percent of the vote.

Staying Honest

``He somehow managed to stay honest yet not antagonize his fellow officers,'' says Dennis Heffernan, 62, a Cleveland-born partner in Van Zorge Heffernan & Associates, a Jakarta-based risk consulting firm. That's no small task in the Indonesian military, where officers have been tainted by corruption and allegations of human rights abuses.

In 1992, the U.S. canceled its training cooperation program with the Indonesian military after troops opened fire on unarmed demonstrators in East Timor, the former Portuguese colony that Indonesia invaded in 1975 and occupied until 1999. In February, the U.S. State Department announced plans to resume military ties, without giving a date.

Yudhoyono says his role model in government is another soldier-statesman, the World War II allied commander and 34th president of the U.S., Dwight D. Eisenhower. ``Eisenhower was a successful president who could apply military doctrines, strategies and tactics into politics, administration and government,'' he says.

Business Experts

Yudhoyono is surrounding himself with business and economics professionals. Vice President Jusuf Kalla, 62, is a veteran entrepreneur, and the chief coordinating minister for economic affairs, Aburizal Bakrie, 58, is chairman of PT Bakrie & Brothers, a Jakarta-based building products company. Minister for National Development Sri Mulyani Indrawati, 42, is the former Jakarta-based executive director for Indonesia at the International Monetary Fund.

``We want to make infrastructure investments in Indonesia so secure and profitable that you will want to invest your pension funds in it,'' she told a conference of investors in January at which the government announced its plan to offer $22.5 billion of contracts for bid in March. The projects include roads, gas pipelines, power plants and seaports.

Sri Mulyani says the investment will help halve unemployment, currently 9.5 percent, and poverty. More than half of the population now lives on less than $2 a day, according to the World Bank.

Capital Needed

It won't be easy to raise the money for these projects, says Richard Deitz, 39, president of VR Capital Group Ltd., a Moscow- based hedge fund manager specializing in distressed debt securities, including Indonesian debt.

``It has only been a few years since a lot of lenders suffered big losses lending to Indonesian companies, many of which have shown extremely poor willingness to service their debts and have been highly inventive in developing tactics to evade their creditors,'' Deitz says. ``The problems are so deep and corrosive that to induce investors to come in in a big way is going to need some confidence building.''

When the Asian financial crisis struck in 1997, Indonesia's rupiah plunged 85 percent against the U.S. dollar, sinking to 16,525 on June 17, 1998, from 2,431 on July 4, 1997. In 1998, the economy contracted by 13 percent, and hundreds of Indonesian companies, including most major banks, became insolvent.

Defaults Recalled

Some, such as Asia Pulp & Paper Ltd., an Indonesian- controlled, Singapore-incorporated company that in 2001 defaulted on $13.9 billion of debt, still haven't settled with all of their creditors.

Sofjan Wanandi, 63, chairman of the Indonesian Employers' Association, says he'll be watching to see how the government awards contracts for the projects as a test of how Yudhoyono is tackling corruption. Indonesia ranks as the 10th-most-corrupt country in the world, according to Transparency International, a Berlin-based research group.

Under Suharto, crony businessmen were favored for such lucrative deals, Wanandi says. ``There has to be no monkey business this time,'' he says. ``There has to be a true tender. It's a test of the president and cabinet and administration. No cronies. It's Indonesia's last chance.''

Disputes With Partners

Disputes with Indonesian partners can result in profitable multinational companies being declared bankrupt by Indonesian judges. On Jan. 14, two former contractors filed a petition in Jakarta Commercial Court to force the Indonesian unit of Total SA, the world's second-largest liquefied natural gas producer, into bankruptcy. The contractors, PT Sanggar Kaltim Jaya and PT Istana Karang Laut, claimed the Total unit owed them $7.2 million.

Total, the biggest gas producer in Indonesia, denies the allegations and says the contractors submitted a bill higher than had been agreed upon, Total attorney Todung Mulya Lubis said at the time. The court rejected the petition on March 8, Judge Agus Subroto said. It was the first time the court had ruled in favor of foreign investors since 2001, Lubis said.

Newmont, the world's biggest gold miner, has carved out a 1,000-meter-wide, 500-meter-deep open-cut mine, built a U.S.-style town for 6,800 workers and constructed from scratch a seaport from which to export the 12 billion pounds of copper and 13 million ounces of gold it aims to extract over the next 28 years. At the Batu Hijau mine, on a jungle-swathed mountainside on Sumbawa, Phil Brumit, 44, general manager of operations for PT Newmont Nusa Tenggara, traces the company's legal woes in Indonesia.

For eight years, he says, Newmont operated a smaller gold mine at Minahasa in North Sulawesi province. Then, last year, when it was winding up operations there after having mined out all of the gold, a group of villagers filed a complaint claiming they were suffering health problems caused by pollution in nearby Buyat Bay.

Executives Jailed

Five company executives were jailed in September after police named them as suspects under a law that allows people under investigation to be detained. They are still barred from leaving Indonesia, Newmont spokesman Rubi Purnomo says, even though an administrative court in Jakarta ruled in March that the detention was illegal. The police can appeal the ruling, Newmont's vice- president for Indonesian operations, Robert J. Gallagher says.

The week they were arrested, then U.S. ambassador Ralph Boyce met then President Megawati to express U.S. concern about the detainments. ``We don't think it's necessary or appropriate,'' he said. The U.S. embassy spokesman, M. Max Kwak, says, ``That is a matter between an American corporation and the Indonesian government.''

$100 Million Sought

On March 9, Environment Minister Rachmat Witoelar told Bloomberg News he is seeking about $100 million for damage to the environment and the effect on villagers' livelihoods. Police have claimed dumping of waste from the mine in the bay had increased arsenic by 10 times the permitted level.

Newmont denies the charges, Brumit says. ``He's going to have to get control of his ministers,'' Brumit says of Yudhoyono. ``The old regime in the government still wants to do business the old way. He needs to get his new government to do business by the business norms of the rest of the world.''

Yudhoyono says he's watching the case closely, though he can't interfere with legal proceedings. ``The decision must be logical, consistent with our own law and be accepted by the international community,'' he says.

Yudhoyono says he also wants to prevent corrupt Indonesians from hiding abroad and wants to sign an extradition treaty with nearby Singapore, a city where many Indonesians like to keep their money. ``The world will see there is no safe haven for corruptors,'' he says. At a joint news conference with Yudhoyono in Singapore on Feb. 15, Prime Minister Lee Hsien Loong said that both sides were working toward an agreement.

War on Terror

Yudhoyono says he's also making progress in the war on terrorism. The Indonesian government has captured the bombers responsible for the 2002 Bali attack. On March 3, an Indonesian court sentenced Muslim cleric Abu Bakar Bashir, 66, to two and a half years in jail. Bashir, who prosecutors said is the spiritual leader of Jemaah Islamiyah, a group linked to al-Qaeda, was found guilty of conspiring to take part in the Bali attack.

Western governments criticized the light sentence, and the U.S. and Australian governments still warn their citizens against nonessential travel to Indonesia.

Even if corruption and terrorism are tamed, investors in Indonesia still face a host of challenges. Exxon Mobil Corp., the world's biggest oil company and the largest foreign investor in Aceh province, was forced to halt its production in 2002 at the Arun gas fields for four months when rebels attacked.

In 2001, the Washington-based International Labor Rights Fund filed a human rights lawsuit against Exxon in U.S. District Court in Washington on behalf of 11 villagers who said they had been tortured by Indonesian military units hired to provide security for its fields.

Exxon's Response

``We have communicated to the government of Indonesia our opposition to human rights abuse in any form by any organization or individual, as well as our concern over the violence in Aceh,'' Houston-based Exxon Mobil spokeswoman Susan Reeves says.

Exxon Mobil, which has invested $17 billion in Aceh since 1968, largely escaped damage during the tsunami; only two of its 600 workers were killed, says Maman Budiman, a Jakarta-based vice president for the company.

Yudhoyono's government has also restarted peace talks with Acehnese rebels. Negotiators on both sides of the talks have met twice this year in Helsinki, under the auspices of the Finnish government, to seek a resolution, the first talks since Megawati imposed martial law in Aceh in May 2003.

Even with its murky business environment, investors can make money in Indonesia, according to Goldman Sachs's Courtis. ``You don't catch big fish in clear water,'' he says. Although Indonesia is the world's 55th poorest country, with per-capita GDP of $872, consumer spending accounts for 70 percent of GDP, according to the World Bank.

Banks Seized

When Indonesian companies with U.S. dollar debt defaulted on their loans in 1998, the Indonesian government seized 11 of the nation's 12 largest banks, injected $40 billion worth of interest- bearing bonds and began selling off majority stakes in some of them to foreign investors.

San Francisco-based hedge fund firm Farallon Capital Management LLC was the first buyer, paying $568 million for 51 percent of PT Bank Central Asia, the country's second-biggest lender by assets, in 2002. Since then, the bank's share price has more than tripled to 3,775 rupiah on March 22 from Rp975. On March 23, the Indonesian government cancelled the planned sale of a 5 percent stake in Bank Central Asia after bids by investors failed to meet its expectations. Share trading had been suspended for a day for the planned sale. Last year, the bank's net income rose 32 percent to Rp3.15 trillion ($336 million), as economic growth spurred companies and individuals to borrow more.

Making Money

``The best way to get investors to Indonesia is for people in New York and London to see the first people in the door are making money,'' says Raymond Zage, Farallon's Singapore-based managing director.

Singapore's state-owned Temasek Holdings Pte in 2003 acquired Indonesia's fifth- and sixth-biggest lenders,PT Bank Danamon and PT Bank Internasional Indonesia. Danamon's share price has also more than tripled to Rp5,000, and BII's almost doubled to Rp210 on March 23. Bank Danamon's profit rose 58 percent to Rp2.41 trillion in 2004 from Rp1.53 trillion a year earlier. BII's profit more than doubled to Rp821.6 billion from Rp309.1 billion in 2003.

Last year, London-based Standard Chartered Plc, a British bank that makes 75 percent of its profits in Asia, teamed up with automobile distributor PT Astra International to pay $305 million, or 3.18 times book value, for a controlling stake in PT Bank Permata, Indonesia's seventh-largest lender, with assets of $3.2 billion.

`Too Big to Fail'

``We are perceived to have paid a high value for Permata, but this is what the values are today,'' says Stewart Hall, 42, Jakarta-based chief executive officer for Indonesia at Standard Chartered. ``When people look back in hindsight, it will be seen as a very good strategic move. This country is too big to fail.''

Even as it battles a threatened $100 million lawsuit, Newmont Mining is also looking at unexpectedly large profits. General Manager Brumit says the company had budgeted to break even if copper prices were $1 a pound. On March 23, copper was trading at $1.45.

Last year, the Batu Hijau mine, which has a life span of another 26 years, contributed $123 million to Newmont's net income. Indonesia, Brumit says, is well placed to supply resource- hungry China. Now, he and his team are hoping an as-yet-unexplored deposit 60 kilometers away will prove to be even richer. ''Indonesia is a resource-rich country, and we plan to stay here for a very long time,'' Brumit says.

The Toll Road

The next deposit may be easier to mine if Yudhoyono's campaign against corruption succeeds. Eugene Galbraith, 52, the American-born president commissioner of Bank Central Asia, says he's already seen results. He cites the disappearance late last year of a system that operated at the immigration line at Sukarno- Hatta International Airport in Jakarta.

To avoid long lines, arriving business executives could go to an unmarked booth nicknamed jalan toll -- the toll road -- where a bribe to an immigration official ensured they were ushered through ahead of the pack. ''There's a subterranean message that's got out,'' says Galbraith, who has lived in Indonesia for 23 years.

It may take a change of generations before that message reaches the whole of Indonesian society, Economics Minister Bakrie says. ''The new generation should believe that it can live and can prosper without corruption, but I do not put a lot of hope on the generation of my age,'' he says. ''Indonesia is a paternalistic society: If the leaders give a very good example, everybody will follow.''

In Yudhoyono, Indonesia has someone striving to set high standards. Investors can only hope that the nation lives up to them.



To contact the reporter on this story:
William Mellor in Hong Kong at wmellor@bloomberg.net

To contact the editor responsible for this story:
Ron Henkoff in New York at rhenkoff@bloomberg.net

LONDON (AFX) - Anglo-Eastern Plantations PLC, which owns approximately 31,000 hectares of plantations, primarily of oil palm in Indonesia, said it has
completed the acquisition of rights over 4,800 hectares of vacant land, known asLabuhan Bilik, in the province of North Sumatra, Indonesia.

These land rights are owned by PT Hijau Pryan Perdana (HPP), 80 pct of which has been acquired by Anglo-Eastern for 320,000 usd.

The balance of 20 pct has been acquired for a pro rata consideration by one of Anglo-Eastern's long standing local Indonesian partners who will fund his share of further development alongside Anglo-Eastern.

The company said conversion of the land rights into a confirmed land title will
take between one and two years and requires development to have commenced in the interim.

Development of this area into an oil palm estate is likely to begin in 2006,
funded initially from the group's own resources. Production is expected to
start in 2009/10.

Anglo-Eastern said the acquisition will have no effect on group profits for
2005.

MasterIndex™ of Retail Forecasts Continued Robust Retail Sales Growth Across Asia/Pacific


Indonesia to Lead the Region in Year-on-Year Growth in the First Half of 2005


Singapore, 4 February 2005 – Stellar growth in retail sales across Asia/Pacific is expected to continue, according to the latest MasterIndex™ of Retail forecast released by MasterCard International today.


All 12 Asia/Pacific markets included in the forecast are predicted to see positive expansion, with Indonesia taking the lead with an anticipated 16.9% year-on-year growth for the first half of the year. Double-digit growth is also expected from China (12.75%) and Thailand (12.3%), followed by Malaysia (8.9%), Hong Kong (8.7%) and the Philippines (8.5%).

Dr. Yuwa Hedrick-Wong, economic advisor, Asia/Pacific, MasterCard International, commented, “The consumption revolution in Asia/Pacific continues to unfold in 2005, in spite of the tsunami disaster, the impact of higher world price of oil, and the regional trend of rising interest rates. The outlook of consumer confidence for the first half of this year remains solidly optimistic, and this is entirely consistent with the expected pace of economic expansion across the region in 2005.


“Retail sales will also benefit from the growing trend of traveler-shoppers, a uniquely Asia/Pacific phenomenon. Key tourist destinations such as Hong Kong, Singapore, Bangkok, Kuala Lumpur, Shanghai and Seoul will see higher tourist arrivals, boosting retail sales and the small and medium size businesses that cater to tourists.”


Conducted twice a year in June and December, the MasterIndex of Retail was launched in June 2003 by MasterCard as part of its knowledge leadership initiatives in Asia/Pacific. It is among MasterCard’s MasterIndex suite of research products and provides six-month forecasts of retail sales growth in 12 markets: Australia, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Taiwan and Thailand.


The other key MasterIndex research products include the flagship MasterIndex™ of Consumer Confidence - the region’s most comprehensive and longest running consumer sentiment survey, and the MasterIndex™ of Travel, which combines outbound travel forecasts for the region with a survey of Asian travelers’ lifestyle trends.


Other highlights of the MasterIndex of Retail for the first half of 2005 are as follows:

China takes the number two spot in the retail sales growth forecasts with 12.75% year-on-year growth, followed closely by Thailand at 12.3% year-on-year growth.

Malaysia, Hong Kong, the Philippines and Singapore are predicted to see optimistic retail sectors, with anticipated 8.9%, 8.7%, 8.5% and 6.5% year-on-year growth respectively.

Other Asia/Pacific markets, while less bullish, indicate positive year-on-year growth. These include Taiwan (4.8%), Australia (4%), Japan (2.3%) and Korea (1.78%).

Combining 10 years of retail sales data1, factoring in the secular trend of growth of the retail industry, and using the MasterIndex of Consumer Confidence as an independent variable2, an estimate of retail sales value is obtained for the same six-month horizon covered by the MasterIndex of Consumer Confidence.



INDIVIDUAL MARKET FORECASTS FOR FIRST HALF 2005

(Full report is available at www.mastercard-masterindex.com)

...

Retail sales in Indonesia for the first half of 2005 are expected to manifest year-on-year growth of 16.9% to reach $166 trillion Rupiah in the first six months. Consumer confidence in Indonesia improves significantly, rising 27 points to 94.7 from 67.3 in the previous survey. Optimism for all variables of the index are above 90, mostly due to strong economic climate and confidence in the new president.

...

China's consumption boom has started to ease, and in some cases is declining as seen in recent automobile sales. So I think this year Indonesia will lead the pack in domestic consumption increases.

Indonesia Gets Textile Orders Exceeding Supplying Capacity

JAKARTA, March 30 Asia Pulse - Indonesian textile makers have received orders that exceed their supplying capacity, the textile association (API) said.

API executive secretary E.G. Ismy said at least 10 producers could not accept more orders from U.S. buyers until June.

The abolition of the export quota in January this year has turned out to be favorable for Indonesian producers as buyers from the US can make direct business contacts with producers in the country, Ismy said.

Last year, the Indonesian government and textile producers asked the US, Canada and the European Union to postpone abolition of the quota restriction as without the quota system powerful rivals like China and India would easily dominate supplies to the world's biggest markets.

He said about 1,000 medium and large textile companies grouped in API are able to continue operations after the abolition of the quota.

He acknowledged that several producers have stopped operations due to market competition.

Ismy said buyers prefer to deal with suppliers having integrated operations that produce all textile products.

He predicted that demand will remain strong this year with more orders expected to come from the US, the largest buyer for Indonesian textiles and garments.

This year the country targets to earn US$8 billion from textile and garment exports.

wow, what a pleasant surprise.

and here's a breaking news..

HSBC Indonesia Unit May Enter Islamic Consumer Market (Update1)
March 30 (Bloomberg) -- HSBC Holdings Plc, Europe's biggest bank by market value, may become the first foreign company to enter Indonesia's growing market for consumer loans and financial services that comply with Islamic law.

``We are quite keen to enter the retail market,'' Mahmoud Abushamma, 35, head of HSBC Syariah, the bank's local Islamic unit, said in an interview in Jakarta. ``There is a good possibility the bank will enter that area in the next 12 months.''

London-based HSBC in October 2003 became Indonesia's first overseas bank to offer companies financial advice and loans that conformed with Shariah, the Muslim law that bans payment of interest and investments in the alcohol, tobacco and gambling industries. In Indonesia, 85 percent of the 238 million people are Muslim.

Indonesia's central bank forecasts Islamic banking assets will expand more than 12-fold by 2011 from $1.48 billion, or less than 2 percent of total banking assets. HSBC already manages $1.75 billion of assets in Indonesia.

``Indonesia has the world's largest Muslim population, so one would naturally go where the numbers are,'' said Kelvin Miranda, who manages the equivalent of $210 million at Asian Asset Management Sdn. in Kuala Lumpur, including Shariah-compliant stocks. ``Banks want a piece of the pie. Indonesia is a far more positive story now. There is increased investor confidence and growth is relatively strong.''

Islamic Assets

HSBC is likely to compete with Western banks such as Standard Chartered Plc and Citigroup Inc. in trying to win customers in Indonesia, investors said. The country's $222 billion economy, Asia's sixth largest, is forecast by the government to expand 5.5 percent in 2005, the most in nine years.

``The market is on the up, the economy is looking positive,'' said Abushamma, who moved to Jakarta in 2003 after working at London-based HSBC Amanah Finance, the bank's Islamic unit in the U.K. Before joining HSBC in 1999, he was a senior associate for global Islamic finance in London at Australia & New Zealand Banking Group Ltd., the third-largest Australian lender.

HSBC is vying with Arab and Asian lenders to supply the growing market for Islamic financial services among the world's more than 1 billion Muslims, including in Europe and the U.S. The U.K. last year licensed the Islamic Bank of Britain, the first bank in Europe and the U.S. to offer only mortgages and accounts that comply with Islamic law.

15% Growth

Assets controlled by Islamic banks worldwide, including Kuala Lumpur-based Malayan Banking Bhd. and Dubai Islamic Bank, total $200 billion to $500 billion and are growing by 10 percent to 15 percent annually, according to the U.K.'s Financial Services Authority.

``It is an expanding market,'' said Salam Saadeh, head of business and products development at Dubai, United Arab Emirates-based Shuaa Capital investment bank, which manages about $1 billion of assets in the Middle East and North Africa. ``You cannot ignore it. There are a lot of different clients who strictly invest according to Shariah principles.''

In Indonesia, the Islamic banking industry is poised to expand to 171.3 trillion rupiah ($18.2 billion) in 2011, from 14 trillion rupiah at the end of last year, according to the central bank. Indonesia has 15 Islamic subsidiaries of mainstream banks such as PT Bank Mandiri and PT Bank Negara, the nation's No. 1 and No. 3 lenders.

``Almost every year, we see conventional banks opening Islamic units,'' said Rizqullah, 48, director of the Islamic Banking Division at Bank Negara Indonesia. ``As it's still in its early stages the potential is unlimited.''

HSBC Amanah

Dubai-based HSBC Amanah, the bank's global Islamic financial services division, was established in 1998, according to its Web site. It has Islamic representatives in nine countries including the U.S, Malaysia and Singapore. Individual customers at the unit increased by 43 percent last year to 165,000 people, according to the bank.

HSBC also helped arrange Pakistan's sale of $600 million of Islamic bonds in January, Qatar's $700 million of so-called Sukuk bonds in September 2003, and Malaysia's $600 million sale of the first government Islamic bonds in June 2002.

Singapore's central bank estimated the market for Islamic bonds at more than $30 billon at the end of 2004. In Indonesia, Islamic banking assets make up 1.9 percent of banking industry assets, and their share may reach 9.1 percent by 2011, central bank data show.

Indonesia's central bank, the Jakarta-based Capital Market Supervisory Agency, the market watchdog, and Muslim scholars are working to simplify taxation and banking rules for mortgages, bonds and financial products to make them acceptable to Islamic law.

``We want to promote Islamic finance here to foreign banks, and to give people more choices,'' Mulya Siregar, head of research and regulation at the Directorate of Shariah Banking, said in an interview. ``We can learn from them.''



To contact the reporter on this story:
Shanthy Nambiar in Jakarta at snambiar1@bloomberg.net.

Jakarta says economy won't fail over quake

2005-03-30 / Bloomberg /

Indonesia's economy will stay largely unaffected by the magnitude 8.7 earthquake that hit Sumatra island last night, Finance Minister Jusuf Anwar said.

"The impact on the economy won't be that big," he said at a ministry meeting in Jakarta today. "We can manage it."

The government has 2 trillion rupiah (US$211 million) of emergency relief funds, he said. Vice-president Jusuf Kalla has called an emergency meeting with some cabinet ministers to work out a plan of action.

The quake last night follows a bigger earthquake on December 26, which triggered a tsunami that killed more than 270,000 people in the region and damaged large parts of Banda Aceh, the capital of Aceh province. The government estimated the cost of reconstruction at 57 trillion rupiah, Planning Minister Sri Mulyani Indrawati said on March 24.

"We've learnt from the December 26 tsunami how emergency efforts have to be implemented, what needs to be done," said Coordinating Minister for Economic Affairs Aburizal Bakrie by telephone. "I don't think this will affect our economy, just as in the case of the tsunami incident. I don't expect investors to be affected by it."

Indonesia's economy is estimated to expand as much as 6 percent this year, said Song Seng Wun, a regional economist at G.K. Goh Holdings Ltd. in Singapore. He doesn't plan to change his growth forecast for the country after the latest earthquake.

"Impact on the economy will probably be fairly negligible," Song said. "A key driver of economic growth in Indonesia continues to be Java island, the region around Jakarta. If consumption continues to be strong there, there may be more upside to the Indonesian economy at this point."

Preventing volatility

Bank Indonesia, the nation's central bank, said it will buy or sell the rupiah, if necessary, to curb volatility.

"We always watch the market and will take action if needed," Zainal Abidin, deputy director of the bank's currency reserve management department, said by telephone in Jakarta. "It's normal for the central bank to conduct operations in the market to smooth out volatility."

The rupiah dropped 0.3 percent to 9,483 against the dollar as of 10:30 a.m. Jakarta time. The currency slid as low as 9,495, its weakest since June 7. Abidin declined to comment on speculation that the central bank bought rupiah today.

The stock index fell as much as 2.5 percent, led by banking shares.

The islands of Nias and Simeulue, off the southwestern coast of Sumatra's northern tip, may have suffered damage and death, said Minister for Communications and Information Sofyan Djalil by telephone before he went into the emergency meeting.

Thursday March 31, 4:53 PM
Indonesia's Telkomsel plans $700 mln capex, up 33 pct
By Nury Sybli
ADVERTISEMENT


JAKARTA, March 31 (Reuters) - Indonesia's largest mobile phone company, PT Telekomunikasi Selular (Telkomsel), said on Thursday it earmarked $700 million for capital spending in 2005 -- an increase of around a third -- to keep up with the growing number of subscribers.

The mobile arm of top telecoms firm PT Telekomunikasi Indonesia Tbk (Telkom) aims to win 6 million new customers this year, out of 15 million new users nationwide.

Indonesia currently has 30 million mobile users, but this is forecast to rise by 50 percent this year -- to 20 phones per 100 people, compared with around 40 in Thailand and 58 in Malaysia -- fuelled by cheaper phones from Motorola , Nokia and others.

"Our (2005) capex will be $700 million. Most of it will be used for network development. We will use our internal funds for that," Kiskenda Suriahardja, Telkomsel's recently appointed president director, told reporters.

Telkomsel had around $525 million for 2004 capex.

Main rival, PT Indosat Tbk has said it could put aside $800-$900 million for capital spending this year, with 80 percent of that for its mobile phone operation.

Telkom owns 65 percent of Telkomsel, with Singapore Telecommunications Ltd. holding the other 35 percent.

Telkomsel has more than 50 percent of the market, ahead of Indosat's 30 percent.

The heady growth has attracted foreign interest and some analysts and industry executives warn the competition will hurt the established providers.

Hutchison Telecommunications International Ltd. said on March 9 it would pay $120 million for a 60 percent stake in Indonesian mobile start-up PT Cyber Access Communications.

Malaysian operators Maxis Communications Bhd and Telekom Malaysia Bhd have also agreed to buy stakes in smaller Indonesian operators.

Telkom's shares, with a market capitalisation of around $9.5 billion, rose 0.56 percent to 4,475 rupiah on Thursday, slightly lagging the overall market .

Apr 1, 2005



Indonesia wins a round against corruption
By Bill Guerin

JAKARTA - Judges at the South Jakarta District Court have jailed a swindler for life for his part in the embezzlement of Rp1.2 trillion (US$126 million) from state-controlled Bank Negara Indonesia (BNI). The sentence - the only salutary life sentence to be issued during President Susilo Bambang Yudhoyono's administration - comes as a major boost to the credibility of the president, who has vowed to fight corruption and boost investment in the country.

On Wednesday, the panel of judges, presided over by Judge Roki Pandjaitan, found Adrian Waworuntu "legally and convincingly guilty" of the criminal act of corruption by receiving Rp1.2 trillion from fictitious letters of credit. The judges also ordered the defendant to pay a restitution of Rp300 billion to the state and fined him Rp1 billion.

Only days after being installed as president, Yudhoyono urged Attorney General Abdul Rahman Saleh to handle major outstanding court cases quickly, including cases of graft, and reportedly asked for periodic updates on the status of major cases, such as the BNI fraud.

"I fully trust you to deal with such cases completely, and you have to trust me as well," Yudhoyono reportedly told Saleh.

The scandal at BNI, the country's second-largest bank in terms of assets, first made headlines in October 2003. The bank's Kebayoran Baru branch in South Jakarta had granted export credits to subsidiaries of the Gramarindo Group, a group
holding company parlty owned by Waworuntu, using 41 letters of credit (L/C) issued by banks in Kenya, Switzerland and the Cook Islands as collateral.

The bills attached to the L/Cs were fictitious, as the goods were never imported, but the branch went ahead anyway and disbursed the credits, between December 2002 and July 2003, without conducting any formal assessments or checks.

No shortage of laws
Numerous existing laws allowed police, prosecutors and judges to go the last mile in pursuing the case. They include Laws No 3/1977, 31/1999 and 20/2001 on corruption, article 263 of the Criminal Code on document forgery, Law No 10/1998 on banking and Law No 15/2002 on money laundering.

Pandjaitan, reading from the verdict, said the judges had decided to impose the heaviest possible sentence as the defendant's acts had "severely hurt the country's economy and the nation's morals".

"Those people involved in corruption should be punished as severely as possible because the act of corruption has been proven to turn the country poor," the judge said.

The credits went to PT Petindo and the Gramarindo Group. PT Sagared is the holding company for all the subsidiaries of the Gramarindo Group. The subsidiaries implicated in the scandal are PT Bassomasindo, PT Bhinekatama Pacific, PT Gramarindo Mega Indonesia, PT Magnetique Usaha Esa Indonesia, PT Triranu Caraka Pasifik, PT Pan Kifros, PT Ferry Masterindo and PT Metrantara.

The court said Waworuntu had acted as an investment consultant for Gramarindo and these subsidiaries. He also held shares in some of them, though the companies were seen simply as fronts for the grand scam. When the verdict was announced, Waworuntu looked shocked and said he would appeal. His lawyer, Yan Juanda Saputra, accused the judges of ignoring the facts presented during the case and merely siding with the prosecution.

Safety in Singapore
The main suspect in the case, Maria Pauliene Lumowa, is still at large. Lumowa, a Dutch citizen and a commissioner at Gramarindo, left the country before the investigation began and is reportedly living in Singapore.

The government is unable to bring her back into the country because Indonesia does not have an extradition treaty with Singapore. The chairman of the Corruption Eradication Commission (KPK), Taufiqurrahman Ruki, had earlier called for an in absentia trial for Lumowa so the government could recoup the bulk of the money. He argued that by holding such a trial the government would have a legal basis for an immediate move to seize all of Lumowa's assets, including the flow of funds on her behalf.

"It seems the efforts to get her back here are difficult as she is not an Indonesian citizen, but we could ask for an in absentia trial that will provide a legal base to seize her assets," Ruki said.

Unproven political aspects
Alleged political dimensions to the case surfaced just as campaigning for last year's presidential election got under way. Rumor had it during that time that three presidential candidates from the opposition Golkar Party received money from individuals implicated in the scandal.

Golkar Party chairman at the time, Akbar Tanjung, coordinating minister for people's welfare Jusuf Kalla, now the country's vice president, and the new leader of the Golkar Party, General Wiranto, all denied the allegations.

A letter leaked to the press written by Edi Santoso, foreign customers' division head at BNI's Kebayoran Baru branch, stated that, together with suspected business persons, Santoso had met with Wiranto to discuss the general's plan to run for the presidency. Wiranto quickly denied this, saying he did not know Santoso and had no relations with any of the suspects in the BNI case.

Help readily available
Waworuntu was first detained last year, but was released when state prosecutors rejected the initial dossier presented against him by police as incomplete. He later managed to sneak out of the country and fled to the United States, despite a travel ban imposed on him, raising suspicions that high-ranking police officers were involved in his escape.

Brigadier-General Samuel Ismoko, head of the fraud squad, was removed from his post in October after media reports that he had taken a bribe worth $20,000 from Waworuntu to help the latter flee the country. Later that month Waworuntu surrendered to police in the North Sumatra capital Medan, after being on the lam for more than a month.

Earlier, a police disciplinary hearing had imposed a one-year suspension on Ismoko for giving special treatment to several suspects in the BNI case. But the hearing was unable to prove that he had accepted a bribe.

Not the first, nor the last
The South Jakarta District Court has so far convicted 11 of 19 suspects in the case. Waworuntu is the ninth to be jailed. Among the others are Ollah Abdullah Agam, Aprilla Widata and Adrian Pandelaki, all of whom were sentenced to 15 years in prison; Richard Kountul received 10 years; and Titik Pristiwati was sentenced to eight years. BNI's Kebayoran Baru branch head Koesadiyuwono received a 15-year sentence, while Santoso, like Waworuntu, was sentenced to life.

Last November another defendant, John Hamenda, a director of PT Petindo, was sentenced to 20 years in jail and fined Rp1 billion. Trust financial and legal magazine was fined Rp1 billion (nearly $115,000) by the Central Jakarta District Court for discrediting Hamenda and his company in an article published in its October 1-7, 2003, edition titled, "A gang of thieves hits state Bank Negara Indonesia".

Hamenda's conviction followed a string of earlier verdicts handed down to bankers and others who were implicated in cases for misusing state funds. Last July, for example, two former branch managers of another state bank, Bank Rakyat Indonesia, and two businessmen were sentenced to jail after being declared guilty in a $21 million scandal. In the same month, the Central Jakarta District Court also sentenced Yosef Tjahjadjaja to 11 years in prison for his part in a state-owned Bank Mandiri loan scandal that involved Rp120 billion of state funds.

On track
Notwithstanding the widely acknowledged improvements in Indonesia's banking sector since the 1997 Asian financial crisis, the fact that this particular embezzlement crime, made possible by help and cooperation from bank insiders, stemmed from a lack of supervision of just two individuals - one of them the branch manager - highlights the continuing need for oversight, supervision and risk management in Indonesia's banking system.

The Yudhoyono administration has committed to continuing to reform the country's financial sector, including improving its regulatory framework. Such reform, however, will take time.

Although pledging to bring the country's endemic corruption to an end may capture the public's imagination, it will take more than just one such example of severe punishment under the Yudhoyono administration to restore police and judicial credibility in the eyes of the world, let alone among Indonesians themselves.
Yet if other large-scale, high-level corrupters are to be vigorously prosecuted and, on conviction, given severe sentences, Indonesia's perception in international eyes as a corrupt country may soon be on the wane.

This could generate positive spin offs for trade, tourism and investment for a country led by a president who swept to victory with one of the strongest mandates of any recently elected democratic world leader.

Bill Guerin , a Jakarta correspondent for Asia Times Online since 2000, has worked in Indonesia for 19 years in journalism and editorial positions. He has been published by the BBC on East Timor and specializes in business/economic and political analysis in Indonesia.

(Copyright 2005 Asia Times Online Ltd. All rights reserved. Please contact us for information on sales, syndication and republishing.)









Indonesia: History revisited (Dec 17, '03)

Just another Indonesian bank scandal (Nov 27, '03)

Corruption in Indonesia: Is it cultural? (Nov 25, '03)

Indonesia's Tax Revenues up 23% in First 3 Months of 2005

JAKARTA, March 31 Asia Pulse - The government tax revenues rose to Rp61.5 trillion (US$6.5 billion) in the first three months of this year from Rp50 trillion in the same period last year.
Taxation Director General Hadi Poernomo said the good performance in the first months of this year gave greater optimism that the tax revenue target of Rp273.7 trillion set for this year will be achieved.

Hadi said the high increase in revenue also indicated that tax payers are more aware of their obligations.

He said the revision in the target from Rp256.5 trillion set previously before the state budget revision will not necessarily cause an increase in tax tariffs.

The government revised the state budget recently following the oil price hikes that

Hadi said the tax tariffs will not change but collection will be intensified and tax base will be expanded

Goldman Sachs came out saying oil prices might rise to as high as $105 per barrel. Oil prices are above $57 a barrel right now. Rupiah is falling and the budget assumes a $35 barrel. Something will have to happen or there will be serious budgetary consequences.

Exports grows by 25.74% as of February
Urip Hudiono, The Jakarta Post/Jakarta

Boosted by higher oil prices and increasing global demands for non-oil and gas commodities, Indonesia's exports for the first two months of the year rose by more than a quarter from the same period last year.

The latest reports on economic data by the Central Statistics Agency (BPS) showed on Friday that January-February exports in 2005 stood at US$12.5 billion, a 25.74 percent increase from the $9.9 billion posted in the corresponding period.

The healthy figure has boosted optimism on the part of the government that it can meet its full-year target of $75.9 billion, or even surpass it.

"We are saying this because we are in fact seeing an increase in investments in the country for export-oriented purposes," said Coordinating Minister for the Economy Aburizal Bakrie, pointing out how many Japanese companies operating in the country invested as much as $3 billion last year for manufacturing export-quality goods.

"This figure is expected to rise by 30 percent this year."

In 2004, total exports reached a historic high of $69.71 billion -- up 11.49 percent from the year before -- helped by strong sales of non-oil and gas commodities including palm oil, electronics, clothing, coal and tin.

The country needs stronger exports to help generate higher economic growth, which has been driven mainly by robust domestic consumption in past years.

To date, net exports only make up about 10 percent of the economy, as measured by gross domestic product (GDP), compared to about 70 percent contributed by consumption.

Indonesia's economy grew 5.13 percent last year.

The BPS also reported that total January-February's exports were helped by strong non-oil and gas exports, which rose 30.77 percent as compared to the same period last year, far outclassing the 9.4 percent growth in oil and gas exports.

For non-oil and gas exports, the U.S. remained the nation's main destination as of February, followed closely by the European Union (EU) and Japan, valued at $1.6 billion, $1.6 billion and $1.4 billion, respectively.

The three nations represent 47.55 percent of the nation's total non-oil and gas exports.

Meanwhile, imports in the first two months of the year totaled $7.99 billion, an increase of 18.69 percent from the $6.73 billion in the same period in 2004.

EXCLUSIVE: Indonesia vehicle sales soar by 42% in Jan-Feb
31 Mar 2005
Source: just-auto.com editorial team

Indonesia’s new vehicle market soared by 42% year-on-year in the first two months of 2005, despite the recent natural disasters that have devastated parts of northern Sumatra. Data compiled by the Gaikindo vehicle manufacturers association shows wholesale volumes in January and February amounting to 91,198 units combined.

interesting article ..

Starbucks Mulls Tsunami-Hit Aceh Coffee Brand
By Phelim Kyne

OF DOW JONES NEWSWIRES

JAKARTA (Dow Jones)--U.S. retail coffee giant Starbucks Corp. (SBUX) may market coffee sourced from Indonesia's tsunami-devastated northwestern Aceh province, an executive with the firm's local licensee said recently.

Representatives of Seattle-based Starbucks are already in discussions with Aceh-based coffee industry participants about the possibility of selling an "Acehnese coffee," said PT Sari Coffee Indonesia general manager Anthony Cottan.

PT Sari is a unit of listed PT Mitra Adi Perkasa (MAPI.JK). PT Sari opened its first Starbucks store in 2002 after obtaining a franchise license from the U.S. firm, and currently has 28 stores in major urban centers across Indonesia.

"They are talking to the coffee farmers (in Aceh), but it takes a lot of time (and) a lot of quality samples," to prepare to launch such a new brand, Cottan said, without elaborating.


Cottan said Starbucks has also contacted coffee agents who purchase beans from the small-scale coffee farm operations that predominate in Aceh and throughout Indonesia.

An Aceh-sourced coffee product would dovetail with Starbucks' strategy to brand itself as a firm with a corporate conscience that balances pursuit of profit with attention to environmental and social concerns.

Starbucks' efforts in that regard have ranged from the use of recycled packaging to the sale of organically-grown coffees, including a variety sold in Australia from the former Indonesian province and conflict zone of East Timor.

An Aceh-sourced coffee brand would likely find a warm welcome among consumers in developed markets in North America and Europe moved to donate millions of dollars to assist victims of the Dec. 26 massive earthquake and tsunami that devastated the province. Latest official casualty estimates indicate the disaster killed more than 120,000 Aceh residents and left more than half a million others homeless.

Private sector initiatives to revive Aceh's economy, already battered by a three-decade civil insurgency that has left the province a martial law zone since May 2003, are desperately needed and Aceh's coffee resources are a logical starting point.

Aceh's fertile soil produces about 40% of Indonesia's premium arabica coffee beans, which earlier this week in FOB Panjang port, Lampung, were quoted for up to $4,000 a metric ton compared to around $900/ton for lower-quality robusta beans. Indonesia is the fourth-largest coffee bean producer in the world. Robusta beans comprise 90% of the country's crop.

While Starbucks headquarters mulls an Aceh coffee brand, PT Sari is poised to open an additional four new outlets in Indonesia over the next three months as part of a "Jakarta-focused" expansion plan, Cottan said.

Growth Limited By "Volatile" Environment

PT Sari currently has 22 Starbucks outlets in Jakarta and the firm is also considering adding to the two stores it operates on the tourist resort island of Bali.

Jakarta's ongoing boom in construction of retail shopping and office complexes will provide the company with ideal potential new locations, but Cottan said that the inherent "very volatile" nature of Indonesia's political and business environment made medium-to-long-term projections of growth problematic.

"The thing about Indonesia is you never know what's going to happen, whether it's the government...the economy or the exchange rate, so if we tried to say we wanted to be at a certain number (of outlets), we'd either be underestimating or overestimating," he said.

PT Sari's Jakarta-focused expansion of its Starbucks outlets will include both drive-through locations and a soon-to-be-announced deal that will put espresso machines and Starbucks' baristas inside selected locations of a domestic listed bank, Cottan said, without elaborating.

Those plans reflect the primacy of convenience in consumer decisions in an Asian capital in which loose bank credit is fueling a surge in consumer vehicle sales that are steadily worsening traffic conditions in the already car-choked capital. An estimated 300 to 500 new cars hit Jakarta's streets every day, along with around 1,200 new motorcycles, the Jakarta Post newspaper reported late last year.

"Convenience is becoming a bigger and bigger factor (because if) you get in a traffic jam for two hours, you'll stop at the closest place to you before you'd drive to a Starbucks, (so) our theory is to make more of the convenience," Cottan said.

Good news about auto sales and exports. March inflation was 1.91%, which is actually less than it was during the month of the last fuel price hike in 2002. That was only a 22% price hike as well.

Apr 02 17:44

SOME 25 AUSTRALIAN BUSINESSMEN TO MEET PRESIDENT YUDHOYONO

This online news service is supplied to readers solely for internal use. Retransmission, dissemination or publication, whether in print, electronic or other means, is expressly forbidden without written authorization from LKBN ANTARA.

Jakarta (ANTARA News) - Some 25 leading business makers in Australia would meet for a dialog with Indonesian President Susilo Bambang Yudhoyono during his visit to Sydney and a number of cities in Australia next week, Indonesian Chamber of Commerse (Kadin)chairman MS Hidayat told ANTARA here Saturday.

He said the Australian businessmen wanted to meet Yudhoyono for a dialog before deciding to make new investment or expand their business in Indonesia.

"Some of those businessmen have already invested in Indonesia while the rests are eager to make new investment here. Thus, they wanted to make a direct contact with President Yudhoyono," Hidayat said, adding that most of Australian investors wanted to invest in banking, telecommunication, steel factory, mining, insurence, automotive components and agricultural sectors.

Hidayat said Australian investors who were eager to invest in Indonesian were among others, from Meat & Livestock Australia Ltd, BluScope, and BHP which has invested in mining sector in Indonesia.

In addition to having a dialog with Yudhoyono, the Australian business makers would also make business meeting with their Indonesian counterparts who are going to visit the country under the coordination of Kadin.

"Through that meeting, we hope the Australian investors investing in Indonesia will not only increase in number but the entry of Indonesian product into Australian markets will also increase," Hidayat noted.

Meanwhile, data obtained by the Department of Industry and Trade from Central Bureau of Statistics indicated that the total trade value between the two countries last year rose to US$4.1billion from US$3.44billion of the previous year.(*)

Apr 02 00:10

GOVT ESTIMATES EXPORTS TO GROW FASTER IN 2005

This online news service is supplied to readers solely for internal use. Retransmission, dissemination or publication, whether in print, electronic or other means, is expressly forbidden without written authorization from LKBN ANTARA.

Jakarta (ANTARA News) - Indonesia`s exports in 2005 are estimated to grow at a higher rate than in 2004 due to an expected increase in export-oriented investment, Coordinating Minister for Economic Affairs Aburizal Bakrie said here Friday.

"As indicated in the revised 2005 State Budget, export growth this year will be higher than last year," Aburizal said.

The gain would be made among other things by increased investment in export-oriented projects, he said.

Citing an example, Aburizal said Japanese investment in 2005 was expected to increase by 30 percent over the 2004 figure of US$3 billion.

"They (Japanese investors) have said they would increase investment here by some 30 percent over last year`s figure," the minister said.

Most of the expected investment was in production of goods intended for export.

Previously, Bank Indonesia (BI), Indonesia`s central bank, had predicted that export of goods and services in 2005 would grow at a such lower rate than in 2004, namely at seven to nine percent.

In 2004, export of goods and services grew 12 percent with main contribution from primary goods-based processed industry, oil and gas, and the mining sector.

BI said, the lower prediction was due to sluggish world economic conditions in 2005 which would affect the world`s trade volume.(*)

Indonesia c.bank says raises 7-day rate by 25 bps

JAKARTA, April 4 (Reuters) - Indonesia's central bank has raised its seven-day intervention rate (Fasbi) by 25 basis points to 7.25 percent effective Monday, a central bank official said.
The rate increase came after the statistics bureau announced last week that consumer prices rose at their fastest pace in 27 months in the year through March, spurred by a sharp hike in fuel prices.

ABN AMRO Cuts Indonesia To Underweight Vs Overweight
SINGAPORE (Dow Jones)--ABN AMRO Holding N.V. (ABN) has downgraded its rating on Indonesia to "underweight" from "overweight," citing the country's vulnerability to an outflow of foreign funds.

"Indonesia has been one of the biggest recipients of foreign inflows in 2005 and looks vulnerable to any further reduction in risk appetite by global investors," the investment bank said in a report dated April 4.

A net $2.5 billion of foreign funds have flowed into Indonesia over the past 15 months, ABN AMRO said, making the country "the second-biggest beneficiary of foreign buying after India."

ABN AMRO's stock picks in Indonesia include Indocement Tunggal Prakarsa (INTP.JK), Summarecon Agung (SMRA.JK) and Indonesian Satellite Corp. (IIT).

- ADB predicts economic growth at 5.5% this year, 6.0% in 2006 and 6.5% in 2007.


Tsunami-ravaged economies of Indonesia, India to grow this year

(Kyodo) _ The economies of Indonesia and India, which bore much of the brunt of the Dec. 26 earthquake-triggered tsunami, will grow this year despite the disaster that killed more than 300,000 people, while the economies of tsunami-ravaged Maldives, Sri Lanka and Thailand are expected to slow, the Asian Development Bank said Wednesday.
The Manila-based bank said in its annual Asian Development Outlook that Indonesia's economy is expected to grow 5.5 percent this year, up from 5.1 percent last year, and even forecasts it "to pick up speed over the next three years."

India's economy will grow 6.9 percent this year, up from 6.5 last year, it said.

However, the bank said the Maldives' economy will grow only 1.0 percent this year well down from 8.8 percent last year due to widespread damage to infrastructure that caters mainly to tourists.

Sri Lanka's economy will slow to 5.2 percent growth this year from 5.5 percent last year, while Thailand will slip to 5.6 percent growth from 6.1 percent last year.

"Despite the huge scale of loss of human life, homelessness and displaced populations, the macroeconomic impact of the disaster appears limited," the bank said. ADVERTISEMENT



It also said that the tsunami's damage is "largely confined to rural areas rather than key economic and densely populated urban centers and industrial hubs."

Nevertheless, it said, "The economic impact will be felt severely at the local and community levels, dragging a significant number of already poor people into deeper poverty."

"The disconnection between the human cost and the limited macroeconomic impact is considerable with this particular disaster," the bank said.

Epidemic outbreaks remain "a very significant risk" that could spoil the ADB's overall forecast of economic growth of 6.5-6.9 percent in 2005 through 2007 in developing Asia.

Other risks include high oil prices, terrorism threat and the growing interdependence of regional economies.

"Strong regional cooperation is absolutely vital in mitigating the risk of various epidemics. The tsunami that devastated coastal areas of the Indian Ocean left these areas vulnerable to epidemics," it said.

"While the immediate economic consequences remain under control in many affected countries, poor sanitary conditions alongside the lack of sound health systems are risk factors for epidemic outbreaks of typhoid, hepatitis, diarrhea, and cholera across the region," the bank said.

Fueled by stronger domestic consumption and investment, Indonesia's economy is expected to grow by 5.5 percent in 2005, despite the tsunami and 6 percent to 6.5 percent in the following two years, according to the bank.

"The December earthquake and tsunami caused heavy loss of life and great destruction in Aceh, and were followed by another strong earthquake in March near Nias Island. These disasters were devastating for communities, but not for the country's main economic production centers," the bank said.

For instance, it noted that in Indonesia, which suffered the highest number of deaths, the poverty impact is geographically concentrated in Aceh and North Sumatra, affecting mostly farmers and fishermen.

"The disaster has displaced at least 475,000 people, and by taking into account other indirect effect, the number of poor people is estimated to have increased by more than 1 million," it said.

In Sri Lanka, the ADB said the disaster cost the jobs of many fishermen and small-scale traders near the shore, throwing 287,000 more people into poverty.

In the Maldives, the ADB said that while the loss of life was fortunately low, the tsunami directly affected about a third of its 300,000 people. About 39,000 people were thrown into poverty as a result.

In India, the bank said the tsunami has thrown 644,000 more people into poverty. In Thailand, the bank said around 24,000 more Thais were impoverished as a result of the tsunami.

Indeed, the bank said many of people in tsunami-affected areas have sunk deeper into poverty.

"It will now take an even greater effort to lift these people above the poverty line," it said.

Full Report for South East Asia: http://www.adb.org/documents/books/ado/2005/ado2005-part2-sea.pdf

EIU March assumptions

In Indonesia, we expect the economy to expand by 5.4% in 2005, rising to 5.7% in 2006. Although the tsunami that occurred in December 2004 will have a negative impact on GDP owing to reduced productive output in Aceh, we expect this to be more than compensated for by construction activity and stockbuilding in the province. The principal reason for the slightly lower growth forecast is that private consumption, on a national scale, was subdued in the first quarter of 2005. A rebound is expected in the second quarter, but will come from a low first-quarter base. Investment is expected to be the main engine of growth in 2005, not just because of post-tsunami reconstruction, but also because the government is prioritising infrastructure development and is intending to offer incentives to both domestic and foreign investors. Real GDP growth is expected to rise again in 2006 to 5.7%, partly as a result of positive momentum from 2005. Interest rates will be largely stable and private consumption will have recovered. Growth in exports of goods and services is expected to slow during 2005, owing to weaker global demand and competitiveness problems. Import growth, however, will be robust, in tandem with the strong growth in investment demand and the need to replace capital stock. We expect the export sector to continue to struggle to meet the demands of liberalisation in 2006.

Indonesia's Inflation to be 5.9 PCT This Year: ADB

JAKARTA, April 7 Asia Pulse - The Asian Development Bank (ADB) has predicted that Indonesia's inflation will be only 5.9 per cent this year falling below the government's prediction of 7 per cent.

ADB economist for Indonesia Amanah Abdulkadir said the oil prices will not rise more than US$10 per barrel this year or lower than the increase in 2004.

Amanah said ADB saw that producers in the country did not immediately increase the prices of their products after the fuel price hike on March 11.

In addition, investment will improve in the country especially in the infrastructure sector, Amanah said.

Some observers, however, said the country's inflation could exceed the 7 per cent target pointing to a surge in inflation in March to 1.91 per cent month on month and 8.81 per cent year-on-year.

5.9% inflation seems a little too optimistic?
and 5.5% growth forecast is just right, if not a tad conservative.

Well, we'll see. I think that 5.9% for inflation is going to be pretty far off. I'll be honest in saying I haven't seen anything that indicates the economy is going to grow less than 6% this year. In the projections that put growth around 5.5%, they usually forecast investment to grow in the 9-10% range for 2005. For the January-February period this year FDI inflows (not just approvals, actual money coming into the country) increased by 44%, and this is coming after a year that FDI approvals dropped from 2003. That's not to mention domestic investment which is also surging. Exports are doing really well, too.

I could be totally wrong, but I think people are going to be surprised. The simple fundamentals seem to indicate it will be quite a bit more than 5.5%.

If so, tell me why almost all forecasters uninamously agree on about 5.5% if not less for 2005, even after the release of Jan-Feb figures of FDI you mentioned? What are they thinking??

Indonesia's Isi to Boost Sales of Audi Cars in Indonesia

JAKARTA , April 7 Asia Pulse - Car distributor PT Indomobil Sukses Internasional (ISI) (JSX:IMAS) targets to sell 184 units of Audi cars in Indonesia this year, up 15 per cent from last year.
ISI President Gunadi Sindhuwinata expressed optimism that the target would be achieved although car sales in the country would not be as brisk as last year.

He said a number of factors will cause a slow down in automotive industry

including increases in the prices of oil fuels and components.

He said in a bid to boost sales, the company will launch new models of Audi with the latest technology.

(ANTARA)

Japan, Indonesia to start formal talks on free trade agreement

TOKYO (DPA): Japan and Indonesia are expected to start formal talks aimed at concluding a bilateral free trade agreement (FTA) later this month, local media reported on Thursday, quoting a government official.

According to Kyoto News, Japanese Prime Minister Junichiro Koizumi and Indonesian President Susilo Bambang Yudhoyono are expected to announce the start of official FTA negotiations on the occasion of the April 21-23 50th commemorative summit of the 1955 Asia-Africa Conference in the West Java provincial capital of Bandung in Indonesia.

The expected formal talks follow preparatory FTA negotiations initiated at a study group three months ago. The informal talks had been long stalled due mainly to Indonesia's generally cautious stance on FTAs, according to the report.

But the two countries agreed to restart negotiations last December after Susilo was sworn in as president last October, it said.

During the past preparatory FTA talks, Japan requested that Indonesia work out investment rules and eliminate tariffs on motor vehicles and auto parts, the report said.

Indonesia, meanwhile, urged Japan to facilitate personnel transfers and remove tariffs on forestry and fisheries products, it said. (**)

ALERT:redx: ALERT :redx:ALERT:redx:
READ THIS ARTICLE:

At around 2 p.m. fire hit the tower of the Maritime Museum in North Jakarta, yet the fire did not destroy the building, which was built in 1652, as firefighters extinguished it within an hour.

"We are yet to investigate the cause of the fire," a North Jakarta firefighter was quoted as saying by The Jakarta Post.

Earlier in the day, a fire swept through at least 27 semi-permanent houses in the dense Tanjung Duren Selatan subdistrict of West Jakarta.
No fatalities were reported in the incident, which started at about 12:30 p.m. Firefighters suspect a short circuit caused the fire.




asmi
Source : JP

HERE SOME INTERESTING NEWS :
April 6th 2005 ; 9:45:07 AM

Airport introduces new transportation system

Airport operator PT Angkasa Pura II introduced a new transportation system after receiving many complaints over illegal fees and robberies in taxis leaving the Soekarno-Hatta International Airport.

The new system integrates the management of airport taxis and bus services which initially was managed by an airport task force, Angkasa Pura II president director Edie Haryoto was quoted as saying by The Jakarta Post.

"The new system is aimed at providing security, safety and comfort for all airport visitors," he said. The integrated service, according to Edie, will enable the airport operator to take stern actions against unscrupulous taxi companies or drivers.

Only 13 taxi companies who passed a selection test for reliability held by the airport operator were allowed to wait and take passengers out of the airport beginning Friday.

The 13 taxi companies are Blue Bird Group, Taxi Cab, Express, Primajasa, Tiffani, Koperasi Taksi, Gading, Steady Safe, Sri Medali, Ratax, Dian, Royal City and Gamya. The total number of the taxis are 1,530.




asmi
Source : JP

Alvin, I wish I could say. WB, IMF, and EIU growth projections tend to be very inaccurate. These sources' initial projects were all off by more than half a percentage point for 2004 for Indonesia, and in other economies (UAE, South Korea, Taiwan, Mexico, etc.) they were off by more than one percentage point, in some cases even two. All I can say is we'll see.

RI retailers trying to modernize, branch out

The Jakarta Post, Jakarta

Major retailers in the country are planning big expansions of their businesses to get a larger chunk of the country's expanding economy.

Alfamart, a minimarket operator since 1999, is leading the charge by planning to increase its outlets by 80 percent from 1,000 to 1,800 locations in the country.

"The momentum can't be stopped, we have to continue expanding," said Djoko Susanto, a director of PT Sumber Alfaria Trijaya, which owns Alfamart.

The company's ultimate goal is to establish between 5,000 and 10,000 minimarkets here.

The decision to expand, according to Alfamart managing director Pudjianto, "will eventually sideline traditional stores".

Competitor Indomaret, meanwhile, has also revealed its plans this year to open 600 more outlets, boosting its stores to 1,600.

The presence of the modern markets, however, often violate Bylaw No. 2/2002 issued by the Jakarta administration on private markets in the capital, which regulates pricing policies, a minimum distance from traditional markets and cooperation with informal businesses.

Supermarkets and hypermarkets are also planning to rapidly expand their presence, with one of the operators, Hypermart, looking to triple its outlets to 18 this year.

Industry analyst Yongky Surya Susilo of AC Nielsen said the retailers growth plans for this year were "realistic".

"The number of retail outlets in Indonesia, which is (estimated to be) 1.75 million, is the second-biggest in the Asia Pacific after China with 3.2 million," he said.

A study by MasterCard International in February said Indonesia was forecast to top the year-on-year retail sales growth for the first semester with 16.9 percent, compared to China's 12.75 percent.

Yongky explained that Indonesia's consumer spending on 47 major goods increased by 13.8 percent last year.

The Association of Indonesian Retailers (Aprindo) has estimated that total retail sales in 2004 reached about Rp 300 trillion (US$31.6 billion).

The recent fuel price hike, according to Yongky, will not affect retail spending as it was still predicted to grow by between 15 percent and 20 percent this year.

Aprindo data shows that sales in 2,720 modern stores nationwide experienced a 28 percent growth from Rp 35 trillion in 2003 to Rp 45 trillion in 2004.

Yongky said although spending increased at both traditional and modern retailers, the growth at modern retailers was 12 percent higher than at traditional markets.

At the current growth rates, the market share of traditional stores, currently at 70 percent, would drop by 2 percent per year, he said, adding that the strong growth in the modern retail sector was because customers obtained more "service and value" there.

The most recent data from AC Nielsen revealed that the share of consumer spending at modern markets has increased by 40 percent from 21.8 percent in 2000 to 30.4 percent in 2004. (002)

Indonesian Retail Sales Tipped to Surge by 30 PCT This Year

JAKARTA, April 8 Asia Pulse - Retail sales recorded by the members of the association of retail companies (Aprindo) are predicted to shoot up 30 per cent to Rp45 trillion (US$4.8 billion) this year compared with last year.

Aprindo, which groups 62 large and modern retail companies, said the increase is attributable not only to growing population but also to change in life style and consumption pattern of the Indonesian people in general..

Aprindo General Chairman Handaka Sansosa said efficiency has marked the change in life style including in consumption patterns resulting in growing demand for finished products.

Aprindo members, which operate 2,700 outlets, account for 30 per cent of retail sales of around Rp160 trillion a year in the country, Handaka said.

Handaka said some estimates see retail sales in the country reaching up to Rp550 trillion a year including motorcycles and phone handset sales.

(ANTARA)

I would like to see more modern mini-marts (7-eleven-style) springing up in INdonesia, to replace the old warungs..

Agree!
But plz dont make it be 7-11
I prefer an Indonesian brand, Indonesian owned, and Indonesian made ;)

yeah I agree, but foreign competition would be good...the consumers are the ones who will be benefited :D So would be great to see both 7-11 and Indomart around!

We have one indomart in melbourne here ;)

I dont think 7-11 can survive in Indonesia since the favourite place to buy and open for 24 hours is.....warung rokok. :)

cheers

Talking about Indonesian brands abroad, you guys know the Es Teler 77 chain, right? It's doing pretty okay here in Singapore. They have quite a few outlets. The owner for one of the outlet also open another Indonesian restaurant, selling ayam penyet. Not bad! :D

Es teler 77 is also in Australia, but i am not sure if they are doing good in Melbourne. the place is very quiet and i've heard some bad stories about them in Melbourne.

cheers

The last time I went there (after about 5 years hehehe).. they abit more busy now. They have about 3 chain here.

In Singapore they now have about 5 outlets. Not bad for an Indonesian franchise. :P

GROWING BANK CREDITS SHOW RECOVERY OF INDONESIA'S REAL SECTOR
Monday April 11, 2005, 6:19 pm


JAKARTA, April 11 Asia Pulse - The outstanding credits of banks in Indonesia grew by 28.3 per cent in February compared with the same period last year, signalling positive growth of the real sector, observers said.

Political and economic stability contributed to the growth of the real sector and bank credits, Ryan Kiryanto, an economist from state-owned Bank Negara Indonesia, said.

Data at Bank Indonesia showed that outstanding credits both in rupiah and foreign exchange rose to Rp560.8 trillion (US$60 million) in February this year from Rp437 trillion in the same month in 2004.

Rupiah credits rose 19 per cent to 444.9 trillion and foreign exchange credits increased 19 to Rp115.8 trillion.

Ryan attributed the increase to optimism of the business players for expansion with greater confidence in the economic and political stability.

(ANTARA)

AUSTRALIA LIKELY TO INVEST US$2.5 BLN, SAYS INDONESIAN MINISTER

Monday April 11, 2005, 7:20 pm



JAKARTA, April 11 Asia Pulse - Coordinating Minister for Economic Affairs Aburizal Bakrie said Australia plans to invest US$2.5 billion in various sectors in Indonesia.

"The investment plan was conveyed during the meeting between President Susilo Bambang Yudhoyono and Australian Prime Minister John Howard, during the President's visit to Australia recently," Aburizal said on the sideline of a workshop on the non-bank financial institutions development here, Monday. ADVERTISEMENT



The investment, he said, would be shared in various sectors among others US$1.7 billion for coal mining in Central Kalimantan, US$120 million for agriculture, and other sectors such as explosive material industry and daily needs.

Aburizal denied reports that the investment climate in Indonesia was unfavourable.

He said Australia, China, Malaysia, Japan and the Netherlands are all interested in investing more in the country, he said.

"China and Malaysia are attracted to invest in toll road development, Japan in the ports sector, and the Netherlands in the clean water sector," he said.

China and Indonesia had also planned to sign a memorandum of understanding for a Natural Resources Project in the near future.

Recently, Phillip Morris has acquired PT HM Sampoerna shares worth US$5 billion.

Of the total price, US$2 billion was paid to Sampoerna's family in cash, while the rest US$3 billion was allocated to buy PT Sampoerna's shares from the public (who wished to sell).

According to Aburizal, the acquisition of PT Sampoerna has shown investor's confidence on the situation in Indonesia.

"We could not attract investment in huge amounts at once, but Phillip Morris presence will encourage others to come in," Aburizal said.

(ANTARA)

Wednesday April 13, 04:20 PM


Ford To Invest US$30 MLN To Boost Sales In Indonesia

JAKARTA, April 13 Asia Pulse - PT Ford Motor Indonesia (FMI) said it will invest US$30 million this year to expand sales in the country.

FMI President Will Angove said new dealers will be named in a number of provincial cities to expand sales .

FMI already has 16 dealers including Ford Superstore in Jakarta.

Angove said a new product Ford Focus, which has become the best selling vehicle in Europe and North America. will be launched in the country expected to draw buyers and increase sales this year.

Last year the company reported sales at 6,100 units .

In the first quarter of this year its sales rose 45 per cent to 1,790 units from the same period last year.

(ANTARA)

Wednesday April 13, 02:19 PM


Indonesia's Economiy Expected To Grow By Up To 5.5% In Q1 2005



JAKARTA, April 13 Asia Pulse - Indonesia's central bank predicts that the country's economic growth could reach up to 5.5 per cent in the first quarter this year.

Although external conditions have been unfavourable, Bank Indonesia (BI) believed the economy grew by 5 per cent to 5.5 per cent in the period, Bank Indonesia's governor Burhanuddin Abdullah said after a meeting of the bank's board of governors here on Tuesday. ADVERTISEMENT



He said the growth was the result of an increase in investment and imports of raw materials and goods.

He said exports were still low and remained dominated by natural resource commodities and farm-based industrial products.

Burhanuddin said the bank at the meeting decided to continue implementing a tight monetary policy with a view to maintaining macro-economic stability, especially controlling mid-term inflation.

In this context, he said, the bank would optimally absorb banking liquidity by possibly increasing interest rate in stages.

"In the next three months there is a possibility to raise interest rates. But no decision has been made on when this will be done," he said.

Regarding the devaluation of the rupiah during that period, Burhanuddin said it was the result of an increase in domestic demand for foreign exchange and a shortage and unsustainable supply of foreign exchange reserves.

Demand for foreign exchange rose as the result of increasing imports and forex needs of state oil company Pertamina and for speeding up debt repayment, he said.

Total bank credits until February 2005 reached Rp601.8 trillion and it is hoped they will grow by 23.2 per cent this year, he said.

(ANTARA)

this growth target might even be achieved this year :)

Indonesia aims for 6.1 percent growth in 2006: Yusuf

JAKARTA (Bloomberg): Indonesia is seeking to boost economic growth to 6.1 percent next year, with consumer spending and investment in infrastructure to help the economy expand at the fastest pace since 1996, Finance Minister Yusuf Anwar said on Wednesday.

The government also expects the rupiah to strengthen against the U.S. dollar and for local currency interest rates to decline, according to predictions Yusuf released at the office of the National Development Planning Board. The government also expects oil production to fall slightly.

President Susilo Bambang Yudhoyono, whose pledges to add jobs and boost investment helped him win a September election, is trying to spur economic growth and create jobs for the one-fifth of Indonesians without full-time work. He also wants growth toincrease tax revenue and curb a deficit that the government has said may swell to 1 percent of gross domestic product, up from an earlier estimate of 0.8 percent.

Faster growth "would allow us to reduce the budget deficit in 2006 to 0.5 percent to 0.7 percent of GDP," Yusuf said.

The government expects the US$222 billion economy, Southeast Asia's biggest, to expand 5.5 percent this year. The economy grew 5.1 percent last year as the lowest interest rates in at least six years spurred spending on cars and mobile phones.

Much of the growth will come from infrastructure investment. Susilo in January said Indonesia may need $150 billion of investment in roads, power plants and other projects to create more jobs and accelerate the pace of economic growth to about 6.6 percent annually. (**)

Private sector to pursue deals at Business Summit
Zakki P. Hakim, The Jakarta Post, Jakarta

The nation's private sector is looking forward to the upcoming Asia Africa Business Summit, which is expected to boost trade relations between the nations of the two continents, Indonesian Chamber of Commerce and Industry (Kadin) chairman MS Hidayat said on Wednesday.

"This summit will be the first ever to connect businesspeople on the two continents.

"ASEAN countries, particularly Indonesia, could use the opportunity to build closer relationships with Africa," Hidayat said during joint press conference with Minister of Foreign Affairs Hassan Wirayuda.

According to Hidayat, Southeast Asian countries were not traditionally close in terms of trade relations with African nations. However, he added that Malaysia and Japan had started to intensify their economic relations with the continent.

"Businesspeople are expected to have one-on-one meetings with their counterparts from certain countries during the event, not only to build trade and investment relations, but also with regard to the transfer of technology and movement of human capital," Hidayat said.

Kadin will host the Business Summit, at which CEOs and captains of industry from the two continents will meet and explore business opportunities.

Kadin is looking forward to hosting the expected 500 participants.

Hidayat said that the summit was expected to result in an Asia-Africa business forum, with regular meetings at least every two years.

"The forum's aim is to help open up business opportunities between countries from the two continents in the future," he said.

President Susilo Bambang Yudhoyono is scheduled to open the business summit on April 21 in Jakarta, and in the evening Kadin will host a gala dinner in which China's President Hu Jintao is scheduled to give the keynote speech.

Among the key speakers at the Business Summit will be South African President Thabo M. Mbeki, Indian Prime Minister Manmohan Singh, Singaporean PM Lee Hsien Loong and Japanese PM Junichiro Koizumi.

According to the Ministry of Foreign Affairs, the Asia-Africa Conference will be attended by delegations from 105 countries, and as many as 56 heads of state and government have confirmed their attendance so far.

Earlier, Hidayat said that on April 26, Kadin would also host a special luncheon between China and Indonesia, at which a Chinese delegation led by Hu would meet with about 1,000 Indonesians from various professions.

"He wants to meet not only local businessmen of Chinese descent, but various Indonesian people from many groups. He wants to build closer ties with Indonesia," Hidayat said.

IMF's world economic report, April 2005:

http://www.imf.org/external/pubs/ft/weo/2005/01/index.htm

For Indonesia, the IMF predicts 5.5% growth for this year and 6.0% next year.

http://www.dbs.com/researchasset/mktoutlook/2005/2Q/mos_q2005q2id.pdf

Macroeconomic Outlook: Indonesia Q2 2005 Market Outlook & Strategy

ID: Back in Business

The investment climate is improving, with foreign direct investment more
broad-based and local players, particularly in the resource-based industries,
expanding capacity. The launch of some US$22.5bn in infrastructure spending,
starting with funding for toll roads, will maintain growth momentum. Real
GDP growth is forecast at 5.6% in 2005 and 5.8% in 2006.

...

A lot more in the report.

Today, government is predicting the economy will grow 6,1% in 2006. Make sense to me.

Actually what worried me the most is the weakening of retail sales in the US which mean bad news for exports in Indonesia. The news shocked dowjones and nasdaq last nite. But the good news , oil is dropping below $ 51

cheers

Yamauchi, how good is your written Indonesian?

The Development Minister, Sri Mulyani, predicts economic growth to be "around 6%" this year, like what you said earlier. :)


Sri Mulyani: Pertumbuhan Ekonomi Capai 6 PersenKamis, 14 April 2005 | 17:55 WIB

TEMPO Interaktif, Jakarta:Menteri Negara Perencanaan Pembangunan Nasional/Kepala Bappenas Sri Mulyani Indrawati mengatakan bahwa kondisi makro perekonoian Indonesia saat ini cukup kondusif.

"Saya bahkan optimis bahwa pertumbuhan ekonomi tahun ini akan mencapai sekitar 6 persen, lebih tinggi dari proyeksi sebelumnya yaitu sebesar 5,5 persen," ujar Sri Mulyani dalam makalahnya yang disampaikan pada acara seminar pembangunan infrastruktur, Kamis (14/4).

Ani, sapaan akrab Sri Mulyani, memaparkan bahwa laju pertumbuhan ekonomi nasional pada 2004 mencapai 5,1 persen, bahkan pada kuartal terakhir tumbuh menjadi 6,7. Laju pertumbuhan itu, kata dia, dipicu oleh meningkatnya investasi domestik pada sektor kontruksi, utilitas, dan jasa-jasa. "Dengan laju pertumbuhan sekitar 15 persen," ujarnya.

Selain itu, kegiatan ekspor Indonesia juga tumbuh lebih dari 10 persen. Indikator-indikator ekonomi yang ada, katanya, juga menunjukan adanya pertumbuhan cukup berarti dalam kuartal pertama tahun 2005 ini.

Ani juga menyatakan bahwa stabilnya kondisi makro Indonesia ditandai dengan rendahnya tingkat inflasi. Pada awal 2002, tingkat inflasi tercatat mencapai 15 persen. Kemudian menurun menjadi sekitar 6 persen pada tahun 2004. "Trend terakhir menunjukan angka inflasi akan turun dibawah 6 persen pada tahun ini," katanya. Sementara itu, nilai tukar rupiah, cukup stabil pada tingkat Rp 9.000-Rp 9.500. Tito Sianipar

Not good at all. :( Also, I think tomorrow we will be getting new numbers on FDI approvals.

Very much looking forward to those numbers, hopefully we'll see a continuation of the triple-digit growth.

Foreign Direct Investment rose 147% y-o-y Q1 2005 :)


Realisasi Investasi Asing Membaik
- Triwulan I-2005 Nilainya Naik 147 Persen Dibandingkan dengan Triwulan I-2004



Jakarta, Kompas - Nilai realisasi investasi atau penanaman modal asing langsung periode Januari-Maret 2005 tercatat sebesar 2,216 miliar dollar AS, naik 147 persen dibandingkan periode yang sama tahun 2004 sebesar 895,2 juta dollar AS. Namun, nilai realisasi penanaman modal dalam negeri turun 46 persen ke posisi Rp 4,44 triliun, dari Rp 8,33 triliun pada triwulan I-2004.

Laporan nilai realisasi investasi itu didasarkan pada izin usaha tetap (IUT) yang dikeluarkan Badan Koordinasi Penanaman Modal (BKPM).

Sementara itu, nilai persetujuan investasi PMA periode Januari-Maret 2005 mencapai 4,28 miliar dollar AS. Nilai persetujuan investasi PMA periode yang sama tahun 2004 sebesar 1,56 miliar dollar AS.

Adapun nilai persetujuan investasi PMDN periode Januari-Maret 2005 sebesar Rp 9,08 triliun, sementara nilai persetujuan investasi PMDN periode yang sama tahun 2004 sebesar 7,82 triliun.

Dari sisi jumlah, realisasi PMA Januari-Maret 2005 sebanyak 211 proyek atau naik 83 persen dibandingkan dengan periode yang sama tahun 2004 sebanyak 115 proyek.

Proyek realisasi PMDN pada Januari-Maret 2005 sebanyak 61 proyek atau naik 50 persen dibandingkan proyek realisasi PMDN pada periode sama tahun 2004 sebanyak 30 proyek.

Sebelumnya, Bank Indonesia (BI) memperkirakan investasi langsung asing (foreign direct investment/FDI) neto tahun 2005 sebesar 1,1 miliar dollar AS, atau sama realisasi tahun 2004. FDI neto merupakan selisih antara investasi asing yang masuk dan yang keluar.

Seiring meningkatnya investasi, menurut data BI, posisi kredit perbankan per Februari 2005 mencapai Rp 560,8 triliun, tumbuh 28,3 persen dibandingkan periode yang sama tahun 2004. Berdasarkan penggunaannya, komposisi kredit terdiri atas kredit modal kerja Rp 284 triliun, konsumsi Rp 158,9 triliun, dan kredit investasi Rp 117,9 triliun. Dibandingkan bulan sebelumnya, kredit investasi tumbuh 1,5 persen atau Rp 1,7 triliun.

Tangani masalah

Kepala BKPM Theo F Toemion mengungkapkan, investasi akan cepat masuk jika persoalan yang dihadapi investor dapat tertangani dengan cepat. Persoalan investor selama ini antara lain terkait dengan masalah perizinan investasi.

Theo menambahkan, persoalan perizinan investasi terkait dengan banyak departemen dan instansi teknis, seperti Departemen Tenaga Kerja, Imigrasi, dan departemen yang menangani masalah sektoral lain, termasuk pemerintah daerah.

Pengamat ekonomi, Faisal Basri, dalam beberapa kunjungan bersama Kompas ke berbagai sentra industri manufaktur menilai bahwa peluang investasi di Indonesia cukup besar. Terbukti dari berbagai dialog dengan para investor pemilik pabrik, seperti industri sepatu, tekstil, dan elektronika, mereka pada umumnya berkeinginan menambah investasi. Akan tetapi, keinginan itu terganjal dengan berbagai persoalan birokrasi yang lamban dan berbiaya tinggi.

Tunjang pertumbuhan

Sementara itu, ekonom Bank Internasional Indonesia Ferry Latuhihin mengatakan, meningkatnya investasi dapat menjadikan pertumbuhan ekonomi sebesar 5,7 persen, lebih tinggi dari perkiraan pemerintah sebesar 5,5 persen.

"Investasi ini naik seiring dengan naiknya konsumsi. Saya perkirakan ekspor dan impor akan bertumbuh juga dengan stabil. Pertumbuhan impor terjadi karena adanya permintaan bahan baku dari dalam negeri. Misalnya industri tas yang memerlukan bahan baku impor," tambah Latuhihin.

Indikator makro yang menunjukkan pertumbuhan ekonomi juga akan menarik investasi multinasional menuju ke Indonesia. Stabilitas politik dan penegakan hukum juga akan mengundang investor.

"Kami perkirakan investasi tumbuh 16,20 persen tahun ini, lebih tinggi dari pertumbuhan 15,71 persen tahun 2004," katanya. (FER/JOE/FAJ)

147% increase is impressive!

cheers

Indonesia to step up rate hikes; SBI rate seen 8.38 pct at yr-end - Citigroup

JAKARTA (AFX) - Citigroup (NYSE: C - news) said it maintains its view that Indonesia's central bank will accelerate interest rate hikes to take the benchmark rate of Bank Indonesia Certificates (SBI) to 8.38 pct by the year-end.
It said inflation pressure is the key factor that will drive up interest rates.
'Despite inconsistent BI (Bank Indonesia) statements concerning its interest rate policy as quoted by the press, we still keep our view of faster increases in SBI rate in the next few months as inflation pressure still persists,' Citigroup said in its latest note.
It expects the year-end inflation rate at 8.0 pct.
'We expect a slightly higher SBI rate of 8.38 pct than the government's budgetary assumption target of 8 pct,' it said.
BI, in a statement issued earlier this week, assured that it will maintain its tightening bias monetary policy over the next few months by gradually raising the interest rate.
The decision, which was made at BI's board of governors monthly meeting, was contrary to an earlier statement by the bank's governor last week.
BI governor Burhanuddin Abdullah said last week that following the unusual 9 basis points increase in SBI rate to 7.53 pct earlier this month, BI will ease the rate hike. The SBI rate increase was a reaction to higher-than-expected inflation in March after the government raised fuel prices from March 1 by an average of 29 pct.
'The second-round effect of fuel price hikes may push up food prices in April, as well as a late response from transportation tariff hikes (taxis, airlines, etc) in early April,' Citigroup said.
'Thus, along with higher-than-expected March inflation, we expect the year-end inflation rate to be higher and move toward 8.0. There is a downside risk to the forecast, as there is less evidence of an El Nino-driven long dry season this year,' it added.
aloysius.bhui@xfn.com

INDONESIA NEEDS UP TO US$136 BLN FOR INFRA OVER NEXT 5 YRS

Friday April 15, 2005, 4:27 pm



JAKARTA, April 15 Asia Pulse - Indonesia needs up to Rp1,300 trillion (US$136 billion) in funds to develop its infrastructure over the next five years, National Development Planning Minister Sri Mulyani said here Thursday.

Infrastructure development was expected to encourage the national economy to grow by an average of 6.6 per cent a year over the next five years, the minister said in written address to the 2nd national seminar on project management. ADVERTISEMENT



"Unfortunately, banks, financial institutions and the State Budget will only be able to provide a total of Rp500 trillion of the needed amount. So there is an enormous shortage of funds to develop infrastructure," she said.

Mulyani therefore called for private investors' participation in the provision of funds still needed to finance infrastructure projects.

Funds owned by the general public could also be used to fill the gap in the funding of infrastructure development, she said. However, it was not easy to mobilize the general public's funds because they were kept in bank deposits and were usually collected for short-term development.

"Extending credits for investment in infrastructure projects is also not an attractive proposition," Mulyani said.

According to Mulyani, other alternatives to fund infrastructural projects were long-term fund resources like pension funds, workers' social security and insurance funds.

"But the use of these alternatives largely depends on the performance of the financial institutions concerned," the minister said.

Mulyani said it was thus high time for the private sector to assume a greater role in national infrastructure development.

"Our macro-economic conditions are quite favorable with national economic growth recorded at 6.7 per cent in the last quarter of last year. Economic growth in the first quarter of this year also indicated significant progress," she said.

But the minister admitted the inflation rate in April was tending to increase as a consequence of the government's decision to raise fuel oil prices by an average of 29 per cent effective last March 1.

(ANTARA)

Foreign investments in Indonesia jump 173%

JAKARTA (Antara): Indonesia's non-oil foreign direct investment (FDI) approvals in the first three months of this year jumped by 173 percent to US$4.28 billion from the those of the corresponding period in 2004, data from the Investment Coordinating Board (BKPM) showed on Friday.

The BKPM said in a report that it approved 285 new projects with investment commitments of $2.69 billion compared with 225 projects worth $454 million the previous year.

The board also approved 81 expansion projects worth $684.5 million against 67 projects worth $699 million.

BKPM said it also approved the change of status of 37 domestic investment projects into FDI projects with combined value of $899 million, compared with 20 projects worth $310 million previously.

At least 130 of the new projects deal with trade and repair businesses, 46 with services, 21 with construction, 20 with textile production and 17 with machinery metal and electronics industries.

The report said that during the quarter, domestic investment approvals increased to Rp 9.08 trillion ($956 million) from Rp 7.82 trillion rupiah.

The board approved 46 new domestic investment projects worth Rp 7.20 trillion compared with 32 projects worth Rp 4.45 trillion previously. (**)

Indonesia Sees Fdi Realization Surge 247% in Q1

JAKARTA, April 15 Asia Pulse - Realization of foreign direct investment (FDI) rose 247 per cent on-year to US$2.216 billion in the first three months of this year.

In contrast, the realization of domestic direct investment (PMDN) shrank 46 per cent to Rp4.44 trillion (US$472 million), down from Rp8.44 trillion.

FDI approvals in the January-March period were valued at US$4.25 billion, up from US$1.56 billion in the same period last year.

Approvals of PMDN rose to Rp9.08 trillion from Rp7.82 trillion, data from the Capital Investment Coordinating Board (BKPM) showed.

Earlier Bank Indonesia predicted that net FDI would reach US$1.1 billion, the same as last year.

this is good news..
if this trend continues, without major shocks this year, I think Indonesia will post growth in the low 6.X % range.

Well, just think about this: supposedly the bank predicted FDI inflows of $1.1 billion. Taking into account the drop in domestic inflows, that means for the quarter they got about $1 billion more in investment than they expected. If the trend continues and investment is $4 billion above estimates for the whole year, that $4 billion alone would represent almost 2% of the GDP.

INDONESIA PRESS: Alcatel, NEC Competing For Telkom Proj
JAKARTA (Dow Jones)--France's Alcatel S.A. (ALA) is competing with Japan's NEC Corp. (NIPNY) to win a $50 million optical fiber project planned by telecommunications company PT Telekomunikasi Indonesia (TLK), the Bisnis Indonesia reports.

The daily quotes Telkom Network Business Director Abdul Haris as saying that the country's largest telecommunications company has shortlisted the two companies out of six bidders.

Telkom will announce the winner later this month, the newspaper reports.

Telkom plans to install 2,000 kilometers of optical fiber from Sumatra to Java and Kalimantan. The project is expected to be completed in one year, the newspaper says.

20-04-2005: Indonesia's Telkomsel adds 1.2m new users in 1Q



Indonesia's largest mobile phone operator, PT Telekomunikasi Selular (Telkomsel), added 1.2 million new subscribers in the 2005 first quarter, bringing its total number of users to 17.5 million, a senior official said on April 20.

The mobile arm of top telecoms firm PT Telekomunikasi Indonesia Tbk (Telkom) has said it aims to win 6 million new customers this year, out of an expected 15 million new users nation wide.

"The number of users in the first quarter has reached 17.5 million," Eric Meijer, general manager marketing, told Reuters .

Indonesia currently has around 30 million mobile users, but this is forecast to rise by 50% this year -- to 20 phones per 100 people, compared with around 40 in Thailand and 58 in Malaysia -- partly fuelled by cheaper phones from Motorola, Nokia and others.

Telkomsel is 65% controlled by Telkom and the remainder by Singapore Telecommunications Ltd.

It competes primarily with number-two telecoms firm PT Indosat Tbk, which is 42 percent-owned by Singapore's ST Telemedia, but foreign companies are beginning to enter the market.

Hutchison Telecommunications International Ltd said last month it would buy 60% of local mobile start-up PT Cyber Access Communications, while Telekom Malaysia Bhd has agreed to buy into the number-three mobile company, PT Excelcomindo Pratama.

Another Malaysian operator, Maxis Communications Bhd, has bought control of another minor operator.

Telkom shares were unchanged at 4,450 rupiah (RM1.77) in early trade on April 20. -- Reuters

INDONESIA PRESS:Semen Gresik Plans $350M Output Expansion

Wednesday April 20, 2005, 1:14 pm

DJ INDONESIA PRESS:Semen Gresik Plans $350M Output Expansion



JAKARTA (Dow Jones)--Indonesia's largest cement maker, PT Semen Gresik (SMGR.JK), will invest around $350 million to build new plants to expand its capacity by up to three million metric tons annually, the Jakarta Post reports, citing company President Satrio.


Semen Gresik shareholders will meet in June to discuss the planned new facilities, which are needed to avert a projected cement shortage by 2007 and will require up to four years to complete, the report says citing Satrio.


The report says the expected shortage is due to a massive national infrastructure upgrade program that will require large amounts of cement.



Newspaper web site: http://www.thejakartapost.com



-By Dow Jones Newswires, Jakarta Bureau; 62-21 39831277; djn.jakarta@dowjones.com

I think Telkomsel is expanding their customers rapidly, my estimation by year end they will get 2 million more customers. Thanks to the simpati 300 rupiah/minute call at 11 PM until 5AM in the morning.

Only with 20,000 rupiah you can call for more than 1 hour! but of course only between that simpati users to any telkom cards (halo/simpati/hoki). I tried this services and their network is very good. No busy network or whatsoever.

cheers

Japan's Toyota, Daihatsu to raise car production capacity in Indonesia
JAKARTA (AFX) - Toyota Motor Corp and Daihatsu Motor Corp said they plan to increase their car production capacity in Indonesia in 2005 and 2006, with additional investments of 40 mln usd and 10 mln usd respectively.
Toyota's local unit, PT Toyota Motor Manufacturing Indonesia (TMMIN), is to raise its annual capacity to around 100,000 vehicles by the end of 2005 from the current 70,000 and will hire about 500 new employees, a joint statement by Toyota and Daihatsu said.
They said PT Astra Daihatsu Motor, which jointly produces a mini van with Toyota, will raise its annual output capacity in 2006 to 114,000 vehicles from 78,000. Daihatsu also plans to hire 700 new employees, the statement said.
The joint mini van known as the Toyota Avanza and Daihatsu Xenia were both among the top selling cars last year.
TMMIN is 95 pct-owned by Toyota and 5 pct by PT Astra International, which sold its 46 pct stake to Toyota in 2003.
berni.km@xfn.com

Kiriman uang TKI lampaui PAD

JAKARTA (Bisnis): Total pengiriman uang (remittance) oleh para tenaga kerja Indonesia di luar negeri setiap tahun ternyata melebihi total pendapatan asli daerah (PAD) provinsi asal TKI.
Menurut Mennakertrans Fahmi Idris, PAD provinsi dari beberapa daerah utama lokasi asal TKI seperti Jawa Timur, Jawa Barat dan Nusa Tenggara Timur ternyata masih di bawah nilai pengiriman uang.

"Jumlah pengiriman uang oleh TKI melalui perbankan selama satu tahun di beberapa daerah, jauh melampaui PAD dari pemda asal tenaga kerja bersangkutan. Jadi program penempatan TKI itu sebenarnya bisa membantu pembangunan daerah setempat," tuturnya, pekan lalu.

Dia mengungkapkan pengiriman uang ke provinsi Jatim mencapai sekitar Rp3,2 triliun, jauh lebih besar dibanding PAD pemda setempat yang hanya Rp1,2 triliun. Demikian juga Pemda NTT yang PAD-nya hanya Rp159 miliar sedangkan pengiriman uang ke daerah itu mencapai Rp350 miliar.

Jumlah pengiriman uang yang masuk ke masing-masing daerah asal TKI tiap tahun, lanjut dia, kemungkinan bisa lebih besar dari data yang ada mengingat banyak TKI yang mengirimkan uang tidak melalui bank tetapi lewat rekannya yang pulang ke Tanah Air.

"Pada umumnya TKI mengirim uang kepada keluarganya melalui bank, tapi banyak juga yang melalui rekan TKI lainnya yang hendak kembali ke Indonesia, sehingga sulit untuk mendata secara kongkrit nilai remittance."

Menurut data yang dihimpun Bisnis tercatat pengiriman uang dari program penempatan TKI di sejumlah negara pada 2001 mencapai US$1,9 miliar. Angka tersebut naik pada 2002 menjadi US$2,2 miliar, namun turun sekitar 23% pada tahun berikutnya menjadi hanya US$1,69 miliar.

Fahmi menilai pengiriman TKI ke luar negeri merupakan kegiatan industri jasa penempatan tenaga kerja dengan mekanisme antarkerja yang bermula dan berakhir di daerah.

"Untuk kedepannya, industri jasa penempatan tenaga kerja akan terus didorong menjadi industri jasa yang modern, sehingga mampu bersaing di pasar global dan memberikan kontribusi positif terhadap peningkatan ekonomi keluarga dan ekonomi nasional," ungkapnya.

Sebelumnya, Abdul Wahid Maktub, Dubes RI untuk Qatar menyatakan bahwa TKI sektor formal mampu menyumbang pengiriman uang cukup besar dibanding TKI sektor informal.

Berdasarkan data Bank Internasional Indonesia (BII) jumlah pengiriman uang dari seluruh TKI di Qatar melalui bank itu selama Januari-April 2004 rata-rata sekitar US$1,5 juta per bulan, sedangkan lewat Bank Mandiri US$800.000 per bulan.

Jadi, lanjut dia, di kedua bank itu tercatat pengiriman uang TKI rata-rata sekitar US$2,3 juta setiap bulan dan dari data itu sekitar 80% disumbangkan TKI sektor formal. (tri)

Ok, The policy of skyscrapercity is to close threads that already passed 600+ posts, so I am going to lock this thread and you guys can continue posting business related news to the Indonesia trade and economy thread, which Alvin created.

Cheers