Economy, Trade and Business II [Archive] - Page 2

tata

January 7th, 2006, 02:01 PM

In year 2005 some industries grew high.

SUARA PEMBARUAN DAILY
2005, Sejumlah Sektor Industri Ekspor Tumbuh Tinggi

JAKARTA - Departemen Perindustrian (Depperin) mencatat pertumbuhan yang tinggi sejumlah sektor industri pada 2005. Sektor industri elektronika, mesin listrik dan telematika memberi kontribusi paling tinggi terhadap kenaikan nilai ekspor. Nilainya mencapai US$ 11,1 miliar. Demikian dikatakan Sekjen Departemen Perindustrian (Depperin), Agus Tjahayana di Jakarta, baru-baru ini.

Dikatakan, pada periode Januari-November 2005, ekspor produk-produk manufaktur meningkat 12,7 persen dari US$ 44,4 miliar menjadi US$ 50 miliar (yoy). Nilai ekspor produk manufaktur tersebut merupakan 64,7 persen dari total ekspor nasional sebesar US$ 77,3 miliar.

Depperin mencatat beberapa cabang industri mengalami pertumbuhan ekspor yang tinggi antara lain produk baja dan otomotif 28,5 persen, makanan dan minuman 13,8 persen, kimia dasar dan kimia lain 11,3 persen, elektronika, mesin listrik dan telematika sebesar 12,2 persen.

Kontribusi tertinggi terhadap ekspor dihasilkan dari industri elektronika, mesin listrik dan telematika senilai US$ 11,1 miliar. Disusul industri tekstil yang mencapai US$ 7,7 miliar, minyak nabati (CPO) US$ 4,5 miliar dan produk baja/otomotif senilai US$ 2,4 miliar.

Posisi Impor

Pada periode yang sama, impor bahan baku/penolong US$ 40,9 miliar, yang berarti naik 26,3 persen dibanding tahun lalu. Impor barang modal mencapai US$ 7,5 miliar atau meningkat 30,6 persen. Peningkatan impor barang modal dan bahan baku tersebut sejalan dengan peningkatan investasi di sektor industri serta meningkatnya pemberian kredit untuk kegiatan industri.

Dari sisi investasi, tambahnya, hingga November 2005, realisasi investasi (Izin Usaha Tetap) PMA sektor industri tercatat US$ 3,36 miliar. Jumlah itu mengalami kenaikan cukup signifikan dibandingkan investasi yang terjadi pada 2004, yang hanya US$ 2,8 miliar.

Agus menilai sejauh ini minat investasi lebih banyak pada cabang industri kimia dan farmasi, industri makanan, serta industri logam, mesin dan elektronika. Pada periode yang sama, realisasi investasi penanaman modal dalam negeri (PMDN) sektor industri mencapai Rp 19,37 triliun. Diharapkan pada akhir 2005, nilainya bisa melebihi nilai investasi PMDN pada 2004.

Dikatakan, peningkatan investasi di sektor industri dibarengi pula dengan peningkatan pemberian kredit yang dikeluarkan untuk sektor industri selama 2005 (Januari-September 2005) yang mencapai Rp 168,1 triliun. Jumlah itu meningkat 24,3 persen dibanding periode yang sama 2004 sebesar Rp1 35,2 triliun.

Untuk usaha kecil, total kredit yang dikeluarkan sampai dengan September 2005 mencapai Rp 4,7 triliun, yang berarti meningkat 95,8 persen dibandingkan periode yang sama tahun 2004 yang mencapai Rp 2,4 triliun, katanya. (U-5)

Last modified: 7/1/06

Zorobabel

January 8th, 2006, 10:54 PM

It's pretty sad that the last cabinet was so inept they failed to spend over $1 billion in development expenditures because of "administrative problems."

Indonesia estimates '05 deficit at 0.52 pct of GDP

JAKARTA, Jan 2 (Reuters) - Indonesia expects the budget deficit in 2005 to be lower than targeted at 0.52 percent of GDP, which analysts said was a sign of improvement in the fiscal health of Southeast Asia's largest economy.

Mulia Nasution, the finance ministry's treasury director general, told reporters on Monday details on the deficit will be announced at 1500 (0800 GMT).

Finance Minister Sri Mulyani Indrawati said the deficit was estimated at 13.9 trillion rupiah ($1.42 billion).

The estimate is largely in line with earlier forecasts by government officials, but below the state budget target of 0.9 percent of GDP.

Analysts said the lower deficit would boost sentiment in the government bond market, but cautioned it was more likely a result of lower spending than higher-than-targeted revenues.

"It means good news in terms of fiscal sustainability, good for the bond market," said debt market analyst Paulus Nurwandono of brokerage house Mandiri Sekuritas.

Government officials have said the government may not complete all planned spending by the end of 2005 due partly to some administrative problems.

Alvin

January 9th, 2006, 05:50 AM

It's pretty sad that the last cabinet was so inept they failed to spend over $1 billion in development expenditures because of "administrative problems."

any reason to be a bit more optimistic with the new economic team? I think Indonesia can afford to have a 1.5% deficit to boost growth.

Zorobabel

January 9th, 2006, 06:02 AM

any reason to be a bit more optimistic with the new economic team? I think Indonesia can afford to have a 1.5% deficit to boost growth.
I remember not long after assuming her position Sri Mulyani held a press conference with a list of projects they would start in the first quarter, which makes me hopeful she will go ahead and start spending the money effectively and efficiently. Maybe I'm too optimistic, though.

Alvin

January 9th, 2006, 07:12 AM

I remember not long after assuming her position Sri Mulyani held a press conference with a list of projects they would start in the first quarter, which makes me hopeful she will go ahead and start spending the money effectively and efficiently. Maybe I'm too optimistic, though.

I do remember one of the first comments she made was to improve on the administrative barriers that's been hampering effective spending of the budget...we'll just wait and see.

Monday January 9, 02:24 PM

Asian Nations Top List Of Investors In Indonesia

JAKARTA, Jan 9 Asia Pulse - Chairman of the Coordinating Investment Board (BKPM) Muhammad Lutfi said the biggest investors in Indonesia in 2005 predominantly hailed from Asian countries such as South Korea, Malaysia, Singapore, China and Japan.

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"Such a big investment by those Asian countries is expected to contribute to the faster growth of the Indonesian economy, hopefully much better than what has been predicted," he said.

He made the comments after witnessing increased investment by the South Korea-based PT LG Elektronika Indonesia (LGEIN) here on Sunday.

South Korea was one of the biggest foreign investors in Indonesia, with its machinery components and textile products, he said.

However, he said the investment had yet to be followed by European investors, for which their investment is tending to decline.

He added that BKPM would keep on improving its service and facility to increase foreign investment at home, which might contribute to the creation of new job opportunities.

The facility and security of investment were the main factors for investors to make new investments, as BKPM would continue to provide access to foreign investors.

(ANTARA)

Alvin

January 9th, 2006, 04:19 PM

The rupiah is trading at its highest levels in 8 months, this is good news for inflation. BI rate is steady and the stock market is booming... can't ask for a better start for the yeear ;)

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Monday January 9, 7:17 PM
Indonesia keeps key rate steady as rupiah gains

JAKARTA, Jan 9 (Reuters) - Indonesia's central bank held its key interest rate steady on Monday at 12.75 percent, as a strong rupiah eased the authority's concern about an inflation rate currently hovering near six-year highs.
The central bank has raised the Bank Indonesia rate, a target rate for one-month central bank certificates, six times since introducing it in July at 8.50 percent.

The decision to keep rates flat confounded market expectations for a 25-basis-point increase and came as the rupiah rallied to its highest level against the dollar in close to eight months and as stocks rose to record highs.

"The stronger rupiah is likely to ease upward inflationary pressure," the central bank's chief spokesman, Halim Alamsyah, said.

Annual inflation eased in December to 17.11 percent from 18.38 percent in November, the highest level in more than six years.

The central bank also kept the rate on its market instruments (Fasbi), used to manage liquidity, at 7.75 percent for the overnight Fasbi and at 10.75 percent for the seven-day Fasbi, Alamsyah said.
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Jakarta stocks extended early gains after the decision, closing up 1.87 percent after earlier hitting a record above 1,247.

The rupiah rose to around 9,430 per dollar on Monday, its strongest level since last May.

LESS PRESSURE

Analysts said the improving domestic economic outlook following the appointment of new economic ministers in December and an easing in inflation had attracted capital to the country, boosting markets and the rupiah.

The inflows are likely to underpin the rupiah, which fluctuated sharply last year. A stronger rupiah would help reduce inflationary pressures as many basic goods are imported, allowing the central bank to keep the BI rate steady.

"It's likely to be kept unchanged until the middle of this year. I don't see any strong reason to raise the BI rate further as the rupiah and inflation are seen stable," said Purbaya Yudhi Sadewa, an economist at Danareksa Research Institute.

Inflation surged after the government raised domestic fuel prices by an average of 126 percent in October in a bid to support the rupiah and reduce oil-import pressure on its balance of payments.

"The move to keep the rate unchanged is in line with predictions inflation would ease in the first half. Even if it has to go up, the highest the BI rate will be is 13 percent," said fixed-income analyst Anung Roni of Andalan Artha Advisindo Sekuritas.

The central bank has forecast the rate of inflation will drop to 7-8 percent by the end of 2006.

(With additional reporting by Yoga Rusmana, Asikin Nurachmad and Adrian Syahputra)

Alvin

January 9th, 2006, 06:10 PM

Jan 10, 2006

Indonesia hypes the economy
By Bill Guerin

JAKARTA - Despite current unfavorable economic indicators, optimistic 2006 budget parameters set by the Indonesian government assume the country's US$280 billion economy will grow by 6.2% to $304 billion, and that inflation will be pegged at about 8%, as will interest rates be pegged.

The central bank, meanwhile, predicts the economy will grow 5-5.7%, similar to last year. Inflation slowed to 17.1% last month from a six-year high of 18.4% a month earlier, and analysts expect it to drop further. The bank's benchmark interest rate is

12.75%, and observers expect it to remain at that level or go up marginally, possibly a quarter point.

High unemployment and poverty levels carry a social-political economic risk and could even threaten stability. At least 17% of the country's 220 million people are unemployed or underemployed, and 40 million live on $2 a day or less.

"The year 2005 was not an easy year ... We must examine what we did in 2005 and admit the shortcomings and weaknesses," President Susilo Bambang Yudhoyono said in his New Year's address. "Only by doing so can we move forward."

His administration had been stretched to the limit in handling a series of unforeseeable calamities, such as natural disasters and contagious diseases, he said.

In a December cabinet reshuffle, Yudhoyono made significant changes in his economic team, which had been criticized for bureaucratic inertia and failing to sufficiently improve the investment climate, as well declining growth and soaring inflation.

His appointment of former International Monetary Fund regional director Sri Mulyani as minister of finance and respected technocrat Boediono as coordinating minister for economic affairs won praise from investors and the markets.

The team's focus in 2006 will be on containing the inflation rate, maintaining macroeconomic stability and taking steps to address the remaining impediments in the investment climate. Continued efforts to strengthen the financial sector can be expected, including sound banking supervision and improvements in the asset quality of state-owned banks. This would enhance the ability of the banking sector to support private economic activity.

"Since economic stability and inflation is one of our focuses in 2006, we will do anything to ensure inflation will not go up so that by the end of 2006 we can reach our target of single-digit inflation," Boediono, who like many Indonesians uses only one name, said last week.

The government plans to focus on curbing price pressures to improve consumers' purchasing power and restore economic stability.

The central bank will need to cut interest rates to boost investment and consumer spending, but conversely any further pressure on inflation and the exchange rate could see it increasing rates.

"We will accelerate spending and improve the investment climate, and will cooperate with Bank Indonesia [the central bank] to help reduce interest rates and boost investment," Boediono said.

Approved domestic and foreign investment plans last year reached Rp110.86 trillion ($11.66 billion), an increase of 88.02 % - more than Rp58.96 trillion ($6.2 billion) in 2004.

Although Rp18 trillion will be spent this year on building roads, bridges, irrigation facilities and other infrastructure to boost investment and reduce unemployment, servicing sovereign debt will account for a massive 21% of government expenditure.

The payments of Rp73.47 trillion in interest and Rp60.38 trillion in principal due this year are much higher than the mere 2.7% of the budget allocated for capital spending - badly needed to help stimulate the economy.

Inflation hit 17.1% year-on-year in December following massive fuel price rises forced on the government by soaring global oil costs and a slump in the rupiah. Expensive fuel has driven up transport costs by more than 40% and food prices have increased by 18%, says Badan Pusat Statistik (BPS-Statistics Indonesia), a government institution directly responsible to the president.

October fuel increases had pleased investors and the market but the ensuing hike in the cost of living has been a major blow to the poor. The price of kerosene, the main cooking fuel of the masses, soared by 185.71 %, while petrol increased by 87.5 % and diesel by 104.76%. Inflation also hit hardest at the lower end of the consumer sector as wealthier consumers are better placed to protect themselves against inflation.

Though inflation fell in December for the first time in seven months, the rise in inflation, along with rising interest rates, has slowed economic growth overall and put the brakes on consumer spending, with both consumer loans and credits for business expansion becoming more expensive.

This limits working capital options, economic expansion, job creation and puts the brakes on public consumption, which for several years has been the main driver of growth in the economy. Labor-intensive industries have slashed more than 1 million jobs in the past three months.

Though consumer prices fell by 0.04% in December, the first time in seven months, the fuel price increases have led to a decline in real disposable income for consumers and raised input costs for the business sector.

Unfinished business
On the business side, several other pending issues have to be addressed, such as the excessive regulatory burden, investment and labor law amendments and tax reforms. The government will push through a number of policies this year to promote robust economic activity for the private sector and help spur growth, geared to providing certainty and stability for the business community.

A draft revision of the labor law is due to be delivered to legislators for deliberation in February or March. Several articles in the law, which forces companies to pay compensation for workers who opt to resign, are reported to be under amendment to encourage companies to hire more workers.

Business leaders warn that the tax system is already causing domestic and foreign investors to withdraw or minimize their investment. Crucial tax reforms in the pipeline may not be implemented until early 2007 after an expected drawn-out debate in the legislature, and a planned corporate tax cut would not take effect until 2010.

"Businesses are already going to China and Vietnam, and one of the main problems is our tax policy," said Sofyan Wanandi, chairman of the National Economic Recovery Committee. "Even Indonesian businesses are investing elsewhere.

The 35% company tax rate made it uncompetitive for businesses, Wanandi added.

The Indonesian Chamber of Commerce and Industry said the proposed amendments "place too much power in the hands of tax officials and excessively heavy sanctions on taxpayers".

Peter Fanning, chairman of the International Business Chamber, warned, "If the bills are not revised, we believe that it will scare away potential investors and make existing investors consider leaving."

Tax receipts account for more than 75% of government revenue, and the budget sets tax revenue at Rp416.3 trillion, or 13.7% of gross domestic product this year.

Boediono has warned the business community not to expect to enjoy tax cuts or write-offs. "The government needs the income from taxes to fund development of the educational and health sectors," he told a news conference.

The economy has grown in the face of a formidable series of challenges over the past year, including the tsunami, high world oil prices, avian influenza and polio outbreaks.

The president's election promises and goals of economic growth of 7% by 2009, job creation and poverty reduction remain in place. This year is likely to be much the the same as last year, in terms of intent and commitment, darkened by anxieties about external factors and sustainability of growth.

Bill Guerin, a Jakarta correspondent for Asia Times Online since 2000, has been in Indonesia for 20 years, mostly in journalism and editorial positions. He has been published by the BBC on East Timor and specializes in business/economic and political analysis related to Indonesia. He can be reached at softsell@prima.net.id.

XxRyoChanxX

January 10th, 2006, 01:27 AM

wow! that's a good way to start of the new year!!
go INdo!

so far I think our president is doing OK, What do you guys think??

F-ian

January 10th, 2006, 04:06 AM

better than the formmer presidents yes absolutly

Sielo

January 10th, 2006, 05:30 PM

Indonesian Shares Hit Record

JAKARTA, Indonesia (AP) - Indonesian stocks rose to a record high Monday buoyed by the central bank's decision to leave its benchmark rate unchanged for the first time since July.

The Jakarta Stock Exchange Composite Index ended up 1.87 percent, or 22.805 points, to hit a record closing high of 1245.054.

That result surpassed the previous record of 1,222.249 set Friday, which was spurred by a resumption in January program buying in certain bank, mining and automotive blue chips.

Investors saw Bank Indonesia's decision to leave its key rate at 12.75 percent as proof that a twin trend of rising inflation and higher rates to trim that inflation was nearing an end, said Kahlil Rowter, head of research at Mandiri Sekuritas.

"(Bank Indonesia's decision) is positive for the rupiah and the stock market," Rowter said. Gainers led decliners 105 to 29, with 55 stocks unchanged.

Volume rose to 2.2 billion shares valued at 2.3 trillion rupiah.

Bank Mandiri, the nation's largest lender by assets, rose 7.18 percent to 1,940 rupiah. Bank Internasional Indonesia rose 9.38 percent to 175 rupiah while Bank Rakyat Indonesia increased 3.01 percent to 3,425 rupiah.

XxRyoChanxX

January 11th, 2006, 04:36 AM

that's good news!

Alvin

January 12th, 2006, 04:33 PM

Southeast Asian GDP Growth May Slow; Thailand May Accelerate
Jan. 11 (Bloomberg) -- Three of Southeast Asia's four largest economies will probably expand at a slower pace this year as easing U.S. growth damps exports and local consumers buy less. Thailand's economy may quicken on increased government spending.

Growth in Indonesia, the region's biggest economy, will slow to 5 percent in 2006 from an estimated 5.5 percent last year, according to the median forecast of 11 economists in a Bloomberg News survey. Malaysia's expansion will ease to 5 percent from 5.3 percent and Singapore's will be 5 percent from 5.6 percent. Thailand's growth is expected to accelerate to 5 percent from 4.6 percent.

Governments in Southeast Asia are trying to spur economic growth by promoting new industries. Singapore has encouraged drug companies such as Merck & Co to set up factories, and auto assemblers in Thailand, including Toyota Motor Corp., last year built more than 1 million vehicles for the first time. That may reduce the region's reliance on U.S. demand.

``The single largest determinant of growth for Southeast Asia is external demand, and that hinges on what's happening particularly in the U.S. economy,'' said Ong Sin Beng, an economist at JPMorgan Chase & Co. in Singapore. ``We're penciling in moderating U.S. growth in the second half, and that will lead to moderating external demand for Southeast Asia.''

JP Morgan's forecasts for the U.S. economy match those of the Paris-based Organization for Economic Cooperation and Development, which said in a Nov. 29 report it expects growth in the world's largest economy to slow to 3.5 percent this year from 3.6 percent in 2005 and 4.2 percent in 2004.

`Remain Solid'

U.S. Federal Reserve economists in their staff forecast for the Dec. 13 meeting of the Federal Open Market Committee ``suggested that growth of economic activity would slow'' from 2005, ``but remain solid, with output staying near the economy's potential over the next two years,'' according to minutes of the meeting released on Jan. 3.

The Fed's economists said a boost to the U.S. economy from hurricane-related rebuilding would be ``countered by higher interest rates, the anticipated waning of the positive wealth effect associated with large earlier gains in equity and house prices, and reduced impetus from fiscal policy.''

Since the Fed's last meeting, a government report showed the U.S. economy grew 3.6 percent in the three months ending September from a year earlier, matching the previous two quarters. The growth reported in the last three quarters was the slowest since the third quarter of 2003, when the economy expanded 3.2 percent.

``That is definitely going to be impacting on Southeast Asian exporting economies,'' said Rebecca Lee, an economist at United Overseas Bank Ltd. in Singapore.

Consumer Spending

Rising fuel prices have also crimped consumer spending in Southeast Asia. Crude oil prices, which have declined about 11 percent from the record $70.85 a barrel on Aug. 30, the day after Hurricane Katrina struck the U.S. Gulf of Mexico, are still about 39 percent higher than a year ago. Crude oil for February delivery was at $63.22 a barrel in after-hours electronic trading on the New York Mercantile Exchange yesterday.

Higher global oil prices and a slump in Indonesia's rupiah last year forced President Susilo Bambang Yudhoyono's government on Oct. 1 to more than double fuel prices.

The Indonesian central bank raised its key interest rate by half a percentage point to 12.75 percent on Dec. 6, its sixth increase since July. The double blow has curbed purchases of motorcycles and cars in a nation where 126 million people live on less than $2 a day.

``Indonesia has been implementing some very positive policies to manage its economy,'' said JP Morgan's Ong. ``But consumption is going to take a hit from higher interest rates and fuel prices.''

Indonesia

Indonesia's economy grew 5.3 percent in the third quarter from a year earlier after expanding 5.8 percent in the previous three months, the Central Statistics Bureau said on Nov. 21. That was the slowest pace in a year.

The $258 billion economy probably expanded 5.5 percent last year, Vice President Jusuf Kalla said on Jan. 2. The government had estimated growth of as much as 6 percent for 2005 and 6.2 percent for 2006. The economy grew 5.1 percent in 2004, the fastest since 1996.

Malaysia's economy, the third-largest in Southeast Asia, grew 5.3 percent in the three months ended September after gaining 4.4 percent the previous quarter, the central bank said on Nov. 30.

Bank Negara Malaysia expects the $118 billion economy grew by between 5 percent and 6 percent in 2005. The Finance Ministry is forecasting a 5.5 percent expansion this year. The economy expanded 7.1 percent in 2004, the fastest pace in four years.

Singapore

Singapore's $107 billion economy, the fourth-largest in Southeast Asia, expanded 7.7 percent in the three months ending December from a year earlier, according to a Jan. 3 estimate by the Trade Ministry based largely on reports for October and November. That was the fastest pace in five quarters.

Prime Minister Lee Hsien Loong on Dec. 31 reiterated the government's growth forecast of between 3 percent and 5 percent for 2006 after revealing the economy expanded 5.7 percent last year. Both the fourth-quarter figure and the full-year growth estimate may be changed when revised reports are released in February.

Lee's government is trying to spur economic growth and create jobs by developing industries such as drugs and biosciences. It also wants to increase tourism with attractions such as casinos.

Thailand's economy, the second-largest in Southeast Asia, grew 5.3 percent in the third quarter from a year earlier following a gain of 4.6 percent in the previous three months.

Thailand

The Bangkok-based National Economic and Social Development Board on Dec. 6 said it expects Thailand's $164 billion economy will expand this year by between 4.7 percent and 5.7 percent from as much as 4.7 percent in 2005.

``Thailand tends to be a bit of an outlier because of their domestic policy situation,'' said JP Morgan's Ong. ``The government has announced some important public infrastructure projects and they should help drive domestic demand.''

Prime Minister Thaksin Shinawatra's government plans to spend 1.7 trillion baht ($41.3 billion) over the next four years on railways, subways and other public works to spur the economy.

Regional GDP Forecasts
--------------------------------------------------------------
Indonesia Thailand
2005 2006 2005 2006
--------------------------------------------------------------
Median 5.5% 5.0% 4.6% 5.0%
Average 5.4% 4.9% 4.6% 5.0%
High 5.8% 5.7% 5.0% 5.7%
Low 4.4% 3.9% 4.5% 4.1%
Number 11 11 11 11
--------------------------------------------------------------
Action Economics 5.5% 5.0% 4.7% 5.0%
Capital Economics Ltd 5.8% 5.2% 4.5% 5.1%
CIMB Securities 5.5% 4.8% 4.5% 5.0%
Citigroup 5.6% 5.7% 4.5% 4.7%
Credit Agricole SA 5.4% 3.9% 4.6% 4.5%
DBS Group 5.4% 5.2% 4.5% 5.2%
Forecast Ltd 5.2% 4.8% 5.0% 5.7%
IDEAglobal 5.2% 5.0% 4.8% 5.5%
JP Morgan 4.4% 4.0% 4.6% 4.7%
Standard Chartered 5.5% 5.5% 4.5% 4.1%
UOB Group 5.5% 4.7% 4.6% 5.1%
--------------------------------------------------------------

--------------------------------------------------------------
Malaysia Singapore
2005 2006 2005 2006
--------------------------------------------------------------
Median 5.3% 5.0% 5.6% 5.0%
Average 5.3% 5.2% 5.5% 5.3%
High 5.5% 6.0% 5.7% 7.1%
Low 5.0% 4.2% 5.1% 4.5%
Number 11 11 11 11
--------------------------------------------------------------
Action Economics 5.3% 5.0% 5.7% 6.0%
Capital Economics Ltd 5.3% 5.0% 5.7% 4.5%
CIMB Securities 5.3% 5.3% 5.4% 7.1%
Citigroup 5.0% 5.0% 5.7% 4.5%
Credit Agricole SA 5.1% 5.0% 5.5% 5.0%
DBS Group 5.4% 5.6% 5.4% 5.3%
Forecast Ltd 5.3% 5.5% 5.1% 5.0%
IDEAglobal 5.5% 6.0% 5.7% 5.3%
JP Morgan 5.1% 4.2% 5.6% 4.7%
Standard Chartered 5.3% 5.0% 5.7% 5.0%
UOB Group 5.3% 5.1% 5.5% 5.4%
--------------------------------------------------------------

To contact the reporter on this story:
Michael Dwyer in Singapore at mdwyer5@bloomberg.net

Alvin

January 13th, 2006, 09:38 AM

Malaysia akan tanam US$2,31 miliar

BUKITTINGGI: Pengusaha Malaysia berkomitmen menanamkan modal melalui sejumlah proyek di Indonesia dengan nilai sekitar US$2,31 miliar dan RM35 juta sebagai bagian dari kesepakatan bilateral kedua negara di bidang ekonomi dan investasi.
Ketua Malaysia Indonesia Business Council (MIBC) Dato' Seri Ahmad Sarji Bin Abdul Hamid menyebutkan komitmen investasi Malaysia itu terbagi dalam beberapa sektor yakni infrastruktur, perkebunan, minyak dan gas, energi, serta pelabuhan.

Di sektor infrastruktur, dia menyebutkan lima perusahaan Malaysia telah mengikuti tender untuk enam proyek jalan tol yang investasinya senilai US$1,34 miliar.

"Dalam perkembangan terakhir, proyek tersebut akan ditender ulang," katanya di sela-sela pertemuan tingkat tinggi Indonesia dan Malaysia yang dihadiri langsung oleh Presiden RI Susilo Bambang Yudhoyono dan Perdana Menteri Malaysia Dato' Abdullah Ahmad Badawi di Bukittingi, Sumbar, kemarin.

Rangkaian pertemuan tingkat tinggi dua negara itu juga dihadiri sejumlah menteri dari Indonesia dan Malaysia serta pelaku usaha kedua negara.

Di sektor perkebunan, kata Sarji, satu perusahaan Malaysia akan mengembangkan usaha pabrik minyak kelapa sawit di Ketapang dan Sanggau, Kalimantan Barat dengan nilai proyek diperkirakan RM30 juta.

"Baru-baru ini salah satu perusahaan Malaysia juga telah membeli lahan 10.000 hektare di Sei Mawang dan 20.000 hektare di Sekadau, Kalimantan Barat," papar dia.

Sektor lain yang diminati oleh perusahaan asal Malaysia adalah minyak dan gas.

Di sektor ini, satu perusahaan telah menyatakan minatnya menggarap proyek jaringan pipa gas sepanjang 1.700 kilometer dari Kalimantan Timur sampai Jawa.

Perusahaan gas Malaysia yang tergabung dalam satu konsorsium bersama PT Rekayasa Industri (Indonesia) dan satu perusahaan asal Dubai telah memenangkan kontrak pembangunan jaringan pipa gas sepanjang sekitar 161 kilometer dengan nilai proyek US$138 juta.

Bidang energi

Sementara itu di bidang energi, satu perusahaan asal Malaysia dikabarkan telah membuat penawaran untuk pembangunan pembangkit listrik tenaga uap (PLTU) berbahan bakar batu bara berkapasitas 600 MW di Cirebon dengan nilai proyek US$600 juta.

Satu perusahaan lainnya juga sedang melakukan pembicaraan dengan PT Perusahaan Listrik Negara (PLN) untuk pembangunan PLTU Mulut Tambang berkapasitas 2x100 MW di Sumatra Selatan dengan nilai proyek US$200 juta.

"Perusahaan yang sama juga tengah bernegosiasi untuk proyek pengembangan sebuah coal-fired power plant with steam di Merak bernilai US$30 juta," papar Sarji.

Sektor pelabuhan, kata dia, juga diminati oleh pengusaha Malaysia. Satu perusahaan Malaysia akan membangun pelabuhan kecil di Ketapang, Kalimantan Barat senilai RM5 juta yang akan digunakan untuk basis ekspor minyak sawit mentah (crude palm oil/CPO) ke Eropa, Jepang, dan Korea Selatan.

Presiden Yudhoyono menuturkan dalam pertemuan bilateral kali ini kedua negara sepakat meningkatkan kerja sama di bidang ekonomi terutama perdagangan, investasi, dan energi.

Dia memaparkan dalam rangka pembangunan infrastruktur dalam empat tahun mendatang, banyak proyek yang bisa dikerjasamakan dan terbuka bagi pemerintah dan pengusaha dari negara manapun termasuk Malaysia.

Sementara itu PM Badawi mengatakan kerja sama Indonesia dan Malaysia kini telah meningkat pada satu tahap yang lebih luas dengan mengambil berbagai peluang dari kekuatan dan kekayaan yang dimiliki oleh kedua negara. (k13) (junaidi.halik@bisnis. co.id)

Oleh Junaidi Halik
Bisnis Indonesia

F-ian

January 13th, 2006, 09:58 AM

do we Invest in Malaysia too?

sanhen

January 13th, 2006, 05:14 PM

we used to build bridges and toll road in Malaysia.
now the other way around hehehe.

F-ian

January 13th, 2006, 07:01 PM

ya gak apa2 its called Bales Budi...

Zorobabel

January 18th, 2006, 10:45 AM

Indonesia's Share Of US Textile Market Tipped To Rise For 2005

JAKARTA, Jan 18 Asia Pulse - Indonesia's share of the US textile market was estimated to rise to 3.4 per cent in 2005, up from 2 per cent in the previous year, the Indonesian Textile Association (API) said.

API executive secretary Ernovian G. Ismy said Indonesian exports to the US market increased as the country succeeded in grabbing the market segment previously held by China.

China left part of the US market open after the United States slapped quota restriction on Chinese textile imports.

In the first nine months of 2005, the country's textile exports rose 11.6 per cent year-on-year to US$2.59 billion.

The country set its textile export target at US$8 billion in 2005 and this year the target is set at US$9 billion with main export destinations the United States, the European Union and Japan respectively accounting for 32 per cent, 22 per cent and 10 per cent.

(ANTARA)

Alvin

January 19th, 2006, 07:02 PM

Coca-Cola to Boost Indonesia Production
Thursday January 19, 6:25 am ET
Coca-Cola to Boost Production by Up to 20 Percent in Indonesia This Year

JAKARTA, Indonesia (AP) -- Coca-Cola plans to boost production by up to 20 percent this year in Indonesia to keep up with rising demand for soft drinks in the world's fourth most populous country, a top executive said Thursday.
"We have big plans for Indonesia," said Robert Foye, managing director of PT Coca-Cola Indonesia, adding the company planned to invest "millions and millions of dollars" over the next five years.

Indonesia's economy is forecast to grow by around 6 percent this year, fueling demand for consumer goods among its 220 million people.

Foye said the company planned to boost production capacity by between 10 percent and 20 percent this year to keep up with demand. He said business grew in "double digits" last year.

Foye was part of a delegation of 20 prominent U.S. companies visiting Indonesia.

Alvin

January 23rd, 2006, 05:47 AM

Monday January 23, 2006

Malaysian investors going into Indonesia

By HANIM ADNAN

MALAYSIAN companies are expected to intensify their investments in Indonesia this year.

Local players are broadening their scope in the republic by venturing into strategic sectors like infrastructure, ports, banking and finance, telecommunications, oil and gas and power, from just oil palm plantations, which topped the list more than a decade ago.

Industry players and analysts concur that Malaysian companies are now more confident of Indonesia's prospects, given the steady recovery in business climate, policy reforms and strong government support to attract foreign direct investments (FDIs).

Malaysia-Indonesia Business Council (MIBC) executive director Datuk Dr Michael Yeoh told StarBiz in Kuala Lumpur that it was timely to invest in Indonesia, given the anticipated FDI boom.

“Prospects are good,” he said, adding that the viable sectors included plantations, infrastructure as well as consumer products, due to the recovery in consumer spending.

He said the financial sector was also showing more interest in Indonesia, with Malaysia's largest investment bank, CIMB Bhd, and others like Public Bank Bhd and AmSecurities Bhd making strong inroads there.

Yeoh also expects more collaboration between Malaysian and Indonesian companies in Indonesia's oil and gas sector.

In infrastructure, he said an important event for Malaysian companies would be the two-day Infrastructure Summit organised by the Indonesian government in Jakarta next month.

A list of major infrastructure-related projects would likely be unveiled at the summit, including six tolled roads estimated at over US$1.35bil.

Yeoh said: “This summit will generate strong interest, especially from those in the infrastructure, construction, energy and utilities sectors.”

While Malaysian companies are “gungho” about Indonesia's prospects, MIBC member Tan Sri Mohd Ramli Kushairi said there were major issues to be addressed when undertaking infrastructure-related projects in Indonesia.

“These include land acquisition law, acquisition costs, the mechanism on periodic toll reviews (for toll road projects) and the issue of local financing.

“Hopefully, the Infrastructure Summit will spell out new terms that will provide a clearer picture to Malaysian investors expanding into Indonesia,” Ramli added.

Yeoh said apart from the private sector, the Malaysian government’s investment arm, Khazanah Nasional Bhd, was also looking at investing in Indonesia.

It was reported recently that Khazanah was investing RM5.7bil in Indonesia while Perbadanan Nasional Bhd has invested RM4bil.

Khazanah, to-date, has 87.5% stake in PT Bank Lippo, Indonesia's ninth largest lender by assets.

An analyst with a bank-backed brokerage said big groups like Maxis Communications Bhd, CIMB and YTL Power International Bhd had become more prominent in Indonesia over the past two to three years.

Pioneering plantation groups like Kumpulan Guthrie Bhd, Kuala Lumpur Kepong Bhd and Golden Hope Plantations Bhd had been there for over 10 years.

He noted that in the banking and finance sector, investment units of major Malaysian banks like CIMB and Public Bank were making forays into Indonesia due to their cash-rich positions.

Citing CIMB, the analyst said the group was making a presence in the republic through PT CIMB Niaga.

Managing director and chief executive Datuk Nazir Razak said recently that the group planned to further tap the potential of Indonesia's equities market.

YTL Power, meanwhile, is investing in Indonesia's second largest independent power producer PT Java Power, while Telekom Malaysia Bhd has a 28% stake in Indonesia's third largest cellular company, Excelmindo.

As for the oil and gas sector, a local company is bidding for a 1,700km gas pipeline from east Kalimantan to Java. Another company, PECD Bhd recently won a US$140mil project to build a 161km pipeline linking Sumatra and Java.

In the power sector, a local company is also bidding for a RM2.5bil coal-fired power plant in Ceribon, West Java, while another is in discussions to build two 100 megawatts coal-fired plants costing about RM7.5mil in south Sumatra.

Alvin

January 24th, 2006, 01:58 AM

Monday January 23, 5:08 PM
Singapore Sees More Investment Opportunities in Indonesia

BATAM, RIAU, Jan 23 Asia Pulse - After placing Indonesia as its fifth biggest trade partner in 2005, Singapore believes there are still many investment opportunities in Indonesia, a senior minister said.
"Traditionally, Singaprore has concentrated its investment in Jakarta and Riau Islands, however, Singapore's businessmen realize that they are other investment opportunities in other parts of Indonesia including West Java," Singapore's Finance and Trade Minister Lim Hwee Hua said Thursday night.

He made the remarks when attending a cultural performance at the Indonesian Embassy in Singapore, which was also attended by West Java Governor Danny Setiawan.

Singapore for the first time since 1974 published data on its trade with Indonesia early this month which has caused a controversy.

According to data from chairman of Singapore International Enterprises Lee Yi Shyan on January 18, Singapore's international trade (exports and imports) grew by 14 percent last year to S$716 billion. Its trade with Indonesia increased by 11.6 percent to S$54.2 billion.

The bilateral trade performance between the two countries has earned Indonesia a place as Singapore's fifth biggest trade partner after Malaysia with S$96.1 billion, followed by the European Union S$84.8 billion, the United States S$77.8 billion and China S$67.1 billion. ADVERTISEMENT

However, the Singapore's Minister admitted that some of its companies have left Bekasi, Karawang and Purwakarta, all in West Java, for more lucrative locations.

Lim hoped that the opening of a West Java chamber of commerce and industry office in Singapore would strengthen the relations between the Indonesian province and Singapore.

In 2005, West Java opened a chamber of commerce and industry office in Sydney, Australia.

Meanwhile, West Java Governor Danny Setiawan said the province has improved its administrative and investment facilities.

(ANTARA)

MARINHO

January 24th, 2006, 03:06 AM

The Big Indonesia Sale has started.

Alvin

January 24th, 2006, 12:51 PM

World Bank Cuts Indonesia's 2006 Economic Growth Forecast to 5%

JAKARTA (Bloomberg): The World Bank has cut its forecast for Indonesia's economic growth this year after investment and consumption slowed.Indonesia may expand 5 percent in 2006, the bank's Country Director Andrew Steer said. Washington-based World Bank had in November forecast 5.5 percent to 6 percent gross domestic product growth this year.

"Growth of investment, which has declined since the first quarter of 2004, has not improved significantly," Steer said in a speech to bankers in Jakarta on Tuesday.

President Susilo Bambang Yudhoyono's government, which wants to attract US$426 billion of investment in the next five years to build roads, power plants and ports, hasn't finalized a law aimed at attracting investment even as domestic consumption slows. Itforecasts 6.2 percent growth this year.

Higher global oil prices also forced the government to increase fuel costs and the central bank to raise interest rates.

That's crimped the purchasing power of a population where 126 million people live on under $2 a day.Bank Indonesia raised its key rate to 12.75 percent on Dec. 6 from 8.5 percent on July 5.

"Clearly, interest rates are still high, the growth of consumption is not that strong," Steer said. "That's why public spending must be increased this year."

Indonesia on Dec. 29 delayed for the second time a meeting to attract companies to build infrastructure projects as the government wants to pass the investment law before the conference.

"The signals coming out of policymakers over the last few weeks have not been comforting," Adam Le Mesurier, an economist at Goldman Sachs Group Inc. in Singapore, said in a Jan 23.research note. Investors must "look for clear signs that policy remains committed to making the hard decisions." (**)

Alvin

January 24th, 2006, 04:12 PM

Tuesday January 24, 1:46 PM
Indonesian Cell Phone Numbers Still Low Despite Growth

JAKARTA, Jan 24 Asia Pulse - Indonesia's cell phone holders to population ratio is predicted to rise to 40 per cent in 2010 from 17.4 per cent in 2005 when the population was estimated to reach 230 million.
Lee Kang Hyun, a director of PT Samsung Electronics Indonesia said on Monday the number of cell phone holders in the country will remain relatively low until 2010 despite a leapfrogging increase of 30 per cent projected in the coming years.

Lee said the low ratio is reflected in the sales of Samsung hand-phones in the country compared with in other countries.

He cited sales of Samsung SGH-D500 launched for the first time in late 2004 totaled 7 million units all over the world but sales in Indonesia have been insignificant.

(ANTARA)

Alvin

January 24th, 2006, 04:13 PM

advertisement

Tuesday January 24, 1:45 PM
India's Bajaj to Site Se Asian Production Base in Indonesia

JAKARTA, Jan 24 Asia Pulse - India's Bajaj Auto Ltd (BSE:500490) said it plans to make Indonesia the production base for its two and three wheelers in southeast Asia.
Bajaj Auto chairman Rahul Baja said to start with Bajaj automotive factory in in Indone sia will come on line in September.

We hopes to expand the market of Bajaj products in southeast Asia starting from Indonesia, Rahul said as quoted by the Indonesian Trade Attache in New Delhi on Monday.

Baja Auto has a 90 per cent share of two and three wheeler market in Sri Lanka, Rahul was quoted as saying.

Bajaj three wheeler is still popular in Indonesia used for public transport in large cities such as Jakarta.

(ANTARA)

Alvin

January 24th, 2006, 04:14 PM

Tuesday January 24, 1:38 PM
Indonesian Car Sales Estimated to Top US$11 BLN in 2005

JAKARTA, Jan 24 Asia Pulse - Car sales on the domestic market were estimated to exceed US$10.95 billion in 2005, the Association of Motor Vehicle Companies (Gaikindo) said.
The estimate was based on the sales that reached 533,840 units in 2005 up from 483,317 units in the previous year.

Toyota led with sales at 182,767 units, followed by Mitsubishi 89,158 units and Suzuki 87,274 units, Honda 53,750 units and Daihatsu 48,762 units.

Other brands among 10 largest are Isuzu, Nissan, KIA, Hyundai and Hino.

Gaikindo chairman Bambang Trisulo said new investment in theauto industry was US$1.75 billion in 2005.

(ANTARA)

tata

January 25th, 2006, 11:11 PM

Wednesday January 25, 9:52 AM
INDONESIA PRESS: Japan's Seibu To Open Store In Jakarta

JAKARTA (Dow Jones)--Japan's Seibu Department Store will open an outlet in Indonesia in September in cooperation with local retailer PT Mitra Adiperkasa (MAPI.JK), Bisnis Indonesia reports.

The report says Seibu's department store will be located in a shopping center under construction in Jakarta's prime business area that will cover 33,000 square meters.

The newspaper doesn't give further details on the Seibu-Mitra partnership.

Seibu operated a department store in Jakarta in the 1990s, but closed it in late in the decade.

Newspaper Web site: http://www.bisnis.com

Alvin

January 26th, 2006, 02:57 AM

FOREIGN INVESTMENT IN INDONESIA RISES 193.7PCT IN 2005

Thursday January 26, 2006, 10:16 am

JAKARTA, Jan 25 Asia Pulse - Foreign investment inflows to Indonesia in 2005 jumped by 193.7 per cent to US$8.91 billion, from US$4.6 billion a year earlier, according to data from Indonesia's Investment Coordinating Board (BKPM) published here Wednesday.

The BKPM data also showed that a total of 909 projects were licenced during 2005, compared to 544 projects in the previous year.

The Board also recorded that domestic investment in 2005 reached Rp30.67 trillion (around US$3.2 million), an increase of 200.9 per cent compared to Rp15.26 trillion in 2004.

The number of domestic investment projects was also up from 129 in 2004, to 214 in 2005.

The largest portion of the foreign investment went to the transportation, warehousing, and communication sectors, with a total value of US$ 2.95 billion in 53 projects. The second-largest was the construction service, standing at US$921.9 million in 35 projects.

The remaining investment went to the food industry, worth US$598.8 million in 46 projects, and the metal, machinery and electronic industries worth US$522.9 million in 87 projects.

Jakarta received the largest share of the foreign investment, with US$3.27 billion for 366 projects, while West Java Province got US$2.57 billion for 210 projects.

Other provinces receiving the foreign investment included Riau (US$795.8 million in 8 projects), East Java (US$702.2 million in 46 projects) and Banten (US$668.1 million in 78 projects).

The new projects were estimated to employ a total of 156,109 workers last year, an increase of 108 per cent, compared to 144,400 workers in 2004.

Last year's new domestic investment went to the paper and printing industry, with a value of Rp9.7 trillion in 13 projects, the food industry worth Rp4.4 trillion in 35 projects, and the crop and plantation sector worth Rp3.07 trillion in 19 projects.

The rest went to the construction sector (Rp2.46 trillion in four projects) and the chemical and pharmaceutical industry (Rp1.9 trillion in 16 projects).

Riau Province received the largest portion of the domestic investment, with a value of Rp10.23 trillion in 15 projects, followed by East Java with Rp4.06 trillion in 25 projects, Banten Rp3.8 trillion in 24 projects, West Java Rp3.35 trillion in 52 projects, and Jakarta Rp2.55 trillion in 24 projects.

Domestic investment in 2005 created jobs for 122,750 people, an increase of 198.4 per cent compared to 61,858 in 2004.

(ANTARA)

627

January 26th, 2006, 03:11 AM

:runaway: i dont knlow much about economics but 200% sounds like alot

Alvin

January 26th, 2006, 05:32 AM

:runaway: i dont knlow much about economics but 200% sounds like alot

actually, the figure should just be 90% +/-, it's less than doubled.

Zorobabel

January 26th, 2006, 07:04 AM

I just hope the government can get the legal framework in place to bring in even larger amounts of investment.

Fir3blaze

January 26th, 2006, 07:12 AM

actually, the figure should just be 90% +/-, it's less than doubled.

Yeap, I think its a reporting error.

Alvin

January 26th, 2006, 07:35 AM

I just hope the government can get the legal framework in place to bring in even larger amounts of investment.

Yep, the DPR's track record has been dismal...if only we had better legislators. *sigh*

Alvin

January 27th, 2006, 04:10 AM

http://www.bi.go.id/NR/rdonlyres/2D719CBB-2076-44D1-8357-559957566FEB/3322/ProspekperekonomianIndonesiatahun2006_Engl.pdf

Alvin

January 30th, 2006, 01:58 AM

my mum spotted Trade Minister Mari Pangestu on her way to Davos, on the plane to Singapore.
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Indonesia, wounded Asian Tiger, attempts to recover
By Michael Logan Jan 29, 2006, 20:13 GMT

Davos - The spotlight in this year's World Economic Forum fell largely on India and China, but Indonesia - with a population of over 200 million the fourth-most populous country in the world - has huge potential to be the next Asian Tiger.

However, the country does not have its problems to seek. The Bali terrorist attacks, widespread corruption in the government, the tsunami that devastated the country in 2004, and the hangover from the Asian financial crisis in 1997 have all caused major setbacks to the economy.

Deutsche Presse Agentur dpa caught up with Trade Minister Mari Pangestu on the fringes of the Forum to find out what the country is doing to try to catch up with its rapidly developing competitors.

'Terrorism and corruption are the two major issues, and particularly how our country is perceived by foreign investors,' Pangestu said. 'However, we are making great progress in both areas.'

'We caught the Bali mastermind and we are still closing in on terrorist cells,' she continued. 'Economic development and growth are the basis of reducing terrorism.'

Pangestu feels that corruption is an even bigger problem and is holding the country back, but said that the government was well on its way to sorting it out.

'There are over 100 people in jail for corruption: ex-ministers, ex-governors, ex-heads of regions,' she said. 'This isn't a witch hunt, though, and we are careful to investigate each case thoroughly.'

According to the minister, the measures are starting to show some signs of reaping benefits.

'We are seeing a high growth of trade with China, India and Korea, and these would be our major new markets,' she said.

Signs of recovery are there already: exports reached an all-time record of 85 billion dollars in 2005 and government debt is declining.

Government debt is a good indicator of how badly the crisis affected Indonesia. In 1996 the debt was just over 20 per cent of Gross Domestic Product, but after the crash it shot up to 100 per cent.

Now it stands at 49 per cent, and is forecast to be 34 per cent by 2009.

The ministers said that the short-term goal was to get the economy back to pre-crisis levels of performance, and part of the strategy is to expand regional trade.

Although the minister sees China as a director competitor, she said that Indonesia was planning on using the emerging economic superpower's massive growth to its advantage.

'We shouldn't be competing head on,' she said. 'China needs our oil, gas and minerals. We have signed a free trade agreement with the Chinese.'

Indonesia has a lot of untapped gas fields she said, and these would be developed to boost export capability.

Pangestu also said that Indonesia was looking to become part of a regional production centre, and pointed out that the potential for manufacturing capacity was high.

'We don't have the same capacity as India, China or Singapore, but that doesn't mean we don't have the potential,' she said. 'Now that South-East Asia has its house back in order, the impact is being felt.'

'Manufacturers are diversifying their sources, and Indonesia must play its part in this,' she continued, adding that Indonesia had already proved itself by manufacturing parts for Barbie dolls while China struggled with SARS.

The minister also said that domestic growth would be stimulated, pointing out that only 10 per cent of the population owned mobile phones as an example for the potential.

Energy was another major theme at Davos, with worry over the rising energy demands of developing countries, but Pangestu said that Indonesia was doing its bit to be green.

'We have a defined energy strategy,' she said. 'The first thing we did last year was to raise oil prices twice: the first time by 30 per cent, the second by 100 per cent.

'We are also looking at alternative sources: we are experimenting with biomass technology and hope to use as much of this as possible,' she continued.

With an already open investment regime and new laws expected to be passed to make the country even more attractive, the minister is sure that Indonesia will eventually assume its rightful place.

'We won't be as big as China, but we will definitely be a major player in South-East Asia,' she said.

Zorobabel

January 30th, 2006, 05:36 AM

If Iran is put under UN sanctions it could raise the price of oil past $100 a barrel. At that point I imagine biofuels would be quite economical, and might act as a boon for CPO production.

Alvin

February 2nd, 2006, 01:41 AM

^^ that would be a disaster for Indonesia...

any way, more bad news...
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AVON TO CLOSE DOWN PLANT IN INDONESIA

Thursday February 2, 2006, 10:14 am

JAKARTA, Feb 2 Asia Pulse - Cosmetics producer PT Avon Indonesia will stop its operational activity in Indonesia as part of its global restructuring effort announced by its parent company, Avon Products, in November last year.

ADVERTISEMENT

In a written statement received here on Wednesday, it said the decision to stop its operations in Indonesia was taken in an extraordinary shareholders meeting.

"Based on the results of an extensive study, PT Avon Indonesia has been constantly operating at a loss in the past several years," the company's Area Vice President for Southeast Asia, Perry Mogar, said.

Perry said Indonesia has a long-term potential market, in view of its large population and economic growth.

"However, our analysis shows that Avon needs additional investment significantly, in order to enable it to materialize the potential," he said.

He said Avon was not yet ready to increase its investment in Indonesia because of the millions of US dollars it had lost in the past few years.

In view of that, he said Avon's plant in Cilandak, South Jakarta, would be closed down, while distribution of its products would be halted and operations would be stopped in the next 30 days.

The closure would affect around 600 workers, their lay-off would therefore be carried out with utmost discretion.

(ANTARA)

David-80

February 2nd, 2006, 02:17 PM

No surprise for me, the company is really suffering a major netloss during this past few years. for instance, my own cargo company was in charge with Avon for the deliveries of their sample products throughout Java and Sumatra couple months ago and what make me surprised, most of their products marketed through MLM (multi level marketing). Then on December, many of the guy who were working as couriers for Avon are laid off, they told me, the payment has been so late and etc.

so i can see the sign for them to close down their business here. Really its no surprise.

cheers

bahar

February 2nd, 2006, 02:31 PM

is it because Avon can't compete with local cosmetic firms like Sari Ayu and Mustika Ratu?

macgyver

February 2nd, 2006, 06:45 PM

is it because Avon can't compete with local cosmetic firms like Sari Ayu and Mustika Ratu?

I think it is because ... just like David stated ... they sell the product using MLM.
and there is another (sweden ?? ) cosmetic product sold by MLM

Blue_Sky

February 3rd, 2006, 06:09 AM

Liputan6.com, Jakarta: Pemerintah secara resmi telah mengajukan pinjaman dari pemerintah Jepang yang mendekati US$ 1 miliar atau sama dengan Rp 9,3 triliun. Dana ini sedianya akan dialokasikan buat membiayai sembilan proyek baru dengan memfokuskan pada pembangunan infrastruktur dan sumber daya manusia (SDM). Demikian diungkapkan Menteri Koordinator Perekonomian Boediono di Jakarta, Rabu (1/2).

Upaya tersebut tetap ditempuh pemerintah kendati Jepang telah menaikkan suku bunga pinjaman dari 1,3 persen menjadi 1,5 persen. Menurut Boediono, langkah itu diambil karena suku bunga pinjaman yang ditawarkan pemerintah Jepang masih lebih murah dibanding negara-negara kreditur. Pun demikian dengan lembaga pembiayaan lain.

Boediono menambahkan, selain Jepang, pemerintah juga mengajukan pinjaman baru kepada kreditur lain yakni Bank Dunia dan Bank Pembangunan Asia (ADB). Mengenai besarnya angka, Boediono mengaku tidak tahu. Namun yang jelas pinjaman terbesar berasal dari ketiga sumber tersebut.(AIS/Linda Putri Mada dan Yopie Jacob)

David-80

February 3rd, 2006, 12:16 PM

Yup, mac is right, they were using MLM for almost everything.. something that sari ayu, Revlon and many others were using it before but they had learn and change their marketing style.

MLM company = dumb investment

cheers

Alvin

February 3rd, 2006, 01:46 PM

Friday February 3, 3:57 PM

Indonesia Q4 GDP growth seen below target on fuel

JAKARTA, Feb 3 (Reuters) - Indonesia's economic growth is estimated to have slowed further in the final quarter of last year due partly to weaker consumer spending after a big rise in fuel prices in October, a central bank document showed.
The document submitted to parliament on Friday and seen by Reuters predicted the economy to have expanded between 4-4.5 percent in the fourth quarter from the same period in the previous year, against a targeted 5.2-5.7 percent for the period.

The central bank said the economy is estimated to have grown 5.3-5.6 percent last year, against a previous forecast of 5.3-5.5 percent and a state budget target of six percent for the period. The economy grew 5.1 percent in 2004.

The statistics bureau is expected to announce economic growth figures for the final quarter of 2005 and full year of 2005 in the middle of February, government officials said.

Jakarta hiked fuel prices by an average of 126 percent in October to ease concerns about a budget crisis and help the rupiah strengthen, but analysts said the move hit consumer spending and further slowed economic expansion.

Annual growth has been slowing since the first quarter of 2005. Indonesia's economy expanded 5.34 percent in the year through the third quarter last year. A Man A Woman

A Man A Woman

A quarterly Reuters poll earlier in January showed Indonesia's economic growth should quicken slightly in 2006 but it is still likely to be below the 6 percent rate needed to make inroads into chronic unemployment.

The median forecast of 10 economists showed Southeast Asia's largest economy would expand by 5.6 percent in 2006 against an expected 5.4 percent for 2005.

The market estimates were lower than the government's 2006 budget target of 6.1 percent and last year's 6 percent target.

Analysts expect the infrastructure and telecommunications sectors to expand at a robust pace due to increased government spending and foreign funds, but high interest rates were likely to crimp the pace of expansion.

In the second half of 2005, Bank Indonesia raised its benchmark one-month interest rate six times by a total of 425 points to 12.75 percent.

Alvin

February 7th, 2006, 12:23 PM

Just for your info, UBS is forecasting Indonesia's gdp growth to fall to 4.3% this year, before rebounding strongly to 6.4% next year...
Personally I think the former figure is overly conservative .

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Indonesia Keeps Key Rate Unchanged on Growth Concerns (Update4)

Feb. 7 (Bloomberg) -- Indonesia's central bank left its key interest rate unchanged for a second month to stem a slowdown in economic growth.

Bank Indonesia Governor Burhanuddin Abdullah and his seven deputies held the rate used as a reference for bill sales at 12.75 percent, central bank spokesman Halim Alamsyah told reporters in Jakarta today. The move was predicted by eight of 11 economists in a Bloomberg News survey.

Growth in Southeast Asia's largest economy in the fourth quarter may have been the slowest in almost four years as surging fuel prices and borrowing costs crimped consumption. Six interest rate increases since July helped the rupiah recover from a four- year low and slowed inflation to 17 percent in January from a six-year high of 18.4 percent in November.

``The central bank is generally under strong political pressure to boost growth,'' said Tim Condon, chief Asia economist at ING Group NV in Singapore. Bank Indonesia will let the rupiah ``appreciate and use that pressure to slash interest rates.''

The Indonesian currency has gained 6.7 percent this year, making it the world's second-best performer after the Brazilian real. The rupiah rose 0.01 percent to 9,213 against the dollar at 4:15 p.m. in Jakarta today.

The rupiah plunged to a four-year low against the U.S. dollar on Aug. 30 amid concern rising oil prices would lead to a surge in fuel subsidies and the government's budget deficit. The government's move to double fuel prices in October and interest- rate increases by the central bank helped it recover.

``If the rupiah strengthens, inflation will slow down but there is a time lag of three to six months,'' Finance Minister Sri Mulyani Indrawati told reporters in Jakarta earlier today.

Currency, Bonds

Bonds rose after today's announcement. The yield on the 14 percent local-currency bond due June 2009 fell 6 basis points, or 0.06 percentage point, to 12.34 percent as of 3:40 p.m. in Jakarta, according to Bloomberg prices. The price rose 0.15, or 1,500 rupiah per 1 million rupiah face amount, to 104.400. Bond yields move inversely to prices.

``Bank Indonesia kept interest rates unchanged to maintain economic growth and reach a short-term, long-term inflation target,'' Alamsyah said without specifying the targets.

Indonesia's benchmark stock index rose 1.1 percent at 4:15 p.m. in Jakarta.

``With the rate being kept unchanged, prices of Indonesian bonds, equity, and assets will remain competitive,'' said Andi Daniel, a currency dealer with PT Bank Sumitomo Mitsui in Jakarta. The rupiah ``will continue its current strengthening trend as long as the increase in inflation is in check.''

Purchasing Power

The central bank raised its BI rate from 8.5 percent in July, when it was introduced. That restricted purchasing power in a nation where 126 million people live on under $2 a day.

``The decline in purchasing power because of high inflation caused private consumption to slow down,'' the central bank said in a document released Feb. 3. ``Investment grew at a slower pace because of increasing production costs.''

Economic growth probably slowed to 4 percent to 4.5 percent in the fourth quarter, the document said. An expansion of 4 percent would be in the slowest since the first quarter of 2002.

Automobile sales in Indonesia fell 32 percent in December, the fourth straight month of decline, according Association of Indonesian Automotive Industries figures.

Car Sales

``We see some indications that Indonesia's central bank, might lower its benchmark interest rate in the coming quarters,'' said Prijono Sugiarto, vice chairman of the Association. ``A low interest climate will prompt people to start buying cars again.''

Governor Abdullah said Feb. 3 the central bank has kept its year-end inflation forecast unchanged at 8 percent even though January's 17 percent rate exceeded economists' forecasts. The median forecast in a Bloomberg survey of 13 economists was for a 16.4 percent increase.

``We are also looking at some amount of pickup in inflation because of salary hikes,'' said Surendra Rosha, head of global markets at HSBC Ltd. in Jakarta. ``But the performance of the currency will likely be a key factor in determining the direction on rates.''

Abdullah said Feb. 3 inflationary pressures remain and the central bank will maintain the ``tight bias'' of its monetary policy. He cited possible increases in electricity tariffs, civil servants' salaries and minimum wages and rice prices as factors ``which will put pressure on inflation.''

Indonesia is considering increasing prices by between 18 percent and 48 percent for all electricity users, National Planning Minister Paskah Suzetta said Jan. 18. The government is studying options to raise tariffs in a way that won't ``burden'' the public, President Susilo Bambang Yudhoyono said Jan. 23.

The inflation rate may gain as much as 1 percentage point should power tariffs be raised 40 percent, Choiril Maksum, director of the Central Statistics Bureau, said Feb. 1.

Last Updated: February 7, 2006 04:19 EST

Blue_Sky

February 8th, 2006, 08:51 AM

Rabu, 08 Pebruari 2006 | 12:53 WIB

TEMPO Interaktif, Jakarta:PT Telekomunikasi Selular (Telkomsel), PT Excelcomindo Pratama Tbk., dan PT Indonesian Satellite Corporation Tbk. (Indosat) menang tender generasi ketiga (3G).

Ketiga operator telepon seluler berbasis teknologi GSM itu masing-masing membeli satu blok dari total tiga blok yang ditawarkan pemerintah.

Dalam penawaran tender terakhir hari ini di Kantor Menteri Komunikasi dan Informasi, yang hasilnya dibuka di depan notaris, Telkomsel mengajukan penawaran sebesar Rp 218 miliar, Excelcomindo Rp 188 miliar, dan Indosat Rp 160 miliar per blok.

Sedangkan PT Bakrie Telecom dan PT Telekomunikasi Indonesia Tbk. (Telkom) kalah dalam tender ini. Bakrie mengajukan penawaran Rp 108 miliar dan Telkom (untuk TelkomFlexi) Rp 103 miliar.

http://www.tempointeraktif.com/hg/ekbis/2006/02/08/brk,20060208-73633,id.html

Blue_Sky

February 8th, 2006, 08:52 AM

Rabu, 08 Pebruari 2006 | 13:33 WIB

TEMPO Interaktif, Jakarta:PT Telekomunikasi Selular (Telkomsel), PT Excelcomindo Pratama Tbk., dan PT Indonesian Satellite Corporation Tbk. (Indosat) menang tender generasi ketiga (3G).

Ketiga operator telepon seluler berbasis teknologi GSM itu masing-masing membeli satu blok dari total tiga blok yang ditawarkan pemerintah.

Dalam penawaran tender terakhir hari ini di Kantor Menteri Komunikasi dan Informasi, yang hasilnya dibuka di depan notaris, Telkomsel mengajukan penawaran sebesar Rp 218 miliar, Excelcomindo Rp 188 miliar, dan Indosat Rp 160 miliar per blok.

Sedangkan PT Bakrie Telecom dan PT Telekomunikasi Indonesia Tbk. (Telkom) kalah dalam tender ini. Bakrie mengajukan penawaran Rp 108 miliar dan Telkom (untuk TelkomFlexi) Rp 103 miliar.

Menteri Komunikasi dan Informasi Sofyan Djalil mengatakan, ketiga pemenang tender 3G itu masing-masing mendapatkan satu blok frekunesi 3G.

Menanggapi perubahan penawaran yang diajukan Telkomsel dan Bakrie yang pada tahap pertama masing-masing menawar dua blok dan hari ini hanya menawar satu blok, Sofyan hanya mengatakan, hal itu sah saja.

“Mungkin mereka melihat kewajiban yang harus dibayar begitu besar, sehingga mereka memilih menawar satu blok saja,” kata Sofyan.

Menteri menambahkan, dalam waktu 30 hari ke depan, para pemenang harus menyelesaikan kewajiban finansial. “Mereka harus membayar upfront fee sebesar dua kali dari penawaran yang mereka ajukan serta biaya hak penggunaan frekuensi 2006 sebesar penawaran pemenang yang paling rendah (Rp 160 miliar),” ujarnya.

Sedangkan untuk operator yang sudah mempunyai alokasi 3G dalam tender sebelumnya, yakni PT Natrindo Telepon Seluler dan PT Cyber Access Communicatios, juga harus mengikuti skema pembayaran seperti pemenang tender hari ini.

Natrindo dan Cyber harus membayar komisi dan biaya frekuensi masing-masing sebesar Rp 160 miliar. Alasan pemerintah menetapkan pembayaran komisi menggunakan penawaran terendah, kata Sofyan, karena pemerintah menilai angka itu akan sanggup dipenuhi kedua operator tersebut.

Sofyan menambahkan, bila Natrindo dan Cyber dalam jangka waktu 30 hari tidak sanggup menyelesaikan kewajibannya, kedua operator itu dapat memgembalikan alokasi frekuensi yang telah diperoleh.

Dalam tender sebelumnya, kedua operator ini masing-masing memiliki dua blok (10 Mhz). “Kedua operator itu bisa mengembalikan 5 Mhz atau mengembalikan seluruh frekuensi yang sudah diperoleh dalam tender sebelumnya,” katanya.

Indriani Dyah S

http://www.tempointeraktif.com/hg/ekbis/2006/02/08/brk,20060208-73635,id.html

Zorobabel

February 10th, 2006, 01:13 AM

Indonesian small business IT spending reached $1.6 bln in 2005
Posted by ZDNet Research @ 7:10 am

The small business segment in Thailand and Indonesia invested a total of $1.3 bln and $1.6 bln in IT, respectively, in the last 12 months. The context for this commitment to IT investment is a dramatic growth in GDP. Robust domestic demand resulted in a growth rate of 6.3% for ASEAN countries 2004. Following the 1997 economic crisis, this is the second highest annual GDP growth, behind only the 6.7% achieved in 2000. It compares with a global GDP growth of 5.1%, and comes amidst a sharp increase in international oil prices and outbreaks of avian flu. Another factor is that ASEAN governments have recognized that the success in promoting small and medium businesses (SMBs) is critical to long-term sustainable economic growth. SMBs drive 40% and 57% of the country's GDP in Thailand and Indonesia, respectively, and are each country's largest source of jobs. Both countries' governments have actively helped SMBs use technology to enhance competition. From 2004 to 2009, investment in IT is expected to grow at a compounded annual growth rate of over 20% for Thailand and Indonesia small businesses, AMI Partners reported.

Alvin

February 10th, 2006, 02:34 PM

AP
[B]Indonesia Seeks New Contract With Freeport[B]
Friday February 10, 5:33 am ET
Indonesia Seeks to Renegotiate a New Contract With Mining Giant Freeport

JAKARTA, Indonesia (AP) -- Indonesia wants to renegotiate its profit-sharing agreement with U.S. mining giant Freeport because of soaring mineral prices on the global market, Indonesia's vice president said Friday.
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"Prices of gold and nickel are currently high, (and) based on this, profit sharing should be increased by two to three times from the previous figures," Jusuf Kalla told reporters, without elaborating on whether the terms of the government's current deal allow for renegotiation.

His comments will likely concern New Orlean's based Freeport-McMoRan Copper & Gold Inc. as well other foreign investors in Indonesia, who have long complained that lack of clear government regulations and legal certainty make doing business here difficult.

Freeport-McMoRan funneled $260 million into government coffers in the form of taxes, royalties and dividends and fees in 2004, data from the firm's annual report for that year indicates.

The company has come under fresh scrutiny recently for the payments it makes to troops guarding the Papua mine. The company said recently that U.S. government agencies were investigating the payments amid speculation they might violate American anti-corruption laws.

Freeport officials were not immediately available for comment.

The company began operating in Indonesia in 1969, after allegedly signing a deal directly with former dictator Suharto, who gained Western support by opening the nation's economy to foreign investment.

Copper and gold prices on the world market hit record highs earlier this month.

Grasberg, the world's largest gold and copper mine, has decades of future production, the 2004 report said.

Alvin

February 10th, 2006, 02:36 PM

Friday February 10, 7:07 PM
Indonesia expects to start new petchem plant in Feb

JAKARTA, Feb 10 (Reuters) - Indonesia is expected to start up a new petrochemical plant, Trans Pacific Petrochemical Indotama (TPPI), this month, starting at 60 percent-capacity to produce aromatic and oil products, an official at state oil firm Pertamina said on Friday.
TPPI, located in Tuban city in East Java province, has a capacity of 100,000 barrels per day (bpd) of condensate to feed its splitter.

"We expect Tuban Petrochemical (TPPI) to start up this month because everything is almost ready," Pertamina's processing director Suroso Atmomartoyo told Reuters, referring to the plant's alternative name.

"The plant (initially) will run at 60 percent capacity and will gradually increase after that. However, that will also depend on how much feedstock we have," he said.

Atmomartoyo said the plant would find some condensate from domestic sources and some from abroad.

"We know that there is not much domestic condensate. We will take some from Senipah," he said. Indonesia produces around 125,000 bpd of condensates, some of which are exported. The 125,000-bpd volume includes 25,000 bpd from Senipah.
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Atmomartoyo said the petrochemical output would include 1.1 million tonnes of kerosene, 189,000 tonnes of diesel oil, 500,000 tonnes of paraxylene, 120,000 tonnes of orthoxylene, and 100,000 tonnes of toluene.

"If the feedstock is 100,000 bpd, then that is the level of production. If the feedstock is less, then the output will also become less than that," Atmomartoyo said.

He said most of the petrochemical products would be absorbed by the domestic market, while Pertamina would take all of its oil products.

Another Pertamina official who declined to be named said Pertamina owns 15 percent of TPPI and local company TubanPetro has 59.5 percent. Siam Cement of Thailand and Japanese firms Sojitz Corp. as well as Itochu Corp. have the remaining stakes.

Alvin

February 10th, 2006, 02:46 PM

Friday February 10, 12:26 PM
Emerging Debt-Philippine, Indonesia bonds up on S&P move

HONG KONG, Feb 10 (Reuters) - Sovereign dollar bonds from the Philippines and Indonesia rose on Friday after ratings agency Standard & Poor's raised its outlook on the two countries, while the rest of the regional debt market was steady.
S&P on Thursday upgraded the Philippines' rating outlook to stable from negative following fiscal reform that included raising the rate of value added tax this month to 12 percent from 10 percent.

It also lifted the outlook on Indonesia, rated B-plus, one notch below the Philippines, to positive from stable, citing improved fiscal and monetary policies.

JPMorgan said in a report it kept its overweight recommendation on the Philippines.

"This view reflects the still positive developments in broader emerging markets and the relative value offered," it said.

Philippine sovereign bonds prices jumped a point and a half after the S&P announcement on Thursday but came off by half a point on Friday.

"The market tried to push higher today, but was met by profit taking... Basically we were up by one point after the outlook upgrade," a Manila-based trader said.

Philippine 2016 bonds were quoted at 106.25/106.625 in price terms, while 2031 bonds were at 99.875/100.125.

Five-year Philippine credit default swaps, which offer protection against debt default or restructuring, tightened by about 15 basis points (bps) to 205/210 bps.

Moody's Investors Service took a different tack to S&P by keeping a negative outlook on the Philippines, saying further fiscal reform will be needed to bring down exceptionally high public-sector debt.

Prices on Indonesian 2016 bonds were up by half a point to 104.25/104.75, while those on 2035 bonds gained one point to 112.625/113.375.

JPMorgan said in a separate report that it maintained a neutral rating on Indonesian bonds but would pick up the long-dated 2035 bonds once supply concern subsides.

Indonesia has appointed Barclays Capital, JPMorgan and UBS for an offshore bond issue to help fund its budget deficit.

Benchmark 2014 bonds from conglomerate Hutchison Whampoa Ltd. were stable at 105/102 bps over comparable Treasuries. FIVE-YEAR CREDIT DEFAULT SWAPS

Zorobabel

February 10th, 2006, 09:42 PM

Freeport is estimated to have given the Indonesian government $1.2 billion in 2005. It seems unhealthy for the government's revenues to be so heavily reliant on one mining corporation.

David-80

February 10th, 2006, 09:54 PM

Is that including the payment for The Indonesian military? They also paid them for security reason right? I heard the shareholders of freeport mcmoran asking about how much money the company pays to TNI.

cheers

Zorobabel

February 10th, 2006, 10:04 PM

"Collier said the company would pay $1.2 billion in taxes, royalties and dividends to the Indonesian government for the 2005 year."

I don't know if it includes payments to the military for security or not. Certainly, that's a major source of revenue for the TNI.

David-80

February 10th, 2006, 10:11 PM

Yeah, but does the money went to upgrade the soldiers welfare? lol..i doubt so..

cheers

David-80

February 10th, 2006, 10:16 PM

Just after we discussed

Freeport shares sink after Indonesia comments

Fri Feb 10, 2006 11:48 AM ET

NEW YORK, Feb 10 (Reuters) - Shares of mining company Freeport-McMoRan Copper & Gold Inc. (FCX.N: Quote, Profile, Research) fell sharply on Friday after news reports that the Indonesian government wants to substantially increase the profits the company shares with the country.

But the company said its payments to the government for 2005 were already set to quadruple compared with 2004.

Freeport shares were down 9.4 percent at $51.48 in morning New York Stock Exchange trade. Virtually all of the company's operations are in Indonesia, centered primarily on its lucrative Grasberg mine.

According to various news reports, Indonesian Vice President Jusuf Kalla told reporters on Friday that the company's profit sharing with the country should be higher due to strength in metals markets.

"Prices of gold and nickel are currently high, (and) based on this, profit sharing should be increased by two to three times from the previous figures," the Associated Press quoted Kalla as saying.

It was not clear, the reports said, if Freeport's contracts with the government are actually subject to renegotiation.

The company said, however, that the government would be getting more money from Freeport anyway under the existing terms of their deal.

"The Indonesian government's revenues increase commensurately with Freeport's," said company spokesman William Collier. "It already increases when metals prices increase and our production increases."

Collier said the company would pay $1.2 billion in taxes, royalties and dividends to the Indonesian government for the 2005 year, compared with $260 million in 2004, when it was mining waste and lower-grade ore in the wake of a landslide at Grasberg.

© Reuters 2006. All Rights Reserved.

Zorobabel

February 10th, 2006, 10:45 PM

Yeah, but does the money went to upgrade the soldiers welfare? lol..i doubt so..

cheers
That's pretty much my problem with Freeport's payments (taxes, royalties, etc.). They seem like they'd be much easier to abuse than regular revenue.

Alvin

February 15th, 2006, 12:55 PM

GDP grew at 5.6% last year, in line with estimates.
I hope we can beat 6% this year, but chances look dim, might have to wait for 2007 and beyond for 6%+ growth.
---------------------------------------------------------------------

Indonesia's Economy Expands 4.9% in Fourth Quarter (Update4)
Feb. 15 (Bloomberg) -- Indonesia's economic growth slowed to 4.9 percent in the fourth quarter as higher borrowing costs curbed consumer spending.

The expansion in Southeast Asia's largest economy, the slowest in six quarters, followed a revised gain of 5.6 percent in the three months ending September from a year earlier and compared with the median forecast of a 4.2 percent rise in a Bloomberg survey of 13 economists.

``The slowing down of global exports combined with a local fuel price increase last month and the increase in interest rates,'' Choiril Maksum, director of the Central Statistics Bureau, told a briefing in Jakarta today. ``The decline of the rupiah in the third quarter,'' also contributed to slower growth.

Indonesia's central bank raised its key interest rate six times from August to December to a three-year high of 12.75 percent to stem inflation after the government more than doubled fuel prices, and to help the rupiah recover from a four-year low on Aug. 30. Higher borrowing costs have prompted consumers to delay buying products including motorcycles, cars and homes.

``The banking industry has been concentrating their efforts on lending more to consumers for the past year or two, so the rise in interest rates has affected consumer sentiment,'' Tomo Kinoshita, an economist at Nomura Securities Co. in Singapore, said before the announcement. That's been ``bad for purchases of automobiles and housing.''

Stocks

Indonesia's key stock index fell 0.2 percent at 3:02 p.m., while the rupiah, which rose as much as 0.2 percent, reversed its gains. The currency was up 0.1 percent at 9,223 against the U.S. dollar.

Economic growth accelerated to 5.6 percent last year from 5.1 percent in 2004, Maksum said. Gross domestic product fell 2.2 percent in the fourth quarter from the third, after the government almost tripled kerosene prices and more than doubled diesel tariffs to cap energy subsidies that eroded confidence in the nation's finances.

Indonesia's private consumption rose 4.2 percent in the fourth quarter from a year earlier, less than the 4.4 percent increase of the previous three months. Manufacturing expanded 2.9 percent in the quarter to Dec. 31 after a gain of 5.6 percent in the third quarter.

Government spending surged 30 percent in the final three months of last year after a previous rise of 16.2 percent. Investment grew 1.8 percent in the period, the slowest pace in two years.

``The government delayed its budget spending till the second half of the year,'' said Winang Budoyo, an economist at PT Bank Lippo. That helped the economy, he said.

Consumption

Domestic consumption makes up for about 70 percent of gross domestic product in Indonesia, where 40 million people survive on about 40 U.S. cents a day. Rising interest rates led to a 9.3 percent decline in demand for loans in the last quarter of 2005 after rising 65 percent in the three months ended Sept. 30, the central bank said.

Motorcycle sales dropped 3 percent in December from a year earlier, the first decline in eight years for the month. Sales of motorcycles, which reached a record in August, began slowing after the central bank started raising interest rates that month.

Car sales fell 41 percent in January from a year earlier, the biggest decline in almost seven years, according to PT Astra International, Indonesia's biggest car retailer.

Higher interest rates helped the rupiah gain 6.7 percent this year, making it the second-best performing of 62 currencies tracked by Bloomberg.

Credit Rating

Standard & Poor's on Feb. 9 said Indonesia's credit outlook is improving after the government increased fuel prices and the central bank raised interest rates. S&P boosted its outlook on Indonesia's B+ foreign-currency rating, which signals the rating company is inclined to increase the credit rating of the country.

Higher ratings may help the government, which plans to sell about $1 billion of dollar-denominated bonds in March, cut its borrowing costs.

The central bank may start cutting interest rates in the second half of the year, after waiting for the government's decision to raise power prices, should the rupiah extend its gains, economists said.

``The central bank will probably keep to a steady rate policy waiting for the power tariff hikes,'' said Irene Cheung, an economist at ABN Amro Holding NV in Singapore. ``There is a potential for a rate cut after power charges increase and depending on the outlook of the rupiah.''

Indonesia is considering increasing electricity prices by between 18 percent and 48 percent, National Planning Minister Paskah Suzetta said Jan. 18.

Inflation

The inflation rate may gain as much as 1 percentage point should power tariffs be raised 40 percent, Maksum said Feb. 1.

To help counter a decline in domestic consumption, Indonesia wants to attract about $10 billion of foreign direct investment this year, about 12 percent more than last year. President Susilo Bambang Yudhoyono said the government will need about $430 billion of overseas investment by 2009 to help the economy expand by an average 6.6 percent.

``The primary driver for growth in the second half will be private consumption,'' said Nomura's Kinoshita. ``We know that some Japanese automobile manufacturers are intensively investing in Indonesia. Not only the assemblers, but auto-part manufacturers, which will be positive for the economy.''

To contact the reporters on this story:
Arijit Ghosh in Jakarta at aghosh@bloomberg.net.
Last Updated: February 15, 2006 03:58 EST

Advertisement: Learn to trade Currency.

Zorobabel

February 15th, 2006, 10:04 PM

Slowly getting better. Just has to improve one step at a time. They also delayed the 2nd Infrastructure Summit because they realized they aren't going to get any significant infrastructure investments without rule of law and legal certainty.

Zorobabel

February 16th, 2006, 12:37 AM

Other investments coming in...

Over $1b in new investment approved in January

Rendi Akhmad Witular, The Jakarta Post, Jakarta

The prospect of a prolonged economic slowdown has not deterred nine local and overseas firms from proposing new investment plans worth over US$1 billion to the government, a senior official says.

The Investment Coordinating Board (BKPM) approved their investment plans in January, raising hopes, at least for BKPM chairman Muhammad Lutfi, that the recovery in the corporate sector will be faster than many had expected.

"Between January and February alone we approved several major investment projects worth hundreds of millions of dollars each. This shows that the business community still has confidence in us," said Lutfi after meeting President Susilo Bambang Yudhoyono on Tuesday.

Lutfi said the agency was predicting that investment -- both domestic and foreign -- would grow by 21 percent this year to Rp 139 trillion ($14.94 billion) from Rp 115 trillion last year.

These investments would create 470,000 new jobs, compared to the 280,000 jobs created by investors last year.

The BKPM estimate excludes investments in the oil, gas and mining industries, banks and non-bank financial institutions, and the capital markets as these are regulated by other agencies.

Realized foreign direct investment (FDI) from January to December last year nearly doubled to $8.91 billion (909 projects) from $4.6 billion (544 projects) during the same period in 2004.

Despite signs of increasing investment, Lutfi warned that the trend could be derailed if electricity prices were increased as this would further burden the business community.

"A decision to invest depends on two factors; cost and risk. The country has no problem now with risks but it is still has a lot to do to reduce the costs of doing business, especially if there is to be an increase in power prices," said Lutfi.

He said that a number of investors had put their plans on hold as they recalculated the likely cost of doing business here following the proposed power price hikes. However, there were no indications thus far that they would cancel their investment plans.

Indonesia has been struggling to lure back foreign investment, which reached a peak of $39.66 billion in 1995, but then collapsed to $13.64 billion immediately following the 1997-1998 Asian financial crisis.

The government has vowed to curb corruption and red tape, promote legal certainty and improve the country's infrastructure in order to boost the business climate and thereby attract investors.

However, the country faces a grave threat this year from instability in the macroeconomic sector as the effects of last year's economic problems, triggered by rising fuel prices, prove to be more persistent than expected.

Alvin

February 16th, 2006, 03:41 AM

RICH HARVESTS FOR INVESTORS - INDONESIA - FOCUS ON: AGRICULTURE
Nina Asz
MATP
1186 words
16 February 2006
The Australian
5 - Generic Preprints
4
English
Copyright 2006 News Ltd. All Rights Reserved
Agribusiness remains the backbone of the nation's economy, and it is hungry for foreign investment. This is where Australia comes in, reports Nina Asz

BUSTLING downtown Jakarta, where noisy traffic and high rise apartment blocks are compounded by soaring tropical humidity in the Indonesian capital, may put off the first-time visitor.

But it takes just a short drive out of the city centre to see that Indonesia has more to offer in terms of agriculture than just about any other country in South-East Asia.

Rows upon rows of crop plantations-banana, cassava and cocoa-line the roadsides leading out of Jakarta and are living proof of the fertile lands this magnificent country has been blessed with.

And while its industries include petroleum, textiles, footwear, mining, cement, chemical fertilisers and tourism, agriculture is the backbone of its economy, employing nearly 50 per cent of the work force and contributing 16 per cent of its Gross Domestic Product (GDP).

The former Dutch colony is today the world's second largest palm oil producer, accounting for 41 percent of global supplies. Its main staple crop is rice but others include cassava, maize, fruit, sweet potatoes and vegetables.

Cash crops include peanuts, rubber, cocoa, coffee, copra, soybeans, sugar, tea, rubber, cocoa, coffee, copra, soybeans, tobacco and peanuts.

Spurred on by rapid expansion of output in key commodities, particularly for export, the sector is set to swell by an average of 3.3 per cent annually over the next five years.

Against this backdrop of abundant natural wealth there is a raft of agricultural opportunities up for grabs and it is little wonder that interest from foreign businesses is starting to show shoots of growth. While the sector continues to develop, it needs more investment to help spur internal know-how and marketing expertise, and Indonesia is keen to attract potential partners from other countries in the region.

Indonesian firms are quick to admit that investment from Australia would be welcomed as they aim to speed up their productivity, expand areas of cultivation and optimise product processing and marketing.

One Indonesian company that is already reaping the benefits from a fruitful relationship between the two countries is Kibif, which operates in the abattoir and beef processing industry. Importing all its livestock from Australia, it has become Indonesia's biggest importer of cattle.

"Australia is the most efficient area to grow livestock because there is lots of land and the grass is very cheap," says Kibif's Juan Permata Adoe. "Our population is big but we don't have enough land."

The firm imports only the finest quality livestock, which is then processed in accordance with its Islamic customers' halal requirements under very strict temperature and hygiene controls by a team of skilled professionals and supplied to supermarkets, hotels catering companies and airlines.

"If investments increase to accompany the growth in our population, the overall demand for food will rise and it's pretty clear that the industry too will grow," says Mr Adoe.

For the moment, Indonesia's agribusiness is mostly state-controlled and centred largely on 14 vast plantations which produce palm oil, sugar, tea and coffee and rubber.

Several of these plantations are slated for eventual privatisation. One, PTPN IX, which has 29,000 hectares of land in Central Java, was established in the 1880s. Today it is devoted primarily to the production of rubber but is diversifying into teas and coffees as well.

Its star brand of coffee, Banaran has a mocca aroma without synthetic additives and the plantation also produces high-quality sumugih and kaligua black teas, which are planted at heights of more than 600m and 1200m respectively. All have considerable sales potential.

But PTPN IX needs major investments to bring its machinery and production processes into the 21st century.

Another possible diversification, says its management, could be into agro-tourism as PTPN IX is situated in land with beautiful vistas worthy of hotel development.

Indonesia's largest sugar-producing plantation, PTPN XI, has been achieving record profits in recent years, in contrast to most of the other state-run plantations.

Its chief executive, Basuki Adjibrata, has developed several strategic plans aimed at enhancing its success and in the process helping to make Indonesia self-sufficient in sugar production, as it once was.

"I would like to establish a new sugar variety with a higher production rate," he says. "Establishing a joint cooperation with Australia would definitely help us achieve that target."

The government has set the country-once a major sugar exporter-the target of becoming self-sufficient in sugar by 2008. PTPN XI has already gone a long way to making that goal become a reality, turning record profits in recent years thanks to Mr Basuki's vision.

But he says that for his ambitions to truly come to fruition, the company will require large injections of capital. It needs to update machinery that dates to the Dutch colonial era, and could well benefit from Australian technology and expertise in sugar milling and refining to make its factories more efficient and productive.

"We can share technology in sugar processing, cooperate in terms of equipment," he says.

"The soil and climate in Indonesia are better than Australia, we have experienced workers in our sugar factory who have the necessary background education in sugar and there is of course a market for it. So the potential is all there."

Another plantation company whose primarily product is sugar is Java-based PTPN X. The sweetener accounts for 60 per cent of its revenue, with tobacco bringing in 40 per cent-90 per cent of which is from exports.

Duduh Sadarachmat, says the plantation has strong links with Australia, where it has its machinery repaired and has had interest shown from Australian investors who have looked into the opportunities offered at PTPN X.

Indonesia's biggest tea producer and exporter is PTPN VIII, which is situated near Jakarta. Its other main products are rubber and palm oil, with cacao and quinine as secondary ones. However, it uniquely produces a material called gutta percha which is used in the manufacture of golf balls, cable insulation and artificial bones.

One of its future goals is to make instant tea, which will be produced in crystal form like instant coffee and it is seeking strategic partners to implement this project.

"We can also use instant tea for materials to produce cosmetic and medicinal products," says H.A. Halik, the president and director.

An issue that has plagued Indonesia's economic growth over the years has been perceptions that it lacks good governance and transparency. Well aware of this fact, and eager to turn around the country's image, the management of PTPN VIII has been involved in a pilot project for good corporate governance.

"We offer information from our company, especially pertaining to marketing and procurement. We do not withhold any information about our company to the public and we want to establish transparency," says Mr Halik.

[AUS_T-20060216-5-004-658317 ]

Alvin

February 16th, 2006, 03:43 AM

Features;Supplement
OIL: GETTING THE DYNAMICS RIGHT - INDONESIA - FOCUS ON: ENERGY, MINING AND BANKING Paul de Zardain
MATP
991 words
16 February 2006
The Australian
5 - Generic Preprints
6
English
Copyright 2006 News Ltd. All Rights Reserved
Sluggish output and blackouts aside, the prospects of the domestic oil industry are getting brighter. Paul de Zardain reports

INDONESIA has 4.7 billion barrels of proven oil reserves. Yet low investment has led to output decline and domestic blackouts. Now, however, high oil prices are brightening industry prospects.

Central Sumatra is the largest oil-producing region of Indonesia. Fields like Duri and Minas helped brand the sweet export crude, known as Sumatra Light.

But the 4.7 billion barrels of proven oil reserves in 2005 represent a shortfall of 13 per cent over 1994. Indonesia is the only Southeast Asian member of OPEC.

With a quota of 1.45 million barrels per day (mbd), it barely produces 1.17mbd.

The energy paradox is due to ageing geological structures and chronic under-investment, say analysts. High oil prices offer the only prospect of making this resource commercially exploitable.

Today, the future of Sumatra Light lies east on the island of Java. If Indonesia is to rank 17th among world producers, the Cepu block is crucial. That is where state-owned Pertamina has signed a joint development deal with ExxonMobil to recover 600 million barrels of oil.

Cepu also marks a watershed in terms of business climate. ExxonMobil was legally permitted to extend its 20-year "sunset provision", in exchange for a lower production share. Drilling is expected to begin in 2009 with output projected at 180,000 barrels per day (bd).

At the Indonesian Petroleum Association (IPA), the upstream dynamics are considered the best in the last five years. According to IPA head Chris Newton, FDI could reach $2 billion this year. "We have business people in government, people who understand how business works and what business needs," says Newton.

"Once the government fights bureaucracy, you will see a move back to E&P (exploration and production)for companies that have skills, portfolios and risk capital. The future is looking bright."

President Susilo Yudhoyono is a former minister of energy from the cabinet of Megawati Sukarnoputri.

"He is certainly smart enough to recognise that fixing some of the investment problems in the oil industry is low-hanging fruit," says Mr Newton. Besides, reducing the import bills will get the domestic economy back on its feet.

In the first eight months of 2005, crude output averaged 944,000 bd. The IPA estimates that 85 per cent of the country's oilfields have reached maturity, resulting in higher lifting costs. Damaged field structures make access to reserves difficult and without enhanced recovery methods companies are uncompetitive.

Caltex, one of the largest multinationals in Indonesia, is using steam injection to raise pressure at Sumatra's Duri field. Marginal fields like Unocal's West Seno, in offshore East Kalimantan, are profitable again due to high market prices.

As for new E&P, it is heading for frontier regions of eastern Indonesia. China, in the meantime, has raised its offshore stakes.

In 2002, The China National Offshore Oil Corporation purchased all of Repsol-YPF's assets for US$585 million.

"The key to a good investment climate in Indonesia is to focus on national security, legal certainty and depreciation," says W. M. P. Simandjuntak, president director of gas distributor PGN.

With more than 4000km of distribution pipelines, PGN is the largest natural gas purveyor in Indonesia. The company is 62 per cent state-owned, but its thinking is guided by value creation.

As Indonesia shifts to natural gas for power generation, more FDI will target energy infrastructure. PGN will walk a fine line, signing more export contracts while supplying domestic industry. For Mr Simandjuntak it is a win-win situation: "Utilising more gas increases government income. Exporting more gas also increases government income!"

Indonesia has proven natural gas reserves of 90.3 trillion cubic feet (tcf). Proven potential is around 220 tcf which adds up to 4 percent of global reserves.

The largest deposits are in the Arun field of Aceh and in the Badak structure of East Kalimantan.

Russia and Iran may be in the natural gas big league, he says. But doing business with them is increasingly unsavoury for geostrategic reasons. With world demand robust, most of Indonesia's exports of liquefied natural gas (LNG) are directed to Japan (68 per cent) and South Korea (19 per cent).

In the meantime, total energy consumption has grown to 4.7 quadrillion British thermal units, of which natural gas accounts for 26 per cent and crude oil for 51 per cent.

This imbalance in domestic energy provision has resulted in frequent blackouts that affect Indonesia's economic takeoff.

From 1975 to 2005, state-owned utilities did not build a single electricity generation plant. "It's very dangerous," says Abimanyu Suyoso, the director of Indonesia Power (IP). Mr Suyoso draws parallels between the development of sugar industries and electricity markets in Indonesia. "There is no sugar factory in Java anymore. Why? Because the sugar company never invested in new plants and we are now importing sugar."

The hotspots for economic growth in Indonesia are in Java and Bali. With demand there up 7-10 per cent per year, this means adding 700MW to the grid for every cycle. Indonesia Power is able to generate 9000-10,000MW. The only way for electricity growth is to build new plants.

The World Bank granted the company a loan in 2003 and its net income has increased dramatically in the last four years. In 2006, privatisation via an IPO will help raise $700 million.

The debt-to-equity ratio at Indonesia Power is currently low, at about 20 per cent. After the IPO, funding will be easier.

Still, Abimanyu Suyoso points to the fact that the government cannot install new capacity:"We need investors from Australia, US, Hong Kong and Singapore," he says.

Features;Feature Supplement
NEED FOR BIG BANG EFFECT - INDONESIA - FOCUS ON: DIVERSITY
Marco Venditti
MATP
942 words
16 February 2006
The Australian
5 - Generic Preprints
3
English
Copyright 2006 News Ltd. All Rights Reserved
Despite the doubters and a kaleidoscope of cultures, Indonesia has lived up to its motto of `unity in diversity'. Marco Venditti looks at the massive changes wrought by decentralisation and structural change

IMAGINE a country whose islands are impossible to count without the help of satellite images. Even harder to understand is the kaleidoscope of cultures, languages and people that form Indonesia, possibly the most diverse archipelago in the world.

A trip from west Sumatra to Papua would take a traveller across 17,000 islands stretching for 3200 miles-roughly the distance that separates Los Angeles from New York.

And it won't be monotonous. If Java is crowded with people and vestiges of an old and powerful kingdom, Kalimantan is scarcely populated except by spectacular wildlife. In West Timor, palm trees and rocky soils have to contend with the hot and dry winds of Australia's north coast, while in the mountain peaks of Papua the snow never melts.

But all this diversity has a price. Whereas many countries around the world ended up unifying because of historical ties, linguistic affinities or geographical boundaries, Indonesia did it mainly to get rid of 350 years of Dutch colonisation.

At the eve of independence in 1945, the first president, Achmed Soekarno, had to put together a nation whose people professed all the world's four major religions, spoke 500 different languages and had had little or no contact with each other for most of their history.

Strong conflicts inevitably arose, and were at times violently quenched. No one had much faith that such a collage could hold, especially after East Timor became an independent country in 2002.

Yet, surprisingly, Indonesia has held together and the national motto, "unity in diversity", captures the essence of this journey towards unification. Unlike past regimes, recent governments have been addressing the controversial issues of diversity and decentralisation in a progressive way.

A form of regional autonomy was introduced in 2001 by the government of President Abdurrahman Wahid. He granted more freedom to cities and regencies, so that Aceh, Jakarta and Jogjakarta now hold special territorial status.

Significant concessions were also made in terms of reinvestment in the regions according to their economic output. Papua, for example, gets back as much as 80 per cent of its revenues.

The positive results of these initiatives are clearly visible in Balikpapan, an oil boomtown in East Kalimantan, Borneo. While the city often struggled towards development in the past, today it boasts an international airport with daily flights to Australia and Singapore, several harbours which could offer a real alternative to the Malacca Straight in North Sumatra and the finest hotels in the region.

Imdaad Hamid, mayor of the city, explains that, thanks to the decentralisation program, he can now allocate 2.1 percent of his local budget to social activities, in particular for the building of schools, housing and professional training. This is not small by Indonesian standards.

"The central government has given us the opportunity to empower ourselves and follow our aspirations," Mr Hamid says, "now we have to listen to the wishes of the people and show that we care about them, especially the poor."

Thanks to its oil refineries, Balikpapan is the centre of Kalimantan's oil business, but Mr Hamid would like to diversify the local economy and develop new industries such as tourism. "We have great potential for eco tourism, as we have splendid beaches and protected areas of tropical forests just outside the city," he says.

The fires of 1997 and early 1998 devastated some of these forests, but the local administration is supporting continuous efforts to preserve the region's unique eco-system, including special programs to rescue the Malayan Sun Bear and the Orang-utan which still inhabit Kalimantan.

But while decentralisation has been praised both at home and abroad, conventional wisdom seems to be that bureaucracy and corruption have increased as government and regions often overlap each other in their functions. The 2001 Regional Autonomy Law, which was rushed through parliament in just nine months in an attempt to counteract dissent and separatist feeling, carries inevitable flaws.

The new administration of Susilo Bambang Yudhoyono has agreed that a revision is mandatory and has set out to correct it through the Chamber of Regional Representatives.

Revisions would include direct elections for provincial and local posts, which should help form a new class of politicians more concerned with their constituents, as well as a clarification of the fields of competence between the central, state and the regional governments.

Other issues to be addressed deal with regulation of land properties and, more importantly, the distribution of wealth.

As not every region in Indonesia enjoys the same standard of living, a higher proportion of revenues to one area inevitably signifies a loss for another. President Yudhoyono will have to find the balance among its 357 districts, or regencies, which are the key administrative units responsible for providing most government services, if he hopes to keep the momentum of decentralisation going.

But there is little doubt that the structural change has been, as the World Bank put it, a "Big Bang" for Indonesia.

Over the past five years, many responsibilities have been handed down to the regencies without major disruption and if the reform keeps moving in the right direction, soon Indonesia will become one of the most decentralised countries in the world and a model for South-East Asia. For an archipelago of 17,000 islands this will not be a small achievement.

[AUS_T-20060216-5-003-605635 ]

Photo

Alvin

February 16th, 2006, 03:45 AM

Features;Supplement
MINERS BACK ON TRACK - INDONESIA - FOCUS ON: INVESTMENT
Nina Asz
MATP
830 words
16 February 2006
The Australian
5 - Generic Preprints
5
English
Copyright 2006 News Ltd. All Rights Reserved
Foreign investors are finally shaking off the jitters from 1997. Nina Asz reports

AS any economist will tell you, home-grown confidence in the domestic market of a country is sure to spur foreign investment. And if Indonesia's experience is anything to go by, that theory certainly holds true.

Domestic investment more than doubled to RP30.66 trillion in 214 projects last year compared with 2004. Foreign direct investment (FDI) also grew strongly.

Nearly US$9 billion was invested in nearly a thousand projects, almost double the 2004 figure.

According to the Investment Coordinating Board, the increased investment provided employment for more than 250,000 workers and a further 467 projects are still in the pipeline that are expected to provide a further 400,000 jobs and exports worth $28 billion.

Indonesia has been struggling to lure back foreign investment, which reached a peak of $US39.66 billion in 1966 but dropped to $US13.64 as a result of the financial crisis of 1997.

The Yudhoyono government has vowed to curb corruption and red-tape, promote legal reforms and improve the country's infrastructure to improve the business climate and attract investors.

As a consequence, many private companies have made major efforts to enhance the local business environment by improving transparency and openness. There is little doubt that this helped boost domestic investment and, in turn, helped a change in climate for FDI.

One sector to have benefited from this virtuous cycle is mining, where Indonesia's production is traditionally centered on bauxite, silver, and tin.

Total revenues from the sector almost doubled to Rp17.68 trillion ($US1.86 billion) last year.

Indonesia, is the world's largest exporter of tin, with a total output of 90,000 tonnes a year. China actually produces more but consumes most of its own production. Mining

Continued next page

From previous page

copper, nickel, gold, and coal output for the export markets.

In the early 1990s, the government reopened the coal sector to foreign investment and by 2004, total coal production had reached 127 million metric tonnes, largely for export. The government hopes that figures for coal exports will soon surpass those of Australia, making Indonesia the world's largest thermal coal exporter.

"The main positive aspect right now is the confidence that people have about the future of the country," says George Tahija, president director of Austindo Resources

Corporation NL, an Australian publicly-listed company seeking to develop gold mines in Indonesia and Australia.

"I guess they are more confident because they see the government is actually tackling problems that are an issue for economic development. They're actually trying to clean up corruption and the illegal logging that is taking place. They're doing something about the fuel subsidies and the smuggling that has been happening."

Two US firms currently operate three copper and gold mines in Indonesia, with a Canadian and a British firm holding significant investments in nickel and gold.

Indonesian gold production in 2004 had sunk to 112 tonnes, from a peak figure of 180 tonnes in 2001. The primary reason for this fall was decreased output at the Freeport Grasberg mine-the world's biggest gold producing mine-following a late 2003 pit wall failure. Additionally, Indonesia's share of global exploration spending has dropped from three per cent to just one per cent, and only three new gold mines have opened their doors since 1998.

But industry experts say this does not accurately reflect Indonesia's mineral prospects, which are extremely high.

The decline in investment in production and exploration is attributed to uncertainty over mining laws and regulations, low competitiveness in the tax and royalty system and investor concerns.

In particular, there are fears that a legislative bill currently under discussion might replace the sector's current contract of work system with licenses issued by local administrations, making it difficult to predict financial profitability.

But the government is making concerted efforts to prove to investors that doing business in Indonesia is becoming easier. A score of state-owned enterprises are set to undergo major transformations-including privatisation-this year and private sector companies are already focused on global markets and mergers.

Bumi Resources is one of the world's largest coal exporters and has ambitions to become Asia's biggest thermal coal producer.

And companies from India and Singapore are competing to buy shares of Medco, one of Indonesia's largest private sector oil players.

It seems that Indonesia has shown that it can present a united economic front to promote international interests and Australia is showing more enthusiasm than ever.

George Tahija of Austindo Resources says: "The Australian stock exchange is going to be interested in coming into Indonesia; along with that of course we'll be able to get the organisational skills out of Australia. That would be one opportunity worth pursuing."

Alvin

February 16th, 2006, 03:51 AM

DATAWATCH - Indonesia 2005 GDP growth stronger than expected - Citigroup
427 words
15 February 2006
AFX Asia
English
(c) 2006, AFX Asia. All rights reserved.
JAKARTA (XFN-ASIA) - Indonesia's 2005 economic growth of 5.6 pct may have fallen short of the government's full-year GDP growth target of 6.0 pct but it came in better than analysts' forecasts, Citigroup economist Anton Gunawan said.

He said the 2005 GDP figure indicates that the impact of last year's double fuel price hike by an average 29 pct in March and by another 126 pct in October was not as severe as many analysts may have feared.

Analysts polled by XFN-Asia had expected full-year GDP to have grown by 4. 1-5.2 pct year-on-year in the fourth quarter and by 5.3-5.6 pct for the whole year.

Some government officials had also predicted the growth to come in within a range of 5.5-5.8 pct although the official forecast was kept at 6.0 pct.

To some extent, Gunawan said relatively strong consumption growth in the fourth quarter may have been spurred by the distribution of cash compensation to help ease the burden of the fuel price hike on the poorest families.

It will be recalled that the government paid 300,000 rupiah to each of 15. 648 mln households registered as poor in the last quarter of 2005.

"I have to say that some parts of the data were better than our forecasts. Private consumption was still strong and net exports still provided support to growth instead of a drag as we had anticipated," Gunawan said.

Private consumption was the economy's main driver, making up 65.41 pct of GDP in 2005 against 67.78 pct the year before. Private consumption expanded 3.95 pct for 2005, growing 4.18 pct year-on-year in the fourth quarter and rising 1.10 pct quarter-on-quarter.

"Food consumption was probably doing well in the fourth quarter, rather than non-food consumption," he said.

Gunawan said he had earlier cut his full-year GDP growth forecast to 5.4 pct from 5.6 pct to factor in the impact of the fuel price hikes.

"Let's see if consumption could still perform well in the first quarter" this year, he said.

He said he does not expect any fresh shocks this year like the ones seen last year, given that the planned power tariff hike is expected to be modest.

He maintains his forecast for 2006 GDP growth at 5.4 pct.

aloysius.bhui@xfn.com

alo/zr

bahar

February 16th, 2006, 05:18 AM

Alvin, thanks for the useful articles.. :)

us_lukman

February 16th, 2006, 04:52 PM

I take this article from Singapore SSC Forum

THEY can't wait for it to get going.
Regular travellers from Indonesia have been keenly following Singapore's plan for an integrated resort (IR).
20 April 2005

REPORTING FROM JAKARTA
By Jo Budimanin
tnp@sph.com.sg

THEY can't wait for it to get going.

Regular travellers from Indonesia have been keenly following Singapore's plan for an integrated resort (IR).

They said they often use Singapore as a stopover on flights to other destinations. Now they may be tempted to stay longer.

Many rich Indonesians frequent Singapore, and inject a considerable amount of money into top-end property and financial investments.

Indonesians are among Singapore's top tourist spenders with an average of $792 spent per visit last year.

Some even call it their second home.

Now they are excited by Prime Minister Lee Hsien Loong's announcement yesterday giving the go-ahead for two mega resorts to be built in Marina Bay and Sentosa.

WEALTHY INDONESIANS

For years, wealthy Indonesians have travelled around the world for the resorts and casinos.

Mr Eddy Widodo, 65, a semi-retired businessman, is one of them.

Along with his wife and siblings, he frequently goes on weekend cruises. He says it's a holiday with great shows, good food - and a casino.

Like him, the friends he travels with are usually businessmen, between the ages of 35 and 50.

In a few days, the 'big fish' among them can spend $100,000 to $200,000 on such trips.

Mr Widodo said it is about time that a major resort with gambling facilities is developed here.

He said: ''Now Singapore realises that they're losing potential monetary gain to places like Macau and Las Vegas. Singapore has wised up.'

Mr Tino Muljana's daughter - who works in Singapore - has been sending text messages on the latest news.

The 56-year-old visits his daughter every two or three months.

He was all for an integrated resort with major shows, restaurants and other entertainment outlets.

He said: 'I was happy when my daughter told me the news. It will be very convenient. When my wife shops, I can gamble.'

Mr Richard Mangaweang, 33, a magazine editor and a former civil servant, thinks it's about time for Indonesia to consider one too.

He said: 'I think that (legalising gambling) is something we (Indonesia) ought to have done a long time ago. We are clearly losing money from Indonesians going overseas to gamble.

'Islamic teaching forbids gambling, but we can regulate things properly the way the Malaysians do. Allow gambling for non-Muslims.'

Political analyst Effendi Gazali predicted that Indonesians will travel to Singapore in droves.

More Indonesian cash will be spent, not just at the IRs, but on everything from property to shopping.

Dr Hakim Murni, an economics lecturer at Jakarta's Atma Jaya Catholic University, agreed.

FOREIGN INVESTORS

He said there's also the possibility of foreign investors - who may have originally considered investing in Indonesia - moving their funds to Singapore. Because the IRs may make Singapore far more profitable.

Any advantages for Indonesia, then?

Mr Sukardi Rinakit, a political analyst, said there will be a decrease in illegal gambling activities at home as those who can afford it will travel to Singapore instead.

According to Indonesian law, all forms of gambling are illegal.

It is difficult for the government to overturn this law and legalise gambling as opposition by religious leaders is strong. Yet gambling is widespread.

Simple casinos exist in Hayam Wuruk and other areas of Jakarta's Chinatown.

So why not have a legal one in Indonesia too, some are asking now.

Mr Rinakit said: 'Although illegal, gambling continues to thrive business here. It's better to legalise it, so the state can benefit from the taxes.'

But Mr Rudy Bera, a lawyer and member of the Indonesian Bar Association, said the Muslim opposition is just too strong.

He said: 'Legally, it will be a disadvantage for local as well as foreign investors should gambling be legalised in Indonesia, as the law can be easily overturned at any time. The opposing party is too strong at the moment.'

Blue_Sky

February 16th, 2006, 05:23 PM

@us_lukman

Yes interesting article indeed
We already have the thread that discuss that

http://www.skyscrapercity.com/showthread.php?t=210916

us_lukman

February 16th, 2006, 05:33 PM

Thx Blue_sky.. Btw, this forum is huge, so I've not too much time to know all the articles.

Alvin

February 17th, 2006, 03:57 PM

The Economist Intelligence Unit has upgraded its 2006 GDP growth forecast to 5.9% from 5.5%, following release of 2005 figures.

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

[February 16, 2006]

Indonesia economy: Growth beats expectations

(EIU Viewswire Via Thomson Dialog NewsEdge)COUNTRY BRIEFING

FROM THE ECONOMIST INTELLIGENCE UNIT

Data issued by Indonesia's Central Bureau of Statistics on February 15th show that the economy shrank in the fourth quarter of 2005 from the third quarter, as the impact of steep cuts in fuel subsidies, rocketing inflation and tighter monetary policy cut private consumption. However, growth in the fourth quarterand in 2005 as a wholewas stronger than expected, suggesting that forecasts for growth this year will have to be revised upwards. Although private consumption, the main driver of growth in recent years, will continue to suffer in the first half of 2006, strong government spending and investment will support growth, while import demand will continue to be capped by high oil prices and export growth should remain solid.

Real GDP growth in the fourth quarter of 2005 was 4.9% year on year, down from 5.6% in the third quarter. Quarter-on-quarter figures demonstrate a more marked slowdown, as the economy contracted 2.2% from the July-September period (during which the economy had grown 3% from the second quarter). There were several reasons for this, including the impact of a second terrorist attack on Indonesia's main tourist resort of Bali in October, but the principal cause was the government's bold decision in the same month to slash fuel subsidies, leading to a 127% average rise in retail fuel prices.

Soaring international oil prices meant the subsidies had become an intolerable fiscal burden; capital outflows sent the rupiah plummeting to a four-year low of Rp11,800:US$1 in the third quarter. But raising fuel prices so drastically sent consumer price inflation rocketing to 18.4% in November. (It has eased only marginally since, staying at 17% in January.) Bank Indonesia (BI, the central bank), having already raised benchmark interest rates several times since August to protect the rupiah, continued to tighten monetary policy aggressively. In these circumstances private consumption, which accounted for 65% of GDP last year, was expected to slow sharply.

However, the impact of these negative factors on GDP growth in the fourth quarter was less severe than the Economist Intelligence Unit had initially expected. Private consumption expenditure rose 4.2% year on year, slowing marginally from 4.4% growth in the third quarter. In quarter-on-quarter terms growth slowed to 1.1% from 1.7%. Overall GDP growth in the fourth quarter was boosted by a sharp slowdown in imports (which fell 3.4% from the third quarter) as the price hikes dampened demand for oil products. Exports stayed robust, rising 7.4% year on year and 2.5% quarter on quarter.

Growth was also supported by a sharp rise in government expenditure, which rose 30% year on year and 33.2% from the third quarter. This timely fiscal boost was made possible by the fact that government spending had been slow earlier in the year: at end-November the government estimated that it had spent only 30% of its budgetary allocation for development expenditure in 2005. Spending was boosted towards the end of the year, in part on alleviating the impact of the fuel-price rises on the poorest sections of the population. Less went towards fixed investment, which contracted 4.8% in quarter-on-quarter termsa sharp slowdown from growth of 3.2% in the third quarter.

As a result of these developments, real GDP growth in 2005 as a whole rose 5.6%higher than our original estimate of 5.1% and an improvement from 5.1% growth in 2004. For the whole of 2005 private consumption, the main driver of growth in recent years, rose only 4% year on year, down from 4.9% in 2004. Government expenditure rose 8.1% (up sharply from 2% growth the previous year); exports rose 8.6% (up from 8.5%); and fixed investmentdespite the weak fourth quarterrose a strong 9.9%. This was down from a 15.7% surge in 2004, but that was coming from a very low base the previous year; in nominal terms investment growth in 2005 exceeded growth in 2004. Higher investment demand helped push imports up 12.3%, although this was down from a 25% rise the previous year.

Outlook

Private consumption proved more resilient than expected in the fourth quarter. Increased spending ahead of two religious holidays, Eid ul-Fitr and Christmas, may have sustained spending even in the wake of increased inflation and steep monetary tightening. But the impact of these factors cannot be masked forever, suggesting that a slowdown in private consumption will be felt more sharply in the first half of 2006. Year-on-year inflation will remain in double digits and is likely to be bolstered by rises in administered prices (such as electricity and telephone tariffs) and by a 20% average rise in civil service pay levels. BI is likely to raise interest rates again, even though the pace of monetary tightening will be more moderate. (In January and February rates were kept on hold, with the bank saying it was monitoring core inflationary trends rather than the headline figure. The strength of the rupiah in early 2006, limiting imported inflation, means BI feels there is less imperative to raise rateswhich appear to be high enough to attract capital inflows.)

Nevertheless, we still expect overall GDP growth in 2006 to strengthen from 2005, as other areas of expenditure will continue to compensate for weaker growth in private consumption. Our earlier forecast was for the economy to grow 5.5% in 2006, but following the release of fourth-quarter data this is likely to be raised to around 5.9%. Growth will be driven by public-sector investment demand and solid export growth. Government policies, such as lower tariffs on sugar, compensation payments to the poor and the civil service pay rise should prevent a collapse of private consumption growth. By mid-2006 we expect falling inflation and a stable rupiah to provide BI with the scope to start loosening monetary policy.

Public investment will provide significant support in the first half of 2006, assuming the relevant government departments can be organised to disburse the financing left over from last year's spending shortfallestimated to be around Rp10trn (US$1bn). The government might also be able to make use of some of the estimated US$5bn-8bn saved in fuel subsidies last year (subsidies for industrial users were also removed, in July). Although government spending itself is a small part of GDP8.2% of the total last yeara fiscal boost should help sustain GDP growth even if private consumption does slow significantly.

Indonesia's economy therefore seems better placed to withstand last year's "oil shock" than was initially thought. However, even at 5.9% in 2006, GDP growth will still be lower than the government's ambitious 6.2% target, and below the 7% estimated to be necessary to make an impact on unemployment and poverty alleviation.

Indonesia: GDP(% change year on year)Q2 04Q3 04Q4 04Q1 05Q2 05Q3 05Q4 054.45.16.76.35.65.64.9Sources: Economist Intelligence Unit, Central Statistics BureauSOURCE: ViewsWire Asia

Zorobabel

February 17th, 2006, 05:24 PM

This news just a a couple of days after Alvin posted the story about the potential of agricultural investments in Indonesia.

---

Consortium to Build US$81.5 MLN Sugar Refinery in East Java

JAKARTA, Feb 16 Asia Pulse - A consortium comprising state-owned plantation company PT Perkebunan Nusantara, the association of sugarcane farmers, private investors, and regional administrations, will build a sugar refinery in East Java.

Agus Pakpahan, a deputy at the office of the state minister for state enterprises, said the government is set to revitalize the sugar industry and construction of the sugar refinery in Banyuangi, East Java, is part of the program.

Agus said the factory, to be built at an estimated cost of Rp750 billion (US$81.5 million), will have a production capacity of 70,000 tons annually.

The factory will have integrated facilities and also produce other cane products such as bio-ethanol and derivatives like particle board and animal feed from bagasse.

(ANTARA)

Alvin

February 19th, 2006, 09:32 AM

Sunday, February 19, 2006

Indonesia fuel imports slump as consumption declines

* Indonesians burning nearly 20% less fuel than a year ago

SINGAPORE: Oil traders looking for a rebound in Indonesia’s oil demand that could resuscitate moribund diesel and gasoline markets may be in for a long wait as Indonesians have quickly learned to live with less fuel.

Despite hopes for a quick recovery, consumers in Asia’s fifth-biggest oil user are burning nearly 20 percent or 200,000 barrels per day (bpd) less fuel than a year ago after the government doubled retail prices last October, industry officials say.

While richer Western citizens readily pay up for record fuel costs, Indonesia’s 220 million mostly impoverished people have had to travel less, rather than part with more of their low wages.

At the same time economic growth slowed in the fourth quarter and inflation remains at double digits.

“We are seeing a sharp reduction in discretionary spending and it’s really hurting. It hasn’t caused any real tension yet but it remains a risk to the economy,” said Michael Chambers, head of sales at CLSA in Jakarta. “Affordability is an issue even for people who ride motorbikes.”

A fall-off in smuggling, the start-up of a new petrochemical plant and more use of natural gas and coal by power plants will also undermine demand this year for imported fuel, which meets about a quarter of the country’s needs.

State oil firm Pertamina, normally Asia’s biggest buyer of gasoline and diesel, slashed February fuel imports by 40 percent versus January to about 235,000 bpd its lowest in years as domestic inventories swelled.

It cut diesel imports almost in half to a paltry 3 million barrels and gasoline by over 20 percent, hitting spot market prices and contribute to a slump in regional refinery profits.

Spending cut: “US consumers can weather the high prices better due to their larger purchasing power,” said Ibnu Bramono, an analyst from FACTS Inc. “And Chinese consumers still enjoy relatively lower fuel prices compared to international prices.”

An anticipated slowdown in demand after oil prices tripled in the past four years has yet to materialise in the West, but Southeast Asian nations have seen a sharp reaction as subsidy regimes are suddenly unwound.

Domestic vehicle sales in Indonesia plunged more than 40 percent last month, the sharpest fall in four years.

“The government has raised fuel prices too high. My spending is increasing not only for gasoline but also for other household needs such as rice and sugar,” said Budi Sudradjat, a motorcycle taxi driver in Jakarta.

“Almost all prices of household goods are rising, making life more difficult,” says the 27 year-old, who is struggling on a daily income of 30,000-50,000 ($3.20-$5.40) rupiah. A litre of gasoline costs 49 cents a litre, up 88 percent from a year ago.

And any further hikes could spark more social tension. Former autocrat Suharto was toppled in 1998 partly after the government sharply raised fuel prices.

With economic growth slowing and industrial users scrambling for alternative fuels, some oil traders are scaling back their hopes for Indonesian demand. “Indonesian demand will take time to pick up again because the economy needs time to adapt to higher energy prices,” said a veteran trader who declined to be named.

Slowing economy: Indonesia, OPEC’s only net oil importer, has about 1 million bpd of refining capacity, but is forced to import fuels such as gasoline, diesel and jet-kerosene to make up for a structural shortfall and feed a ravenous power sector.

In addition to consumer demand, purchases by the industrial sector have fallen off after Jakarta liberalised those prices last summer, with some plants switching to cheaper alternatives such as gas and coal to fire their generators.

“The industry is suffering at the moment particularly at these high oil prices. Profits seem to have collapsed in private banks as fourth-quarter results were poor. All these indicate some sort of recession,” said Chambers.

“I don’t think there will be much growth this year. Our economists are looking for just 2.8 percent growth.”

The economy expanded by 4.9 percent in the fourth quarter, the slowest in six quarters as the removal of fuel subsidies battered consumer spending, government data showed this week.

Indonesia’s oil consumption the proxy being the sales of products included illegal fuel exports, allegedly backed by some military personnel who resold fuel obtained under heavily subsidised prices from Pertamina’s own production or overseas purchases.

The amount of smuggled oil was estimated to be as much as 120,000 barrels daily, or 10 percent of total demand. reuters

Zorobabel

February 19th, 2006, 09:59 AM

I was reading that article. "Our economists are looking for just 2.8 percent growth." - This is why you need to live in Indonesia after you finish your education, Alvin. :) They need new economists.

Alvin

February 19th, 2006, 11:47 AM

I was reading that article. "Our economists are looking for just 2.8 percent growth." - This is why you need to live in Indonesia after you finish your education, Alvin. :) They need new economists.

I was quite shocked by that forecast - terrible, some people just don't know what they're on about. These so called "economists" probably knows next to nothing about the country, preferring to do their "forecasts" by simply putting some numbers into some generic/outdated models that's about as useful as nothing. My gosh, these people must have been living in a cocoon, and it's even more shocking to see that these statements are coming from ppl who actually live in indonesia..

sanhen

February 19th, 2006, 01:17 PM

^^ Well said Alvin. Well said.

Zorobabel

February 19th, 2006, 06:53 PM

I just don't understand how they can be so far off. Granted, I was off by .4% for 2005 in predicting 6% growth (totally blind-sided by the oil thing). Even major investment groups have very poor analysis sometimes. Morgan Stanley was predicting 4.5% growth for Indonesia for 2005 and didn't revise this until late June. If investors are using companies like Morgan Stanley and the handful of similar companies that Bloomberg polls for their growth forecasts they will be deterred from investing. There's a pretty big difference between 4.5% and 5.6% in terms of the health of the economy. It's just a bit frustrating to me.

Alvin

February 20th, 2006, 03:46 AM

^^The Economist Intelligence Unit is certainly more reasonable.

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

Indonesia: Under pressure, but headed the right way
963 words
20 February 2006
Economist Intelligence Unit - Business Asia
Business Asia
7
Number x
English
(C) 2006 The Economist Intelligence Unit Ltd.
The Indonesian economy stuttered towards the end of 2005, with GDP growth slowing to 4.9% in the fourth quarter. This compared with 6.3%, 5.6% and 5.6% in the first three quarters respectively. A budgetary crisis, brought about by high oil prices, forced the government to cut subsidies and raise fuel prices by an average of 127% from October 1st. This was both a bold political decision and a vital economic reform. However, rising prices subsequently depressed private consumption. Market turbulence preceding the fuel-price hike hit investment and drove the rupiah to a four-year low of Rp11,300:US$1 in late August.

This mini-crisis contributed to the impression that all was not well with the government’s management of the economy. While some important steps had been taken against pervasive corruption, measures to improve the business climate and create jobs had largely failed to live up to expectations, and economic reforms at times seemed to drift.

Frustration at this state of affairs provided the backdrop to a limited cabinet reshuffle in December, in which President Susilo Bambang Yudhoyono replaced Aburizal Bakrie, the co-ordinating minister for the economy, with Boediono, a respected former finance minister; and Jusuf Anwar, the finance minister, with Sri Mulyani Indrawati, a former IMF official. The markets reacted warmly to these appointments, which offer hope of better progress with economic reforms.

For better

Revitalised economic policy. The new ministers quickly announced plans to stimulate the economy through increased spending, in a bid to maintain growth despite weaker private consumption and investment. A raft of business-friendly policies are planned, including civil-service reforms to improve service delivery and transparency for business; labour-law reforms to ease requirements for recruiting and dismissing employees; and revised rules on local taxation to curb inconsistent nuisance fees and taxes levied by provincial and district governments.

Anti-corruption measures. Efforts to curb graft are starting to bite, and the climate of fear is growing for those involved in corrupt practices. High-level graft in the bureaucracy was the focus in the first year of the campaign. Attention is now turning to the judiciary. The Judicial Commission plans to launch a performance review of all 49 Supreme Court judges.

Improving business climate. Efforts to improve the business climate will continue in 2006. The government is due to put forward a long-delayed law on investment. The bill is expected to offer incentives on tax and import duties, provide for equal treatment of foreign and domestic investors, and abolish requirements that foreign companies divest shareholdings to local entities. The bill is also expected to reduce the time needed to establish a business to 30 days, from an average of 150 days at present, and extend the duration of licences for renting land. Measures to attract investors are already paying dividends: approved foreign direct investment rose by 30% to US$13.6bn in 2005, despite signs of slackening interest in the second half of the year.

GDP uptick. The recent weakening of the economy should give way to a modest recovery. Growth slowed in late 2005, even though it remained robust enough for the national statistics bureau on February 15th to report a full-year expansion in GDP of 5.6%, well up on the 5.1% recorded in 2004. Growth could weaken in early 2006 as the impact of last October’s fuel-price hike continues to feed through into private consumption. But thereafter growth should strengthen, driven by investment and exports. As a result, our most recent forecast for 2006, which predated the new GDP data, is likely to be revised upwards to perhaps 5.8-5.9%. By 2007 we expect the scene to be set for further robust GDP growth as inflationary pressures ease.

For worse

High inflation. The fuel-price hikes have created inflationary pressures, pushing up interest rates. We forecast inflation will average over 15% in 2006, but this will drop to 6% in 2007. The benchmark Bank Indonesia interest rate rose 450 basis points to 12.75% in the second half of 2005.

Resistance to reforms. President Yudhoyono will struggle to ensure Indonesia’s corrupt and inefficient bureaucracy delivers on his reform agenda. Recent changes proposed to tax laws were intended to simplify payment of taxes for businesses. However, last-minute changes introduced criminal penalties for tax avoidance and enhanced the discretionary powers of tax officials. Domestic and foreign chambers of commerce warn of more opportunities for bribery and extortion, raising costs for business.

Terrorist threat. The October bombings in Bali showed that terrorists retain the capacity to strike. The government has warned of further terrorist attacks in 2006.

Key economic indicators, Indonesia
2005(b) 2006(c) 2007(c)
Real GDP growth, % 5.1* 5.5* 6.2
Private consumption, % chg 3.8 3.4 4.9
Gross fixed investment, % chg 11.3 11.8 10.4
Exports of goods & services, % chg 8.8 6.8 6.8
Imports of goods & services, % chg 12.3 8.4 7.6
GDP, US$ bn 280.4 321.4 347.8
GDP per head, US$ 1,160 1,310 1,400
Consumer price inflation, % (av) 10.5(a) 15.5 6.0
Trade balance, US$ bn 21.8 23.1 24.3
Current-account balance, US$ bn 2.2 3.1 3.7
Exchange rate Rp:US$ (av) 9,705(a) 9,961 10,272
(a)(b)(c)
* The data in this table predate the government’s release on February 15th of GDP data showing 5.6% growth in 2005. The above forecast numbers remain unchanged for consistency’s sake.
Source: EIU Country Forecast

SOURCE: Business Asia

Alvin

February 20th, 2006, 03:54 AM

Zorobabel

February 20th, 2006, 04:29 AM

Hey Alvin, are you paying for the EIU updates? Otherwise, where are you getting them from?

Alvin

February 20th, 2006, 04:53 AM

Hey Alvin, are you paying for the EIU updates? Otherwise, where are you getting them from?

from work...haha..i'm only gonna be here till early march though..so..makin' the most out of it ;)

Zorobabel

February 20th, 2006, 05:02 AM

Haha, thanks.

Alvin

February 20th, 2006, 02:50 PM

5 year forecast...from ViewsWire
http://www.viewswire.com/index.asp?layout=VWcountryVW3&region_id=420000442&country_id=1810000181

Key indicators 2005 2006 2007 2008 2009 2010
Real GDP growth (%) 5.3 5.8 6.0 6.1 6.0 6.3
Consumer price inflation (av; %) 10.5 15.1 5.3 5.3 4.0 3.6
Budget balance (% of GDP) -0.5 -1.1 -0.8 -1.3 -1.8 -1.7
Current-account balance (% of GDP) 0.8 1.0 0.8 0.7 1.0 0.9
Deposit rate (av; %) 7.9 8.4 5.8 5.5 5.2 5.2
Exchange rate Rp:US$ (av) 9,707 10,099 9,977 9,906 9,976 10,047
Exchange rate Rp:¥100 (av) 8,819 8,878 9,547 9,832 9,976 10,047

Alvin

February 21st, 2006, 02:58 AM

Asia - South-east Asia
MM Lee on India, China lessons for Indonesia
Azhar Ghani , Indonesia Bureau Chief
503 words
21 February 2006
Straits Times
English
(c) 2006 Singapore Press Holdings Limited
JAKARTA - INDONESIA has the resources to succeed but could speed up the process by learning from the success of countries like China, India and even Vietnam, said Minister Mentor Lee Kuan Yew yesterday.
Mr Lee was speaking during a meeting with a group of Indonesian legislators led by People's Consultative Assembly Speaker Hidayat Nur Wahid, a Singapore delegation spokesman said.
Mr Lee, who is on his first trip to Indonesia since 2001, met the lawmakers at a closed-door meeting at Jakarta's Grand Hyatt hotel.
'He hopes we can develop faster so that we won't be left behind, as it will be more difficult to catch up in the future,' Mr Hidayat said.
Indonesia's economy expanded 5.6 per cent last year, lower than the government's target of 6 per cent. In contrast, the Indian and Chinese economies were estimated to have grown by 8 and 10 per cent respectively. Vietnam's economy grew by 8.4 per cent.
In particular, Mr Lee referred to how countries like China had started their economic revolutions small by carving out special areas into investment-friendly zones where the country could focus more easily on putting things right, said Mr Hidayat.
'He suggested we should start small, like a special zone, then spread to other areas. The start is important,' he told reporters after the meeting.
Dr Zulkieflimansyah, another Indonesian legislator at the meeting, described Mr Lee's view as a 'wake-up call' for Indonesian political leaders.
He said: 'Political leaders in Indonesia should change their mental model and the way they see the world. For that, we should go to countries like China and India and learn something from there and look at how the world is changing.'
During the free-flowing, hour-long exchange, issues such as corruption and managing human capital were also discussed, said the Singapore spokesman.
Mr Hidayat said he told Mr Lee that while Indonesian leaders are keenly aware of the danger of being left behind, they are bogged down by corruption and the uncertainty over regulations, which deter foreign investments.
On the issue of managing human capital, Mr Lee encouraged the Indonesians to focus on educating their people and to suitably reward those who are able to put things right.
The meeting, which began and ended with friendly banter in Bahasa Indonesia between Mr Lee and Mr Hidayat, was also attended by Second Minister for Finance and Foreign Affairs Raymond Lim and Minister of State for Education and Manpower Gan Kim Yong.
Singapore's Deputy Speaker of Parliament S. Iswaran and Parliamentary Secretary for Community Development, Youth and Sports and National Development Mohamad Maliki Osman were also present.
The meeting capped a busy first day for Mr Lee, who will be in Indonesia for four days. Earlier in the day, he met other eminent Indonesians, as well as representatives from the local media in private talks.

Alvin

February 21st, 2006, 01:16 PM

Indonesia Econ Min: No Plan To Revise '06 GDP Forecast
408 words
21 February 2006
13:06
Dow Jones International News
English
(c) 2006 Dow Jones & Company, Inc.
JAKARTA (Dow Jones)--Indonesia's government doesn't have any immediate plan to revise downward its official 6.20% on-year gross domestic product growth forecast for 2006, Coordinating Minister for the Economy Boediono said Tuesday.

The government remains hopeful that the 6.2% on-year growth target in 2006 is achievable, Boediono told reporters at a press briefing.

"There are a variety of forecasts for (economic) growth this year, some pessimistic, some optimistic, (but) I am one of the optimists," Boediono said. [ 21-02-06 0318GMT ]

Indonesia recorded an on-year economic expansion of 5.60% last year, outpacing the 5.4% rise in 2004 but falling below a 6.0% on-year official government target.

Boediono's comments contrast with Bank Indonesia Governor Burhanuddin Abdullah's projection Monday of an average 5.40% on-year economic expansion in 2006. That projection matches analysts' forecasts of 5.4%-5.5% economic growth in the same period.

Burhanuddin said that he had heard the government was preparing to downwardly revise its official 2006 on-year GDP growth target to within a range of 5.8%-6.2%, but didn't elaborate.

Analysts and government officials say jump starting the economy hinges on expanding greatly needed investment inflows. An apparent delay in Boediono's long-awaited investment stimulus policy package may dent the confidence of analysts and investors who were bullish when he joined President Susilo Bambang Yudhoyono's economic Cabinet in December.

Boediono, who served as finance minister under Yudhoyono's predecessor Megawati Sukarnoputri, earned a good reputation by piloting Indonesia's departure from an International Monetary Fund emergency borrowing program at the end of 2003.

Analysts and government officials say Indonesia's economic growth will slow in 2006 due to a combination of lingering inflationary pressure, high interest rates and bureaucratic obstacles to fresh investment.

Bank Indonesia has hiked its benchmark rate 175 basis points to 12.75% since November to cool an inflationary surge powered by the governments move to effectively raise fuel prices by more than double on Oct. 1.

Boediono reiterated an official target of 6.0%-7.0% average annual growth in the medium term to meet government commitments to effectively halve unemployment and poverty levels by 2009.

-By I Made Sentana; Dow Jones Newswires; 62 21 3983 1277; I-Made.Sentana@dowjones.com

Alvin

February 22nd, 2006, 01:54 AM

MM Lee, Jakarta leaders discuss Indon investment climate
Shoeb Kagda In Jakarta
498 words
22 February 2006
Business Times Singapore
English
(c) 2006 Singapore Press Holdings Limited
Revamping the civil service to make it more efficient was also on the agenda

IMPROVING Indonesia's investment climate and revamping the country's civil service were the two key issues on the table in discussions yesterday between Minister Mentor Lee Kuan Yew and Indonesian economic ministers.

In a free-ranging lunch meeting, Mr Lee shared Singapore's experience in reshaping its civil service to make it more efficient and in tune with developments in the world.

He noted that while Singapore had adopted the British model for its civil service, Indonesia would need to decide which model it adopts for itself, given the system it inherited from the Dutch.

Indonesia could start the process, he said, by identifying one or two key ministries and revamping them first.

This way the entire civil service would not be harmed by drastic changes.

Mr Lee also noted that salaries of civil servants must be equivalent to their counterparts in the private sector if they are to be better motivated.

Improving Indonesia's investment climate was also discussed during the lunch meeting, said Chief Economics Minister Boediono.

Indonesia needs foreign investments to boost its economic growth to 6 or 7 per cent, to keep pace with the growth of countries such as China, India and Vietnam.

Jakarta plans to announce a comprehensive economic policy package soon to improve the investment climate.

The package, Mr Boediono noted, will cover many aspects and cannot be completed in a short span of time.

'We exchanged views and, considering his very vast experience, we did a lot of listening. He gave a lot of very good thoughts about the region and Indonesia for the next few years and the relations between Indonesia and Singapore,' he said.

Trade minister Mari Pangestu noted that the message from the lunch meeting was very much in line with what is normally discussed in bilateral relations between the two neighbours.

'For Singapore, an Indonesia that is growing is very important because of the spill-over effects due to the close proximity and the fact that Indonesia is a crucial part of South-east Asia,' she said.

'In general we talked about what are the kind of things we need to do to improve the investment climate, and we also shared with him what we are doing to try and improve the investment climate.'

The Minister Mentor is on a five-day visit to Indonesia to learn first hand about the changes that have taken place since his last visit in 2001 - and to catch up with old friends.

Yesterday, he also held meetings with President Susilo Bambang Yudhoyono and former military chief Endriartono Sutarto.

Mr Lee is accompanied by Second Minister for Finance and Foreign Affairs Raymond Lim, Minister of State for Education and Manpower Gan Kim Yong, Deputy Speaker of Parliament S Iswaran and Parliamentary Secretary for Community Development, Youth, Sports and National Development Mohamad Maliki Osman.

Document STBT000020060221e22m0000t

Zorobabel

February 22nd, 2006, 04:17 AM

Domestic and foreign investment in Indonesia rises

February 22, 2006

Jakarta (ANTARA News) - Indonesia`s Capital Investment Coordinating Board (BKPM) has issued a monthly report saying that realization of domestic and foreign investment based on permanent business licences already issued in January 2006 is increasing.

In the report made available to ANTARA here on Tuesday, the domestic investment rose by 129 percent or reached Rp2.6 trillion compared with the corresponding period of last year, while the foreign investment increased ten times reaching US1.3 billion.

A number of domestic projects increased by 58 pct from 17 to 27 and foreign projects rose by 59 pct from 57 to 91 in the same period.

The domestic projects absorbed 8,624 workers, up by 165 pct, while foreign projects five times larger than that reaching 34,158 people.

Sectors which have drawn interest for domestic investment are, among other things, transportation, warehouse, communication, chemistry, wood, pharmaceutical, food, and non-metal industrial sectors while for foreign investment are construction, food industry, services, trade, repair, metal industry, mechinery and electronic.

Most of the projects are located in Jakarta and its surrounding areas, West Java and East Java.

In terms of investment, Hong Kong invests the largest followed by Singapore, Malaysia, South Korea and China.(*)

Zorobabel

February 22nd, 2006, 04:25 AM

Foreign and domestic approvals were down in January while realized investment surged. Looks like investors are scurrying to get their projects started. Let's hope the Indonesian government starts using the unspent development funds from last year as well to get the economy going fast in the first half, because it looks like investment will seriously wane in the second half of the year with the declining approvals. By that time, though, consumer spending should start to grow again with lower interest rates.

Alvin

February 22nd, 2006, 07:45 AM

before these investment figures came out, the 'conventional wisdom' was that growth will be slow in 1H06 due to effects of oil price rise last year, and that economy will pickup in 2H06 along with declining ir and inflation...
anyway, i think it's too early to say that FDI approvals will decline this year, after all, it's only Jan. i would expect approvals to rise this year following the passage of the new investment law and estbalishment of new infrastructure fund to speed up infrastructure projects + attract capital inflow into productive investments..

Zorobabel

February 22nd, 2006, 08:37 AM

I only say I think FDI approvals will slow because they have been contracting for the last 4 months. About $10 billion of the $13 billion in FDI approvals last year were in the first 7 months. Almost another $1 billion was added in September, but shortly after FDI approvals dropped to around $500 million monthly. For January 06 it was less than that. Also, domestic investment approvals in January 06 were 1/5 what they were in January 06. I think growth for the first half will still be slow because consumer spending, which represents 70% of Indonesia's economy, is flat if not contracting. I'm still optimistic, though, because $1 billion in realized FDI is a lot.

Alvin

February 23rd, 2006, 10:35 AM

DJ Indonesia Econ Min: 2007 Economy To Grow 6.4% On Year
78 words
23 February 2006
17:23
Dow Jones Chinese Financial Wire
English
Copyright (c) 2006, Dow Jones & Company, Inc.
JAKARTA (Dow Jones)--Indonesia's economy is set to expand 6.4% in 2007 due to an improvement in the nation's macroeconomic situation, Coordinating Minister for the Economy Boediono said Thursday.

'The economy next year is expected to grow 6.4% on year, supported by a lower inflation rate,' Boediono told reporters.

He said the government wants inflation in 2007 to stay below 8%.

-0-

Alvin

February 23rd, 2006, 12:30 PM

Indonesia to spend $1.4b on public works to boost growth

JAKARTA (Bloomberg): Indonesia will spend Rp 13 trillion (US$1.4 billion) on public works in the first quarter, attempting to boost economic growth, Finance Minister Sri Mulyani Indrawati said Thursday.

Last year's economic growth of 5.6 percent "isn't good enough," Mulyani told foreign reporters in Jakarta. "We will frontload spending to the first quarter, which will boost growth."

Indonesia's economic growth, while it accelerated last year from 5.1 percent in 2004, fell short of the government's forecast of 6 percent. Growth slowed to 4.9 percent in the fourth quarter, the slowest in six quarters, as higher borrowing costs curbed consumer spending in Southeast Asia's largest economy.

Mulyani described the response to a recent debt swap as disappointing. Indonesia this month swapped 280 billion rupiah of local currency bonds with longer maturity debt that matures on June 15, 2021, to help lower interest costs, the second suchtransaction in three months.

Indonesia got bids for 7.6 trillion rupiah of debt at the sale. (**)

David-80

February 23rd, 2006, 02:03 PM

Price of Indonesian Crude Palm Oil Seen Rising This Year

JAKARTA, Feb 23 Asia Pulse - The price of crude palm oil (CPO) is predicted to rise this year with expected increase in demands from China and India and growing requirement to be processed in alternative fuel.
Commercial Director of PT Bakrie Sumatra Plantation Bambang Aria Wisena said the price of CPO is estimated to the level of 1,700 Malaysian ringgit (US$460) per ton, up from 1,474 ringgit at present.

Ben Santoso, a commodity analyst from PT Namalatu Cakrawala said the price of CPO will rise because of expected decline in supply from Malaysia, the word's largest producer.

China and India are the world largest consumers of CPO and expansion of the two world's fastest growing economies will increase demand for CPO in the world market, Bambang predicted.

The U.S. agriculture ministry predicted that China will need to import 4.75 million tons of palm oil this year or up 9 per cent from last year and India is expected to see a 4 per cent rise in its imports to 3.5 million tons.

(ANTARA)

Alvin

February 23rd, 2006, 02:59 PM

Hey ... I just read a recent UBS article published last month titled "Not another China or India, but a stronger Indonesia"

The article basically argues that to grow at the rate of between 6-8%, the key lies in investment. This is because indonesia's investments as a contribution to GDP has equalled the country's savings rate, at 22%. which means that Indonesia atm is only 'internally capable' of growing at the present rate of 5-6%...therefore, they key lies in foreign investment. In the past , investments' share of GDP was something like 28%-30%. Compared to other country's, indonesia's savings rate is low...China has a savings rate of 35% while India, 28%...

The article ends quite optimistically though, saying that indonesia has good medium term prospects as long as reforms get carried out.

Alvin

February 24th, 2006, 02:37 AM

Indon economy moving in right direction: MM
Shoeb Kagda In Jakarta
890 words
24 February 2006
Business Times Singapore
English
(c) 2006 Singapore Press Holdings Limited
But country needs to shore up investor confidence to vie with India, China

INDONESIA is moving in the right direction with the economy having stabilised and beginning to pick up - but the country has to move quickly to shore up investor confidence if it is to compete with the likes of China and India, Minister Mentor Lee Kuan Yew said yesterday.

Wrapping up his five-day visit to Jakarta, Mr Lee noted a new sense of optimism since his last trip there in 2001. Confidence was returning and he shared that confidence.

'My feeling is that people generally recognise that there is no magic solution and you cannot expect everything to be resolved in one to two years,' Mr Lee told the Singapore media. 'There is a deeper sense of timeframe within which things can be resolved, which is useful because it gives the government time to implement longer term policies.'

But Mr Lee added that the country's poor investment climate was driving away foreign investors, so the government will have to find some quick solutions to reverse the trend.

The Minister Mentor said that in his meetings with government leaders, legislators, businessmen and politicians, he had observed that Indonesia needs to compete with India, China and Vietnam.

'Investors are leaving Batam, Jakarta and other parts of Indonesia and are going into Vietnam, China, Thailand and now India. The reasons are very simply legal uncertainties, unrealistic labour laws, minimum wages are not helping to create jobs,' he said.

'This is a globalised world and I explained to the MPR (People's Consultative Assembly) members that the Japanese are looking at India and Vietnam,' he added. 'Japanese companies now have a new strategy which is China-plus-one, which in other words for every factory they have in China, they will put one factory elsewhere just to have a spread and diversify so they are not completely dependent on China in case there is a disruption of supplies.'

Mr Lee suggested that Jakarta choose specific areas in the country and concentrate all its efforts to get better regulations, less bureaucracy, more transparency and more certainty. If that is done, the country can produce visible results in three years.

'I spoke to the vice-president and he is planning five special zones where different laws will apply, and all this will change the system and get different rules so bureaucracy will not be an impediment,' he said. 'I think if Batam is made part of that special zone together with places in Java, Makassar or south Sumatra, it will blossom.'

Singapore can play a role in this process by bringing the problems faced by businessmen in Batam to the notice of people who can change it. 'I spoke to the legislators and I hope the Indonesian media will also carry this. We are not trying to promote Batam just for the sake of Singapore. We are trying to promote Batam because we have already invested in it, we have got Japanese, Koreans, Taiwanese and other investors to invest in it. Let's not throw this opportunity away. We are creating jobs.'

Batam, Mr Lee said, has been doing well since it was first established in the early 1990s as a joint industrial base between Singapore and Indonesia. The island, just 40 kilometres from Singapore, currently employs 60,000 to 70,000 workers, but it is beginning to diminish because of legal uncertainty.

The Minister Mentor was however confident that the government of President Susilo Bambang Yudhoyono would be able to resolve many of the issues damaging the investment climate. Mr Lee said that he was greatly cheered in his meeting with Coordinating Minister for People's Welfare Aburizal Bakrie for example, because Mr Bakrie had brought his business background to bear on Indonesia's health, social, educational and tourism problems.

'He has got a business-solving mind and he has been brought into a different area and I was greatly cheered to see how he has within three months recognised the problems Indonesia has to resolve to be part of the modern world.

'He also knows that unless you encourage mass tourism, which will come from India and China, and you just protect your national airlines, you are going to lose the tourism economy. Freeing your airlines cannot bring you the millions of passengers from India and China. They are not rich and they are low budget travellers and they want low budget airlines.'

Mr Lee said for example that if he had to save Singapore Airlines or the Singapore airport and the tourist trade, he would save the latter and let budget airlines push out SIA. 'You either compete and put down your costs and go with a different market and go into the budget airline business yourself or you move on.'

The current government in Jakarta understands this paradigm, noted Mr Lee. 'I think this is a government that is thinking and beginning to solve problems. This is a problem-solving government.'

Mr Lee noted that Singapore's relationship with Indonesia was positive, despite some difficulties. There is now a realisation in Jakarta that although the two countries may not always see eye to eye, if they do not work together, Indonesia's economic recovery will be slower.

Document STBT000020060223e22o0000u

XxRyoChanxX

February 24th, 2006, 03:24 AM

come on indo!!! don't give up! :)

Zorobabel

February 24th, 2006, 08:36 AM

INTERVIEW:Malaysia May Lose Top CPO Producer Rank Soon
By Benjamin Low
http://asia.news.yahoo.com/060224/5/2gden.html

Of DOW JONES NEWSWIRES

KUALA LUMPUR (Dow Jones)--Malaysia's crude palm oil production is likely to grow only marginally, if at all, in 2006 because of crop stress, paving the way for fast-expanding Indonesia to take over as the world's largest producer, a prominent industry official said late Thursday.

Carl Bek-Nielsen, vice chairman of Malaysia's United Plantations Bhd, said Malaysia's CPO output in 2006 is expected to be around 15.0 million-15.2 million tons compared with 15.0 million tons in 2005.

Strong production in recent years may take a toll on the productivity of oil palm trees in Malaysia this year, especially during the current quarter.

"You see these cycles every 2-3 years that we can call a biological resting period, where once the oil palm is stretched, it tends to want to have a bit of a rest. Coupled with a rainfall deficit which we had in peninsular Malaysia last year, we are going to see production in the first quarter down significantly, by more than 5%, compared to the same period last year," Bek-Nielsen said in an interview on the sidelines of Bursa Malaysia's palm oil price outlook conference.

CPO output totaled 3.4 million tons in January-March 2005.

Meanwhile, Indonesia's CPO output is expected to continue growing as more oil palm areas reach maturity, thus, producing more.

Having been unrivaled as the largest palm oil producer for decades, Malaysia may finally lose its top position to its neighbor this year, Bek-Nielsen said. "It is most likely going to happen in 2006. If not 2006, then it will happen in 2007."

For Malaysian producers, the emergence of Indonesia - widely known to sell its palm oil at cheaper prices because of lower costs - means it is imperative for them to boost yields to remain competitive.

Yields in Malaysia, on average, are currently around 3.8-3.9 tons of CPO per hectare per year. More efficient producers, however, are achieving yields of about 5.5 tons/hectare/year, he said.

By increasing yields by about 10%, production costs can be reduced by 7%-8%, Bek-Nielsen said.

"Our concern should drive us into action, not into depression," he said, adding that some industry players may be lulled into complacency by the current high palm oil prices.

The use of newer and better planting materials and efficient management practices are the key to yield enhancement.

Malaysian palm oil producers also need to act quickly to ensure they meet global standards for environmentally and socially-responsible production, or risk losing customer, he said.

Non-governmental organizations, conservationists and other interest groups, particularly in Europe and the U.S., have stepped up their criticism of palm oil lately, saying the industry is a contributor to the loss of rainforests and wildlife in Southeast Asia.

Bek-Nielsen said there is evidence that sustainability issues are increasingly influencing the decisions of consumers when making purchases.

"Our group has refineries in Europe in four different countries and the level of inquiries on sustainably produced palm oil has exponentially shot through the roof over the last year," he said. "If you're not sustainably produced, we don't want to buy from you - that's the simple message."

Sees CPO Prices In MYR1,500-MYR1,600/Ton Range In 2006

On the demand side, biodiesel is expected to be a key growth driver this year and beyond, keeping prices firm.

"My price outlook for 2006 ranges between MYR1,500 to MYR1,600 a ton. It's going to be MYR1,550 on average, which I think is very achievable," he said.

World consumption of edible oils is expected to grow by over 7 million tons for a second straight year in 2006, underpinned by the emerging use of edible oils as a fuel source, particularly in Europe.

The European Union has a target of replacing 5.75% of its diesel used in transportation with renewable sources by 2010.

The EU's biodiesel market is expected to grow from 3.75 million tons in 2005 to 4.5 million tons in 2006.

Palm oil stands to benefit from the growth of biofuels use in that region, although the bulk of the requirements there are met by locally produced rapeseed.

"Even if it is another oil that is goes into biodiesel, that other oil then needs to be replaced. Either way, there's going to be a vacuum and palm oil can fill that vacuum - be it for biodiesel or for food," he said.

In Malaysia, the government's plans to launch its own biodiesel blend soon under a voluntary program involving a fleet of government vehicles would be important in boosting the popularity of alternative fuels in the domestic market, Bek-Nielsen said.

The blend, called B5, will be made up 5% palm oil and 95% regular diesel.

Prime Minister Abdullah Ahmad Badawi is expected to launch the product in March, government officials said.

"I think that is the best way, by starting right at the top and letting it cascade down. The government has got to give it support," he said.

For the palm oil industry, the B5 program, when it becomes mandatory nationwide, would significantly trim inventories in the long-run.

"The Malaysian diesel market is estimated to be around 10 million tons a year now. If you replace 5% of that with palm oil, that's 500,000 tons of palm oil stocks that can be taken out," he said.

Palm oil prices are usually sensitive to the size of Malaysia's stockpile, with low stocks typically resulting in high prices.

-By Benjamin Low; Dow Jones Newswires; 603 2692 5254; benjamin.low@dowjones.com

-Edited by Denny Kurien

Alvin

February 24th, 2006, 04:45 PM

Friday February 24, 3:10 PM
Jan FDI in Indonesia's Auto Sector Close to Full Year Target
JAKARTA, Feb 24 Asia Pulse - Implementation of foreign direct investment (FDI) in the automotive and transport sector was valued a US$225.1 million in January, exceeding half of the full year target of US$359.7 million, the newspaper Bisnis Indonesia reported today.
The paper quoting data at the Capital Investment Board (BKPM) said the investment value was contributed only by 4 projects.

The investment in the automotive and transport sector made up 17.2% of the total value of FDI in the country in January, the paper said.

There were 91 FDI project altogether valued at US$1.311 billion including the four automotive and transport projects implemented in January, the data showed.

There was no domestic investment in the automotive and transport sector in January, 2006.

(ANTARA)

Alvin

February 24th, 2006, 04:46 PM

Iran to build oil refinery in Indonesia

JAKARTA, Feb. 24 (UPI) -- Iran's foreign minister, on a visit to Jakarta, has confirmed his country's plan to invest $1.5 billion to build an oil refinery in Indonesia.

Indonesian Foreign Minister Hassan Wirajuda told reporters Thursday that his country's minister of energy would soon be visiting Tehran to follow up on the proposal, Xinhua reported Friday.

Wirajuda said that a meeting between Iranian Foreign Minister Manouchehr Mottaki and Indonesian President Susilo Bambang Yudhoyono had focused on the refinery project.

The plan was proposed by Iran and first discussed between the two countries' presidents at the United Nations in New York, he said.

Mottaki said his country was ready to invest between $1.5 and $2 billion on the energy project in Indonesia.

Alvin

February 24th, 2006, 04:48 PM

Indonesia struggles to fight graft and lift growth
By Shawn Donnan in Jakarta
Published: February 24 2006 00:48 | Last updated: February 24 2006 00:48

Indonesia’s fight against corruption is colliding with efforts to boost economic growth, with bankers and bureaucrats increasingly cautious about signing off on loans and projects for fear of later facing charges, the finance minister warned yesterday.

A campaign against Indonesia’s endemic corruption has been the hallmark of President Susilo Bambang Yudhoyono’s 16-month-old tenure. On Wednesday, for example, police detained the once-powerful head of the former Indonesian Bank Restructuring Agency (Ibra) on graft charges.

But Mr Yudhoyono, a retired general, also took office promising to boost the economy, which continues to struggle to emerge from the shadows of the 1997-98 Asian economic crisis.

“This is the dilemma for Indonesia now,” Sri Mulyani Indrawati, finance minister, told foreign journalists. “Because the information – or at least the threat – that we are receiving now is that if we pursue this good governance, anti-corruption effort too strongly . . . it will cost us in terms of economic growth.”

Mrs Indrawati said the government’s priority this year was using its “fiscal tools” to bolster economic growth that has slowed from 6.7 per cent in the last quarter of 2004 to 4.9 per cent in the last quarter of last year.

South-east Asia’s largest economy – with a gross domestic product of about $270bn in 2005 – is also suffering from inflation above 18 per cent and rising interest rates, the result of October’s 126 per cent increase in government-set fuel prices.

Economists say the resulting slowdown in consumption has put new pressure on the government to increase spending, which lagged behind budget forecasts in 2005 at Rp509,400bn ($54.8bn) and is budgeted to grow to Rp647,700bn this year. In the first quarter of 2006 alone, Mrs Indrawati said, the government planned to spend Rp13,000bn left unspent from last year’s budget.

But state bankers and government bureaucrats were being inhibited in their efforts to boost government spending by fears related to the anti-corruption fight.

Behind those fears are the public examples now being made of once-powerful figures as part of the anti-graft war. Among them are ECW “Eddie” Neloe, former chief executive of Bank Mandiri, the country’s largest lender, who was acquitted of graft charges this week but could face more, say prosecutors.

There is also Syafruddin Temenggung, Ibra’s former head, who was detained on Wednesday as a suspect in a case linked to the 2003 sale of a sugar factory.

Mrs Indrawati, a former IMF director, and others have applauded those cases and the finance minister expressed disappointment with this week’s Mandiri verdict, which is being reviewed by Indonesia’s judicial commission. But she said state bankers were now worried: “‘If I make this decision and the credit becomes non-performing, will I become a criminal?’”

Bureaucrats from the lower ranks of the civil service up to ministers, she said, were also eager to distance themselves from decisions related to anything that might one day get them in trouble, “from the very small projects up to the very big projects”.

The anti-corruption fight has put some large Indonesian corporate customers at state banks such as Mandiri in the spotlight and resulted in tighter lending criteria at those banks.

The collateral damage, some bankers fear, will be a migration towards private and foreign banks and a drag on what should be growing investment by domestic business people.

“Ever since the recent investigations into state banks there has been a sense of discomfort among [those] doing business with state banks,” said Intan Abdams Katoppo, corporate secretary at Bank Negara Indonesia.

But Mrs Indrawati said Mr Yudhoyono’s government had to calm those concerns.

“The president says we will continue to fight corruption,” Mrs Indrawati said. But “we have to say to everybody that this [fight] is not against policy or against decisions. This is against people who steal money.”

Additional reporting by Taufan Hidayat

Zorobabel

February 25th, 2006, 04:21 AM

I wonder what those $1.4 billion worth of development projects in Q1 will be.

Alvin

February 25th, 2006, 08:26 AM

I wonder what those $1.4 billion worth of development projects in Q1 will be.

I think the finance minsiter once mentioned that roads and clean water infrastructure are the spending priorities for this year.

Alvin

February 26th, 2006, 12:13 PM

The Biggest Sleeper
Indonesia, Asia's overlooked giant, is stable at long last. But now the hard work begins.

By George Wehrfritz and Joe Cochrane
Newsweek International
March 6, 2006 issue - Sometimes even the starting line is hard to reach in Indonesia. Just ask President Susilo Bambang Yudhoyono. A few weeks ago fans converging on a speedway outside Jakarta for the city's inaugural A1 Grand Prix turned nearby roads into parking lots, trapping the presidential motorcade. So the guest of honor exited his limousine and leapt onto the back of one of his escort motorcycles, weaving through traffic for two kilometers to reach the track and deliver a short opening speech. "I arrived two minutes before the race," he said with a chuckle. "I was really on time."

The same might be said for Yudhoyono's presidency. Inaugurated 17 months ago, he is Indonesia's first directly elected leader, and the first to show a firm hand after a series of sleepy bumblers since the fall of Indonesia's dictator Suharto, in 1998. Yudhoyono led a highly competent response to the devastating tsunami in December 2004, and then exhibited a statesman's touch in signing a visionary peace pact to end the long-running rebellion in the province of Aceh. For the first time in years the ethnically and politically fractured archipelago is relatively stable; the Asia Foundation's Indonesia representative, Douglas Ramage, calls Indonesia "the sleeper democratization success story" in Asia. All this, however, has only brought the country to the starting gate—positioned for a run to reclaim its rightful place as the third giant growth story in Asia.

Though it was a developing world star under Suharto, Indonesia has been fully eclipsed by larger rivals of late. The economies of India and China are each growing faster than 8 percent, while Indonesia's growth is expected to slow down to 5.2 percent this year, which is meager for a big emerging market. For Indonesia to move up faster, it has to work harder to streamline its "high-cost economy," a euphemism for rampant corruption and red tape. The bright side is that bottoming out creates a sense of urgency. While prosperity has dampened the political will to reform in India, fear of falling behind is helping Yudhoyono push through change. The president cut budget-breaking energy subsidies after world oil prices shot up last year, and has since been rewarded by Standard & Poor's, which recently raised its outlook on Indonesia's credit rating to "positive." Indonesia's budget deficit, as a share of GDP, is now just one percent, and one tenth of India's.

To be sure, its comeback tale remains too confusing and uncertain to have attracted foreign investors in large numbers. Indonesia lacks the "two-sentence story" that can draw outsiders to an emerging market, says a Western diplomat in Jakarta, who requested anonymity as a matter of government policy. While China has its rise as an export manufacturing power, and India its emergence as a global headquarters for information services, Indonesia is known mainly for failing to fully exploit a rare abundance of natural resources, from timber to gold, despite booming commodity prices. This tragically botched opportunity is exemplified by the fall of Indonesian oil production (down 20 percent since 2000) in the face of spiking oil prices.

But that problem is now the target of Yudhoyono's next big move. The president appears ready to clear the way for the American giant ExxonMobil to take charge of a long-stalled plan to tap huge oil reserves under the seabed off East Java, sidelining the state oil monopoly, Pertamina. That suggests a strong willingness to take on a powerful lobby and risk a nationalist backlash, all in the name of efficiency. In an interview with NEWSWEEK in Jakarta last week, Yudhoyono signaled a deal of some kind is imminent, without addressing the details: "The bottom line is that I have chosen the type of cooperation and joint operations to accelerate the project and produce oil in the timeliest manner," he said. "It has nothing to do with nationalism versus internationalism."

If ExxonMobil does take over the $2.6 billion project, it would represent the —largest new foreign investment in Indonesia since the Asian financial crisis triggered Suharto's fall. "It's a very pivotal deal," says T. N. Machmud, former head of Arco Indonesia. "This is a great place to invest if we can get our act together." Opening the Cepu offshore oilfield could raise Indonesia's oil output by 177,000 barrels a day, or nearly 20 percent, putting production back on a growth track for the first time in a long time. The imminent deal is "going to put Indonesia back on the map," says the Western diplomat.

Indonesia's political climate augurs well for further reforms. Yudhoyono's approval rating remains above 60 percent, according to opinion polls, despite the sluggish economy. With a string of traumas from Suharto to the tsunami now in the past, the government is moving out of crisis mode for the first time in its brief life as a democracy. Yudhoyono doesn't face re-election until 2009, and he and his team have front-loaded painful reforms so they have time to revive economic growth before the voters pass judgment. Sjahrir, a top Yudhoyono adviser (who goes by one name), routinely draws parallels with a recent American president. "I always quote Bill Clinton's [mantra], 'It's the economy, stupid,' in my memos to the president," he says, adding: "He knows that, too."

Yudhoyono's attack on the "high-cost economy" is a complex war on many fronts. Jakarta has begun to streamline bureaucracy and to rewrite tax, business and labor codes. Citing a favorite World Bank measure of a nation's business environment, Yudhoyono says he has already cut the time it takes to register a business from 150 days to 60, and vows to "do my best to bring it down to one month." He is orchestrating the biggest anti-corruption campaign in Indonesia's history. Since its launch last year the campaign has claimed what political analyst Salim Said says is an unprecedented number of high-profile targets, including a provincial governor and a former cabinet minister. All this bears the stamp of orthodox freemarket reform, as typically prescribed by the World Bank and International Monetary Fund. But don't say that in Jakarta. "We don't want to use the term 'Western style'," says Said. "Western liberalism is anathema, and capitalism is hated here, but we're doing both."

Yudhoyono's campaign is controversial even within his cabinet, which is divided between reformers and nationalists who are less enthusiastic about embracing globalization. The reformers are mainly free marketeers who "hang pictures of Milton Friedman on their office walls," as Ramage puts it, and they control the briefs that set overall strategy, like the Ministry of Finance. But they do not control many of the ministries that actually execute policy, including Health, Agriculture, Education and Tax. The result is that even well-intentioned efforts to improve efficiency can founder. One example: the clumsy response to avian flu, which has spread to 27 of the country's 33 provinces, and killed 20 people. It still takes "nerves of steel" for foreigners to enter the market, says Malaysian lawyer Karim Raslan.

Still, the shake-up at Pertamina has put other state firms on notice. Together they comprise about 30 percent of Indonesia's economy, and most are barely growing. (The military also owns several businesses, which it's in the process of selling.) While there isn't a consensus for privatization, Yudhoyono insists that state enterprises must become more profitable—even if that means entering into joint ventures controlled by foreigners. Pertamina, for example, holds vast oil and gas fields but lacks the money and expertise to exploit them. "To be frank, the business environment in Indonesia is not healthy yet," says Yudhoyono.

The Cepu joint venture had gotten snagged on Pertamina's demand that control of day-to-day operations should alternate between the partners on a five-year cycle, with Pertamina taking the first shift. Yet Pertamina has never independently operated a field that produced more than 12,000 barrels a day—a small fraction of the size of Cepu. The suspicion among analysts and the media is that Pertamina wanted the first five-year shift so it could dole out the millions of dollars in onshore subcontracts that Cepu will generate. The Jakarta Post said in an editorial last week that Pertamina is "perceived to be corruption infested... [and] highly vulnerable to vested political interests." By taking on these interests, Yudhoyono has signaled that state industries will be held to a higher standard in the future. "We are really serious about improving performance," says Finance Minister Sri Mulyani Indrawati.

For all the signs of change, there is still something fundamentally troubling about Indonesia's story. Yes, the country has the most abundant natural resources in Asia, a market of 220 million people, agricultural potential that could one day rival regional leader Thailand and a long history of light manufacturing that could make it a booming export base. Yet no one sector seems big enough to power Indonesia into prosperity. Big oil deals are promising, but oilfields don't produce nearly as many jobs per dollar invested as manufacturing plants or information services. The disadvantage Indonesia faces in competition with India and China comes down to this question, says the Western diplomat: "Can Yudhoyono build a winning team without a superstar?" The Indonesian leader has found the starting line. But this race is a marathon.
© 2006 Newsweek, Inc.

Alvin

February 26th, 2006, 12:15 PM

Interview: Order In The House
Indonesia's hard-charging president on reform, internal resistance, and countering the country's Muslim radicals

Newsweek International

March 6, 2006 issue - Indonesian President Susilo Bambang Yudhoyono stormed into office nearly 18 months ago—and has not stopped running since. The former Army general took power at a time when the world's fourth largest nation was threatened by economic stagnation, lawlessness and terrorism. Affectionately known as "SBY" by the public, Yudhoyono is pushing painful reforms—raising electricity rates, revamping the civil service, rewriting tax laws, imposing civilian control over the maverick armed forces and working to bring peace to rebellious provinces like Aceh. He spoke with NEWSWEEK's George Wehrfritz and Joe Cochrane at the Presidential Palace in Jakarta last week. Excerpts:

NEWSWEEK: How significant is the Aceh deal for Indonesia's future stability?
YUDHOYONO: "We tried military options in Aceh for three decades but it doesn't work. I saw an opportunity to eliminate the problem peacefully, constitutionally, and it is working. I can now tell our people that we must change the internal-security paradigm, and I will apply this new method of conflict [resolution] in [separatist] West Papua, for example.

Do recent uproars, like the Muhammad cartoon controversy, hurt your efforts to check Islamic extremism?
I have to deal with extremists firmly. The situations in Iraq, Afghanistan, Palestine and Iran have become the main concern of several Islamic elements in Indonesia, so when the cartoon depicting the Prophet Muhammad appeared, the impact was large here in Indonesia. I made my statement [condemning the cartoons], and I reminded my own people—OK, of course we are very offended but we have to remain calm.

Is the movement of extremists in and out of Indonesia increasing or decreasing?
Indonesia has won the battle against terrorism but not the war. We have to do more by conducting police operations, intelligence operations and strengthening bilateral cooperation with other countries. Of course, even if we improve these very effective operations, the connection is still happening between elements in Indonesia, the Philippines, Malaysia, southern Thailand and the Middle East. We have to do the things [necessary] to ensure the connection will not grow and make bigger trouble for Indonesia.

How are you attacking the perception of Indonesia as a "high cost" economy?
I'm working hard to improve legal certainty, to pass sound tax, customs and investment laws. We're trying to reduce the number of days it takes to start a business in Indonesia. Another problem is that our bureaucracy is still corrupt. I'm trying to make the bureaucracy more efficient, end corruption and fix Indonesia's labor laws. The climate is not perfect, but we're putting our house in order.

It seems that you're in a race against time. You need to deliver higher growth in Indonesia today, next year, the year after, or risk a one-term presidency.
Last year I made the unpopular decision to increase fuel prices. I've also revised many regulations and laws. There's been a lot of resistance from other politicians, nongovernmental organizations and other communities. But I have chosen to make [the biggest] changes early, in my first or second year.

© 2006 Newsweek, Inc.

XxRyoChanxX

February 26th, 2006, 10:26 PM

wow! thANKS for posting that article

Alvin

February 27th, 2006, 12:53 PM

glad you liked that article, Ryo ;)

good news..possible credit rating upgrade by moody. Stock market and rupiah up, closing at 9235 to US$. If this exchange rate persists, inflationary pressures may subside faster than expected,giving way for BI to cut rates earlier than expected and boost growth.
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Indonesia's Credit Rating May Be Raised by Moody's (Update4)
Feb. 27 (Bloomberg) -- Indonesia's debt rating may be raised by Moody's Investors Service, the second endorsement this month of financial policies that have halted a plunge in the rupiah. The currency and stocks rose.

The nation's B2 foreign-currency rating, five below investment grade, will be reviewed for a possible upgrade after the budget deficit was less than 1 percent of gross domestic product last year, Moody's said in a statement. Standard & Poor's on Feb. 9 raised its outlook on Indonesia's B+ rating.

A reduction in fuel subsidies and higher interest rates have restored confidence in the currency, which slumped to a four-year low in August. A rating increase will help Indonesia win lower interest rates on $1 billion of planned dollar- denominated debt sales this year, reducing the costs of infrastructure projects in Southeast Asia's largest economy.

``Things in Indonesia are looking better and the government is committed to reform,'' said Euben Paracuelles, an economist at DBS Group Holdings Ltd. in Singapore. ``They've handled the fuel subsidy cuts and monetary policy tightening quite well. It's certainly positive for investment sentiment.''

S&P rates Indonesia's debt at B+, the fourth-highest junk rating, while Fitch Ratings has a BB-, the third junk rating.

Indonesia's budget deficit was 0.5 percent of gross domestic product, or 13.97 trillion rupiah ($1.5 billion), in 2005. The government had forecast a deficit of 0.9 percent. Indonesia has $3.9 billion of dollar-denominated bonds, according to data compiled by Bloomberg.

Budget Deficit

``The government's budget deficit in 2005 was under 1 percent of GDP, continuing a record of only small deficits for the past several years,'' Moody's said in a statement today. ``This fiscal prudence has led to a steep decline in the ratio of government debt to GDP.''

The government, which is trying to attract $426 billion of investment by 2009 and create jobs, is changing its laws to help attract investors. President Susilo Bambang Yudhoyono changed his economic team in December to improve implementation of his policies. Yudhoyono named former Finance Minister Boediono as the coordinating minister for economic affairs and Sri Mulyani Indrawati as the finance minister.

``They are very conservative because they think that some of the fiscal policies were not really right last year,'' said Anton Gunawan, chief economist at Citigroup Inc in Jakarta. ``This time they are seeing signs toward positive development with the new finance minister and the new coordinating minister.''

Public Works

Indonesia will spend 13 trillion rupiah on public works in the first quarter, attempting to boost economic growth, Sri Mulyani said on Feb. 23. That's 30 percent more than the government's previous estimates.

For 2006, the budget deficit may rise to as much as 1.1 percent as the government boosts spending on projects to build roads, ports and utilities, Sri Mulyani said on Jan. 11.

The rupiah, which plunged to a four-year low against the U.S. dollar on Aug. 30 amid concern of rising oil prices, has gained 6 percent this year, making it the world's second-best performing currency. The rupiah rose 0.7 percent to 9,230 against the U.S. dollar at 4:04 p.m. in Jakarta.

Indonesia's key stock index rose 1.6 percent after the announcement, its biggest gain in more than a month. The central bank raised its key interest rate six times from August to December to help boost the rupiah.

The yield on the 12.5 percent local-currency bond due March 2013 fell 5 basis points, or 0.05 percentage point, to 12.20 percent as of the 4 p.m. close in Jakarta, according to the Inter Dealer Market Association.

The price rose 0.241, or 2,410 rupiah per 1 million rupiah face amount, to 101.359. Bond yields move inversely to prices.

Foreign Investment

Moody's said Indonesia needs to attract more foreign direct investment before the ratings assessor would consider raising its outlook on the economy further.

Indonesia's government forecasts overseas investment will probably increase 12 percent this year to about $10 billion. Funds flowing into the nation may increase once the government enacts a law that will improve investment procedures. The government may enact the law in March, Muhammad Lutfi, chairman of the Investment Coordinating Board, said in Feb. 8 interview.

Moody's ``review will concentrate on medium-term fiscal prospects as well as on Indonesia's external debt position and associated vulnerabilities, including problems related to low levels of foreign direct investment,'' the rating company said.

Indonesia offered about 91 projects valued at $22 billion in January last year. Of the total, just one project has been completed, while five are being constructed.

The government is completing plans to invite bids for six projects, while it may scrap 19 projects, Suyono Dikun, a deputy minister at the Coordinating Ministry for Economic Affairs said on Dec. 29.

Indonesia needs to simplify its investment rules to compete with rival Southeast Asian economies and China, which attracted $60 billion of investments in 2005.

To contact the reporter on this story:
Arijit Ghosh in Jakarta at aghosh@bloomberg.net.

Alvin

February 28th, 2006, 12:04 PM

Market Alert - Moody's Underscores Our Positive Outlook
504 words
27 February 2006
Emerging Markets Daily News
English
© Copyright 2006 Business Monitor International.
News that Moody's has put Indonesia's foreign and domestic currency ratings on review for a possible upgrade boosted key assets. The move follows a decision by Standard & Poor's to raise its own outlook on Indonesian debt on February 9. Moody's was particularly encouraged by Indonesia's fiscal prudence. The 2005 fiscal deficit came in at 0.5% of GDP (IDR13.97bn), well below the government's 0.9% of GDP projection. However, that number is expected to rise to 1.1% this year, as the government has earmarked IDR13trn for public works investment in Q106, a 30% rise on earlier government projections. In 2006, President Susilo Bambang Yudhoyono slashed fuel subsidies, while Bank Indonesia dramatically tightened monetary policy in H205 to thwart crippling inflation and a depreciating rupiah. Moody's Indonesian foreign-currency rating is B2 at present.

Buoyed by the announcement, the rupiah has resumed appreciating towards our medium-term IDR9,000/US$ upside target after a slight correction. The unit weakened to IDR9,355 on February 24, in line with our suggestion that the currency looked overbought in the short-term (see Government Rupiah Report Bearish, February 21), but strengthened to IDR9,250/US$ on Monday. The latter area is a six-year trendline resistance level. We believe the rupiah can break above this level in the short-term.

Indonesian stocks also rose, by 1.59% to 1,235.42. We have been bullish this market since Q405, and believe further gains are at hand. Our longstanding view is for a cut in the BI Target Rate to 10.75% from the current 12.75% by year-end, in line with reduced price pressures and a strengthening rupiah. This should support renewed economic expansion in H206, boosting corporate profitability. Renewed equity inflows will support the currency.

In terms of fixed income instruments, the Moody's statement should support the five-year credit default swap (CDS), which has been trending lower since Q405, when it was trading near 315bps. The CDS is currently priced at 184bps and we could see a move towards 175bps. Further consolidation of fiscal reforms and a concerted effort to lower Indonesia's debt ratio would help the instrument trend lower yet.

In the longer term, Moody's indicated that foreign direct investment must pick up in order for Indonesia's rating to continue improving. The agency stressed that low levels of FDI remain a threat to Indonesia's medium-term growth prospects. We believe that enhanced FDI inflows are a distinct possibility. Investment agency BKPM recently announced that FDI soared by 988% y-o-y to US$1.31bn in January 2006 from US$120mn in January 2005. Actual FDI almost doubled to US$8.91bn (909 projects) in 2005 from US$4.6bn (544 projects) in 2004. The government is aiming to attract US$10.0bn of FDI this year. A law to facilitate FDI inflows should be enacted in March.

Emerging Markets Online

XxRyoChanxX

March 1st, 2006, 01:21 AM

so as of right now..what do u guys think of the indonesian economy...?

Alvin

March 1st, 2006, 10:55 AM

Indonesia Jan Exports $7.51 Bln Vs $$8.09 Bln Dec
355 words
1 March 2006
16:50
Dow Jones International News
English
(c) 2006 Dow Jones & Company, Inc.
JAKARTA (Dow Jones)--Indonesia's trade surplus edged down to $3.24 billion in January from $3.30 billion in December, but rose from $2.01 billion a year ago, the Central Statistics Agency said Wednesday.

Although sliding, the trade surplus in January beat market expectations and was higher than the average monthly surplus of $2.34 billion in 2005.

Four economists polled by Dow Jones Newswires had forecast an average surplus of $2.82 billion in January. [ 01-03-06 0706GMT ]

The trade surplus slid from December as January exports grew 22% on year to $7.51 billion, relatively unchanged from the 22.1% growth in December to $8.09 billion.

On the other hand, imports rose 3.6% to $4.27 billion in January, swinging from a 3.7% on-year decline in December to $4.79 billion.

Finance Minister Sri Mulyani Indrawati said recently that she is concerned with the stagnant growth in exports as it could create a deficit in the balance of payments if imports continue to grow.

Mulyani said the government is trying to increase investment in export-boosting projects but didn't provide further details.

The agency said crude exports fell to $718 million in January from $814.9 million in December.

Exports of refined oil products rose to $233.3 million from $151.6 million in December.

Natural gas exports edged down to $865.9 million in January from $894.0 million a month before, the agency said.

Indonesia's imports of crude oil rose to $462.3 million in January from $424.2 million in December, whereas imports of oil-based fuels fell to $621.4 million from $881.1 million, likely because consumption continued to slide after the government raised fuel prices sharply in October.

Still, the only Southeast Asian member of the Organization of Petroleum Exporting Countries had a $132.4 million deficit in its oil trade balance.

-By Farida Husna; Dow Jones Newswires; 62-21 39831277;I-Made.Sentana@dowjones.com

-Edited by Mary de Wet [ 01-03-06 0824GMT ]

70694

Alvin

March 1st, 2006, 11:07 AM

DATA VIEW: Indonesia CPI Likely To Prompt Steady Policy
By Farida Husna and I Made Sentana
Of DOW JONES NEWSWIRES
378 words
1 March 2006
18:42
Dow Jones International News
English
(c) 2006 Dow Jones & Company, Inc.
JAKARTA (Dow Jones)--Indonesian inflation was slightly higher than expected in February, according to data issued Wednesday, encouraging the country's central bank to keep monetary policy tight when it holds its next policy meeting.

But a further rise in already high official interest rates is very unlikely as inflation pressures will probably ease later this year, analysts say.

In separate data, the official Central Statistics Agency said Indonesia's trade surplus fell to $3.24 billion in January from $3.30 billion in December due to flat export growth.

The consumer price index rose 17.92% in February from a year earlier, beating a 17.03% increase in January and market expectations that centered on a 17.59% rise.

But the CPI rose only 0.58% from the previous month, well below a 1.36% jump in January. The on-month CPI increase outpaced a consensus forecast of a 0.32% rise.

Food price increases were the main driver of the on-month CPI increase, the agency's chairman, Choiril Maksum, told reporters. Food prices rose due to a late start to the February harvest season, he said.

Action Economics economist David Cohen said February's inflation data don't require Bank Indonesia to respond with a benchmark rate hike this month.

"The likely scenario is they'll hold steady on rates," he said. "Recent statements out of Bank Indonesia indicate they're... looking ahead to eventually lowering rates, but I think they'll wait until later in the year."

Bank Indonesia is next slated to decide on interest rates during its monthly Board of Governors' meeting next Tuesday.

Cohen said the faster on-year increase in the CPI is due to a low base effect caused by 0.17% on-month deflation in February 2005.

Stock prices were little moved by the latest data.

At 0752 GMT, the Jakarta Stock Exchange Composite Index had risen by 0.1% to 1231.963 from an intraday low of 1222.209.

"This has already been expected by the market...investors see year-on-year inflation is up due to a base effect," a dealer said. [ 01-03-06 0842GMT ]

Document DJI0000020060301e231000cp

David-80

March 1st, 2006, 01:09 PM

@ryochan, The economy is just getting better and better, CPI on feb is under 1% which is good and there are rumours that hot money from Thailand and Philippines are now coming to Indonesia.

e-bursa.com
Rabu, 1 Maret 2006 17:22:48
StockWatch (Jakarta) - Indeks Harga Saham Gabungan (IHSG) Bursa Efek Jakarta (BEJ) hari ini (1/3) ditutup menguat 8,606 poin (0,699%) ke level 1.239,270. Indeks LQ45 juga naik 2,526 poin (0,935%) ke level 272,952, dan Jakarta Islamic Index (JII) naik 1,654 poin (0,758%) ke posisi 219,915.

Pada sesi pagi hingga siang IHSG sempat mengalami koreksi akibat penurunan indeks bursa Dow Jones dan Nikkei, namun memasuki sesi kedua, pemodal kembali memborong beberapa saham menyusul inflasi Februari 2006 yang cukup terkendali yaitu d ibawah 1%.

Penguatan nilai rupiah mendekati level Rp9.100 per dolar AS dan peningkatan cadangan devisa Indonesia per akhir Februari lalu menjadi US$35,535 miliar menjadi sentimen positif pasar, ujar analis Sudesh Wanto dari Sinarmas Sekuritas kepada StockWatch News.

Investor asing hari ini membeli saham sebanyak 211,203 juta unit senilai Rp337,585 miliar. Sedangkan transaksi jual mencapai 146,299 juta lembar saham senilai Rp237,384 miliar sehingga terjadi pembelian bersih Rp100,201 miliar, atau turun dibanding kemarin (28/2) sebesar Rp175,608 miliar.

Total volume perdagangan mencapai 1,317 miliar saham senilai Rp1,205 triliun dengan frekuensi perdagangan 14.721 kali. Terdapat 174 saham yang aktif diperdagangkan dengan rincian 72 saham naik, 60 saham tetap (stagnan) dan 42 saham melemah.

Secara rinci, perdagangan saham di pasar reguler tercatat 1,100 miliar unit senilai Rp1,094 triliun, sedangkan di pasar tutup sendiri tercatat 210,377 juta lembar senilai Rp110,039 miliar, dan pasar negosiasi 5,125 juta unit saham senilai Rp1,201 miliar.

Saham-saham yang ditutup menguat antara lain adalah Tambang Timah (TINS) naik Rp175 (8,54%) ke level Rp2.225, Tambang Batubara Bukit Asam (PTBA) naik Rp125 (6,10%) menjadi Rp2.175, dan Telkom (TLKM) naik Rp100 (1,61%) ke posisi Rp6.300.

Selain itu saham Bank Rakyat Indonesia (BBRI) juga naik Rp75 (2,31%) ke posisi Rp3.325, Bank Mandiri (BMRI) menguat Rp60 (3,70%) ke level Rp1.680, Bank Central Asia (BBCA) naik Rp50 (1,39%) ke level Rp3.650, dan Bumi Resources (BUMI) naik Rp40 (4,76%) ke level Rp880.

Sedangkan sejumlah saham yang ditutup melemah di antaranya Semen Gresik (SMGR) turun Rp550 (2,37%) menjadi Rp22.700, Tempo Scan Pacific (TSPC) turun Rp200 (2,94%) ke level Rp6.600, Medco Energi International (MEDC) turun Rp100 (2,42%) ke level Rp4.025, dan Indosat (ISAT) turun Rp50 (0,95%) ke level Rp5.200. (yan)

David-80

March 1st, 2006, 01:14 PM

here is the news about hot money from those two countries i mentioned.

http://www.e-bursa.com/berita/content.php?sour=stw&id=60301180153500228

Btw, e-bursa.com is one of the best Indonesia business website IMO, i been checking out their website ever since 2002. You can also check your portfolio in JSX up to date.

cheers

Alvin

March 1st, 2006, 02:08 PM

so as of right now..what do u guys think of the indonesian economy...?

should get better and better leading to 2009 elections... i think GDP growth will pick up consistently to 7%+ in the next 3 years. Hopefully indonesia can sustain a 7% gdp growth in the medium term.

Alvin

March 2nd, 2006, 02:24 PM

Indonesia to Raise $2 Bln in Its Biggest Debt Sale (Update4)
March 2 (Bloomberg) -- Indonesia plans to raise $2 billion in its biggest overseas debt sale, taking advantage of falling borrowing costs after the government halted a drop in the rupiah.

The Ministry of Finance will sell new bonds maturing in 2017 and add to existing debt due in 2035, an e-mail sent to investors by one of the sale's arrangers said. Investors ordered about $7.5 billion of the dollar-denominated bonds, according to the e-mail.

The government, rocked by a slump in the rupiah to a four- year low in August, has cut fuel subsidies and restored confidence in its budget targets, winning praise from debt rating agencies. Finance Minister Sri Mulyani Indrawati will gain funds to improve the infrastructure of Southeast Asia's largest economy, after meeting her 2006 overseas debt sale target in a single offering.

``The local situation appears to have stabilized after worries last year,'' said Gregory Suen, who helps manage $1.6 billion of shares and bonds at PCI Investment in Hong Kong.

The rupiah, which slumped to a four-year low in August amid concern over surging oil prices, is the world's second-best performing currency this year. Indonesia will spend 13 trillion rupiah ($1.4 billion) on infrastructure this quarter, Sri Mulyani said on Feb. 23. She said last year's economic growth of 5.6 percent ``isn't good enough.''

Indonesia will probably price the bonds due in 2017 to yield 7 percent tonight in New York, the e-mail said. It will probably price the dollar bonds due in 2035 to yield 7.375 percent, the e-mail said. The bonds, which were first sold in October, were bid yielding 7.33 percent as of 3:45 p.m. in Singapore, according to data provided by Deutsche Bank AG.

Minimum Levels

``They are the minimum acceptable levels to the market,'' said Dilip Parameswaran, Hong Kong-based head of Asian credit research at Calyon, the securities unit of Credit Agricole SA. ``Yesterday, there was something left on the table for the new bonds and today it's been taken away.''

Indonesia yesterday sought to pay as much as 7.125 percent for the bonds due in 2017 and as high as 7.5 percent for the securities maturing in 2035, an e-mail sent to investors showed. Barclays Capital, JPMorgan Chase & Co. and UBS AG are arranging the sale.

Venezuela's dollar bonds due in January 2034 yielded 6.85 percent, according to data provided by Deutsche Bank. Venezuela's bonds are rated B2 by Moody's Investors Service, the same as Indonesia's.

Brazil's dollar bonds due in March 2015 yielded 6.14 percent, according to Deutsche Bank data. Brazil is rated Ba3 by Moody's and BB by Standard & Poor's, two levels higher than Indonesia's debt ratings.

Tapping

The additional sale of securities will increase the size of Indonesia's bond due in October 2035 to $1.6 billion.

``The problem with tapping a bond is that all you're really doing is hurting the people who are already own the bond,'' said Simon Treacher, who helps manage $1 billion of emerging-market investments, including Indonesia's bonds due in 2035, at BlueBay Asset Management in London. ``We're slightly fed up that they're tapping it. I'd have thought it would make a lot more sense to do a 2021 bond.''

Indonesia's 8.5 percent bonds maturing in 2035 fell about $5.60 per $1,000 face amount to 114.52 yesterday, according to data compiled by Bloomberg. The yield rose to 7.30 percent yesterday from 7.25 percent. The fall in the bond price reduced the value of an existing $10 million holding by $56,000.

The government is also tapping demand for developing nation debt as investors seek high-yielding assets.

``People are moving down the credit curve for more yield in the low interest rate environment so high-yielding names have performed very well this year,'' Suen said.

The extra yield investors demand to own emerging market bonds rather than Treasuries narrowed to 1.87 percentage points from 10.4 percentage points in 2002, according to JPMorgan Chase's EMBI+ index. The spread narrowed to a record low 1.86 percentage points on Feb. 27.

Deficit

Indonesia, which has been running a budget deficit since the Asian financial crisis of 1998, needs the support of bond investors to fund its revenue shortfall.

The deficit may rise to as much as 1.1 percent of gross domestic product in 2006 as the government boosts spending on projects to build roads, ports and utilities, Finance Minister Sri Mulyani said on Jan. 11.

The prospect of higher debt ratings, signaling a lower risk of a default, is also attracting investors to Indonesia's bonds and is helping the government secure a lower borrowing cost.

Moody's said on Feb. 27 it may raise Indonesia's B2 foreign-currency rating, which is five levels below investment grade.

Standard & Poor's on Feb. 9 raised its outlook on Indonesia's B+ rating to ``positive'' from ``stable'', signaling that it is inclined to boost its credit assessment of the nation. The rating, which S&P raised four times since September 2002, is four levels lower than investment grade and one step lower than the Philippines' BB- rating.

``We want to get involved and we're very positive on the credit,'' said BlueBay's Treacher.

Indonesia's bonds were the second-best performer among Asian government debt last year after the Philippines, handing investors a return of 8.17 percent, according to J.P. Morgan & Chase indexes.

The rupiah has gained about 7 percent this year, making it the world's second-best performing currency. Six interest-rate increases since July helped the rupiah recover from a four-year low in August and ease inflation from a six-year high of 18.4 percent in November. The rupiah was little changed at 9,180 against the U.S. dollar as of 2:45 p.m. Jakarta time.

The Indonesian government's external debt stood at $74.768 billion as of October, according to the central bank's Web site. Indonesia plans to ask for $2.5 billion of new loans from the World Bank, Japan and other overseas lenders this year to help cover its budget deficit and pay existing debt.

To contact the reporter on this story:
Netty Ismail in Singapore nismail3@bloomberg.net.
Last Updated: March 2, 2006 03:19 EST

Zorobabel

March 2nd, 2006, 06:51 PM

Hey David, if you have any free time could you give a short 1-2 sentence summary of that story on hot money? It's okay if you're busy, just thought I'd ask.

F-ian

March 3rd, 2006, 02:54 AM

Mexico and Indonesia 'will overtake British economy'

By Gabriel Rozenberg, Economics Reporter

MEXICO and Indonesia will both have bigger economies than the UK by 2050, according to a report out today which outlines the massive potential of the world’s emerging nations.
The report examines long-term demographic trends to suggest that countries such as Mexico, Indonesia, Brazil and Turkey all have young and fast-growing populations compared with the UK and continental Europe, putting them in line for significantly higher long-term growth rates.

India is forecast to have the fastest growth rate in its working-age population of any major economy in the next 50 years, while China is projected to become the world’s biggest economy in that time.

The report collectively identifies all these countries, together with Russia, as the “E7” group of emerging economies which it estimates will grow to become 75 per cent larger than the G7 group by 2050.

These seven countries hold between them nearly half the world’s population.

John Hawksworth, the head of macroeconomics for PricewaterhouseCoopers (PwC), who wrote the report, said that India had the potential be the fastest-growing economy in the world, overtaking China.

In US dollar terms, he forecast that India would grow by an average of 7.6 per cent a year between now and 2050, with Indonesia on 7.3 per cent and China at 6.3 per cent.

Mexico would see growth of 4.8 per cent a year, far ahead of the US on 2.4 per cent or the UK on just 1.9 per cent, his report predicted.

On a purchasing power parity measure, which adjusts GDP by the cost of living in each country, China will be 43 per cent larger than the US by 2050 and India will be the same size, PwC forecasts.

The fourth-biggest economy would be Brazil, followed by Japan, and then Indonesia and Mexico. Germany and the UK would drop to joint eighth place, down from third and fifth today.

However, Mr Hawksworth said that Britain should see being overtaken by these economies as an opportunity, and not a threat. He said: “UK companies need to factor these projections into their future planning to ensure they are best placed to take advantage of these opportunities.”

With investment in education, Britain could successfully specialise to its advantage while enjoying the benefits of low-cost imports from emerging markets, he said.

Figures from the Office for National Statistics highlight the size of the opportunity for UK companies.

The figures show that the share of Britain’s exports going to the “E7” economies was just 5 per cent in 2004. This compared with about 44 per cent going to the other six G7 countries.

Zorobabel

March 3rd, 2006, 06:56 AM

Zorobabel

March 3rd, 2006, 07:06 AM

My opinion: Since the Indonesian government ended up with $1 billion more than they were expecting from the bond sale, they should take $500 million and give it to the Ministry of Finance for disbursement in Q2. The other $500 million can go to the general budget and help reduce the budget deficit (which should still be under 1% of GDP this year). In the second half of the year they could raise another billion from debt borrowing.

---

New Indonesia bonds supported by strong demand

HONG KONG, March 3 (Reuters) - Newly issued Indonesian bonds were steady to slightly firmer on Friday, as strong demand from yield-hungry investors for the issue offset weakness in other emerging debt markets caused by falls in U.S. Treasury prices.

Indonesia sold $2 billion worth of sovereign bonds on Thursday, its biggest-ever offshore fund raising exercise and matching its projected foreign debt borrowing for all of 2006.

The deal, comprising $1 billion in new 2017 bonds and a $1 billion reopening of its existing 2035 issue, attracted $8 billion of orders. That saw the bonds priced at the tight ends of their indicative yield ranges.

The 2017 bonds were sold at 99.052 to yield 7.0 percent, or 235.1 basis points over comparable Treasuries, while the 2035 bonds were priced at 113.454 to yield 7.375 percent, or 263.8 basis points over Treasuries.

On Friday, the 2017 notes were quoted at 99.5/99.75 and the long-dated 2035 paper were at 113.45/113.50.

Jakarta initially set yield guidance at 7 to 7.125 percent for the 2017 bonds and 7.375 to 7.50 percent for the 2035 issue. Barclays Capital (BARC.L: Quote, Profile, Research), JPMorgan (JPM.N: Quote, Profile, Research) and UBS (UBSN.VX: Quote, Profile, Research) were the joint bookrunners of the transaction, the third offshore sovereign bond issue from Asia this year.

U.S. buyers took 50 percent of the 2017 bonds, while Asian investors accounted for 30 percent and the remainder went to European customers, a source familiar with the deal said.

By investor type, asset managers took 68 percent, banks 16 percent, insurance companies 12 percent and retail 4 percent.

U.S., European and Asian investors took one-third each of the 2035 reopening. By investor type, asset managers accounted for 71 percent, banks 17 percent, insurance 10 percent and retail 2 percent, the source said.

The reopening took the amount of the 2035 bonds on issue to $1.6 billion. Indonesia first sold the 2035 paper, along with $900 milion of 2016 bonds, last October.

Last month Indonesian Planning Minister Paskah Suzetta said the country might issue $2 billion in offshore debt during 2006 to repay foreign loans. He said $1 billion would be issued in the first quarter.

In 2005, Jakarta raised a total of $2.5 billion in the international debt market.

Zorobabel

March 3rd, 2006, 07:07 AM

Indonesia unveils investment policy package

JAKARTA (AFP) - The Indonesian government has announced a package of policies aimed at improving the investment climate, including a revision of the investment law, Economic Affairs Minister Budiono said.

In a statement released late Thursday, Budiono said that the package was the government's response to demands raised by the business community about the urgent need for reform and public service improvement.

"Competition to attract investment among countries in Asia has become severe and this package is expected to create an environment that will bring Indonesia back as an attractive investment destination," the statement said.

It said each objective in the policy package, which is expected to boost economic growth to more than six percent this year, was tied to a program, a timetable and the ministry in charge of achieving it.

In general, the government aims to revise the investment law, strengthen investment service agencies and simplify investment procedures.

Policies to be put in place include those that will speed up customs procedures, improve tax laws, improve the industrial relations climate, provide protection for Indonesian workers overseas, and empower small- and medium-sized enterprises, the statement said.

Foreign investment approvals grew steadily last year, which analysts attributed to improved political stability after 2004 polls swept President Susilo Bambang Yudhoyono to power on an anti-corruption platform.

Rampant corruption in Indonesia -- one of the world's worst-rated in terms of graft -- has been cited as a main deterrent of much-needed investment in Southeast Asia's largest economy.

David-80

March 3rd, 2006, 02:45 PM

Hey David, if you have any free time could you give a short 1-2 sentence summary of that story on hot money? It's okay if you're busy, just thought I'd ask.

Sure, no problem. Its basically those foreign investors that cashing out from the Phisix and thai SET are putting their money into JSX's market. They needs to trade dollar into Rupiah to buy those stocks therefore its affected the inflow and volume of rupiah in the forex market. I think thats about it regarding the hot money rumour.

cheers

Alvin

March 3rd, 2006, 03:19 PM

Alvin

March 3rd, 2006, 03:27 PM

That sounds about right. You take into account population growth, economic growth, and a strengthening currency and Indonesia will be one of the world's largest economies by 2050. But I do believe if the currency has a significantly higher value by that time Indonesia will have a larger economy than Brazil. Brazil's economy is only growing at about the same rate as the US (3-4% annually).

it was once said at the height of Indonesia's economic standing (mid 90s), that Indonesia could become the world's 5th largest economy by 2020. Now, according to this forecast, we'll be the world's 6th largest by 2050. What a difference 3 years of political crisis and 7 years of modest economic growth have made to longterm forecasts. :)

Indonesia has always been the most overlooked large country of the world in terms of economic potential. the popular acronym BRICs refer to the fast growing economies of Brazil,Russia , India and China. but Brazil, as Yamauchi pointed out, has been growing at very modest rates compared to Indonesia...I hope E7 will be the more popular term used in the future.

David-80

March 3rd, 2006, 04:35 PM

I started to realized that currency is one of the main factor of Indonesia GDP. If you calculate 1 $ = 9,200 rupiah thats equals to $4.5USD (1$ USD= 2,100 rupiah) a year before the financial crisis. Today GNP per capita is 1,350 something, so that means 12,420,000 rupiah or equals to $6,000 dollars when using USD$ = 2,200 rupiah. On another side, our PPP percapita already at 15,000 USD by today if there is no financial crisis.

No wonder in 1994-1995 we hired a lot of american basketball players that were playing in Kobatama. Even one of them is ex-NBA (from Timberwolves). Also on football, we hired Roger Milla and Mario Kempes, two stars of world football....and on the racing sport.. MotoGP, World Rally Championship and Superbike were all held in Indonesia...

How number makes the different...

cheers

MARINHO

March 3rd, 2006, 08:43 PM

The political crisis was needed. Economic factors and the withdrawal the US support to president Soeharto created a dangerous environment. Also the failing of the ABRI was a shame.
But sell out after and the closure of Indonesian banks was the most stupid decision. I can imagine that there was little negotiating space left during the height of the asian financial crisis but the closure of the indonesian banks created a shake through the whole Indonesian banking system. Which led to massive capital flow to Singapore and Hong Kong. And to get these funds back you need a government with an iron fist and with a democratic fase.

MARINHO

March 3rd, 2006, 08:49 PM

But guys don't be depressed Indonesia is member of the Group of 20 or the G20. This group consist of Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea,Turkey, the United Kingdom and the United States of America.

The G-20 thus brings together important industrial and emerging-market countries from all regions of the world. Together, member countries represent around 90 per cent of global gross national product, 80 per cent of world trade (including EU intra-trade) as well as two-thirds of the world's population. The G-20's economic weight and broad membership gives it a high degree of legitimacy and influence over the management of the global economy and financial system

Indonesia will gain more infuence in the future as China and India need huge amounts of natural resources to fuel their economy.

David-80

March 4th, 2006, 02:54 PM

But sell out after and the closure of Indonesian banks was the most stupid decision.

And what even more silly...the BLBI (funds for liquidation) are mostly being corrupted by those bankers...

cheers

Alvin

March 6th, 2006, 09:24 AM

From Yosef Ardi's (Bisnis Indonesia journalist) blog.
http://yosef-ardi.blogspot.com/

Ironies of investment in Indonesia

Just when the cabinet announces the new investment policies to lure in investors, politicians mounts pressures on foreign investors. Politicans like Amien Rais condemns Vice President Jusuf Kalla's defense on Freeport and keeps steering nationalism sentiment saying the US company should get out of this country and close down the giant mining in Papua.
Politicians also rejects ExxonMobil's US$2.5 billion investment in Cepu giant oil field yet praised government's 'success' in selling the US$2 billion global bonds as a signal of foreign investor's trust on this country. No nationalism issue raised in the global bond offer.
No regrets on Cemex's plan to exit from its investment in PT Semen Gresik Tbk, the largest cement producer in Indonesia. Politicians even urge government to buyback Cemex's US$400 million shares in Semen Gresik.
With such a level of distrust on foreign investors to put capital here, Indonesian's prefer to pay US$200 million in interest payment for the US$2 billion global bond. So, we trust the bond holders (investors) who actually creditors (not investors), but we don't like guys like Freeport, Exxon, and Cemex.
We tend to believe that the frenzy demand on the global bond send signal of trust on Indonesian economy. At some point, it might be true. But investment in bond or stocks are completely different with the foreign direct investment (FDI) in nature. Bond holders should not have to deal with the crazy bureaucracy and protection money for military or police. They could easily exit from the portfolio.That's not the case with FDI.
If we couldn't trust foreign investors (FDI) and the government who invited them in the first place can't protect their existence, why the cabinet should waste their time to make an investment policy package?
Why not asking Indonesian businessmen instead if that's the nationalism sentiment is all about. Ask Putera Sampoerna why he prefers to put his money in a London Casino, an Internet gambling business (Mansion) in Gibraltar, or invest US$170 million in Manchester United's shirts?
Politicians like Amien should ask Sukanto Tanoto why the owner of Raja Garuda Mas group planned to invest US$6 billion in China until 2010 and that US$2 billion had been invested there until now?
Respected members like Didik Rachbini or Tjahyo Kumolo might have to ask Sinar Mas Group why they invests US$4 billion in China? Ask Salim Group, whol already invested US$1.2 billion in China, why they prefers to put US$240 million in Mongolia to build a dairy farm? Why would Salim want to build a motorcycle plant in India?
If these guys are not Indonesian enough, ask Hashim Djoyohadikusumo and his brother Prabowo Subianto on their US$2.5 billion ventures in Khazakhstan and Azerbaijan.

Alvin

March 6th, 2006, 03:31 PM

latest report that came out couple days ago - www.imf.org

http://img157.imageshack.us/img157/9725/imf7gk.jpg

Zorobabel

March 8th, 2006, 04:15 AM

Alvin

March 8th, 2006, 08:27 AM

Indonesia seeks to boost footwear export to 4 bln USD by 2008

Indonesia has targeted to boost footwear export to 4 billion U.S. dollars by 2008 taking advantage from the European Union's recent move to increase duty on products from some other Asian countries, a newspaper said Wednesday.

Indonesia's footwear export valued at estimated 1.5 billion dollars in 2005 and is expected to climb to 1.7-1.8 billion dollars this year.

To achieve the target, Trade Minister Mari Elka Pangestu has urged footwear industries to increase investment, reported Bisnis Indonesia.

"I hope investment in supporting industries, such as raw material industry, will also expand," the minister was quoted as saying.

Meanwhile, the Indonesian Footwear Industries Association ( Aprisindo) has targeted to increase export to 1.95 billion dollars this year.

Aprisindo chairman Harijanto said the industry needed government support to acquire related materials.

"Imported materials are very crucial in footwear industry... Government support is very important to help us optimize the utilities of market opportunities in the European Union," said Harijanto.

Source: Xinhua

Alvin

March 8th, 2006, 08:30 AM

http://www.rieti.go.jp/jp/publications/dp/06e008.pdf

Technocracy in Indonesia: A Preliminary Analysis

This paper traces the evolution of technocracy in Indonesia, while asking how to explain the changing effectiveness of the economic team of ministers from the early Suharto era to the current era under President Susilo Bambang Yudhoyono in the economic policy decision making.
The paper argues that the technocracy nurtured by the New Order was cohesive and effective in part because of its shared academic background and technical expertise and in part because of its adherence to the three principles of balanced budget, open capital account, and pegged exchange rate system and its ability to serve as Soeharto's right arm in formulating and executing national development policies. In the late Soeharto era, however, these academic technocrats faced increasing challenges from engineers entrenched in the government agencies such as the Ministry of Industry, the Investment Coordination Agency and the BPPT (Agency for the Assessment and Application of Technology). Technocrats who, in alliance with the IMF, attempted to use the Asian crisis to force structural reforms on Indonesia found themselves shut out by Soeharto.
The transitional governments led by B.J. Habibie, Abdurrahman Wahid, and Megawati sought institutional and political alternatives to the discredited technocratic economic policy-making process. These alternatives ranged from putting technocrats in touch with other key players in Indonesia's economy and politics such as businessmen, the mass media, emerging politicians and future technocrats to the outright bypassing of technocracy to the empowerment of MOF for the sake of macroeconomic stability at the expense of BAPPENAS and long-term national planning. With the enactment of a series of laws governing the BI, government finance, and national development planning as well as constitutional revisions, however, a new institutional framework is now in place.
This new institutional framework will go a long way toward upholding the mid-term and long-term economic rationality of the policy-making process. But technocrats will now also become even more dependent on their ability to secure the backing of the president, whose decisions on economic policy will likely be influenced by non-technical and highly politicized issues. Moreover, the technical expertise that was once commanded only by the academic technocrats is now shared not just by technocratic bureaucrats, but also politicians and political (ex-)activists with backgrounds in economics. This means that a range of perspectives in economic thinking is now available for political appropriation. In this sense, it is clear that technocracy can no longer be shielded from "politics". In retrospect, it has never been. If it had once looked as if it was under the New Order, Soeharto made it appear so. But those days are over. Although the institutional foundation is now in place for the independence of Central Bank, the fiscal prudence of the Ministry of Finance and the planning function of the BAPPENAS, their performances ultimately depend on who runs these institutions and what political processes inform their operations.

Alvin

March 8th, 2006, 08:32 AM

Commentary: Indonesia needs investment to head off stagflation
By Andy Mukherjee Bloomberg News

TUESDAY, MARCH 7, 2006

The Indonesian authorities are faced with the unenviable task of fighting inflation in a slowing economy. Ever since the Indonesian government cut its pernicious fuel subsidies in October, more expensive gasoline and diesel have pushed up the inflation rate to more than 17 percent, compared with an average of 8 percent in the first nine months of 2005.

In three aggressive moves in the fourth quarter, the central bank increased its benchmark one-month interest rate, which was 10 percent before the spike in energy prices, to 12.75 percent. The increase in borrowing costs had a dual objective of stabilizing the rupiah, which had crashed to a four-year low in August, and arresting the relentless surge in consumer prices.

The first objective has been met successfully - too successfully, some would say - even as the second goal eludes: The Indonesian rupiah is now 10.7 percent dearer against the U.S. dollar than it was on Sept. 30. Inflation, however, still hovers close to 18 percent.

The International Monetary Fund in Washington is advising Bank Indonesia to "maintain a tightening bias" in monetary policy until "inflation shows clear signs of abating."

The central bank left its benchmark interest rate unchanged for the third straight month Tuesday, a decision most private-sector economists had been expecting because investment growth has collapsed even as a rising currency threatens to hurt exports.

Indonesia's gross domestic product expanded 4.9 percent in the final three months of 2005 from a year earlier, the slowest pace of growth in six quarters. According to an International Monetary Fund assessment, released last week, gross domestic product will expand between 4.5 percent and 5 percent this year.

That may be unacceptable to the new economic team of Coordinating Minister Boediono and Finance Minister Sri Mulyani Indrawati, who were appointed in December. President Susilo Bambang Yudhoyono gave them the task of restoring investor confidence and raising annual growth to at least 6 percent, the minimum pace required to create jobs and reduce poverty.

At least for the first half of the year, the ministers should not hope for much accommodation from the central bank, whose immediate priority must be to tackle inflation.

Most of the current year's rice crop is set to be harvested in March and April. That may ease food prices. At the same time, an expected increase in electricity tariffs could push up the overall inflation rate by one percentage point or more. What is not known is how soon that might be.

Until there is more clarity on the future path of inflation, it may be suicidal for Bank Indonesia to start easing rates to support growth. Its priority should be to establish the credibility of its inflation-targeting mechanism.

Stoking economic growth should be squarely the responsibility of the Finance Ministry. The budget deficit last year was less than 1 percent of GDP. That offers the government some leeway to spend more on public works.

Finance Minister Sri Mulyani is quite correct to "frontload" into the first quarter of this year about $1.4 billion of investment plans carried over from last year.

Fiscal pump-priming by itself will not be enough. A lot is riding on a long-awaited policy on improving the business climate.

From unfriendly taxation policies and cumbersome customs procedures to rigid labor laws and a legal system that refuses to recognize precedent, much in Indonesia needs to be fixed before the $276 billion economy can at least double the $8.9 billion in foreign direct investment it received last year.

A January survey by PricewaterhouseCoopers said that Indonesia was the third-most-difficult country for miners.

Exxon Mobil and the Indonesian state-owned oil company Pertamina have quarreled for more than four years over control of Cepu, the nation's biggest untapped oil field, even as oil production and exports decline.

Retrenchment costs in Indonesia amount to 145 weeks of wages, the sixth-highest in the world.

Boediono has made it clear that Indonesia's economic growth over the medium term should be supported by investment, which rose less than 2 percent from a year earlier in the fourth quarter of 2005.

A revival in investment is vital because consumer demand, which was buoyant in the fourth quarter despite rising fuel prices, may not be sustained while inflation remains a threat.

Automobile sales dropped 41 percent in January, the biggest decline in almost seven years.

A hawkish monetary policy coupled with a somewhat relaxed fiscal stance and an aggressive plan for improving the investment climate might be the only prudent course open to the Indonesian authorities while the U.S. Federal Reserve is still in a tightening mode.

Such a strategy might not lead to spectacular economic growth, though an inflation rate at or below the central bank's target of 9 percent this year will put Indonesia on track for a better 2007.

The Indonesian authorities are faced with the unenviable task of fighting inflation in a slowing economy. Ever since the Indonesian government cut its pernicious fuel subsidies in October, more expensive gasoline and diesel have pushed up the inflation rate to more than 17 percent, compared with an average of 8 percent in the first nine months of 2005.

In three aggressive moves in the fourth quarter, the central bank increased its benchmark one-month interest rate, which was 10 percent before the spike in energy prices, to 12.75 percent. The increase in borrowing costs had a dual objective of stabilizing the rupiah, which had crashed to a four-year low in August, and arresting the relentless surge in consumer prices.

The first objective has been met successfully - too successfully, some would say - even as the second goal eludes: The Indonesian rupiah is now 10.7 percent dearer against the U.S. dollar than it was on Sept. 30. Inflation, however, still hovers close to 18 percent.

The International Monetary Fund in Washington is advising Bank Indonesia to "maintain a tightening bias" in monetary policy until "inflation shows clear signs of abating."

The central bank left its benchmark interest rate unchanged for the third straight month Tuesday, a decision most private-sector economists had been expecting because investment growth has collapsed even as a rising currency threatens to hurt exports.

Indonesia's gross domestic product expanded 4.9 percent in the final three months of 2005 from a year earlier, the slowest pace of growth in six quarters. According to an International Monetary Fund assessment, released last week, gross domestic product will expand between 4.5 percent and 5 percent this year.

That may be unacceptable to the new economic team of Coordinating Minister Boediono and Finance Minister Sri Mulyani Indrawati, who were appointed in December. President Susilo Bambang Yudhoyono gave them the task of restoring investor confidence and raising annual growth to at least 6 percent, the minimum pace required to create jobs and reduce poverty.

At least for the first half of the year, the ministers should not hope for much accommodation from the central bank, whose immediate priority must be to tackle inflation.

Most of the current year's rice crop is set to be harvested in March and April. That may ease food prices. At the same time, an expected increase in electricity tariffs could push up the overall inflation rate by one percentage point or more. What is not known is how soon that might be.

Until there is more clarity on the future path of inflation, it may be suicidal for Bank Indonesia to start easing rates to support growth. Its priority should be to establish the credibility of its inflation-targeting mechanism.

Stoking economic growth should be squarely the responsibility of the Finance Ministry. The budget deficit last year was less than 1 percent of GDP. That offers the government some leeway to spend more on public works.

Finance Minister Sri Mulyani is quite correct to "frontload" into the first quarter of this year about $1.4 billion of investment plans carried over from last year.

Fiscal pump-priming by itself will not be enough. A lot is riding on a long-awaited policy on improving the business climate.

From unfriendly taxation policies and cumbersome customs procedures to rigid labor laws and a legal system that refuses to recognize precedent, much in Indonesia needs to be fixed before the $276 billion economy can at least double the $8.9 billion in foreign direct investment it received last year.

A January survey by PricewaterhouseCoopers said that Indonesia was the third-most-difficult country for miners.

Exxon Mobil and the Indonesian state-owned oil company Pertamina have quarreled for more than four years over control of Cepu, the nation's biggest untapped oil field, even as oil production and exports decline.

Retrenchment costs in Indonesia amount to 145 weeks of wages, the sixth-highest in the world.

Boediono has made it clear that Indonesia's economic growth over the medium term should be supported by investment, which rose less than 2 percent from a year earlier in the fourth quarter of 2005.

A revival in investment is vital because consumer demand, which was buoyant in the fourth quarter despite rising fuel prices, may not be sustained while inflation remains a threat.

Automobile sales dropped 41 percent in January, the biggest decline in almost seven years.

A hawkish monetary policy coupled with a somewhat relaxed fiscal stance and an aggressive plan for improving the investment climate might be the only prudent course open to the Indonesian authorities while the U.S. Federal Reserve is still in a tightening mode.

Such a strategy might not lead to spectacular economic growth, though an inflation rate at or below the central bank's target of 9 percent this year will put Indonesia on track for a better 2007.

David-80

March 8th, 2006, 01:34 PM

politicians mounts pressures on foreign investors. Politicans like Amien Rais condemns

Who listen to him? I mean get a life Amien, you're using students for your own agenda by forcing them the term "reformation and democrazy", but guess what? its all everything about Amien for president and Power to Amien.

cheers

Alvin

March 8th, 2006, 02:22 PM

Who listen to him? I mean get a life Amien, you're using students for your own agenda by forcing them the term "reformation and democrazy", but guess what? its all everything about Amien for president and Power to Amien.

cheers

he's just a sore loser, such a cameleon (bunglon).

Zorobabel

March 9th, 2006, 12:27 AM

Jakarta to sell 3 trln rph bonds next Tues

JAKARTA, March 7 (Reuters) - Indonesia aims to raise 3 trillion rupiah ($324.7 million) from sales of government bonds through an auction next Tuesday, finance ministry treasury director general Mulia Nasution told reporters.

Nasution said the auction was part of government efforts to help finance the state budget. The government plans to raise a net amount of 24.8 trillion rupiah in bonds this year.

Bonds to be sold will mature on Dec. 15, 2012 and June 15 2022, he said.

Indonesia, which has been trying to ease debt refinancing risks, has raised more than 8 trillion rupiah in auctions of domestic bonds this year.

The bond market has rebounded in recent months on inflows of foreign funds, helping the rupiah gain more than six percent against the dollar this year and easing concerns over inflation, currently hovering near six-year highs. ($1 = 9,238 rupiah)

David-80

March 10th, 2006, 04:57 PM

Summary from this story

-the $2,1 billion from Bonds is now in government bank account
-The government FOREX reserves is now at $41,04 Billion USD! (Good lord!)
-BI thinks rupiah can strenghten more than 9,000/usd in the coming days

My summary, I think, we will see less money spend on infrastructure project if the money from bonds is going to be stay for forex reserves in order to get more power for the micro/macro economic stability within Indonesia.

Dana Obligasi Internasional Sudah Masuk Rekening
--------------------------------------------------------------------------------

Jumat, 10 Maret 2006 18:12:26

StockWatch (Jakarta) - Hasil penerbitan obligasi internasional senilai US$ 2,157 miliar sudah masuk ke rekening Pemerintah Republik Indonesia di Bank of New York Amerika Serikat. Diharapkan dalam waktu dekat ini dana tersebut ditransfer ke rekening pemerintah di Bank Indonesia (BI).

menurut Dirjen Perbendaharaan Negara Depkeu, Mulia Nasution, hasil penerbitan obligasi yang kurang lebih Rp 18 triliun itu akan menambah cadangan devisa menjadi US$ 41,014 miliar dari sebelumnya US$ 38,857 miliar. Dana tersebut diharapkan akan memberikan sentimen positif kepada pasar finansial di Indonesia. "Kita mengharapkan rupiah bisa menguat setelah itu," katanya.

Sementara itu, Deputi Gubernur BI, Aslim Tadjuddin seusai shalat Jumat di Mesjid BI, Jakarta, mengatakan, potensi rupiah untuk menguat ke posisi di bawah Rp 9.000 per dolar AS masih besar. Investor, menurutnya, masih yakin fundamental Indonesia sudah jauh lebih baik sehingga tetap akan menanamkan dananya.

Pelemahan rupiah beberapa hari ini lebih kepada aksi ambil untung yang dilakukan para investor. Selain itu katanya selisih sukubunga Indonesia dibandingkan bunga Federal Reserved masih besar di level delapan persen. (nls)

source e-bursa.com

cheers

Zorobabel

March 11th, 2006, 12:56 AM

The rupiah already seems very stable in my opinion. Inflation is certainly not coming from an increase in the prices of imported good, but of domestic prices. Since the government will have made $2.4 billion from bond sales by Tuesday, I think they should seriously consider diverting at least a portion of those funds to jump-starting GDP growth in the first half of the year. Ahh, Sri Mulyani, you're a smart woman...

---

Indonesia May Double Monthly Bond Sales, Finance Minister Says

March 8 (Bloomberg) -- Indonesia may double monthly bond sales this year as the government raises money to finance public work projects and cover the budget deficit, Finance Minister Sri Mulyani Indrawati said.

Southeast Asia's largest economy may sell as much as 5 trillion rupiah ($541 million) of bonds a month this year, including debt to replace maturing issues, Sri Mulyani said yesterday. Government debt sales totaled 22.5 trillion rupiah in 2005, according to the finance ministry. Investors had bid for 48.7 trillion rupiah of bonds, the ministry said.

Sri Mulyani plans to spend 13 trillion rupiah in the first quarter to help spur the economy, which expanded 5.6 percent last year, less than the 6 percent growth the government forecast, as fuel prices rose. The government expects the budget deficit to widen this year from 0.5 percent of gross domestic product, or 13.97 trillion rupiah, in 2005.

``If you look at the net issuance plus the maturity it definitely will increase quite significantly from the previous year's profile of the monthly transactions,'' Sri Mulyani said in an interview in London yesterday. ``We are aiming almost close to five,'' trillion rupiah, she said.

The government expects its budget deficit to be about 1.1 percent of gross domestic product, wider than its previous forecast of 0.7 percent for 2006, Sri Mulyani said in January. She said yesterday the deficit will be ``around 1.1 or 1.2 percent of GDP.''

`Very Hard'

A government prediction for growth to accelerate this year to 6.2 percent, up from 5.6 percent in 2005, may be ``very hard'' to achieve, Sri Mulyani said.

``It's going to be very tough, I must say, considering the situation now that we are having,'' she said. ``For the government, in terms of planning as well as the policy target, we are still expecting to be really, really close to 6 percent. We're still expecting above the 2005 level.''

The government, which started issuing Treasury bonds in December 2002, sold 23.6 trillion rupiah of the securities in 2004, according to the finance ministry. The government last week raised $2 billion selling dollar-denominated bonds after selling $2.5 billion last year.

Further foreign-currency bond sales will only add to borrowings, Ai Ling Ngiam, associate director at Fitch Ratings, said in Singapore yesterday at a conference organized by Fitch. Foreign investment is a ``better alternative,'' she said.

`Our Objective'

``I cannot agree more,'' Sri Mulyani said, in response to Ai's comments. ``That's definitely our objective, of course.''

The government has been selling bonds at lower yields, which will help cut interest payments on about 450 trillion rupiah in securities held by local banks.

Indonesia plans to sell 3 trillion rupiah of bonds on March 14, Mulia Nasution, director general for treasury at Indonesia's Finance Ministry, said yesterday.

Moody's Investors Service may raise Indonesia's debt rating, the rating company said in a statement last month.

The nation's B2 foreign-currency rating, five steps below investment grade, will be reviewed for a possible upgrade after the budget deficit was less than 1 percent of gross domestic product last year, Moody's said in a statement Feb. 27.

Sri Mulyani spoke at the Asia2015 conference, a gathering of officials from countries such as Thailand and Bangladesh and international organizations including the World Bank.

Zorobabel

March 11th, 2006, 03:44 AM

Government accepts Japan's $1 billion loan offer

Urip Hudiono, The Jakarta Post, Jakarta

The government has in the end agreed to accept Japan's offer of a new US$1 billion loan package to support Indonesian development this year, but will continue to negotiate the terms and conditions of the projects that the loans are intended to help finance.

"We will continue to discuss and finalize the details of the planned projects," State Minister for National Development Planning Paskah Suzetta told reporters Thursday.

While confirming the decision to accept the loan offer, Paskah said the government would continue negotiations on the Indonesian request that the projects employ at least 70 percent local consultancy content, and at least 40 percent local product content.

"We would like to see more of the projects being untied ones," he said.

Coordinating Minister for the Economy Boediono had earlier indicated that Indonesia should avoid rejecting the offer, although he said that the final decision would be up to Paskah.

The state minister's decision came after the Japanese ambassador, Yutaka Iimura, requested a response to the offer by not later than March 31, which marks the end of Japan's fiscal year. He also said that he hoped a definitive decision would be made by Thursday (March 9) to allow Japan time to post the loans as official development aid allocations in its budget.

Japan plans to help finance nine infrastructure projects with the new loan package, including the construction of a subway line in Jakarta.

Last year, Japan committed ?114.83 billion (some $1.07 billion) through the Consultative Group on Indonesia (CGI) to help finance eight major infrastructure projects, aside from grants for the tsunami-stricken Aceh province.

This year, however, a new interest rate of 1.5 percent, up from 1.3 percent previously, will be applied to a number of loans on consideration that Indonesia's gross domestic product has increased to such an extent that Indonesia is now classified as a lower-to-middle-income bracket country.

Although the new rates will only apply to three general term projects, with the others all being preferential term projects with lower interest rates of between 0.4 and 0.75 percent, the issue had proven to be a constraint on the negotiations, besides the local content issue and a lack of preparedness on the Indonesian side for implementation of some of the projects.

The government hopes to raise Rp 35.11 trillion ($3.7 billion) from foreign loans to help cover this year's budget deficit, which is expected to reach Rp 22.4 trillion.

Indonesia's debt stock currently stands at US$61.04 billion, the Finance Ministry said, with the country having to allocate Rp 63 trillion for repayment of debt principal this year alone.

This has raised concern and criticism from the public that Indonesia may never be able to escape its debt trap, with many urging the government to reduce its future foreign borrowing.

Finance Minister Sri Mulyani Indrawati said that Indonesia may repay its $7.8 billion debt to the International Monetary Fund ahead of schedule. Meanwhile, as the negotiations on Japan's new loan offer appeared to stutter, Paskah said Indonesia might seek out lower cost foreign lenders, including China.

David-80

March 11th, 2006, 01:17 PM

The Japan loan, I read on newspaper, most of it will go for the MRT project though.

cheers

Alvin

March 11th, 2006, 02:18 PM

Indonesia postpones creditors meeting

Indonesia would postpone this year's meeting of the Consultative Group on Indonesia (CGI) until June, citing the sound condition of the budget thus far and the lack of urgency in taking out more foreign debt, a newspaper reported in Jakarta Saturday.

The delay of the creditors' annual meeting would also give time for better preparation, and a more comprehensive assessment of Indonesia's economy and its financing needs, it said.

"The meeting will likely be held sometime in June, not this March as was previously planned," Coordinating Minister for the Economy Boediono, who was quoted by the Jakarta Post as saying.

"But this is not because there are problems, but rather the financing of our budget is still secure, and should remain so, at least until that time," he said.

The CGI is a country-level group of creditor countries and international agencies that hold annual meetings to agree on development aid in the form of loans and grants for Indonesia following an assessment of the country's economic progress and financing needs.

It was formed in 1992, succeeding the dissolved Inter-Governmental Group on Indonesia (IGGI), with its largest contributors being Japan, the Manila-based Asian Development Bank (ADB), the Washington-based World Bank, and the International Monetary Fund (IMF).

Last year, the CGI pledged 3.4 billion U.S. dollars in loans and grants to help cover the budget deficit and support development programs. The group also pledged 1.2 billion U.S. dollar in support for the relief efforts after the Aceh tsunami disaster.

The government is seeking 35.1 trillion rupiah (some 3.7 billion U.S. dollars) in foreign loans to cover this year's budget deficit, which is expected to come in at 22.4 trillion U.S. dollars, or 0.7 percent of gross domestic product (GDP).

Indonesia's debt stock currently stands at 61.04 billion U.S. dollars.

Source: Xinhua

Alvin

March 12th, 2006, 08:20 AM

Indonesia's infrastructure drive hits potholes

Time is GMT + 8 hours
Posted: 12-Mar-2006 11:47 hrs

http://www.todayonline.com/OthPictures/SGE.TMK72.120306034628.photo00.quicklook.default-245x159.jpg

Cranes sit atop building under construction as sun sets in Jakarta. Disappearing roads have joined regular power outages, an overburdened phone network and a groaning railway system on Indonesia's list of things-to-fix as Southeast Asia's largest economy fights off a looming infrastructure crisis

The hazards of driving fast on Indonesian roads are escalating: if you don't hit one of the countless potholes, you may find your expressway sinking.
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Now analysts warn that unless investment perks up this year, Indonesia's economy may head in the same direction.
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Disappearing roads have joined regular power outages, an overburdened phone network and a groaning railway system on Indonesia's list of things-to-fix as Southeast Asia's largest economy fights off a looming infrastructure crisis.
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Few roads, bridges, power plants or any other pieces of infrastructure have been built here since the Asian financial crisis struck in 1997, crippling Indonesia and unleashing political turmoil as well.
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In 1996 Indonesia outranked Thailand, Taiwan, China and Sri Lanka in terms of infrastructure quality, according to figures in a government report released this month.
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Now, the world's fourth largest nation ranks close to bottom in the region for most of the indicators.
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It came in 11 out of 12 nations on its electrification rates, with just 53 percent of Indonesia's 220 million people connected to an electricity grid, figures in the report showed.
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It crawled in at last place on fixed telephone connections -- at four percent -- and eighth on its road network, with just 1.7 kilometers (miles) of roads per 1,000 people. And about 40 percent of that road network is damaged.
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Just 55 percent of people have access to sanitation, while only 14 percent have access to clean water, and national electricity supply is "at worrying levels," it said.
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"Outside Java and Bali, several regions are experiencing an electricity crisis because their systems operate with extremely low reserve margins of below 15 percent in average," it added.
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The government admitted last year that Indonesia needed up to 150 billion dollars over a five-year period to build infrastructure to revive the economy as it claws its way out of the 1990s crisis.
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"Indonesia's crumbling infrastructure is hurting the economy. The situation is very critical because the government has no money for maintaining what it has, let alone building anew," economist Sri Adiningsih from Gadjah Mada University told AFP.
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"For example, the sorry state of roads and traffic in Jakarta and its surrounding area is hampering economic activities and the movement of goods. It is very costly," she said.
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Two sections of a toll road linking Jakarta to Bandung in West Java province have dramatically subsided since it was hurriedly completed in April last year to coincide with a summit of the world's non-aligned nations.
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The government insists it is trying to turn the corner.
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In its report, it says it wants to accelerate infrastructure development by improving investment policy, streamlining administration and improving competitiveness. But it concedes it can fund only about 20 percent of projects from its budget and must rely on investors to foot the rest of the bill.
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In January 2005, it held a much-vaunted summit aimed at attracting foreign investors and announced 91 projects worth more than 22.5 billion dollars.
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The outlook document said 24 projects worth six billion dollars had been secured but National Development Minister Paskah Suzetta admitted recently that only about 20 percent of the projects on offer attracted foreign investors.
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"Investor interest is scant but the projects must go ahead," he said, conceding that it was difficult to attract foreign investors -- a reference to concerns about rampant corruption and legal uncertainty, among other disincentives.
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A second infrastructure summit has been postponed twice -- amid claims more time was needed to fine-tune regulations for the tender and implementation of the projects -- and is expected to be held later this year. Some 25 projects worth seven billion dollars are due to be offered.
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The government of President Susilo Bambang Yudhoyono, who assumed office in October 2004, is targetting economic growth of 6.6 percent this year after 5.05 percent in 2005.
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"Infrastructure is getting worse and this severely affects our competitiveness," economist Faisal Basri from the University of Indonesia told AFP.
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"How can the economy grow faster if roads are clogged, ports are congested and electricity is scarce?" — AFP

Alvin

March 13th, 2006, 10:39 AM

Posted: 13 March 2006 1606 hrs

Exxon Mobil to operate Indonesia's Cepu field: company spokesman

JAKARTA : ExxonMobil expects to sign an agreement with Indonesia's state oil and gas firm Pertamina which would see it operate the giant Cepu oil block after a long-running dispute.

Pertamina has been in a stand-off with the local unit of US giant ExxonMobil over who will operate Cepu, Indonesia's biggest oil discovery in decades. Foreign investors have been keenly observing the case.

"The negotiation for the JOA (joint operation agreement) has been concluded," Exxon Mobil spokesperson Maman Budiman said Monday.

He said talks ended last week but after the Pertamina's board of directors was reshuffled -- amid a warning from President Susilo Bambang Yudhoyono that the company would be overhauled -- the new management needed to take a look at the agreement first.

"They (Pertamina) are now ready to sign ... The legal entity (operating the field) will be Mobile Cepu," he added, referring to ExxonMobil's unit.

Pertamina officials are to hold key positions in the unit and a joint operation committee, chaired by Pertamina, will supervise it, he added.

ExxonMobil has a 45 percent stake in the Cepu field, while Pertamina also owns 45 percent and the remaining 10 percent is held by the local governments overseeing the area where the field is located.

The two sides signed a production-sharing agreement last September but the block's much-needed development has stalled over who should operate it.

The Cepu oil block is expected to produce some 170,000 barrels of oil per day (bpd). Indonesia now produces about one million bpd but output is falling.

- AFP /ls

XxRyoChanxX

March 14th, 2006, 08:53 AM

Zorobabel

March 15th, 2006, 07:35 AM

Can someone please explain this to me? They've already surpassed the entire year's projected proceeds for bond sales (right now at about $2.8 billion) in less than three months. The government also had $1.1 billion in unspent funds from last year. That means they should have about $3 billion for development expenditures in the first quarter, while they could spend the next three quarters raising more bonds to meet the initial budget's projection of Rp 25 trillion. $3 billion is more than 1% of the GDP and could be a serious boost to economic growth.

---

Govt sells more bonds than expected on high demand

The Jakarta Post, Jakarta

Thanks to strong demand, the government managed to sell Rp 7.2 trillion (some US$785 million) in bonds Tuesday, the biggest amount so far this year and more than double the original target.

Previously, the government had said its target was Rp 3 trillion.

Mulia Nasution, director general of the state treasury at the Finance Ministry, said that overall bids amounted to Rp 13.3 trillion.

Of the total bonds issued, six-year bonds with a weighted average yield of 12.399 percent accounted for Rp 2.1 trillion of the sales, while the remaining Rp 5.1 trillion was made up of 16-year bonds with an average yield of 12.82 percent.

According to the 2006 budget, the government plans to raise net proceeds of Rp 24.9 trillion from sales of both rupiah-dominated and dollar-dominated bonds throughout the year.

Most of the proceeds will be used to help cover this year's budget deficit, which it is estimated will reach Rp 22.4 trillion, or about 0.7 percent of the country's gross domestic product (GDP).

The next bond issue has been set for April 11.

Global rating agency Standard & Poor's has given Indonesia's foreign-currency debt a B+ rating, which is four levels below investment grade.

Meanwhile, Moody's Investors Service ranks Indonesia's foreign currency debt at B2, five levels below investment grade.

teddybear

March 16th, 2006, 02:13 AM

Mengapa Nasib Pengusaha di Jatim Makin Menderita?

Tarif Listrik untuk Dunia Usaha Baru Saja Naik 50 Persen
Tanpa adanya kenaikan tarif dasar listrik (TDL) yang kini ramai dibicarakan pun, dalam empat bulan ini, dunia usaha di Jatim sebenarnya sudah mendapat pukulan kenaikan tarif listrik rata-rata 50%. Dengan adanya wacana kenaikan TDL sekarang ini, dunia usaha semakin bingung. Pukulan apa lagi ini?

Seperti diketahui, sejak November 2005 secara sepihak PLN telah menetapkan batasan KWh dan KVA Waktu Beban Puncak (WBP) bagi pelanggan B3 (golongan bisnis > 200 KVA), I3 (industri > 200 KVA), I4 (industri > 30 MVA), dan P2 (pelanggan kantor > 200 KVA). Dari segi "kiat bisnis", kebijakan itu memang hebat. Sebab, tanpa mengumumkan kenaikan TDL, PLN sudah mendapatkan kenaikan pendapatan dari dunia usaha sebesar 50%.

Pelanggan kantor, bisnis, dan industri tertentu bisa jadi dipilih karena faktor politis untuk menghindari resistensi (protes) publik. Selain itu, karena faktor teknis pengukuran (tiga jenis pelanggan itu mempunyai fasilitas meter WBP-LWBP, sedangkan pelanggan rumah tangga tidak memilikinya). Meski efek dominonya tidak bisa dihindari, kenaikan harga-harga tetap sangat memberatkan masyarakat luas.

Secara sepihak PLN menetapkan bahwa KVA WBP maksimum hanya 50% dari daya kontrak. Sedangkan KWh WBP maksimum (batas) dihitung atas dasar 50% rata-rata pemakaian KWh WBP periode April sampai September 2005.

Tak pelak, pembatasan tersebut membuat pengusaha dan industriawan terkena dampak langsung. Namun, pelanggan kelas besar tersebut juga tak berkutik karena terperangkap dengan addendum atas nota kesepakatan (surat perjanjian jual beli listrik).

Nota kesepakatan itu, antara lain, berbunyi: Mengingat kondisi beban puncak Jawa Timur: a. Apabila pihak PLN mengalami kekurangan penyediaan tenaga listrik, pihak pelanggan bersedia dipadamkan aliran listriknya saat WBP sewaktu-waktu jika diperlukan pihak PLN.

b. Kedua pihak sepakat untuk mengadakan pertemuan rutin guna membahas, apabila ada, perubahan besarnya pembatasan pemakaian aliran listrik saat WBP.

Realisasi atas pembatasan itu sungguh memberatkan kalangan industri. Rata-rata denda WBP, baik disinsentif daya maupun pemakaian KWh, mencapai 50 persen dari rata-rata tagihan PLN bulan-bulan sebelumnya, atau sekitar 30 persen dari tagihan bulan berjalan.

Misalnya, pada tagihan rekening Februari 2006 di perusahaan A tercatat tagihan listrik Rp 3,1 miliar, maka Rp 950 juta adalah denda disinsentif. Pada perusahaan B, dari tagihan listrik Rp 90 juta, Rp 30 juta berupa denda WBP. Lantas, di perusahaan C, dari Rp 210 juta tagihan listrik, Rp 60 juta di antaranya berupa denda.

Wajar kalau para pengusaha menjerit. Sebab, denda itu dianggap unfair, memalukan, dan tidak lazim dalam etika transaksi jual beli listrik.

Pada saat sama pengusaha masih dipusingkan dengan dampak kenaikan harga BBM dan tuntutan UMK baru-baru ini yang belum teratasi. Bahkan, jeritan mereka lebih keras kala tidak ada kejelasan tentang nasib denda disinsentif ini kelak pasca kenaikan TDL 2006? Apakah dihapus, tetap, atau dikurangi?

Seperti biasanya, konsumen tidak pernah mendapat hak untuk mendapat informasi secara transparan dari perusahaan monopoli listrik pengemban tugas PSO (public service obligation) ini. Dalam surat edaran PLN perihal KWh dan KVA Batas WBP 10 November 2005 lalu, tidak disebutkan sampai kapan pemberlakuan batasan-batasan yang menyesakkan itu. Konsumen hanya bisa diam karena memang tidak ada pilihan.
****
Sudah selayaknya PLN meninjau denda disinsentif WBP agar lebih fair. Tidak hanya memasukkannya pada komponen perhitungan biaya pokok pengadaan (BPP) untuk meminimalkan rencana kenaikan TDL, tetapi juga meninjau masa depan denda disinsentif itu sendiri pasca-kenaikan TDL 2006. Transparansi PLN dalam menghitung besaran BPP, asumsi-asumsi, denda disinsentif, dan lain-lainnya dipastikan mengurangi resistensi masyarakat dalam menghadapi rencana kenaikan TDL tahun ini.

Hampir semua kalangan yang menolak kenaikan TDL menyangsikan seberapa baik efisiensi di tubuh BUMN kelistrikan ini. Seolah hendak berpesan: Efisienkan dulu, baru naik (baca Jawa Pos 13 Maret 2006 halaman 14). Kasus bagi-bagi tantiem saat PLN mengalami defisit parah, kasus mark up pengadaan pembangkit, serta susut jaringan (losses) yang masih 2 digit memperkuat stigma tersebut. Sepantasnya PLN memberikan klarifikasi sebagai bagian dari sosialisasi sebelum menaikkan TDL.

Uji efisiensi PLN paling mudah adalah dengan second opinion. Maksudnya, PLN mempersilakan swasta berpartisipasi dalam pembangkitan listrik dan kemudian membandingkan tingkat efisiensinya. Pada tataran ide, PLN sudah mempersilakan swasta untuk berpartisipasi. Tapi, praktiknya PLN masih saja pelit memberikan PPA (power purchasing agreement). Jadi, swasta yang mau masuk bisnis listrik sulit mendapat kredit dari lembaga keuangan.

Misbahul Huda
Penulis adalah alumni FT UGM, dan kini menjadi praktisi industri.

Alvin

March 16th, 2006, 08:48 AM

Singapore requests more free trade zones in RI

Singapore has asked Indonesia, Southeast Asia's largest economy, to establish more free trade and industrial zones similar to those on Batam island, a senior minister says.

The request was conveyed during a meeting between Vice President Jusuf Kalla and visiting Singapore Trade and Industry Minister Lim Hng Kiang on Wednesday.

"We discussed a request by Singapore for more free trade and industrial zones in Indonesia, like those in Batam. The government will soon issue a regulation on the establishment of such zones," said Coordinating Minister for the Economy Boediono.

Boediono said that besides Batam, the government was currently preparing to establish the Bojonegara area in Banten as an integrated economic zone with complete support facilities, including an international seaport hub.

There was also the possibility that similar zones would be established in Kalimantan and Sulawesi.

By giving preferential facilities to investors in these economic zones, the government hoped to accelerate the development of the country's manufacturing sector, and thereby create major employment opportunities, he said.

Further discussions on the issue would be held in Batam on March 18 between Kalla and Singapore Foreign Minister George Yong-Boon Yeo. -- JP

bahar

March 16th, 2006, 12:10 PM

I read in Straits Times a while ago that there will be 5 additional free trade zones in Indonesia:
1. Dumai - Riau
2. Bojonegara - Banten
3. Semarang - Central Java
4. Tuban - East Java
5. Makassar - South Sulawesi

Zorobabel

March 16th, 2006, 10:17 PM

I thought there were only enclave FTA areas in Batam? They should make the entire area a free trade zone.

Alvin

March 16th, 2006, 11:41 PM

Adviser Soapbox
Follow Condi And Exxon Into Indonesia
Carl Delfeld, Chartwell Advisor 03.16.06, 6:00 AM ET

COLORADO SPRINGS, Colo. - Secretary of State Condoleezza Rice's visit to Indonesia this week is hopefully the start of a much closer and broader relationship. This would be great news for Indonesia, America, the Asia-Pacific region and global investors.

The headlines will focus on global terrorism and the pivotal role Indonesia plays as the world's largest Muslim nation, though the vast majority of its population is more moderate and secular than the small number of Islamic extremists. Fair enough. For this reason alone democratic Indonesia warrants America's greatest attention, which has been sorely lacking. If we win in Iraq and lose ground in Indonesia, are we really better off?

A second great reason to be more fully engaged with Indonesia is trade and investment. It is a triple play of fostering higher economic growth and income in Indonesia, jobs and growth for America, and maintaining America's influence in the region, which is being undercut by powerful Chinese economic diplomacy. In fact, we need to pay more attention to Indonesia than the Chinese do.

Indonesia's President Yudhoyono, a combination of general, intellectual and bureaucrat, has made real progress in fostering market reforms. Many would categorize Indonesia as a relatively poor country, but I beg to differ. I have toured Indonesia from tip to tip, and it is a country with many assets and great promise. The nation, which is three times the size of Texas but has the world's fourth-largest population, is rich in natural resources, has a talented and young population, and is strategically positioned to benefit from Asian growth. As a relatively young democracy and developing economy, it lacks two important ingredients for economic growth: capital and a fiscal system to allocate it wisely.

Let's focus on oil and natural gas. The energy sector could dramatically jumpstart the Indonesian economy and stock market, while unleashing resources for badly needed education, health care and infrastructure. Right now, it is far below its potential.

The way that oil production has been handled over the past few years is worse than a blunder and is close to a crime. Indonesia has 10 billion barrels of proven and potential oil reserves and 180 trillion cubic feet of proven and potential natural gas reserves. Nevertheless, Indonesia, Asia's only member of OPEC, became a net importer of oil in 2004.

Help is on the way. After five years of tough negotiations, ExxonMobil (nyse: XOM - news - people ) and Pertamina have finally signing a joint-operating agreement this week

ExxonMobil has operated in Indonesia for a century and invested $17 billion in the country. The company also agreed to explore the dormant Cepu area years ago and, by using advanced technology, found 600 million barrels of proven oil reserves and 1.7 trillion cubic feet of gas. Prepared to invest $3 billion to develop the project, it has been waiting for two years to move forward, as Indonesia's state-owned energy company, Pertamina, waited for a better deal. Meanwhile, Indonesia's oil-production levels have fallen to less than 900,000 barrels per day!

At peak production, Cepu would provide the government of Indonesia with about $2 million per day in revenue, add 180,000 barrels per day in production and eliminate gas shortages in East Java. There are other projects that could move forward and, in total, could lead to a rising economic tide that would lifts all Indonesian people. Moving ahead with these projects would jumpstart the economy and bolster the confidence of foreign investors and capital markets. This is certainly a better option than sharply raising interest rates, a move that chokes economic growth and makes badly needed capital even more expensive.

The Indonesian stock market has been one of Asia's best this year--up 14%. Markets should respond favorably to this deal, and I suggest aggressive investors take a look at the closed-end Indonesian Fund (nyse: IF - news - people ) as the best vehicle with which to invest in Indonesia. It is managed by Credit Suisse Asset Management and trades at a premium of 7.7% to net asset value, with a price of $6.87.

Although this joint venture will help Indonesia once the oil starts flowing in 2008, it is important that America not just be seen as backing big-oil and mining interests. We need a bottom-up strategy that gets into the fabric of Indonesia, village by village. Indonesians need clean water, nutrition, power, consumer products, autos, consumer financing and much more. There is no reason American businesses cannot meet these needs for Indonesia.

Indonesia has taken the brave step of opening its financial-services sector to majority investment by international investors; let's hope they also open other areas such as infrastructure and power. The most important reform to make Indonesia more attractive to international capital is to set up a transparent and clear approval process to cut out red tape and corruption. Then reinvigorate a previously announced plan to privatize some of the largest of Indonesia's 145 state-owned companies to increase their profitability and raise more government revenue. Finally, why not follow ten other countries by putting in place a flat tax to rein in bureaucracy, stymie corruption and stimulate growth and productivity.

America needs to be seen as an active and close friend of Indonesia as it continues on the track of democracy, prosperity and progress.

Carl Delfeld is head of the global advisory firm Chartwell Partners and editor of Chartwell Advisor. He served as a director on the executive board of the Asian Development Bank during the administration of President George H. W. Bush and is the author of The New Global Investor. Click here for more analysis from Delfeld, or to subscribe to Chartwell Advisor.

Alvin

March 17th, 2006, 12:23 AM

3 police and 1 air force personnel killed by demonstrators in Papuan protest against Freeport. In Suharto's era, those demonstrators would probably have been shot at by now.

http://us.news3.yimg.com/us.i2.yimg.com/p/ap/20060316/capt.lon80503161526.indonesia_mine_protest_lon805.jpg?x=380&y=277&sig=ovTkzMAzxFFfE8jm3AMC1g--
http://us.news3.yimg.com/us.i2.yimg.com/p/ap/20060316/capt.jak10403161409.indonesia_mine_protest_jak104.jpg?x=380&y=250&sig=yLCaguqQUCom69yTQ5.XlA--

Zorobabel

March 17th, 2006, 07:01 AM

Indonesia opens a gusher
By Bill Guerin

JAKARTA - Spurred by the personal intervention of President Susilo Bambang Yudhoyono, Indonesia has brought to a dramatic end a four-year dispute between US oil giant ExxonMobil, the world's largest oil company, and Pertamina, Indonesia's largest state enterprise. The dispute involved rights to a massive oil discovery.

The Cepu oil-and-gas block, Indonesia's largest oil discovery in decades, has estimated recoverable reserves of as much as 600 million barrels of high quality reserves and 2 billion barrels of lesser-quality reserves. The field is also estimated to hold 11 trillion cubic feet of natural gas. Tapping the find promises to return Indonesia to the status of a petroleum-exporting country, and Yudhoyono's bold intervention in the deal was interpreted widely as a signal move towards a more foreign investment-friendly policy regime.

Exxon, which joined with Mobil Oil in 1998 in the largest industrial merger ever, has been operating in Indonesia since 1898. Its local operations are integrated under the subsidiary ExxonMobil Oil Indonesia Inc, which currently operates Indonesia's Arun gas field and is also developing a huge contested gas field near the Natuna Islands in the South China Sea.

Yudhoyono, who pledged early in his term to settle the protracted negotiations surrounding the Cepu contract, intervened in big-bang fashion last week, which came in the middle of a high-profile visit to Jakarta by US Secretary of State Condoleezza Rice.

The president fired six of Pertamina's seven directors and appointed Ari H Soemarno as the new director, replacing Widya Purnama, who was widely viewed to be at the core of the disagreement with ExxonMobil. Washington had lobbied heavily for a resolution, and the new contract signed on Wednesday gives Exxon the lead role.

The deal simultaneously represents a defeat for nationalist elements in Indonesia's legislature, suggesting that, contrary to the claim of his critics, Yudhoyono does indeed have the political will to take decisions in the national interest - even if it means siding with foreign investors.

Dwindling reserves
Although Indonesia is Asia's only member of the global Organization of Petroleum Exporting Countries (OPEC) cartel, dwindling oil output and decades of mismanagement at Pertamina has reversed the country's energy fortunes, making Indonesia a net oil importer for the past two years. While the 2006 state budget assumes oil production of 1.075 million barrels per day (bpd), the actual figure dropped to an average of around 970,000 bpd throughout last year.

Contradictory regulations, security problems, bureaucratic tangles and corruption, not to mention years of well-documented mismanagement at Pertamina, have stymied investment in new exploration in the oil and gas sector and led to declining output - although the Cepu agreement should go some way towards restoring the global oil industry's faith in Indonesia.

At a time when domestic fuel consumption is growing annually at 4%-5% and export demand for Indonesia's oil and gas is up almost 20% year-on-year, the urgency for a settlement with ExxonMobil was paramount. Current crude oil reserves are expected to be depleted by 2018, and Indonesia is in desperate need of new sources to boost production and resume its position as a net oil exporter. Last year the country had a massive US$7.3 billion oil trade deficit.

At full production capacity, which would require about $2 billion in new investments, it is estimated by 2008 Cepu could produce around 180,000 bpd. Analysts estimate that once Cepu is fully online, it would increase national production by some 20% and would restore Indonesia as a net oil exporter.

In Indonesia, the state owns all rights to petroleum and mineral finds. Foreign companies participate in the industry through production sharing and work contracts, which historically have often been prone to disagreement. Oil and gas contractors are required to finance all exploration, production and development costs in their contract areas, and are entitled to recover those expenses through sales revenues.

The enactment of new oil and gas legislation in June 2003 ended Pertamina's long-running regulatory role in the sector, which critics said often led to a conflict of interest with its production activities. The law effectively ended the state concern's upstream monopoly on handling exploration and refining contracts, and last year its longtime control over domestic distribution of fuel and petroleum-based products came to a close. Pertamina's regulatory role in the upstream sector was taken over by the state-managed Upstream Oil and Gas Implementing Body (BP Migas).

In January, a high-powered business delegation from the US, including representatives of oil companies ExxonMobil, ConocoPhillips and mining giant Freeport McMoRan, had pressed the Indonesian government to review its taxation policy on production sharing contracts and provide better incentives for their exploration activities. Specifically, they requested that the government give a clear-cut policy and explicit job descriptions for BP Migas and Pertamina, towards the aim of preventing future conflicts of interest.

BP Migas had earlier cited the Cepu difficulties as motivation for a new government plan to force foreign oil and gas investors to provide multimillion dollar performance bonds before they be allowed to sign production sharing contracts. The state agency now must approve all work and spending plans of production sharing contractors, including the Pertamina-ExxonMobil deal, and is responsible for determining what expenditures can be counted as expenses for oil and gas production operations.

New age contract
The Cepu deal cuts across Indonesia's geography in complicated ways. Part of the Cepu block is in Blora regency, Central Java, while another part is in Bojonegoro regency, East Java. Under the new agreement, Pertamina and ExxonMobil will each have a 45% equity holding in the block, with the remaining 10% - legally considered a participating interest - going to local administrations in East Java and Central Java, distributed 6.7% and 3.3% respectively.

ExxonMobil's local subsidiary, PT Mobil Cepu Ltd, will operate the block under a 30-year production-sharing contract with the government, under the supervision of the so-called Cepu Operation Committee (COC), drawn jointly from officials from ExxonMobil, Pertamina and local administrations. The committee will be empowered to take decisions on operations, development and budget, while Pertamina's subsidiary, PT Pertamina EP Cepu, will be the deputy operator of the block.

The ExxonMobil deal had featured prominently in Indonesia-US bilateral relations. On a visit to Washington last year, Yudhoyono told US oil executives that amendments to current laws governing oil and gas deals were in the works, which would offer more lucrative fiscal incentives, including a revision of the current 15% to 85% revenue split between oil producers and the government, as well as changes to the 35% to 65% split on natural gas deals.

For the Cepu deal, Exxon's take will range from 6.75% to 13.5%, depending on global oil prices. Although the contract's production split will give the government and local contractor the same 85% and 15% shares, the deal stipulates that global oil prices must average $45 per barrel or higher to maintain that pay structure, an unprecedented clause for an Indonesian energy deal. If world prices fall below $35, the split would diminish to 70% and 30% respectively.

Political energy
In August 1990, Pertamina, which was the governing Golkar Party's cash cow under former president Suharto, granted a 20-year concession to operate the Cepu block field to Humpuss Patragas (HPG), then owned by Suharto's youngest son, known locally as "Tommy", who is currently serving a jail sentence for ordering the murder of a supreme court judge. That deal was in cooperation with Australian Ampolex, which at the time owned a 49% stake in the field.

The deal was that HPG would get 35% of its production costs rebated after production. Pertamina and the contractor, HPG, would split the revenue from any excess oil produced over the agreed limits in the contract on a 65%-35% basis. But after years of unsuccessful exploration activities, HBG ran up severe debts and encountered cash flow problems, and was later forced to sell its 51% holding in the Cepu block to the Indonesian Bank Restructuring Agency (IBRA), a state-run asset rehabilitation agency established in the wake of the 1997-98 Asian financial crisis.

ExxonMobil Oil Indonesia bought both HPG's and Ampolex's stakes reportedly for around $90 million, through Mobil Cepu Ltd, acquiring 100% ownership. Soon thereafter, ExxonMobil discovered a huge reservoir of oil, the largest found in Indonesia for decades, that Pertamina had failed to hit on after nearly 30 years of plumbing the site.

Exxon said it was willing and able to invest $2 billion to develop the potentially lucrative field, but because the initial work contract was due to expire in 2010, the company sought a 20-year extension under the original terms. Pertamina proposed to act as the project's sole operator during the first five years under a new contract, a suggestion that Exxon flatly rejected unless the state-owned company put in half the development costs.

Despite the deadlock, Pertamina had said it was willing to go it alone in developing Cepu - even at the risk of facing a protracted arbitration lawsuit. Widya Purnama, Pertamina's president director at the time, said in October 2005 that the state oil firm had set aside $120 million to start drilling 30 wells in the Cepu's Sukawati and Banyu Urip fields.

Indonesian vested interest groups famously run exclusive agendas, aiming to bolster narrow personal benefits over broad national interests. Pertamina has neither the capital nor the expertise needed to develop such a major oil project, analysts say, and Hestu Bagyo, head of Pertamina's Cepu block exploration and production unit, has conceded this point in public.
Still, nationalistic sentiments have run on high since the 1997-98 Asian financial crisis, often ensnaring foreign investors. Other high-profile business disputes with foreign investors, such as with Mexican cement producer Cemex, US gold miner Newmont and the one brewing with US mining giant Freeport, reflect the risk to foreigners doing business in Indonesia. But with global commodity prices spiking up, foreign investors are nonetheless seeking new deals in Indonesia's resource rich territories, and hopes are that Yodhoyono's recent intervention will mitigate the political risks to new and existing investments.

Analysts say the resolution of the ExxonMobil deal, which is expected to start production in about 2.5 years, will bring massive benefits to the central government and also shore up newly-autonomous local regions. At peak production, citing the conservative future estimates of global oil prices averaging $35 per barrel, the government would earn as much as US$1.5 billion a year from the deal - excluding the revenues that would go to Pertamina as contractor.

"The project will create jobs, and of course it will bring benefits to the local economy," says Energy and Mineral Resources Minister Purnomo Yusgiantoro. Exxon has said it also plans to build roads, schools, medical clinics and other infrastructure for the project.

Marginal dissent
Nationalistic commentators had demanded that Pertamina maintain sole control of the Cepu block for the first five years of the project, and thereafter manage it with ExxonMobil managers on a rotating basis. American control would amount to another form of colonization, they claimed, and in any case they argued that Pertamina's local staffing expenses would keep down costs.

Although Yudhoyono's intervention has broadly cheered foreign investors, it's not yet clear that the nationalists have been completely pushed into the shadows. Over 400 Muslim protesters staged a rally in front of the US Embassy on Tuesday, slamming what they said was US interference in Indonesia's domestic affairs, citing in particular ExxonMobil's deal in Cepu and Freeport's investment in Papua. The protesters were predominantly from the Muslim radical Islamic groups Hizbut Tahrir and Majelis Mujahideen, led by convicted cleric Abu Bakar Baashir, the alleged leader of the militant Jemaah Islamiyah organization accused of masterminding the Bali bombings.

It's not just Islamic radicals that are making nationalistic demands, however. Sutarjo Suryoguritno, deputy speaker of the House of Representatives, warned that a ruling in favor of ExxonMobil would be tantamount "to us being colonized again ... I urge the government to return to the true path. We should take a firm stance, that the oil block is the right of Indonesia and its people," he told reporters. "We'll take every means, including legal and political measures, to fight the decision," echoed Tjatur Sapto of the National Mandate Party.

Yudhoyono, with his strong democratic mandate, at least for now is firmly in control and has shown no sign of being influenced by the nationalist opposition. He has important backing for his pro-foreign investment decisions from the secular-minded Golkar Party, which commands the most seats in the House of Representatives.

Agusman Effendy, chairman of the commission responsible for mining and energy and a political heavyweight from the secular Golkar Party, recently said that it was essential that the Cepu block start production as soon as possible. "We should not lose the momentum."

http://www.atimes.com/atimes/Southeast_Asia/HC17Ae03.html

Zorobabel

March 17th, 2006, 07:15 AM

Major sale just took place.

---

Indonesia Bumi Resources Sells Coal Mines For $3.2B

JAKARTA (Dow Jones)--Indonesia's PT Bumi Resources (BUMI.JK) Friday said it has sold its coal mine assets to a consortium controlled by unlisted PT Borneo Lumbung Energi, an affiliate of Indonesia-based PT Renaissance Capital, for $3.2 billion.

The nation's largest coal producer by output said in a statement that it has signed a binding sale and purchase agreement with the consortium to sell a 95% stake in coal miner PT Kaltim Prima Coal, or KPC, and a 100% stake in PT IndoCoal Resources Limited, which controls coal miner PT Aurtmin.

"The transaction is subject to customary completion conditions including shareholders' approval," Bumi said.

---

On the buyer from Yosef Ardi's site:

A consortium led by Renaissance Capital had signed the sales and purchase agreement (SPA) with PT Bumi Resources Tbk to acquire Bumi's shares in two major coal producers, PT Kaltim Prima Coal and PT Arutmin Indonesia at US$3.2 billion.

Sources said Bakrie Family put US$750 million in the consortium with the remaining US$2.5bn from debt instruments provided by some banks with Credit Suisse First Boston (CSFB) as the arranger.

Earlier this morning, Marubeni Corp had deposited US$150 million to Bumi's escrow account for the transaction.

tata

March 17th, 2006, 11:30 AM

3 police and 1 air force personnel killed by demonstrators in Papuan protest against Freeport. In Suharto's era, those demonstrators would probably have been shot at by now.

sh*t, this isn't good. they must deploy more anti riot police.

David-80

March 17th, 2006, 02:54 PM

JSX's massive performance today

Indonesia Shares End At Fresh Record High On Foreign Buys

JAKARTA (Dow Jones)--Indonesian shares ended sharply higher Friday as foreign investors continued to buy bank, automotive, cement and telecommunication blue chips, driving the main index to a fresh record close, dealers said.

They said buying was boosted by expectations that interest rates will continue to fall, providing support for an improvement in the nation's economic growth.

The Indonesian government expects the economy to expand by 6.2% this year, compared with 5.6% in 2005.

"Foreign funds continued to come to the equity market amid hopes that an improvement in the economy will support the financial performance of many companies," said an analyst with a foreign securities firm.

The Jakarta Stock Exchange Composite Index ended up 31.381 points, or 2.5%, at a fresh record close of 1305.178.

Gainers led decliners 74 to 42 with 81 stocks unchanged. Volume was 3.48 billion shares valued at IDR2.9 trillion, compared with 2.35 billion shares valued at IDR2.3 trillion Thursday.

Foreign funds spent IDR823.37 billion in net buying.

Heavyweight Telekomunikasi Indonesia jumped 5.5% to IDR6,750 on growing expectations that the government, which owns a 51.19% stake in Telkom, will ask the company to put aside 60% of its 2005 net profit for dividend payments, compared with 50% of the 2004 net profit.

Telkom's rival Indosat also rose 5.5% to IDR5,300 on bargain hunting after recent losses due to fears of poor 2005 earnings.

Dealers said investors continued to snap up shares in banks amid expectations of falling interest rates.

The central bank Wednesday cut the one month Bank Indonesia Certificate, or SBI, rate to 12.70% from 12.74%.

Analysts said the lower interest rate would provide room for banks to create a healthy net interest margin, improving their 2006 performance.

Bank Central Asia, the country's second largest bank in asset terms, gained 5.9% to IDR4,025, Bank Rakyat rose 3.9% to IDR4,000 and Bank Danamon ended up 6.5% at IDR4,500.

Shares in automotive company Astra International extended gains, rising 4.3% to IDR11,000 on expectations of improved 2006 car sales.

Cement maker Indocement Tunggal Prakarsa rose 6.5% to IDR4,525 and rival Semen Gresik gained 2.5% to IDR24,500 on expectations of improved 2006 sales as lower interest rates are expected to boost the property sector.

Dealers said they expect shares to continue to trade higher Monday on further incoming foreign funds.

Alvin

March 18th, 2006, 03:17 AM

PT Borneo Lumbung hanya SPV
Samin Tan bos baru KPC

JAKARTA: Konsorsium empat perusahaan-terdiri dari Marubeni Corporation, Thiess Contractor, Renaissance Capital, dan DBZ-berada di balik PT Borneo Lumbung Energi yang membeli tiga anak perusahaan PT Bumi Resources Tbk senilai US$2,6 miliar-US$3,2 miliar.
"Borneo digunakan sebagai kendaraan (special purpose vehicle) dalam mengakuisisi untuk menghindari masalah, terutama terkait dengan kewajiban mendivestasi KPC kepada pihak domestik," ujar sumber Bisnis yang mengetahui transaksi itu kemarin.

Ketiga perusahaan yang dibeli itu adalah PT Arutmin Indonesia (100% saham), PT Kaltim Prima Coal (95% saham), dan PT Indocoal Resources Limited (100% saham). Sedangkan PT Borneo Lumbung Energi merupakan perusahaan patungan antara Samin Tan yang menguasai 75% saham dan Surjadinata Sumantri yang memiliki 25%.

Samin juga tercatat sebagai Presdir Renaissance Capital. Samin dan Surjadinata adalah mantan auditor HTM-Deloitte Touche Tohmatsu. Sebelum bergabung di HTM-DTT, Samin tercatat sebagai staf di KPMG Indonesia.

Dia menangani banyak masalah perpajakan. Jabatan terakhirnya di HTM adalah managing partner divisi pajak. Tahun 2003, mereka keluar dari HTM untuk mendirikan bisnis baru.

Sementara itu, sumber lain menyebutkan bahwa Leighton Australia juga bergabung dengan Renaissance Capital. Tetapi belum ada konfirmasi mengenai hal itu.

Dalam transaksi penjualan aset batubara itu, menurut sumber tadi, Samin lebih banyak berperan dibandingkan dengan Surjadinata. Apalagi Samin juga didukung oleh satu konsorsium yang dibantu oleh penasihat investasi Credit Suisse First Boston (CSFB), sedangkan JP Morgan menjadi penasihat Bumi Resources dengan fee yang menggiurkan.

Ketika dikonfirmasi tadi malam, Samin tidak menjawab panggilan di telepon selularnya, sedangan Surjadinata mengatakan dia masih rapat.

Sumber tadi menjelaskan seluruh pendanaan yang bakal dikeluarkan oleh PT Borneo Lumbung Energi berasal dari konsorsium yang kemungkinan besar anggotanya tidak dibuka ke publik. Sedangkan dana untuk membiayai akuisisi aset batubara itu berasal dari CSFB yang sekaligus menjadi pemimpin dalam mencari pendanaan dari berbagai bank asing.

"Setelah proses akuisisi itu rampung yang ditargetkan tahun depan, Bumi dikabarkan mengubah namanya menjadi PT Bumi Energi yang berperan sebagai induk Energi Mega yang berfungsi sebagai operator minyak dan gas."

Bantah akuisisi

Presdir Bumi Ari Saptari Hudaya seperti dikutip Bloomberg kemarin membantah rencana akuisisi Energi Mega. Bumi juga menjajaki pembicaraan dengan Energi Mega untuk merealisasikan merger.

"Kami tidak akan menggunakan hasil dari penjualan itu untuk mengakuisisi Energi Mega. Transaksi dengan Energi masih jauh," tuturnya kepada Bisnis.

Ari menjelaskan jumlah dana yang bakal diterima Bumi akan mencapai US$2,6 miliar-US$3,2 miliar, karena transaksi memperhitungkan besaran utang di tiga anak usaha yang sekitar US$500 juta.

"Ini bukan beli putus, akan ada banyak penyesuaian sebelum transaksinya final. Jadi, angkanya bisa naik bisa turun, berkisar antara US$2,6 miliar dan US$3,2 miliar."

Pascaakuisisi Energi Mega, katanya, bakal menjadikan aset Bumi Resources membengkak sehingga sekelas dengan Xstrata. Perusahaan raksasa di bidang energi dari Australia itu akhir tahun lalu memiliki nilai aset sekitar US$8,13 miliar.

Dalam keterangannya kepada Bursa Efek Jakarta, Bumi menyatakan rencana penjualan aset batu bara itu sejalan dengan strategi usahanya yang ingin menjadi perusahaan energi dan sumber daya alam terdepan di Indonesia.

"Hal itu memungkinkan Bumi untuk melakukan penyesuaian portofolionya di sektor usaha yang dipercaya manajemen bakal memberikan potensi keuntungan lebih besar," tulis Sekretaris Perusahaan Bumi Geroad Jusuf.

Ke depan, Bumi akan mengambil peluang dalam pengembangan sumber energi alternatif seperti batu bara cair, briket batu bara, biomassa biodiesel, dan upgraded brown coal. (Adhitya Noviardi) (pudji.lestari@bisnis.co.id/wisnu.wijaya@bisnis.co.id)

Oleh Pudji Lestari & Wisnu Wijaya
Bisnis Indonesia

Alvin

March 18th, 2006, 03:36 AM

Rough translation of the above article, from Yosef Ardi's blog:

"Behind the US$3.2bn acquisition of KPC & Arutmin

PT Borneo Lumbung Energi finally won the US$3.2 billion deal to acquire two major coal producers PT Kaltim Prima Coal (KPC) at 95% sgares and 100% shares of PT Arutmin Indonesia from PT Bumi Resources Tbk. While the US$3.2 billion acquisition already become the largest acquisition in the country's stock market history, the deal is most likely just the beginning of something big.
Who are the beneficiary owners of the deal?
PT Borneo Lumbung Energi is owned by two shareholders of PT Renaissance Capital Asia, Mr Samin Tan and Mr Suryadinata with 75% and 25% shares respectively. With such scheme, the new owner have nothing to worry about the requirement to have minimum 51% shares of both KPC and Arutmin by Indonesian.
But for sure, Samin Tan and Suryadinata have no such amount of money. They got full support from four enterprises. They are PT Renaissance Capital Asia, Marubeni Corporation, Thiess Contractor, and DBZ. It's not clear of how much equity and debts in the deal. But sources said US$1 billion of equity and US$2.2 billion of debt arranged by Credit Suisse First Boston (CSFB).
Marubeni has reportedly deposited US$150 million, while Bakrie Family at US$700 million.
What's next?
PT Bumi Resources will acquire oil and gas producer PT Energi Mega Persada Tbk, and develop coal to liquid technology with South Africa's SASOL. The merger would likely to materialize next year.
New investments: Oil, gas, coal to liquid, biodiesel, biomass, and electricity.
What the Borneo Energi will do next?
That would be the vehicle to acquire PT Indocopper Investama which controls 9.4% shares of PT Freeport Indonesia. Bakrie Family once controlled the company before Soeharto's golf buddy Mohammad 'Bob' Hassan acquired Bakrie shares with Freeport's full financial support. Hasan failed to service the debts to Freeport which led to the US company's control of 100% of Indocopper. The value of Freeport's 9.4% shares is predicted at US$1 billion.
PS: Special thanks to a friend who is kind enough to provide most of the information in this article."

Alvin

March 20th, 2006, 08:03 AM

Newmont suspends exploration on Indonesian island after camp attack
(AP)

20 March 2006

JAKARTA - The Newmont mining company suspended gold and copper exploration on Indonesia’s Sumbawa Island after unidentified people torched a camp for its workers, the company said on Monday.

No one was injured Sunday when the assailants set the remote camp in Elang district on fire, but the attack underlined the difficulties facing foreign mining companies working in remote regions of the sprawling archipelago.

In a statement, the local subsidiary of Newmont Mining Corp. said the “unlawful and violent action” had forced it close the camp and suspend exploration activities in the area.

It said the attackers did not come with any demands.

Newmont “is disappointed that the illegal act by this small group of people has caused the larger community to suffer as many people will lose their jobs and businesses,” the company said.

Operations at the Denver-based company’s nearby mine on the same island were unaffected by the suspension, the statement said. Newmont has said it planned to open a second mine on Sumbawa, which it says still has rich reserves of copper and gold.

Mining companies in Indonesia face frequent protests by nearby residents demanding jobs or compensation for resources.

The companies also often have to fight off allegations that they pollute the local environment.

Poor law enforcement and local government compound the problems, which analysts say are stopping foreign companies from investing badly needed dollars in the country’s natural resources sector.

Newmont, the world’s largest gold miner, faces other problems elsewhere in Indonesia.

On Sulawesi island, one of its top American executives, Richard Ness, is facing criminal charges over allegations that waste from a now-closed gold mine polluted the bay and sickened villagers.

Freeport-McMoRan Copper & Gold Inc temporarily closed its massive Grasberg gold mine in Papua province last month after protesters demanding the right to mine its waste ore blockaded the facility.

XxRyoChanxX

March 20th, 2006, 08:52 AM

omg!!

sanhen

March 20th, 2006, 02:44 PM

i know it does not sounds good to attract new investment, but at least, hopefully, in the long run it can bring more good for people around the mines.

Zorobabel

March 21st, 2006, 12:14 AM

It's not better for the locals in the long term considering the local government would have received 5-10% of the revenues from any mining operation. Plus any sizeable mine would have created hundreds if not thousands of formal sector jobs for the local population. But I suppose if the people don't want investment and don't mind the food shortages they've been facing, they have that choice.

Alvin

March 21st, 2006, 02:11 AM

Summary: Andrew Steer (World Bank's Indonesia country director) said that government investment should be the main 'motor' of economic growth this year. Thanks to subsidy cuts last year, he expects govt expenditure to increase 60% this yr. But he's sticking wiht a conservative growth estimate of 5.5% for this yr and 5.8% for next yr.
------------------------------------------------------------------------1

Investasi pemerintah pacu laju ekonomi

NUSA DUA, Bali: Pertumbuhan ekonomi Indonesia tahun ini akan dimotori oleh investasi pemerintah, bukan oleh konsumsi masyarakat lagi.
Andrew Steer, Country Director Bank Dunia untuk Indonesia, memperkirakan pertumbuhan investasi pemerintah tahun ini mencapai 60% dari tahun lalu, sementara investasi swasta tumbuh 10%. Investasi di Indonesia, lanjutnya, akan mulai pulih pada paruh kedua tahun ini.

"Tahun lalu investasi pemerintah hanya 1,3% dari produk domestik bruto. Negara ini membutuhkan investasi pemerintah lebih banyak lagi," kata Steer dalam konferensi investasi Indonesia dengan tema mengakses pasar modal kemarin.

Dia juga menilai positif keputusan pemerintah yang menaikkan harga BBM pada tahun lalu sehingga memberikan dana lebih untuk diinvestasikan.

Global Markets Economist Standard Chartered Bank Fauzi Ichsan, yang turut hadir dalam acara tersebut, mengatakan perkiraan tersebut cukup realistis bagi Indonesia.

Dana yang dimiliki pemerintah sekitar Rp50 triliun hingga Rp80 triliun dari penghematan setelah pengurangan susidi BBM tahun lalu, merupakan potensi yang besar untuk menggerakkan investasi di Indonesia.

"Pemerintah harus segera menggunakan dana itu. Pengeluaran pemerintah akan membantu pertumbuhan ekonomi karena daya beli masyarakat mengalami penurunan setelah kenaikan BBM."

Dia memperkirakan pertumbuhan ekonomi Indonesia tahun ini sebesar 5,5% dan 5,8% pada tahun depan.

Tak perlu khawatir

Sementara Nicholas Kwan, Regional Head of Economic Research Standard Chartered Bank, mengatakan Indonesia tidak perlu khawatir dengan pesatnya pertumbuhan ekonomi China dan India.

Bila Indonesia bisa serius dalam menjalankan semua programnya, maka negara ini diperkirakan akan mampu menyaingi kedua motor penggerak perekonomian di Asia itu.

"Dalam tiga hingga lima tahun ke depan akan ada tiga mesin penggerak ekonomi di Asia yaitu China, India, dan Indonesia," ujar Nicholas Kwan yakin.

Dia juga mengatakan manfaat kenaikan harga BBM pada tahun lalu akan mulai dirasakan oleh Indonesia pada paruh kedua tahun ini.

Sementara Wakil Presiden Jusuf Kalla mengatakan Indonesia memiliki potensi besar bagi masuknya investasi asing.

"Krisis adalah cerita lalu. Tidak ada tempat yang benar-benar aman di dunia ini, termasuk Indonesia," ujarnya menanggapi ancaman keamanan yang sering menjadi salah satu alasan rendahnya investasi di Indonesia.

Kepala Badan Koordinasi Penanaman Modal (BKPM) Muhammad Lutfi mengatakan dia telah menerima keluhan dari para investor mengenai lima masalah utama yang menghambat investasi di Indonesia.

Lima masalah itu adalah penegakan hukum, peraturan tenaga kerja, sistem perpajakan, bea & cukai, serta infrastruktur.

"Jika ingin menyelesaikan masalah infrastruktur maka harus segera dibangun pembangkit listrik baru dan bandara baru," ujar Lutfi dalam sambutannya di acara tersebut.

Di depan para investor dan pelaku pasar yang hadir dalam kesempatan itu, dia juga menjamin pemerintah Indonesia pro pertumbuhan, pro penciptaan lapangan kerja, dan pro kesejahteraan.

Oleh Yeni H. Simanjuntak
Bisnis Indonesia

Alvin

March 21st, 2006, 05:06 AM

Lippo hints at taking Robinsons brand to key Asia-Pac markets
Kalpana Rashiwala
530 words
21 March 2006
Business Times Singapore
English
(c) 2006 Singapore Press Holdings Limited
Touted front-runner for OCBC's stake to also keep retailer's management

JAMES Riady of Indonesia's Lippo Group - reportedly the front-runner for OCBC's stake in Robinson - hinted yesterday that Lippo would take the retailer's trade names to Indonesia, China and other parts of the region.

Lippo, a conglomerate with interests in retailing, property and media, also plans to retain Robinson's existing management.

Market sources said yesterday that Lippo could offer OCBC about $8 per Robinson share.

While Mr Riady and his younger brother Stephen were mum yesterday about the group's bid for ODBC's stake in the Singapore-listed retailer, their excitement was obvious.

'Robinson is one of Singapore's jewels in the services sector,' Mr Riady told reporters on the sidelines of an MOU signing between NUS Business School and the Riady family's Universitas Pelita Harapan in Indonesia.

'And after all, Singapore is a service economy that attracts shoppers from around the region, and the government would like to see that sector expand even further, so we are quite excited about this.'

Lippo has been interested in the Singapore retail sector for the past couple of years, according to Mr Riady. 'I think the retailing sector in Singapore has a lot of strengths, a lot of expertise, a lot of know-how that could be exported into China, Indonesia and other parts of Asia.'

And those fearing a management change at Singapore's oldest retailer if Lippo becomes the biggest shareholder can rest easy. 'Robinson has excellent management. Anybody who goes into Robinson must be going there because of management.

'So the first thing you want to do is to make sure that they stay and get empowered to do even more, to perform even better and to go regional and intensify in Singapore - and build upon their great name, their brand names.

'I think there are a lot of opportunities for the brands to be developed further and to be capitalised upon beyond Singapore . . . If you want to be regional, you have to be in China and Indonesia, and eventually, probably India.'

Lippo controls Matahari - Indonesia's largest multi-format retailing group. 'And we have gone to China, and so when we have opportunities to expand further in the region, we would do that,' Mr Riady said.

The group has also been expanding its footprint in the Singapore property market. It has stakes in office buildings such as 78 Shenton Way, bought in August 2004 and since renamed Lippo Centre, and 79 Anson Road.

Last month, Lippo's Singapore-listed unit, Auric Pacific, bought One Phillip Street in the Raffles Place area.

Lippo has also been investing in the Singapore residential property market and has participated in all the high-profile land tenders over the past year.

Stephen Riady reiterated the group's continued interest in the Singapore property market, saying it will continue to scour for opportunities in the residential, office and retail sectors. 'Singapore is definitely one of the markets we like because it is a stable country, having good government, right environment,' he said.

Document STBT000020060320e23l0000t

Alvin

March 21st, 2006, 05:22 AM

DJ Indonesia Econ Min: Exports Hurt By China, India Rivals
298 words
20 March 2006
16:19
Dow Jones Chinese Financial Wire
English
Copyright (c) 2006, Dow Jones & Company, Inc.
BALI, Indonesia (Dow Jones)--Indonesia's economic growth is facing challenges from China and India, Coordinating Minister for the Economy Boediono said Monday.

The export sector is 'feeling the impact' of Indian and Chinese competition, Boediono said in a speech at an investment conference on the tourist resort island of Bali.

As a result, Boediono said the government of President Susilo Bambang Yudhoyono was committed to creating a 'dramatic change in the perception of Indonesia's investment environment.'

Indonesia's 5.6% gross domestic product growth in 2006 showed the country is well on its way to economic recovery, and growth will likely approach 6% in 2006, he said.

The economy would likely grow 6.0%-7.0% in the subsequent two to three years, he said.

Boediono said Bank Indonesia had taken 'decisive steps' to stem the slide in the value of the rupiah against the dollar in the third quarter of 2005. He said the bank's priority was now to reduce inflation to single digit levels by the end of 2006.

The central bank has forecast that inflation will be running at around 8% by the end of this year.

Boediono said the government is set to unveil a series of investment-boosting monetary and fiscal policy measures. But he said creating new job opportunities remains the government's greatest challenge.

Indonesia's economy creates 1.2 million-1.4 million new jobs annually, he said, but 1.6 million-1.8 million new job seekers enter the market each year.

'We aren't making progress (in new job creation)....We are losing ground,' he said. -By Phelim Kyne, Dow Jones Newswires; 62-3983 1277; djn.jakarta@dowjones.com

Alvin

March 21st, 2006, 06:21 AM

GE to Double Presence in Indonesia Over Five Years, Dean Says
March 21 (Bloomberg) -- General Electric Co., the world's second-largest company by market value, plans to double its presence in Indonesia, where it has invested more than $500 million since the 1990s, said Stuart Dean, its president for Southeast Asia.

``Our five-year plan is to double our presence in Indonesia,'' Dean said at an Indonesia investment conference in Bali today. ``Investments could be in infrastructure, health care, consumer finance and consumer manufacturing.''

Indonesia's central bank expects Southeast Asia's largest economy to grow between 5 percent and 5.7 percent this year, the fastest pace since before the Asian financial crisis of 1997 to 1998 because of rising investment.

President Susilo Bambang Yudhoyono wants to attract more than $420 billion in additional investment over the next five years to achieve faster growth and create more jobs in a nation where about 17 percent of the population doesn't have full-time employment.

GE, based in Fairfield, Connecticut, is the world's biggest maker of locomotives, power-plant turbines, jet engines and medical imaging equipment.

``Across all of our infrastructure businesses, aircraft engines, power generation, oil and gas, and rail, some of our largest installed bases are right here in Indonesia,'' Dean, who is based in Kuala Lumpur, said in an interview.

Economy

The size of GE's future investments in Indonesia will depend on ``what government policies are, how the projects evolve and what the economics of those opportunities look like,'' he said.

Indonesia's central bank raised interest rates six times in the five months to December to stem a slide in the rupiah and curb gains in the consumer price index, which reached a six-year high in November after the government doubled fuel prices. The government is also expected to raise electricity prices for the first time since 2003, to reduce subsidies and a budget deficit.

Zorobabel

March 21st, 2006, 06:56 AM

The title, in a sense, seems to hint that they are interested to begin pouring massive investments into Indonesia once the government establishes rule of law.

---

INTERVIEW:GE Wary Of Indonesia Infrastructure Investment

By Phelim Kyne

OF DOW JONES NEWSWIRES

NUSA DUA, BALI (Dow Jones)--U.S. corporate giant General Electric Co. (GE) will avoid large-scale investment in Indonesian infrastructure projects until the government addresses long-standing concerns about legal uncertainty, a senior company executive said recently.

The government of President Susilo Bambang Yudhoyono has recognized those concerns, including the need for credit and currency risk guarantees and contract sanctity assurance, but General Electric needs proof about the security of such investments before taking the plunge, GE Southeast Asia President Stuart L. Dean told Dow Jones Newswires.

"If we're going to bring in money, we have to fully understand what the rules are (and) I think we're headed in that direction, but we're not there yet from a GE comfort point of view," Dean said.

He was speaking on the sidelines of a blue-ribbon Indonesian investment conference on the tourist resort island of Bali.

"We're willing to invest in...infrastructure projects, but the ground rules have to be very clear and we have to make sure that the legal system will support those rights once they've been granted," he added.

General Electric's presence in Indonesia reaps the firm between $400 million to $500 million in annual revenue through operations including machinery sales for infrastructure projects in the oil and gas extraction and processing sector, lightbulb manufacturing and branded credit card operations through its GE Finance subsidiary.

Dean's comments reflect the lingering skepticism among foreign firms about the viability of the Indonesian government's aim to attract massive levels of foreign investment to help power a 6.6% average annual economic growth target from 2004 to 2009, analysts say.

Indonesia recorded a 5.6% on-year rise in gross domestic product in 2005 and the government has forecast a 6.2% on-year economic expansion in 2006.

After Failure Of Last Plan, Investors Want To See Progress

Analysts say that perceptions of judicial unpredictability and rampant corruption continue to dent investor confidence in the wisdom of large-scale investment to upgrade Indonesia's shambolic infrastructure including power grids, toll roads and port construction.

The government's failure to follow-through on a high-profile infrastructure investment program launched in early 2005 further dampened investor confidence.

Indonesia's Coordinating Minister for the Economy, Boediono, recentlyunveiled a long-awaited investment stimulus package that identifies key investor concerns and outlines a timetable for resolving them.

But Dean said that the government must move quickly to implement that plan and convincingly demonstrate the security of large-scale infrastructure investments in order to jump-start meaningful investor inflows.

"It wasn't until the last 30 days that (government ministers) began to talk about what reforms are (needed), let alone begin implementing them and getting them passed by parliament, so that investors know specifically what's going to be available," he said.

"Until those kind of details get worked out, it's impossible for most foreign investors to make a firm commitment," he said

GE is interested in infrastructure projects that will allow the firm to leverage both its technological and financing expertise, but Indonesia's current absence of credit and currency risk guarantees make the likelihood of such investment projects unlikely in the short-term, Dean said.

"In the twenty-year life of a power plant, you may have as many as three different (government) administrations, and if you have a populist government that lets inflation get out of control (and) the currency devalues and you have a project borrowed in dollars and selling its output in rupiah, that doesn't work," he said.

Dean said Indonesia's government must focus its energies in 2006 on implementing meaningful investor-friendly policies to overcome disappointment about last year's abandoned infrastructure development program and establish benchmarks for the attractiveness of the country's investment environment.

"They don't need to hit a home run, (but) they need to get a few projects done with credible foreign investors and then be able to say 'hey, look at the success stories,'" he said.

Zorobabel

March 21st, 2006, 07:11 AM

Inflation may be below 8 % in 2006
ANTARA News - 2006-03-21 11:24:26

Jakarta -March 20, 2006- (ANTARA News) - The Indonesia Central Bank (BI) Governor Burhanudin Abdullah said on Monday the statement by the government not to raise electricity tariffs will keep the inflation rate below 8 percent at the end of 2006.

"Given the government`s statement I hope that the inflation rate in 2006 will be better than expected," he said on the sidelines of an annual seminar on improving investment and the real sector here.

The central bank had earlier projected the inflation to reach 8 percent at the end of this year. "If the inflation is less than 8 percent that will be better. The government itself has targeted full-year inflation of 9 percent," he said.

In dialogs with businessmen on Bintan Island last Friday, Vice President Jusuf Kalla said the government had dropped a plan to raise electricity rates.

On-year inflation reached a six-year high of 18.38 percent last October after the government raised fuel prices for the second time in 2005.

Alvin

March 21st, 2006, 02:28 PM

DJ Indonesian Rupiah Ends Higher On Offshore Invest Inflows
362 words
21 March 2006
21:54
Dow Jones Chinese Financial Wire
English
Copyright (c) 2006, Dow Jones & Company, Inc.
JAKARTA (Dow Jones)--The Indonesian rupiah ended at a more-than-15-month high Tuesday, powered by offshore investors buying into Indonesia's equities market, dealers said.

The dollar closed at IDR9,114, down from Monday's close of IDR9,140 and marking the lowest end-of-day result for the U.S. unit since the IDR9,097 level reached on Dec. 7, 2004.

'Offshore inflows for equities and other offshore investment money just keeps coming into the country,' a dealer said.

'I think the trend is still pretty bullish for the rupiah.'

The Jakarta Stock Exchange Composite Index edged down 0.2% Tuesday, but that followed three days of gains that ended with a 1.8% rise Monday to a record close of 1330.113 points.

Foreign investors have been piling into Indonesia's equities markets due to increasingly upbeat sentiment about the country's economic outlook.

The government has targeted economic growth of 6.2% in 2006, which would outpace the 5.6% increase in 2005.

High expectations that President Susilo Bambang Yudhoyono's economic cabinet team will make significant progress this year in reducing regulatory and bureaucratic obstacles to investment growth are fueling investor sentiment, analysts say.

Dealers said the greenback will strengthen against the rupiah in the days ahead as local corporates make routine end-month dollar purchases to service foreign debt obligations.

But subtle intervention by Bank Indonesia through state-owned banks will likely keep the greenback from falling below the IDR9,000 level this week, dealers say.

Bank Indonesia officials routinely express their support for market forces determining the value of the rupiah against the dollar, but hedge those comments by adding that the central bank reserves the right to prevent potentially disruptive movements in the currency's value.

'We'll probably see Bank Indonesia selling dollars through state banks to smooth out the recent rise,' a dealer said, without elaborating.

Dealers expect the greenback will trade in a IDR9,090 to IDR9,115 band Wednesday. -By Phelim Kyne; Dow Jones Newswires; 62 21 3983 1277; phelim.kyne@dowjones.com

-Edited by Hilary Mc Cully

Alvin

March 22nd, 2006, 05:02 AM

Deal shows coal is king in Indonesia
Greg Earl
810 words
22 March 2006
Australian Financial Review
First
12
English
© 2006 Copyright John Fairfax Holdings Limited. www.afr.com Not available for re-distribution.
Asia-Pacific observed

When Aburizal Bakrie lost his job as Indonesia's economics minister last December, one of the unspoken reasons was the failure of the businessman-politician to boost investment - particularly from foreigners.

But last Friday the man who now serves as People's Welfare Minister might have felt he had fulfilled both ministerial responsibilities.

He secured a remarkable premium from a Japanese investor for coalmines dumped by BHP Billiton, Rio Tinto and BP only a few years ago and improved the welfare of one group of people hard hit by the 1997 financial crisis - his own family.

Uncertainty still surrounds the financing of the $4.4 billion sale of the Bakrie group's coalmines in Kalimantan but the second-biggest deal in Indonesian history has underlined a little-appreciated point.

When the rest of the country's mining industry is suffering from an investor drought and protests, coal is doing well and Indonesia has overtaken Australia as the world's biggest thermal coal exporter.

And the lure of coal is also being underlined by an unusually public brawl in a Singapore court between two powerful Indonesian business families over the sale of the country's second-largest coal exporter, Adaro, which used to be part-owned by Washington H. Soul Pattinson.

The Kalimantan mines sold by the Bakrie-related Bumi Resources on Friday have played the key role in boosting Indonesia's coal exports.

Bumi has sold the mines to an Indonesian investment bank with which it has close links before a deal with an investor consortium led by Japan's Marubeni Corporation.

The price tag is more than three times what Bumi paid BHP for 80 per cent of Arutmin in 2001 and Rio/BP for Kaltim Prima in 2003 and is also more than the $2.5 billion at which Bumi has been trading recently.

Even though thermal coal prices have fallen recently, the premium is at least partly explained by the sharp rise in the past few years due to Chinese demand and the search across Asia for oil substitutes.

But Bakrie also appears to have benefited once again from his skill at playing the native Indonesian business card in a country where big business has been dominated by foreigners or ethnic Chinese tycoons.

The Bakrie coal company started life as a hotel developer called Modern but changed its name to Bumi (which means native) in time to scoop up the foreign-owned mines when they were required to reduce foreign equity.

And Bumi presented itself as a particular saviour to the Kaltim Prima owners, who were being attacked by local activists and under central government pressure to sell half the mine very cheaply to the local Kalimantan government, but were able to exit entirely via the Bumi offer.

The 2003 Kaltim Prima deal underlined that Bakrie, now 59, was back in business after virtually losing the two-generation-old family company because it was so overleveraged when the 1997 financial crisis hit.

The family equity in its sprawling conglomerate, which started as a Sumatra oil palm plantation, was reportedly slashed to the low single digits as it negotiated with more than 200 creditors, but it retained a right to buy back the lost equity.

By 2004 Bakrie was one of the final candidates being considered by once dominant political party Golkar for the first direct presidential election, which was eventually won by Susilo Bambang Yudhoyono.

But with no majority in the parliament, Yudhoyono was forced to turn to Golkar to fill his ministry and Bakrie was given the top economics job on the basis that he could get investment going again.

But despite the global resources boom, mining investment growth has been a notable laggard.

This, combined with allegations of conflicts of interest, led to last December's ministerial shake-up that resulted in Bakrie being replaced by respected economist Boediono, who has adopted several pro-investment initiatives.

Bumi Resources says that it will use the money from the Marubeni consortium for other resource development projects such as biodiesel.

But it is interesting that the group now has a cash box just when a 10 per cent Indonesian national stake in the Papua copper mine run by Freeport McMoRan is up for grabs and its US owners are again under assault from local protesters.

In the early 1990s, Bakrie was the first owner of this Freeport stake when he was the favoured bumi businessman but lost it to Bob Hassan, an ethnic Chinese associate of former president Soeharto.

The government can't complain that Bakrie has finally attracted some real investment, but all this insider manoeuvring only underlines how badly overall Indonesian welfare is losing out from the failure to properly develop the country's resources.

Alvin

March 22nd, 2006, 10:59 AM

NEW INDONESIAN FISHING RULES PROMPT CHINA, MALAYSIA TO INVEST
179 words
22 March 2006
Asia Pulse
English
(c) 2006 Asia Pulse Pty Limited
JAKARTA, March 22 Asia Pulse - The government's decision to ban foreign fishing ships from operating in Indonesia if they are not investors in the fish processing industry or related sectors has forced foreign fishing companies to plan investment in the country.

After the termination of the present agreements with foreign countries, foreign fishing ships are allowed to resume operations in the country only if they have fish processing industry or related industries in the country.

A Chinese delegation led by Agriculture Minister Chien Hoa said in a meeting with Maritime and Fisheries Minister Freddy Numberi said Chinese investors want to build fish processing factories and fish ports with a total investment of at least Rp500 billion (US$54.3 million).

The project will be implemented before the present bilateral agreement on fishery expires in 2007, the delegation said.

Meanwhile, a Malaysian investor plans to build fish canning factory in Padang, West Sumatra, and procure 100 units of fishing vessels from Japan with a total investment of Rp200 billion.

(ANTARA)

Alvin

March 22nd, 2006, 11:01 AM

INDONESIA NEEDS US$11 BLN TO DEVELOP HUMAN RESOURCES: OFFICIAL
332 words
22 March 2006
Asia Pulse
English
(c) 2006 Asia Pulse Pty Limited
JAKARTA, March 21 Asia Pulse - The Indonesian government needs additional funds amounting to Rp103 trillion (US$11.3 billion) to upgrade the quality of the country's human resources in order to catch up with other countries' human resources' quality, a senior official said here on Tuesday.

"In order to improve the quality of our human resources and reach a par with other countries, we need a budget amount equal to 5.8 per cent of our gross domestic product, or about Rp103 trillion," Sujana Royat, deputy for people's welfare to the coordinating minister for people's, said.

He said the budget for the purpose still accounted for about 3.2 per cent only, but he did not disclose the exact amount the government had allocated for the development of human resources.

Speaking on the sidelines of a preliminary meeting of the National Human Resources Development Congress, Sujana said the funds for HRD development would be used to finance four main sectors, namely education, health, food and security.

He said the government also intended to improve the HRD system. "The government will improve the HRD system and empower field officers."

Sujana said that in developing human resources, the government would involve all stakeholders, including the private sector.

"We want to involve all sides and work together with them. We want also to create public understanding that this effort is not a high-cost exercise but a long-term investment," he added.

Up till July 2005, Indonesia's population had reached 241,973,879 with a growth rate of 1.45 per cent per annum.

The life expectancy of the Indonesian people is in average 69.57 years, or 67,13 years for men and 72.13 years for women.

The literacy rate for those over 15 years is recorded at 87.9 per cent, of which 92.5 per cent are men and 83.4 per cent are woman.

(ANTARA)

Alvin

March 22nd, 2006, 11:07 AM

INTERVIEW: JPMorgan Predicts Indonesia FDI Inflow Boom
By Phelim Kyne
Of DOW JONES NEWSWIRES
640 words
22 March 2006
14:26
Dow Jones International News
English
(c) 2006 Dow Jones & Company, Inc.
NUSA DUA, BALI (Dow Jones)--The Indonesian government's efforts to rectify deficiencies in the country's investment environment are about to reap the country a boom in foreign inflows, a senior executive with U.S. investment bank JPMorgan said recently.

The resolution last week of the festering joint operations contract deadlock between U.S. oil giant Exxon Mobil Corp. (XOM) and state-owned Pertamina (PTM.YY) over the massive East Java Cepu oil block was a significant symbolic victory in boosting investment confidence in Indonesia, JPMorgan Asia Pacific Chairman Ralph Parks told Dow Jones Newswires.

"Breaking the four year logjam in the Exxon negotiations (is) a great example...(of what's) needed, wanted (and) is being watched for, and has huge signaling value to investors right across the spectrum," Parks said.

Parks spoke on the sidelines of a blue-ribbon investment conference on the tourist resort island of Bali.

The protracted Cepu dispute stood as a symbolic warning to investors of the perils of Indonesia's investment environment.

Investors' perception that Indonesia suffered from an unpredictable judiciary, rampant corruption and flawed infrastructure has been a major deterrent to significant foreign investment inflows since the Asian financial crisis of 1997-1998.

The government of President Susilo Bambang Yudhoyono needs foreign investment to help fund an estimated $150 billion national infrastructure upgrade in order to help meet an average annual 6.6% economic expansion target for 2004-2009. Indonesia's government has forecast 6.2% on-year economic growth in 2006, outpacing the 5.6% on-year expansion last year.

Indonesia recorded a 30% on-year rise in approved FDI to $13.6 billion in 2005, reversing a 26.0% decline the previous year.

Parks said that Indonesia's government is poised to tap a torrent in foreign investment inflows if it can maintain bullish investment sentiment by adjusting regulatory obstacles blamed for denting investor confidence.

Indonesia Competitive Against China, India

Those changes include adjustments to Indonesia's labor rules as well as taxation, customs and excise laws, he said.

Indonesia's Coordinating Ministry for the Economy Boediono issued an investment stimulus package earlier this month that outlined a detailed timetable for regulatory revisions aimed to make the country's legal infrastructure more investment-friendly.

While some of the government's goals are "slightly aspirational," Parks said that even incremental changes to the country's legal framework will help spur investment inflows.

"We want to see some big wins, some early wins (and) some clear win-wins in terms of good outcomes," he said. "They don't have to solve all the problems, they just have to solve a few."

Parks said Indonesia's economy has impressed the foreign investment community with its proven "resilience" to a series of recent calamities, including a string of terrorist bombings across the archipelago since 2002.

The country is also demonstrating its competitiveness as an attractive foreign investment destination against bigger regional rivals.

While China and India are hobbling foreign investment inroads into their financial and retail sectors, respectively, Indonesia is providing relatively unrestricted access to those segments, Parks said.

He said foreign investors understand the challenges of policy change in Indonesia's often fractious democracy as it continues to recover from the damage of the 1997-1998 Asian financial crisis.

Investors will be patient as long as the Indonesian government maintains its current momentum in delivering needed policy reforms, he said.

"There is demonstrable evidence of progress on multiple (policy) fronts," Parks said.

"Implementation is difficult, particularly in a large, complex and bureaucratic country, and certainly Indonesia is all of those things, but the direction is correct."

-By Phelim Kyne; Dow Jones Newswires; 62 21 3983 1277; phelim.kyne@dowjones.com

Alvin

March 22nd, 2006, 01:27 PM

Figures just out - realised FDI for the first 2 months of 2006 is $2.2 billion, an increase of 286.9% from last year ($571.8 million)

Alvin

March 22nd, 2006, 01:32 PM

here's the news
--------------------------------------------

March 22, 2006 04:56 ET

Indonesia Jan-Feb Actual FDI $2.21B Vs $571.8M Yr Ago -2-

The board didn't provide a reason for the jump in actual FDI or the decline in FDI approvals during the period.

The rise in actual FDI indicates long-term foreign investors, not just speculators, are being drawn to Indonesia as sentiment toward the country improves.

The political climate has stabilized since President Susilo Bambang Yudhoyono was elected in late 2004. In addition, Yudhoyono's government has tried to improve the country's fiscal position and attract more foreign investment.

The recent resolution of the dispute between Exxon Mobil Corp. (XOM) and state-owned oil and gas company PT Pertamina over the control of the Cepu oil and gas block earlier this month is expected to further boost FDI in Indonesia.

The board said actual investment by local investors increased to IDR3.26 trillion ($360 million) during the first two months of 2006 from IDR2.46 trillion a year earlier, while the approval of new investment planned by local investors rose to IDR8.17 trillion from IDR6.72 trillion.

The government has said Indonesia needs around $87 billion in investment this year to achieve its economic growth target of 6.2%.

F-ian

March 22nd, 2006, 01:43 PM

Indonesia expects a growth spurt in 2007
By Aloysius Unditu Bloomberg News

TUESDAY, MARCH 21, 2006

JAKARTA Indonesia's economy may expand as much as 6.4 percent next year amid rising foreign investment, the finance minister, Sri Mulyani Indrawati, said Tuesday.

"We do hope that macroeconomic stability continues to improve and investment increases next year," Sri Mulyani said. "Funding for infrastructure development will also start to pour into the country."

The rupiah has climbed 15.6 percent from a four-year low on Aug. 30 as foreign investors return to Indonesia. The nation wants to attract more investment to build $150 billion of roads, seaports, airports and power plants.

Such projects would create more jobs. About 17 percent of the population lacks full-time employment.

A 6.4 percent pace of growth next year would be the fastest since before the Asian financial crisis of 1997-98. The $258 billion economy will probably expand from 5 percent to 5.7 percent this year, the Bank Indonesia governor, Burhanuddin Abdullah, said Monday.

Indonesia's economy grew 4.9 percent in the last three months of 2005, the slowest pace in six quarters, after the government more than doubled fuel prices and the central bank raised interest rates, reducing demand for homes, cars and other consumer goods.

The 5.6 percent growth last year was faster than the 5.1 percent pace in 2004.

Indonesia also expects a budget deficit of 0.3 percent to 0.7 percent of gross domestic product next year, Sri Mulyani said. The budget deficit was 0.5 percent of gross domestic product in 2005. The government had forecast a deficit of 0.9 percent in 2005.

Still, Indonesia's plan to attract more private funds to build infrastructure faces skepticism among some investors.

"Some of the budget assumptions are realistic enough, but the economic growth forecast is not," said Fauzi Ichsan, chief economist at Standard Chartered in Jakarta. "Private investors might be discouraged from investing in infrastructure until the government improves the investment climate."

The Indonesian government expects foreign investment to increase 12 percent to about $10 billion this year, from $8.9 billion in 2005.

In January, overseas investment surged 11-fold to $1.31 billion, led by investments in paper and pulp and food industries, according to the Investment Coordinating Board in Indonesia. Foreign direct investment helped Indonesia add 34,100 jobs in January, the agency said.

Funds flowing into Indonesia may increase once the government enacts a law that will improve investment procedures. The government may enact the law in March, Muhammad Lutfi, chairman of the Investment Coordinating Board, said last month.

The government has delayed a conference meant to attract companies to invest in building roads, ports and power plants to as late as June from February because it wants to pass the law before meeting investors.

Indonesia offered about 91 projects valued at $22 billion at the first such conference held in January last year. Of the total, one project has been completed, while five are under way.

Alvin

March 22nd, 2006, 02:22 PM

Btw, FDI approvals (not actual) dropped from $3.25bn last year to $1.27 bn this yr (first 2 months). I wonder why?

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

Indonesia official hopeful 2006 FDI approvals will rise despite weak Jan-Feb
347 words
22 March 2006
AFX Asia
English
(c) 2006, AFX Asia. All rights reserved.
JAKARTA (XFN-ASIA) - Foreign direct investment (FDI) approvals in Indonesia this year can still exceed last year's level of 13.58 bln usd despite a sharp drop in the first two months of the year, National Investment Coordinating Board (BKPM) chairman Muhamad Lutfi said.

"Hopefully, approvals will pick up in the second half (of this year)," Lutfi told XFN-Asia.

He cited the expected passage of a new investment law and tax incentive plan as among the reasons for being optimistic about Indonesia's prospects for attracting more FDI.

BKPM data released earlier today showed that FDI approvals fell 61 pct in the two months to February to 1.27 bln usd from 3.25 bln in the same period last year.

"It (the decline) could be the impact of last year's fuel price hikes," Lufti said.

Last year, the government raised fuel prices for transportation and household use by an average of 29 pct in March and again by 126 pct in October. For industrial consumption, the government removed subsidies and pegged fuel rates to the market prices since last July.

Lutfi said he hopes investment climate will improve this year.

The government has submitted an investment bill to parliament yesterday and will soon name a team to discuss the draft law with legislators.

Among the aims of the bill is to reduce the cost and time needed to set up businesses in Indonesia to about 30 days from 150 days currently.

The draft bill will also reduce the authority of the investment board from an approving agency to one that handles registration.

Indonesia is ranked 115 out of 155 countries in terms of the ease-of-doing-business index, trailing way behind its regional rivals, according to a survey by the International Finance Corporation.

Six East Asian economies made the list of top 30 economies in the world in terms of the ease-of-doing-business index.

(1 usd = 9,130 rupiah)

Zorobabel

March 22nd, 2006, 06:17 PM

It's as I thought. They won't pick up until the economy picks up.

Alvin

March 23rd, 2006, 01:31 AM

Indonesia: Country forecast summary

8 March 2006
Economist Intelligence Unit - ViewsWire
ViewsWire
58
English
(C) 2006 The Economist Intelligence Unit Ltd.
COUNTRY VIEW

FROM THE ECONOMIST INTELLIGENCE UNIT

The president, Susilo Bambang Yudhoyono, is backed by an informal coalition of parties that gives him a governing majority, but the legislative process is still likely to be fractious. From 2007 government effectiveness is expected to become more problematic as parties and key individuals, such as the vice-president, Jusuf Kalla, start to disassociate themselves from the administration in preparation for the parliamentary and presidential elections in 2009. Mr Yudhoyono’s success as president will be measured by his ability to fulfil his election pledges to fight corruption, improve national security and create jobs.

Although Mr Yudhoyono has successfully brokered a peace agreement with the separatist Free Aceh Movement (GAM), there are signs of rising discontent in Papua. The government and the security forces are also facing rising tensions between the Muslim and Christian communities in Central Sulawesi and the ever-present threat of Islamist terrorism.

Relations with Australia are improving and a bilateral security pact is expected to be signed in 2006. Relations with the US are also improving, and in November 2005 the US restored full military relations, but the Indonesian government will continue to harbour concerns about US foreign policy.

The monetary policy stance of Bank Indonesia (the central bank) is likely to remain prudent, but there are concerns about the bank’s ability to take pre-emptive action. Fiscal policy will be constrained by the government’s heavy domestic and external debt-servicing obligations, but there will be a steady increase in capital expenditure as a percentage of GDP.

Real GDP growth will average 6.1% a year in 2006-10, reflecting a return to positive, if tentative, foreign investment inflows and steady growth in investment demand. Consumer price inflation is forecast to average 6.7% a year in 2006-10, helped by lower global oil prices from 2007.

The current account will remain in surplus in 2006-10, owing to robust merchandise trade surpluses. The stock of external debt will be largely unchanged over the forecast period, reflecting an ongoing reluctance on the part of both the public and the private sector to borrow abroad.

The government is expected to make a sustained effort to improve the operating environment during the next five years. However, progress on combating corruption and on reform of the judiciary will be slow, given the entrenched nature of vested interests.

Key indicators 2005 2006 2007 2008 2009 2010
Real GDP growth (%) 5.6 5.8 6.2 6.4 6.0 6.4
Consumer price inflation (av; %) 10.5 15.2 6.2 4.6 4.0 3.6
Budget balance (% of GDP) -0.5 -1.1 -0.8 -0.8 -1.0 -1.4
Current-account balance (% of GDP) 0.8 0.6 0.5 0.4 0.5 0.4
Deposit rate (av; %) 7.9 8.4 5.8 5.5 5.2 5.2
Exchange rate Rp:US$ (av) 9,705 9,870 10,170 10,387 10,630 10,887
Exchange rate Rp:¥100 (av) 8,816 8,774 9,733 10,309 10,630 10,887

Alvin

March 23rd, 2006, 01:35 AM

Indonesia: Business environment at a glance
359 words
8 March 2006
Economist Intelligence Unit - ViewsWire
ViewsWire
56
English
(C) 2006 The Economist Intelligence Unit Ltd.
COUNTRY VIEW

FROM THE ECONOMIST INTELLIGENCE UNIT

Policy towards private enterprise and competition

2006-07: The government tries to reduce the corporate cost base by simplifying bureaucratic procedures and tackling corruption. Policies to support small and medium-sized enterprises are enacted.

2008-10: Less state regulation in the energy and services sectors will create a more favourable environment for private enterprise.

Policy towards foreign investment

2006-07: Government efforts to encourage foreign investment are stepped up; tax incentives in key sectors are likely to be offered, and procedures simplified. Attempts at judicial reform begin in earnest.

2008-10: Liberalisation in the utilities sectors (including power) will provide attractive opportunities for foreign investors.

Foreign trade and exchange controls

2006-07: Some restrictions on imports—primarily of agricultural goods—remain in place, but, barring a crisis, capital controls will not be considered.

2008-10: Liberal foreign-exchange policies will remain in force, and the trade regime will be deregulated further.

Taxes

2006-07: The government proposes an overhaul of the tax schedule, which will attempt to lower the corporate tax burden, reduce tax evasion and increase coverage.

2008-10: Efforts to improve tax collection and coverage will continue.

Financing

2006-07: The high level of foreign participation in the banking sector encourages competition, modernisation and a more transparent operating regime.

2008-10: Improvements in the health of the corporate sector will encourage banks to increase corporate lending.

The labour market

2006-07: Planned new labour laws would introduce greater flexibility into the labour market, and in particular, make it easier to sack employees, but the laws may be watered down as a result of parliamentary opposition.

2008-10: Skills shortages in the labour market will become a problem as Indonesia seeks to move into higher value added industries.

Infrastructure

2006-07: The government has pledged to prioritise infrastructure development. Incentives are offered to encourage private-sector investment.

2008-10: The gradual improvement of the business environment will prompt a modest recovery in investment in infrastructure, particularly in more potentially profitable areas, such as telecommunications.

Alvin

March 23rd, 2006, 04:47 AM

Indonesia May Enforce Overseas Arbitration of Business Disputes

March 23 (Bloomberg) -- Indonesia may enforce international arbitration awards arising from business disputes under a government-sponsored law that aims to boost investment in Southeast Asia's biggest economy.

The new law will ``give more certainty to our foreign investors for them to clarify disputes,'' Investment Coordination Board Chairman Muhammad Lutfi said in an interview in Bali on March 21. If we have ``certainty of law, (allow) repatriation of money, honor arbitration from overseas, simplify licenses, we will be at par with others in the region.''

President Susilo Bambang Yudhoyono's administration will seek parliamentary approval for the law in April. The government wants to attract $426 billion of investment by 2009 to boost economic growth to an average 6.6 percent and improve the living conditions of about 40 million Indonesians who live on the equivalent of 40 cents a day.

While Indonesia is a signatory to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitration Awards, companies often struggle to enforce rulings. The arbitration award must be recognized by the Supreme Court and can't violate public policy. Indonesia only recognizes international arbitration rulings from countries with which it has a treaty covering the mediation of business disputes.

``The court is the one which probably delays or annuls the arbitration awards,'' said Mulya Lubis, partner at law firm Lubis, Santosa & Maulana in Jakarta. ``The inclusion in the investment law of the article only underlines that Indonesia should honor the foreign arbitration award. The Supreme Court should be more firm to enforce foreign arbitration awards.''

`Sense of Assurance'

Investors have asked Indonesia to improve legal standards. In 2002, an Indonesian court ordered the cancellation of a $261 million Swiss arbitration award against state oil company PT Pertamina that U.S. utility Karaha Bodas Co. won in litigation over a power project that collapsed in 1998.

``If you have the rule of law, then you're going to get investment in factories,'' George Soros, whose personal fortune is estimated at $7 billion by Forbes, said in Jakarta on Jan. 5. ``You have to assure or give a sense of assurance to investors in direct investments that they will be fairly treated and that their property rights are respected.''

More funds may begin flowing into Indonesia once the government enacts the law, Lutfi said. The new regulations will replace a law introduced in 1967.

Projects

The government has delayed a conference meant to attract companies to invest in building roads, ports and power plants to as late as June from February because it wants to pass the law before meeting investors.

Indonesia offered about 91 projects valued at $22 billion at the first such conference held in January last year. Just one of those projects has been completed, while five are under way.

The government is completing plans to invite bids for six projects, while it may scrap 19, Suyono Dikun, a deputy at the Coordinating Ministry for Economic Affairs, said on Dec. 29.

Indonesia needs to simplify its investment rules to compete against regional rivals as well as China, which attracted $60 billion of investments in 2005.

The government also needs to ensure that rules issued by provincial governments don't clash with federal investment laws, Lubis said.

To contact the reporter on this story:
Arijit Ghosh in Bali, Indonesia at aghosh@bloomberg.net.

Zorobabel

March 23rd, 2006, 08:19 AM

Resource Investor
Is It Time to Steer Clear of Indonesia?
By Jon A. Nones

St. Louis (ResourceInvestor.com) -- After weeks of relentless protests
staged against Freeport-McMoRan’s Grasberg mine, it would appear Newmont
is the next target. But as most of us know, Newmont is no stranger to
trouble in Indonesia. When is it time to say enough is enough in this
volatile country?

Barely one month after Newmont Mining [NYSE:NEM] agreed to pay Indonesia
$30 million to settle a civil suit over pollution at Buyat Bay, an
unidentified group of 50 people today torched a worker camp on the
company’s Sumbawa Island property.

According to various press wires, the assailants were demanding
unspecified amounts of “compensation” for the exploration activity.
Newmont was forced to close the Elang camp and suspend exploration in the
area, but work at its massive Batu Hijau copper-gold mine on the island
was unaffected.

Fortunately, no one was injured in the attack, which is more than we can
say for the ongoing protests aimed at Freeport-McMoRan [NYSE:FCX].

Just last week, three policemen and a soldier in Indonesia's Papua
province died in clashes with protesters over Freeport-McMoran’s Grasberg
mine. Around 19 other police officers had to be rushed to the hospital due
to injuries.

Freeport was forced to suspend operations on March 1 after 500 locals set
up barricades on a road leading to the site. The protestors were demanding
the right to illegally sift through and sell tiny amounts of gold and
copper in the tailings river.

And this followed with protests in Jayapura and Jakarta led by the
anti-mining NGO groups, where “scuffles” were and still are frequently
erupting.

Richard Adkerson, President and CEO of Freeport-McMoRan, told listeners at
the BMO Nesbitt Burns Global Resources Conference earlier this month:
“This is just part of the scenery of being in the mining industry today.”

However, even Indonesia's President Susilo Bambang Yudhoyono said he was
sending officials to the scene and his ministers would investigate issues
raised in controversy over the mine.

There have also been rallies over a deal last week between Indonesia's
state-owned oil company and Exxon Mobil Corp. [NYSE:XOM] to jointly
operate the country's largest untapped oil field in Cepu, Java Island.

And don’t forget, Newmont executive Richard Ness still faces criminal
charges in the country. And the list goes on and on
.

Granted, giants like Newmont and Freeport-McMoRan have more resources per
say to overcome much of this risk. But what of the juniors currently
exploring?

Junior Companies
Aside from the big boys mentioned above and nickel giant Inco [NYSE:N;
TSX:N], there are a number of junior exploration companies currently
braving Indonesia.

Pencari Mining Corporation [TSXv:PMC], formerly Azure Resources Corp., has
a 90% interest in the Pani Property, located in North Sulawesi, Indonesia.
The property was previously explored by BHP and Utah Mineral International
Corp, and has an indicated resource of 431,451 ounces of gold and an
inferred resource of 31,814 ounces.

Petromin Resources Ltd [TSXv:PTR] maintains a 70% interest in the Muko
Muko gold mining property in the province of Bengkulu in south Sumatra,
Indonesia. The land covers over 500 square miles (approximately 151,000
hectares) within the northern portion of the Lebong Gold District, which
includes a trend of old mines and mineral properties that stretches for
approximately 150 km along the west side of the Great Sumatran Fault.

Twin Mining Corporation [TSX:TWG] has an 85% interest in the Layuh
gold-copper property, located in the province of South Kalimantan.
According to the company, a number of short trenches have returned
encouraging results: one trench showing 15 metres at 2.15 g/t Au and
anomalous samples occurring throughout the whole length of the 40 metre
trench.

Vista Gold Corp [AMEX:VGZ; TSX:VGZ] acquired the Awak Mas property in May
2005, located in Sulawesi, Indonesia. The deposit contains a measure and
indicated resource of 1.65 million ounces of gold, according to company.

Waseco Resources Inc [TSXv:WRI] owns the Tewah Alluvial Gold property in
Kalimantan. The deposit contains 750,000 ounce gold resource with an
additional 2 million ounces identified by riverbanks. Should financing
become available, the company predicts a cash cost of $93/oz with a mine
life of 17 years.

The above companies all had interests in Indonesia, but not solely. The
companies below have all their eggs in one rickety basket.

Indonesia Only Juniors
Apolo Gold Inc. [OTCBB:APLL] has the development rights to a gold-silver
property in Sumatra, Indonesia. According to the company, the mine will be
a low cost operation once production is achieved with costs under
$100/ounce. The company also boasts excellent relationships with
government, the property owner and the local mining community.

Kalimantan Gold Corporation Limited [TSXv:KLG] has four porphyry
copper-gold-silver prospects located in Kalimantan, Indonesia: Baroi,
Beruang Kanan, Focus 1 and Mansur. The company has 18 years of experience
working in Kalimantan and has identified 38 prospects in that time,
according to the website.

Pacific Wildcat Resources Corp’s [TSXv:PAW-H] Sulut gold property is
located adjacent to the town of Kotabunan on the northeastern tip of the
island of Sulawesi in Indonesia. According to the company, Sulut has 1.2
million ounce of gold resource as well as an extensive regional
reconnaissance program.

Weda Bay Minerals Inc [TSX:WDA] owns the rights to develop the Halmahera
property, located on Halmahera Island in the North Maluku province of
Eastern Indonesia. Based on the extensive nickel and cobalt resources
identified to date, the company is proposing to develop a mine and
processing operation with the capacity to produce up to 60,000 tonnes of
nickel and 5,000 tonnes of cobalt annually.

Southern Arc Minerals Inc [TSXv:SA] has a total of seven mineral
properties located in Lombok, Sumbawa and Flores Island. The company’s
goal is to become “the premier mineral exploration and development
company” in Indonesia.

Conclusion
Based on the findings of Newmont and Freeport-McMoRan, we know that
Indonesia has ample resources at a very low cost of production. However,
the recent attack on the big boys, whether it isolated or specific to each
case, still leaves an unsettling feeling in regards to the little guys.

Alex Turkeltaub, Managing Director of Frontier Strategy Group, told
Resource Investor that the next five years are going to be very slow years
for investment in the country.

“Any junior that hopes to get a big buy out or investment from a major,
won’t get it” with things as they are in the country at present time, he
said.

The Frontier Strategy Group recently gave Indonesia a triple “C” rating in
its “Above-Ground Risk Report” - one of the lowest scores.

Turkeltaub said this is because Indonesia has a high level of corruption,
community unrest and a government that will do little about it.

However, Indonesia’s willingness for political cooperation with the U.S.
is “the light at the end of the tunnel,” said Turkeltaub. He added that 10
years from now we could see a serious turnaround in the country.

But until then, investors proceed with caution.

Alvin

March 23rd, 2006, 02:23 PM

COMPANIES INTERNATIONAL
Confidence in Indonesia is on the rise - Large deals show memories of the Asian crisis are fading as investors believe things are looking up, says Shawn Donnan.
By SHAWN DONNAN
628 words
23 March 2006
Financial Times
London Ed1
Page 50
English
(c) 2006 The Financial Times Limited. All rights reserved
Ever since former strongman Suharto and his crony-driven economy came tumbling down in the 1997-98 Asian financial crisis, Indonesia has struggled to find its champions.

Yet, after almost eight years of muddling its way out of the international capital markets wilderness, there are clear signs change is afoot.

Investment bankers are again talking up prospects for south-east Asia's largest economy. Its market's flirtations with record levels are drawing first-time visits from fixed-income and other portfolio investors. And companies that seemed set to be pariahs in perpetuity in the world of international finance are again drawing suitors.

Even as, in the eyes of some analysts, the government of President Susilo Bambang Yudhoyono is struggling to deliver promised reforms, investors say they see a brighter future.

"Indonesia is coming back," says Sheldon Trainor, head of Asia investment banking for Merrill Lynch. "Where we are now (in Indonesia) is at a very positive inflection point. There are just huge pots of capital out there looking at Indonesia."

Comments such as these are part of what observers say is an unmistakable change in tone, albeit one that remains more timid than the mid-1990s exuberance that led Indonesia and its fellow "tiger" economies to become favourite destinations for foreign investors.

After years of ruing losses incurred in the Asian crisis, foreign investors are again "looking at the future (of Indonesia) rather than trying to figure what happened", says Eugene Galbraith, the American chairman of Bank Central Asia. "There's definitely a change of heart."

Mr Trainor and others say that is the result of some recent landmark deals such as Philip Morris' Dollars 5bn take-over of cigarette maker Sampoerna and Bumi Resources Dollars 3.2bn sale of its coal assets to a consortium of local and foreign investors. Also important has been the recent resolution of a dispute between ExxonMobil, Jakarta, and Indonesia's Pertamina over the large Cepu oil block in central Java.

All of those deals, says Ralph Parks, Asia Pacific chairman of JPMorgan, have had "huge signalling value" that investors are again willing to allocate billions to an economy once fraught with political risk. "It just creates a whole different dynamic," he says. Underlying that new dynamic, Mr Parks says, are broader trends, such as excess global liquidity and the three-way fight for access to natural resources being waged by China, India, and Japan.

Mr Trainor argues that Indonesia's resources sector is what remains most attractive to outside investors. Indonesia last year overtook Australia as the world's largest exporter of thermal coal and is expected to soon pass Malaysia as the world's largest palm oil exporter. It also remains, for the time being, the world's leading exporter of liquefied natural gas.

Some may complain about Indonesia becoming a net importer of crude oil and its lack of a cohesive long-term energy policy, or about recent unrest over foreign mine owners. But Mr Trainor insists investors are seeing "a renaissance period in the Indonesian resource sector".

That enthusiasm has yet to translate to the critical infrastructure sector and the Dollars 150bn in investment Jakarta says it needs in power plants, toll roads, ports, and other vital infrastructure. And open to question is how much reform has taken place in the corporate sector.

Goldman Sachs economists last week praised Mr Yudhoyono's new government economics team for "making the right noises". But, they also pointed out, "implementation will be key" and any "growth dividends from this are unlikely to be visible before 2007".

20060323L150.009

Document FTFT000020060323e23n00075

Alvin

March 23rd, 2006, 02:30 PM

INTERVIEW: Alcatel Urges Change In Indonesia Labor Regs
By Phelim Kyne
Of DOW JONES NEWSWIRES
748 words
23 March 2006
21:29
Dow Jones International News
English
(c) 2006 Dow Jones & Company, Inc.
BALI, Indonesia (Dow Jones)--Indonesia's government should overhaul labor laws that are costly for private firms and aren't "in tune with...international standards", a senior executive with France's telecommunications equipment and systems provider Alcatel SA (13000.FR) said recently.

While Indonesia's telecommunications sector is freer and less-regulated than many other markets, the country's labor laws deprive private firms of needed flexibility, PT Alcatel Indonesia President, Jan Glinski, told Dow Jones Newswires.

"The ability to hire and fire people...is one of the areas that could definitely be improved to make the laws more in tune with what are average international standards," Glinski said, without elaborating.

"There are companies that cannot afford to do it because it's simply too expensive."

Glinski was speaking on the sidelines of a blue-ribbon investment conference that concluded Tuesday on the resort island of Bali.

His comments are a reflection of long-standing frustration at Indonesian labor laws that executives and analysts alike say unduly benefit workers at the sacrifice of efficiency and competitiveness.

Private companies say that legal requirements of relatively high cash payments for laid-off workers stifles job creation opportunities in a country desperate to reduce an official unemployment rate of around 9.0%.

Unlike regional neighbors including Singapore and Malaysia, Indonesian law requires employers to pay approximately one-month severance for every year of service regardless of whether an employee resigns or is dismissed.

Indonesian law also obligates employers to compensate departing workers for unused annual leave, relocation expenses and an additional payment for housing and medical expenses constituting 15% of the total severance package.

Indonesia's economy creates 1.2 million-1.4 million new jobs annually compared to 1.6 million-1.8 million new job seekers who enter the job market each year, Coordinating Minister for the Economy, Boediono, said Monday. Boediono, like many Indonesians, has only one name.

Foreign investors are eagerly awaiting implementation of a package of investment stimulus measures unveiled earlier this month by the Coordinating Ministry for Economic Affairs aimed at helping accelerate on-year economic growth to above 6.0% in 2006.

The package consists of 85 measures designed to remove regulatory obstacles to investment in areas including taxation, customs and excise, labor and small- and medium-sized enterprise development.

The bulk of the package consists of timetables for the next year to draft or revise regulations the Indonesian government views as critical to accelerating investment rather than specific policy measures.

While the government has prioritized the settlement of labor disputes "quickly, cheaply and fairly," the document doesn't outline mechanisms for doing so.

Alcatel's recent experience in reducing the number of lower-skilled workers it employs proved "very costly," Glinski said, without providing specific figures.

Glinski said Alcatel recognizes the challenges that the government faces in pushing through politically-unpopular changes to local labor laws that might reduce payouts to redundant employees.

"We know how politically charged it is...it's certainly not easy," he said.

3G Licenses Boost Alcatel's Revenue Prospects

Despite the costly labor regulations, Alcatel remains upbeat on prospects in Indonesia.

The government's move last month to award PT Indonesian Satellite (ISAT.JK), PT Excelcomindo Pratama (EXCL.JK) and unlisted PT Telekomunikasi Selular, or Telkomsel, licenses to operate third-generation, or 3G, networks,has significantly increased Alcatel's revenue prospects in the Indonesian market, Glinski said, without providing a specific forecast.

Third-generation cellular technology offers subscribers high-speed data transmission services such as video streaming, fast downloads, live traffic updates and even home surveillance services.

Glinski said Alcatel has already recorded annual revenue growth of 20.0%-40.0% in Indonesia in recent years providing infrastructure for second-generation telecommunications services.

Indonesia has a total of around 50 million telecommunication subscribers, around 95.0% of whom are mobile service customers, Alcatel data indicates. That suggests high market potential for a country with a population of around 220 million people.

Those numbers make Indonesia Alcatel's second-biggest Asian market behind China and not including India, Glinski said.

"Indonesia is the No. 2 (Asian) country for us...in terms of (market) potential and our ability to address it," he said, without elaborating on past revenue or future revenue targets.

-By Phelim Kyne; Dow Jones Newswires; 62 21 3983 1277; phelim.kyne@dowjones.com

-Edited by Craig Lewis [ 23-03-06 1029GMT ]

Document DJI0000020060323e23n000k8

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Alvin

March 23rd, 2006, 02:33 PM

= INTERVIEW: Indonesia Resources Invest To Surge In 06
548 words
23 March 2006
15:05
Dow Jones Commodities Service
English
Copyright 2006, Comtex News Network. All Rights Reserved.
Mar 23, 2006 (DJCS via Comtex) --

By Phelim Kyne

Of DOW JONES NEWSWIRES

BALI, Indonesia (Dow Jones)--Foreign investment in Indonesia's natural resources sector to help power China and India's economic engines will surge in 2006, a senior executive with Merrill Lynch & Co. Inc. (MER) said recently.

Foreign and domestic investors see Indonesia's natural resources firms as a relatively safe and lucrative investment destination while demand from China and India is driving up commodity prices on the global market, PT Merrill Lynch Indonesia president director Roger Suyama told Dow Jones Newswires.

"What you'll see in 2006 is many more structured transactions in the natural resources sector....more tie-ups from companies in India and China and maybe Middle Eastern companies," Suyama said.

Indonesian firms producing resources including coal, oil and gas, cold-pressed crude palm oil and base metals are attractive to investors as "...they're dollar denominated because they're exported and also demand for these exports will grow as China and India grow," he added.

Fast growth in the economies of China and India has driven up the prices of commodities these countries need to feed their booming export manufacturing sectors.

Copper and gold prices on the world market hit record highs last month as fund managers entered the market en masse as a result of strong demand expectations from the two countries.

Copper reached an all-time intraday high of $5,110 per metric ton on Feb. 7 while gold reached an 18-year high of $575 an ounce on Feb. 2. on the London Metals Exchange.

PT Merrill Lynch Indonesia brokered a total of eight transactions valued at $3.5 billion in 2005, Suyama said. That total included $2 billion in private firm transactions.

Suyama said resource-sector firms dominated the private transactions, including a $600 million coal securitization deal for Bumi Resources (BUMI.JK) and a $200 million hedge fund for Medco Energi International (MEDC.JK).

Mining Protests Won't Dent Investor Sentiment

That trend will likely continue in 2006, he said, without providing specific projections.

"For many investors, their interest in Indonesia is in an area where (local firms) have a comparative advantage over China and India, which is natural resources," Suyama said.

"The interest in the natural resources sector means that these independent companies have the opportunity to raise capital to grow."

Suyama said recent protests that have rocked Indonesian operations of U.S. mining giants Freeport-McMoRan Copper & Gold Inc. (FCX) and Newmont Mining Corp. (NEM) won't dent investor sentiment for the country's resource sector.

Newmont said Monday it suspended exploration on Indonesia's Sumbawa Island after unidentified people torched a camp for its workers.

Freeport-McMoRan temporarily closed its massive Grasberg gold mine in Papua province last month after protesters demanding the right to mine its waste ore blockaded the facility.

Those incidents "...could be viewed as more exceptions to the rule," Suyama said.

"There are many mining and natural resource companies that are doing well without that kind of (problem)."

Suyama didn't name specific companies.

-By Phelim Kyne; Dow Jones Newswires; 62 21 3983 1277; phelim.kyne®dowjones.com

-Edited by Jenny Paris

(END) Dow Jones Newswires

03-23-06 0405ET

Document OSTDJ00020060323e23n0036z

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Alvin

March 23rd, 2006, 11:40 PM

Exxon Oil Offers Hope for Indonesia's Poor
William Pesek Jr.
March 24 (Bloomberg) -- Few facts say more about Indonesia's dysfunctional economy: The only Asian member of OPEC is also a net importer of crude oil most months of the year.

It would almost be comical if more than half of Indonesia's 239 million people didn't live on less than $2 a day. The sad truth is that Indonesia, Southeast Asia's biggest economy, hasn't benefited from its abundant reserves of oil, a natural resource that leaders in countries such as China spend virtually every waking moment buying.

That's about to change now that Indonesia has signed a deal to extract oil from the $2.6 billion Cepu field, the country's biggest untapped reserve of the resource. The agreement with operators Exxon Mobil Corp. and PT Pertamina, Indonesia's state oil company, is expected to provide a huge boost to the economy.

Or will it?

The project will generate $3.3 billion a year to be shared by the government, Exxon and Pertamina, in that order. Higher tax revenue will leave more money for job creation, education and health care, as well as better roads, bridges and ports. During the four-year dispute over the field, Indonesia's fuel-import bill reached as much as $1.6 billion a month.

Investors appreciate the calculated risk that Indonesian President Susilo Bambang Yudhoyono took by allowing U.S. giant Exxon to take charge of the long-delayed plan. His gutsy move to sideline Pertamina shows Yudhoyono is putting economic realism ahead of nationalism. It may lead to a multiplier effect of investors looking anew to Indonesia.

Blessing or Curse?

Yet Indonesia now faces a sticky question that confronts all oil-rich nations: Is oil a blessing or a curse?

Commodity-created wealth rarely trickles down very far into an economy, never mind to those living in poverty. Economists call the phenomenon the ``paradox of plenty,'' and it's something Yudhoyono and his policy makers need to guard against aggressively.

All too often, inhabitants of resource-rich nations fail to prosper from underground treasures like oil, gold or diamonds. Politicians and their cronies get wealthy, while the development needs of the struggling masses are ignored. That's been Indonesia's experience far more often than not.

History is littered with examples of how oil-wealth leads to a kind of economic-policy tunnel vision. Awash in oil, governments lose incentive to create other viable industries. They have little time for agriculture, textiles or manufacturing industries that could employ much of the population. Why bother when the real money is in oil?

Instant Windfall

``Oil promises to make you rich, but instead it makes you poor,'' Stanford University economist Terry Lynn Karl wrote in ``The Paradox of Plenty: Oil Booms and Petro-States.'' Her 1997 book, which homes in on Algeria, Indonesia, Iran, Nigeria and Venezuela, is even more relevant today amid near-record oil prices.

The instant windfall from commodity exports can destroy a nation's competitiveness. By contrast, adversity and the absence of natural resources can urge on a small nation, encouraging it to work harder to succeed. Here in Asia, Singapore is a perfect example. The city-state barely has drinking water, never mind oil, and its per-capita income is $23,636 compared with Indonesia's $906.

In many parts of the Middle East and Africa, crude oil at $62 a barrel is leaving even fewer reasons to diversify economies. While poverty is less of a concern, Russia is a more recent example of how oil revenue consumes leaders' attention and distracts them from modernizing financial systems.

Spreading the Wealth

Investors should keep a close eye on whether Indonesia can resist the oil curse. So far, Yudhoyono is saying the right things. Only time will tell if he succeeds in fighting the ineptness and corruption that keeps growth from reaching those who most need it.

It's highly encouraging that Yudhoyono intervened directly in the Cepu oilfield issue to win investor confidence. Indonesia sure could use more of it; growth in the $258 billion economy slowed to 4.9 percent in the last three months of 2005 amid tepid overseas investment.

International investors will only enter Indonesia if they believe oil revenue -- and that of other commodities -- is being used productively. Yudhoyono also needs to convince an Indonesian population that has grown wary of foreign companies profiting from their natural resources.

The past week saw protests against the Indonesian operations of Newmont Mining Corp., Freeport-McMoRan Copper & Gold Inc. and Exxon. Keeping them running, and attracting more such foreign investment, will be vital if Indonesia is to increase growth. Mining companies, for example, account for more than 10 percent of Indonesia's economy.

Convincing Locals

``Often mining companies do deals with local elites, sometimes corrupt local elites, and local communities don't feel they have a fair share,'' said Bruce Gale, a Jakarta-based political-risk consultant who has covered Southeast Asia since 1998.

Protesters have a point, too. There's a well-deserved perception that multinational companies make more money from Indonesia than Indonesians do. It means the government has an uphill climb in convincing the populace that, sometimes, siding with foreign investors can work to the people's benefit.

It can indeed, so long as the government makes sure its oil wealth gets into the right hands -- those of Indonesia's poor.

Alvin

March 24th, 2006, 01:19 PM

US INVESTORS MULL MOVING MANUFACTURING OPS TO INDONESIA
112 words
24 March 2006
Asia Pulse
English
(c) 2006 Asia Pulse Pty Limited
JAKARTA, March 24 Asia Pulse - US investors in labor intensive industries are considering to move part of their operations from China and India to Indonesia, the United States Indonesia Society (Usindo) said.

Usindo chairman Ed Master said Indonesia has an opportunity to attract up to US$1 billion in US investment in textile, footwear, automotive and electronic sectors this year.

Many US investors would be encouraged to move operations to the country if the government succeeded in improving investment climate, and investment security and creating legal certainty, Master said.

The key words are stability and concrete policy support from the government, he said.

(ANTARA)

Zorobabel

March 24th, 2006, 07:42 PM

I have a feeling US investors are going to start massively re-investing in Indonesia in 2007 or 2008.

Alvin

March 25th, 2006, 01:09 AM

I have a feeling US investors are going to start massively re-investing in Indonesia in 2007 or 2008.

which sectors you reckon? manufacturing? resources/mining? Services? I'd like to see manufacturing so as to create more jobs for the people.

Zorobabel

March 25th, 2006, 02:05 AM

I'm not exactly sure where the major investments will go. Manufacturing would be good, I agree. I simply think investment will increase because economic growth in the US is expected to slow to about 2.5% in 07-08, and developed countries with slower economic growth rates tend to invest more heavily overseas. With a $13 trillion economy and 25% of the world's capital, SBY's continued efforts to bring in American investment could pay off big time.

bahar

March 27th, 2006, 07:38 AM

I found this article good. Delivered by Boediono last week.

=======================================================
Indonesia needs higher economic growth

Boediono, Jakarta

If you live here or are visiting for more than a few days, you must have observed how vibrant our democracy is. Almost every major issue is openly and vigorously debated in public. Sometimes it takes the form of noisy street protests and, regrettably at times, it is accompanied by violence. But if we are willing to see through all this, behind those dynamics, we observe progress, slow, but unmistakably progress.

One such dynamic that must have raised a question in your mind is the public attitude toward foreign investment. If you have followed the issue in the media lately, some of you may get the impression that anti-foreigner and anti-foreign investment sentiment are on the rise in this country.

I would submit to you that such a perception is not entirely correct. What we actually see is democracy at work. What we see is form that dominates substance. But there indeed is a substance in it, though it is not one of rising anti-foreigner, anti-foreign investment, anti-American and anti-American investment sentiment.

In my view it is a form of growing awareness among the public here that business and economic activities by domestic or foreign companies must produce tangible benefits for the ordinary people especially those around the localities and not just for a small group of people. This, I think, is a legitimate demand and it can surely be accommodated without violating fair business practices and without spoiling the business and investment climate. The government and the business community can work together in earnest to meet such demand.

On economic relations, I am happy to see the renewed vigor in our cooperation within the U.S.-Indonesia Trade and Investment Framework Agreement or the TIFA. I hope the Trade and Investment Council Meeting next month in Washington will solidify the foundation for both sides to embark upon a more strategic economic partnership. On development cooperation, we welcome the U.S. initiatives to help Indonesia to get access to the Millennium Challenge Account (MCA). Last, but certainly not least, we welcome the recent revival of interest of U.S. corporations in exploring business opportunities in this country.

During my meeting with Secretary of State Condoleezza Rice, I asked her support to encourage American investors and businessmen to take part in our efforts to accelerate economic development. Dr. Rice's response to the idea was forthright and she said that she would like to see more U.S. investors coming here.

We fully understand that Indonesia needs to make special efforts to improve our investment and business climate to attract more investment.

On the macroeconomic front things seem to be moving in the right direction. Economic growth is slowly but surely recovering. A 5.6 percent annual growth last year was still well below our pre-crisis performance, but it was the highest growth performance since the crisis. Barring exceptional circumstances we expect our economy to grow by close to 6 percent this year and in the range of 6 to 7 percent in the next two to three years.

On the stability front the trend in the past four years has been toward sustainable macroeconomic balances. Last year, due to both internal and external factors our financial markets experienced a short but sharp period of turbulence. But we are now witnessing a dramatic recovery from the set back. We believe that this recovery reflects a growing market confidence and the anticipation of a dramatic turn-around in growth later this year and next. The rupiah is now trading at around Rp 9,100 per U.S. dollar significantly stronger than the Rp 11,000 level of only six months ago.

On the monetary policy front our independent central bank, Bank Indonesia, has been increasingly more adept in managing monetary and financial stability. In handling last year's financial "mini crisis" for instance, Bank Indonesia took a decisive step by raising the interest rate by over 5 percent in a series of moves beginning in mid-2005. Bank Indonesia has been consistent in its message, and reinforced in its policy, that its prime objective is to bring inflation down to single digits by the end of 2006 and to the regional averages over the next few years.

While growth and stability are necessary macroeconomic goals, what matters most to the ordinary people (and this is crucial in a democracy) is whether there are improvements in their welfare. One of most basic conditions for such improvements is the creation of more jobs and here we have our greatest challenge. The latest data indicates that the economy is currently adding a net 1.2 to 1.4 million jobs a year. However, with new additions to the workforce at approximately 1.6 to 1.8 million workers, we are not making progress, in fact we are losing ground especially when you factor in those already unemployed that need jobs. So we need higher economic growth.

We have decided to adopt a three pillar strategy designed to create incentives for private investment. First, we need to address the investment climate issues facing all firms including the important infrastructure sector. Second, we need to take steps to expedite the implementation of high profile cases that are important in their own right but may be even more important for the perception they create. Finally, we need to address some issues in the financial sector to restart lending, facilitate access to financing and improve the structure of capital markets more broadly.

The first pillar is not difficult to describe as we have just issued policy packages in infrastructure and investment that include numerous measures in multiple areas. In both cases these packages are based on numerous surveys and discussions with stakeholders which allowed us to identify areas where there are obstacles for all or almost all investors. From this list we created policy matrices where issues are dealt with according to a clear timetable and responsibility at the ministerial level.

The second pillar of the strategy of our reform involves the acceleration of some key outstanding high profile cases. These cases require special handling as they are important in and of themselves, they often reflect unique circumstances that influence broader perception. Thus we have adopted a more proactive policy, for example in the case of the Cepu oil field project which was resolved last week.

The final pillar of the reform includes access to credit at reasonable cost and appropriate maturities. Financing is normally not an important problem for international investors but it is often a crucial one for domestic investors, especially for small and medium enterprises. The availability of adequate and reasonably priced sources of financing for small and medium enterprises is economically and politically important, and the more so because we have opted to take the democratic route to development.

It is therefore my profound hope that I will be able to count on your continued support for the next chapter of Indonesia's maturing open-market democracy.

Speech by Coordinating Minister for the Economy Boediono delivered at the USINDO Corporate outreach dinner on March 23, 2006.

MARINHO

March 27th, 2006, 08:17 PM

Alvin

March 28th, 2006, 05:31 AM

Deutsche Bank, Lufthansa & ADB Ready to Finance Garuda
282 words
28 March 2006
Bisnis Indonesia
English
(c) 2006 Bisnis Indonesia
JAKARTA: Deutsche Bank, Lufthansa, and the Asian Development Bank (ADB) are ready to finance the recovery of PT Garuda Indonesia by injecting US$105 million funds.

However, the parties are waiting for guarantee letter from the government.

President Director of Garuda Indonesia Emirsyah Satar confirmed that the potential creditors were waiting for guarantee letter from the government.

"Deutsche Bank is one of the creditors ready to inject US$105 million funds to Garuda, and there are some other creditors. At the moment, the potential creditors are waiting for guarantee letter from the government," he said yesterday.

Minister of Transportation M. Hatta Rajasa explained that the government tried to maintain the existences of state airlines Garuda and Merpati.

"However, the recovery should be accompanies with reforms in corporate cultures of Garuda and Merpati," he added.

Yesterday, the Limited Coordinating Meeting on recovery of Garuda was cancelled, despite the fact that the deadline of Garuda's settlement of short-term liabilities was the end of this month. In addition, the issue of fund injection made to Garuda and Merpati will be brought to the cabinet meeting today.

At the moment, Garuda is preparing an option of US$250 million in capital injection, US$105 million of which will be in form of government capital equity, to the cabinet meeting today after the Department of Finance decided not to issue guarantee letter due to a possible conflict with regulations.

If the government approves the option, it means that Garuda will have been injected with capital by the government three times, in 1998 (IDR2 trillion), in 2001 (IDR4 trillion), and now.

By M. Munir Haikal

Bisnis Indonesia

Alvin

March 28th, 2006, 05:35 AM

Time to face up to the real world of electricity
John McBeth Senior Writer
1338 words
28 March 2006
Straits Times
English
(c) 2006 Singapore Press Holdings Limited
JAKARTA - PRESIDENT Susilo Bambang Yudhoyono's recent decision not to raise electricity prices this year may have been popular on the street and in factory boardrooms. But business leaders say that, politically and economically, it is also probably the only way to go when Indonesia is still having trouble digesting the inflationary effects of last year's huge fuel price hike.

There is still a price to be paid. The government must not only find an extra 10.2 trillion rupiah (S$1.8 billion) to add to a power subsidy Bill in the 2006 budget that now tops 27 trillion rupiah.

It must also pressure state-owned power utility Perusahaan Listrik Negara (PLN) into improving efficiency and come up with inventive ways to attract infrastructure investment.

'I think the President did the right thing,' says one Western power executive, reflecting on the October oil price increase and its knock-on effect on the electricity sector. 'It was the only thing to do to move PLN into the real world. They had it too good for too long. It's a shame the small people have to suffer, but to have the nation bearing that burden is crippling.'

As he did then, Dr Yudhoyono typically thought long and hard about what to do in a no-win situation, with his political rivals snapping at his heels. But in the end, the manner in which the decision was taken was clumsy and hinted at a disturbing policy disconnect between an ever-cautious President and his economic team, which at one point indicated it was leaning towards a 10 per cent increase in higher-end rates.

Although Dr Yudhoyono and Vice-President Jusuf Kalla apparently made up their minds at a private meeting on March 16, it was another week of uncertainty before the President definitively announced that there would be no increase this year. By then, public anxiety had intensified and daily crowds of protesters had begun to gather outside PLN's south Jakarta headquarters.

It is similar foot-dragging that is making things worse for PLN. Government energy officials say Indonesia needs at least 12,000MW in extra natural gas and coal-fired generating capacity in the next five years to ward off a power crisis. In fact, the country has been in a crisis for years. It is just that the authorities have done a splendid job concealing it.

The available power on the main Java-Bali grid, anchored by two giant coal-fired complexes at either end of the populous island, is never more than 15,000MW of the 18,700MW in installed capacity.

The spinning reserve - electricity that can be instantly brought on line if a station goes down - varies on any given day from a wafer-thin 100MW to an acceptable 1,100MW. But on most early evenings, the PLN dispatch centre calls Jakarta's industrial estates and tells them to either to go on to their standby generators or shed some of their load.

Given the price of oil these days, that is an extra cost manufacturers can do without. Big electricity users are also having to pay a substantially higher rate for the peak power they do get.

Mr Jusuf argued at a recent investment conference that the policies of past administrations are responsible for the current situation. He is right. Former president Suharto allowed Indonesia to live in a fool's paradise for years by not raising fuel prices. Subsequent leaders treated the issue like a live hand grenade, often retreating in the face of outrage when a hike was proposed.

Worse, the government built gas-fired power stations during the Suharto era without providing a gas supply, forcing PLN to use diesel and fuel oil instead. Other plants have had to rely more and more on oil because the gas supplies they do have are running out. The result: At one time or another, up to 50 per cent of the Java-Bali grid is running on oil, which most experts say may never return to its previous US$20-a-barrel price levels.

PLN's average tariff is about 7 US cents (11 Singapore cents) per kilowatt hour, compared with the 4.57 US cents it has negotiated with the Chinese developer of a new 600MW coal-fired Cilacap station on Java's southern coast. But using fuel oil costs the utility 10 to 12 US cents, depending on the strength of the rupiah, which is at a 14-month high.

'That's what is giving PLN real heartburn,' says one analyst. 'It's killing their bottom line.'

According to a State Audit Agency examination of PLN's books, the utility could save 12.1 trillion rupiah alone if it had a sufficient supply of gas - in a resource-rich country where that should never have been a problem.

System and administrative inefficiencies only worsen the problem. Power pilferage, a years-long delay in finishing a vital transmission line, and a failure to make large influential companies pay their bills is costing the utility about 20 per cent of its potential revenue.

Two new coal-fired stations, the newly completed Cilacap station and Sumitomo's long-delayed 1,200MW Tanjung Jati B on the northern Java coast, are both due to be commissioned this year. But Tanjung Jati may not be able to come fully on stream until PLN completes the second East Java-West Java transmission line, which is six years behind schedule and still facing land acquisition problems.

Analysts say PLN's failure to announce a successful tenderer for a planned 600MW coal-fired plant at Cilegon, west of Jakarta, has led to speculation that the project is not bankable under its present terms. After all, the developer gets no government payment guarantees, has to acquire the land for the plant itself - instead of the normal practice of leasing it from the government - accept domestic arbitration and take on a PLN subsidiary as a partner.

One long-planned project that could begin almost immediately, however, is a fourth 800MW unit at the giant Paiton complex in East Java. But the government continues to insist that it has to be put up for competitive bidding, even though Paiton Energy - the Japanese-led consortium which owns two super-efficient 660MW units next door - is ready with the money and a tariff below that of the Chinese station.

Analysts say now that the electricity price is being kept on hold, the government will have to begin considering short cuts and other concessions to attract the US$11 billion needed for new electricity-generating capacity over the next five years. That will mean implementing a provision in a 2005 government regulation which allows for the direct awarding of projects in an emergency situation.

Although it will make officials extremely nervous, the Finance Ministry may also have to underwrite PLN's payment obligations. That is because infrastructure investors are equally nervous about striking a deal with an inefficient power utility with a bottom line illuminated in red - the main reason why no new privately run power stations have been built since the 1997-98 financial crisis. What the ministry does not want to do is give a blanket guarantee, given the way contingent liabilities affect the country's debt rating.

Even if things do begin to move, Indonesia will not be out of the woods. Demand is estimated to be growing at 10 to 12 per cent a year, but PLN is keeping this artificially lower at 6 to 7 per cent by not adding new connections. Building new plants may help ease the demand, but it will take a lot longer to start decommissioning some of the oil-fired stations that contribute so much to its indebtedness.

One thing is obvious: In power, at least, there is none of the nationalist uproar that now surrounds the mining and oil and gas sectors.

feerjkt@pacific.net.id

Alvin

March 28th, 2006, 08:41 AM

CHINA EYES US$30 BLN SINO-INDONESIA TRADE BY 2010
156 words
28 March 2006
Asia Pulse
English
(c) 2006 Asia Pulse Pty Limited
JAKARTA, March 28 Asia Pulse - China is optimistic that trade between it and Indonesia projected at US$30 billion by 2010 would be met, General Chairman of the Chinese People's Political Consultative Conference, Jia Qinglin, said on the sidelines of a courtesy visit to the Indonesian Regional Representatives Council (DPD) here on Monday.

Jia Qinglin said that trade between the two countries had reached US$16.7 billion, a 24 per cent increase from 2004.

"Following the trend, we believe the trade between the two countries in 2008 projected by the Chinese Government at US$20 billion and at US$30 billion by 2010 would be reached," he said.

"Last year marks a significant development, and became a landmark of the two countries' relations after the heads of state of the two countries made an official visit each other's country," Jia Qinglin said.

(ANTARA)

Alvin

March 28th, 2006, 08:42 AM

Indonesia Govt Plans To Build 1,000-Km Toll Road In 3 Yrs
199 words
28 March 2006
13:56
Dow Jones International News
English
(c) 2006 Dow Jones & Company, Inc.
JAKARTA (Dow Jones)--Indonesia's government plans to build 1,000 kilometers of toll road across the country starting from this year, Minister of Public Works Joko Kirmanto said Tuesday.

"We expect the development of the toll road to be completed by 2009," Kirmanto told reporters after a meeting with Vice President Jusuf Kalla.

He said the government will open tenders for the development of the toll road.

"We will invite private investors to take part in this project," he said without indicating the expected cost of the project.

Analysts have said the government needs to speed up infrastructure investment both to help create more jobs and to improve the distribution goods in order to prevent shortages which would fuel inflation.

Indonesia's state-owned toll-road builder and operator PT Jasa Marga said the company wants to invest around IDR3 trillion to help finance the proposed road building.

"We are committed to take part in this project," Jasa Marga President Frans Sunito said.

-By Jakarta Bureau; Dow Jones Newswires; 62-21 39831277; djn.jakarta@dowjones.com

-Edited by Michael Kitchen [ 28-03-06 0356GMT ]

Alvin

March 28th, 2006, 11:32 PM

Indonesia Cuts 2006 Economic Growth Estimate to 5.9% (Update1)

March 28 (Bloomberg) -- Indonesia's government cut its economic growth forecast for this year to 5.9 percent from 6.2 percent on concern exports and investments will be slow.

``We are still confident consumption will be relatively strong despite higher inflation,'' Finance Minister Sri Mulyani Indrawati told reporters in Jakarta today. ``However, investment and exports may be less than'' in 2005.

Indonesia, which wants to draw $426 billion of investment by 2009 to boost economic growth, has yet to pass a law meant to ease investment procedures and improve legal certainty. Of the 91 projects, valued at $22 billion, offered by the government last year, just one was completed, while five are in progress.

Indonesia, Southeast Asia's largest economy, may attract 12 percent more overseas funds or about $10 billion of investment this year, Indonesia's Investment Coordinating Board said on Feb. 9. Last year foreigners invested $8.9 billion.

Indonesia's economy expanded 5.6 percent last year, the fastest pace since 1996.

The budget deficit may also be wider than forecast because the government will have to spend more to subsidize electricity prices after scrapping a plan to raise rates. The deficit may be ``slightly more'' than 1 percent of gross domestic product compared with a forecast of 0.7 percent, Sri Mulyani said.

The deficit may be as much as 35 trillion rupiah because the government will have to spend an extra 10.3 trillion rupiah for capping electricity tariff.

Inflation may average 9 percent this year, Sri Mulyani said.

Alvin

March 30th, 2006, 07:17 AM

I was supposed to attend this event but I've been sick :(
oh well, things aren't looking so bright for Indonesia's economy.

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

World Bank Raises Asian GDP Forecasts, Cites Exports (Update2)

March 30 (Bloomberg) -- The World Bank raised its 2006 growth forecast for most of Asia as demand for the region's technology exports accelerates in the U.S., Europe and Japan.

The Washington-based lender increased its 2006 forecast for East Asia, which excludes Japan and the Indian subcontinent, to 6.6 percent from a November estimate of 6.2 percent, citing faster expansion in the region's export-reliant economies.

``A lot of the growth is being fueled by exports,'' Homi Kharas, the bank's chief economist for East Asia and the Pacific, told a media conference in Sydney today. ``Growth is very broad based. Coming into 2006, things look quite strong.''

Rising global demand for mobile phones, digital cameras and flat-screen televisions is spurring economic growth in Asian electronics exporters including China, South Korea and Malaysia. Companies such as Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co. expect overseas sales to improve further this year.

``The outlook is a bit brighter'' for the region's export- dependent economies, the bank said in a twice-yearly report on the region. Among overseas markets, ``growth in the U.S. remains robust, while it is picking up in Europe and has rebounded quite strongly in Japan.''

Growth in the 30-nation Organization for Economic Cooperation and Development is expected to strengthen to 2.9 percent this year from 2.7 percent in 2005, as faster expansion in Japan and Europe offsets a ``mild slowing'' in the U.S., the report said.

U.S., Japan

The U.S. economy may expand 3.4 percent this year following 3.5 percent growth last year; Japan's expansion may accelerate to about 3 percent in 2006 from 2.8 percent in 2005, it said.

``The U.S. and China continue as the primary engines of export growth for the region, and we are seeing improvements in Europe and Japan as well,'' said David Cohen, director of Asian economic forecasting at Action Economics in Singapore. ``Export strength is helping support investment and consumer demand.''

Worldwide semiconductor sales this year will rise 9.5 percent to $257.7 billion, more than previously estimated, because of a supply shortage and slower price declines, researcher Gartner Inc. said on Feb. 16.

Global sales of semiconductors rose 7 percent to $19.66 billion in January from a year earlier as 2006 got off to a ``good start,'' the Semiconductor Industry Association said on March 2.

Semiconductors

Samsung, Asia's biggest maker of liquid-crystal displays and semiconductors, last month said sales may increase 13 percent this year, helped by demand for televisions and chips used in digital music players.

Taiwan Semiconductor, the world's largest made-to-order chip supplier, in January said fourth-quarter profit rose 53 percent to a record on demand for chips used in Microsoft Corp.'s Xbox game consoles and Motorola Inc.'s Razr mobile phones. The company forecasts the chip industry will grow about 10 percent this year.

East Asian economies expanded an average 6.8 percent last year, faster than the bank's November projection of a 6.2 percent gain, largely reflecting a revision of China's national accounts that resulted in a higher growth rate for 2005.

The expansion also reflected faster second-half growth in China, South Korea, Hong Kong, Singapore and Taiwan, which was principally led by a pick-up in technology exports, it said.

China

China's economy may expand 9.2 percent this year, more than an earlier projection of 8.7 percent, the World Bank said. The lender raised forecasts for South Korea, Malaysia, Vietnam and the Philippines. It cut Indonesia's forecast and left Thailand's unchanged.

``In 2006, China will benefit from solid export demand'' even as ``investment remains robust,'' the report said.

China's economy grew 9.9 percent in 2005, powered by record exports and investment in manufacturing, the nation's statistics bureau said Jan. 25.

Asia's second-largest economy expanded by 10 percent a year on average in the past three years, boosting demand for goods from other East Asian economies, the bank said.

In the first half of 2005, exports to China including Hong Kong accounted for 30 percent of export growth of the eight main East Asian economies, surging from just over 20 percent in 2004.

Rising domestic demand in the second half boosted China's growth in imports of machinery and transport equipment to 24 percent, from 10 percent in the first half. The gain was ``a turnaround of major importance for other East Asian economies, which are major suppliers of capital equipment, parts and components to China,'' the report said.

Indonesia

Expansion in Indonesia, meanwhile, may slow in 2006 for the first time in five years because of lower private investment. The bank forecasts the economy to grow 5.5 percent, down from 5.6 percent last year.

``The deceleration of private investment is expected to be more severe than previously envisaged,'' the bank said. ``Growth is expected to bottom out in the first or second quarter.''

Though East Asia's economies remain vulnerable to such risks as high oil prices, global economic imbalances and the threat of a human influenza pandemic, some of these have ``moderated over the last six months'' and growth held up well in the face of surging oil prices last year, the report said.

Today's report assumes oil prices in 2006 will average 10 percent higher than in 2005, and their impact will be felt through the year. High oil prices led countries such as Indonesia, Thailand and Malaysia to cut fuel subsidies, which will strengthen government finances and be good for economic stability and growth in the medium term, it said.

Interest rate increases made in countries including Indonesia, Thailand and South Korea should help to stem inflation arising from higher oil costs, the bank said.

The following table contains the World Bank's November estimates of growth and revised forecasts for 2006 and projections for 2007.

Nov. Estimates Latest Estimates &
Forecasts
2005 2006 2005 2006 2007

East Asia 6.2 6.2 6.8 6.6 6.3
China 9.3 8.7 9.9 9.2 8.5
Southeast Asia 5.0 5.4 5.1 5.3 5.7
Indonesia 5.7 6.0 5.6 5.5 6.2
Malaysia 5.0 5.3 5.3 5.5 5.7
Philippines 4.8 5.0 5.1 5.3 5.6
Thailand 4.2 5.0 5.5 5.0 5.2
Vietnam 7.5 7.5 8.4 8.0 7.5
Small Economies 4.9 4.9 5.2 5.1 4.9
South Korea 3.8 4.6 4.0 5.0 4.8

To contact the reporter on this story:
Amit Prakash in Singapore at aprakash1@bloomberg.net

Alvin

March 31st, 2006, 12:52 AM

for the full report:
http://siteresources.worldbank.org/INTEAPHALFYEARLYUPDATE/Resources/550192-1143237132157/indonesia-March06.pdf

Zorobabel

March 31st, 2006, 06:52 AM

The 5.9% estimate by the Indonesian government seems quite optimistic. ADB estimates are usually way off so I wouldn't worry about that much. Because the Indonesian government has already surpassed their full-year goal on bond revenue but are still planning to raise $320 million in April, and perhaps as much for every other month of the year, if they are serious in accelerating growth through government spending they could very well do so. However, I don't have very much faith in their ability to actually disperse funds. The website for the 2nd Indonesian infrastructure investment summit is history leading me to believe that entire initiative is recognized as a failure, the summit being entirely canceled.

Alvin

March 31st, 2006, 06:57 AM

^^ yeah. There's been some very worrying numbers coming out of the statistics agency which points to slump in FDI approvals, exports (e.g. cars) and consumption. I have a feeling that growth will be slow in the first half (maybe 5% yoy), but let's hope that things will accelerate in the 2nd half.

Zorobabel

March 31st, 2006, 07:03 AM

Sorry, that report was from the World Bank, not ADB. Nonetheless, IMF/WB/ADB estimates are generally very rough. It's better to just look at the info as it comes out quarter by quarter.

Alvin

March 31st, 2006, 07:08 AM

Sorry, that report was from the World Bank, not ADB. Nonetheless, IMF/WB/ADB estimates are generally very rough. It's better to just look at the info as it comes out quarter by quarter.

The Economist Intelligence Unit is forecasting 5.8%. that seems quite realistic.

Alvin

April 3rd, 2006, 09:55 AM

March inflation numbers are out, it's good news:
*DJ Indonesia Mar CPI +15.74% On Yr Vs +16.18% Consensus
*DJ Indonesia Mar CPI +0.03% On Mo Vs +0.31% Consensus

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

Monday April 3, 3:30 PM
Indonesia's March CPI up 15.74 pct yr/yr
JAKARTA, April 3 (Reuters) - Indonesia's consumer price index in March rose 15.74 percent from a year earlier, less than expected and its smallest annual rise since fuel prices surged last October, due in part to an easing in food prices at the start of a major harvest season, data showed on Monday.
The rise compared with a forecast in a Reuters poll of an increase of 16.20 percent and annual inflation in February of 17.92 percent.

"This is a result of the harvest season," Choiril Maksun, the head of the statistics bureau, told reporters when asked about the reasons for the easing in the consumer inflation rate.

The statistics bureau also said annual core inflation fell to 9.64 percent in March from 10.2 percent in February.

The core rate, which the bureau started releasing this year, excludes volatile items such as food prices and is used by the central bank to help guide policy.

Inflation in Southeast Asia's biggest economy spiralled to a six-year high of 18.4 percent in November, a month after the government raised domestic fuel prices by an average of 126 percent.
A Man A Woman

A Man A Woman

The central bank raised interest rates to contain inflation, but has kept the BI rate , its target interest rate for one-month certificates, steady at 12.75 percent so far this year after inflation eased from November's high.

Analysts say that with the inflation rate edging down, the central bank is unlikely to increase interest rates because of worries about choking off economic growth in the country of 220 million given consumption has slowed since the fuel price rise.

"Bank Indonesia is still concerned about the high global oil prices. This could lead to upward inflationary pressure through higher unsubsidised domestic fuel prices," said Anton Gunawan, economist with Citigroup in Jakarta.

"Interest rates, therefore, are unlikely to be reduced. But they are also unlikely to be raised given overall lower inflationary pressure. Interest rates are likely to be held steady. They may fall starting in August at the earliest."

Analysts had expected a stronger rupiah and stable food prices as farmers harvest their crops to ease inflationary pressures in March.

The government expects inflation to fall to below 8 percent by the end of the year.

The rupiah, up more than 8 percent against the dollar so far this year, has been buoyed in recent weeks by foreign investors buying the country's high-yielding assets.

The statistics bureau also said exports in February grew 15.17 percent from a year earlier, while imports grew an annual 5.33 percent compared with a year earlier.

The trade surplus was $2.84 billion in February compared with $3.24 billion in January and a market forecast of $3.2 billion.

Alvin

April 3rd, 2006, 02:36 PM

Asia: Jakarta stands out in Asia
By Naila Firdausi Bloomberg News

MONDAY, APRIL 3, 2006

JAKARTA Indonesian stocks were Southeast Asia's best performers in the first quarter of 2006, shrugging off increased fuel costs and lofty interest rates, and investors see the rally persisting as the economy improves.

The Jakarta composite index ended the quarter with a gain of 14 percent, double the advance in the Morgan Stanley Capital International Asia-Pacific index. The country's three biggest companies by market value, Telekomunikasi Indonesia, Bank Central Asia and PT Bank Rakyat Indonesia, did even better in the first three months.

Rising foreign investment and net exports of oil and gas are spurring economic growth and strengthening the rupiah, said Kokkie Kooyman, a fund manager at Sanlam Investment Management in Cape Town, South Africa.

Currency gains in turn are making imports less expensive, holding down inflation and bringing borrowing costs down, he added.

"Indonesia will probably be the best-performing market in Asia this year," Kooyman said. "We always like banks, because they're very geared to the economy, and we've been looking at consumer plays as well."

The market will reopen on Monday after having been closed for public holidays since Wednesday.

The Jakarta composite's 0.9 percent gain for the week trailed a 2.3 percent advance in the MSCI Asia-Pacific index.

Last month, the Jakarta composite index gained 7.5 percent, second only to India's Sensitive index among Asian benchmarks.

Indonesian stocks are cheaper than those in India. The Jakarta composite is valued at 14 times estimated earnings for this year and the Sensex at 21 times, according to Bloomberg data.

"The relative attractiveness of Indonesia compared to other emerging markets, in terms of outlook and potential, will likely mean continued liquidity flows into local stocks," said Raymond Gin, head of equities at PT Manulife Asset Management.

"Indonesia has turned the corner," Merrill Lynch analysts said.

Zorobabel

April 3rd, 2006, 08:21 PM

Good inflation figures. I'm hoping in April there may start to be some m-o-m deflation. People are still profiteering from fuel hikes by raising their own prices too high, and people fell for it, shrugging it off as a result of the fuel price increases. It's also clear the strength of the rupiah is hurting exports and the trade surplus.

Alvin

April 4th, 2006, 12:57 AM

yeah,the rupiah shouldn't be allowedto strengthen much further. BI should intervene to prevent the rp appreciating to sub-9000.It should be kept relatively stable between 9000-9200 or so.

Alvin

April 4th, 2006, 05:56 AM

Deal with substance more than form to attract FDI
Thang D Nguyen
959 words
4 April 2006
Business Times Singapore
English
(c) 2006 Singapore Press Holdings Limited
Indonesia must implement economic measures, and introduce legal reforms and sanctions

ON THE surface, it looks like Indonesia is doing all the right things to attract foreign direct investment (FDI).

In January 2005, shortly after President Susilo Bambang Yudhoyono (SBY) came to power, the Indonesian government organised an infrastructure summit in which it pledged to make infrastructure development a top priority.

And now, more than a year later, the government is planning another one for this coming June.

Meanwhile, both SBY and Vice-President Jusuf Kalla, accompanied by economic ministers and Indonesian business delegations, have taken numerous trips abroad in an effort to boost the country's international standing and attract foreign investment.

But, alas, these road shows are nothing more than a Potemkin village.

In other words, these initiatives by the government amount to nothing more than broadcasting a rosy picture of doing business in the country.

Unfortunately, as many investors find out shortly after they arrive in Indonesia, the business operating environment on the ground is very different.

Of all the challenges that confront investors, the most formidable are macroeconomic instability, regulatory policy changes, corruption and legal uncertainty.

In taking a look at each of these risks, we can see that, taken together, they make Indonesia one of the least favoured destinations for foreign direct investment in the world today.

Since the 1997/98 East Asian financial crisis, of which Indonesia was a prominent victim, the macroeconomic condition of the country has been undermined, for the most part, by political instability.

The lack of stability over the past seven years has been a direct result of transitional politics and the fact that the nation has seen four presidents and administrations since the fall of Suharto in 1998.

To be sure, Indonesia's transition from authoritarianism to the world's third-largest democracy has been an inspiring story. Nevertheless, democracy is not enough. Without equity, predictability and more rigorous leadership, the investment that Indonesia so badly needs will stay away.

As a Hong Kong-based investment banker put it: 'We (businesses) don't have a problem with either a dictatorship or a democratic government in Indonesia.

'It's something between the two that we cannot accept.'

With regard to corruption, what more is there to say? Better known in the country as 'KKN' - an acronym associated with the Suharto era that stands for corruption, collusion, and nepotism - corruption is so entrenched that many doubt it can seriously be addressed until society as a whole becomes more embarrassed by it.

Until this happens, fairly or unfairly, Indonesia will continue to be dogged by the unflattering image that corruption is the rule, not the exception.

But among all the frightful risks investors face, legal uncertainty is by far the most formidable.

Laws and regulations are often contradictory, vague or antiquated. A much larger problem, however, is the behaviour of judges, lawyers, courtroom clerks, the police, and others who have the solemn duty to uphold the law.

In this system, a verdict in a commercial lawsuit or legal dispute can be purchased no matter what the respective merits of the case. If an investor involved in a legal matter is unwilling or unable to play this game, the chances of losing in court - particularly at the lower level - is high.

Some business people have even gone as far as to say that abiding by the rules only serves to disadvantage them.

Another point worth mentioning is that the Indonesian legal system operates on inconsistency. For instance, not all the laws concerning foreign investors are applied in all cases.

What is more, the speed with which the Indonesian courts process legal cases or appeals often depends on the size and perceived importance of the plaintiff or defendant.

In other words, if a case involves a big foreign business, it is likely to be heard relatively quickly. By the same token, if a case involves a small foreign business, the process can take a lot longer.

Examples abound. A case in point is that of PT Kangar Consolidated Industries (KCI) vs PT Multi Inti Trada (MIT). KCI is the Indonesian subsidiary of Owens Illinois, a US-headquartered multinational company with a modest manufacturing enterprise in the country. The company worked with MIT as its local distributor until last year when it ended the distributor agreement because MIT paid late and violated other trading terms. Upset with KCI's decision, MIT filed a suit against KCI in the East Jakarta District Court.

Although right was on the side of KCI, the East Jakarta District Court ordered KCI last November to pay MIT six billion rupiah (S$1.07 million) in material damages and another one billion rupiah in immaterial losses for 'wrongful termination' of the distribution agreement.

In reaction to the dubious court decision, KCI has reported the case to the Judicial Commission and says it intends to contest the verdict.

It remains to be seen what the Judicial Commission will do with the case of KCI vs MIT and how long it will take to hear from it.

Meanwhile, one thing is certain: While they don't make headlines like US mining giants Newmont and Freeport, or Canadian insurance giant Manulife, it is smaller ventures like KCI that have stayed loyal to Indonesia through the Asian financial crisis and the years since.

So, if the SBY government really wants foreign businesses in Indonesia, it must get beyond form and start addressing the substantive issues that are damaging the business operating environment.

It should implement new economic measures, and introduce legal reforms and sanctions now. Otherwise, do not expect much improvement in the investment picture.

The writer is a Jakarta-based columnist