[Kabar-indonesia] 1: RI Trade and Investment News, 7 August 2006

Mon Aug 7 00:12:39 MDT 2006

The Coordinating Ministry for Economic Affairs
Republic of Indonesia
Jakarta
Monday, August 7, 2006

Trade and Investment News, 7 August 2006

Part 1 of 2

Highlights 

Politics 

* President Yudhoyono urges OIC to contribute 
  to Mideast peacekeeping force 

Regions 

* New Papua Governor calls for more attention 
  to plight of poor 
* 15-year sentences for rioters in March incident 
  in which 6 died 
* Free Aceh Movement accepts law on governance 
  with reservations 
* Bali's local government acts swiftly on bird flu 
  outbreak 

Economy 

* Per capita income tops $1,500 
* Inflation down, spurring hopes of more interest 
  rate cuts 
* Good response for first retail bond 

Business Briefs 

Macroeconomy 

* Inflation falls to lowest in 10 months
* Forex Reserves Rise to $41.13b 

Investment 

* First half foreign investment up on same 
  period of 2005 
* Malaysian business community invited 
  to invest 

State Concerns 

* More Debt swap deal sealed with Germany 
* Tourist arrivals down after natural disasters 

SOEs

* IPOs planned for three state-owned companies 
* PT Telkom says first-half net profit jumped 53% 

Private Sector 

* Motorcycle sales still down, but signs of revival 
* TV stations in strategic alliance 

Banks 

* Modest growth in debt expansion in first half 
* Bank Central Asia records growth in profit, loans 

Power 

* Consortium to build world's largest geothermal plant 
* Investors line up to bid for 10 coal-fired plant projects 
* State utility PLN to divest power plants to subsidiaries 

Oil & Gas 

* Oil prices driven by political concerns: Minister 
* Pricing deal sealed between CNOOC and 
  Tangguh project 

Mining 

* The Berau coal mine has been sold to a private 
  Indonesian investor 

POLITICS

President Urges IOC to Aid Lebanon 

President Susilo Bambang Yudhoyono said Thursday (3/8/06) that Organization 
of the Islamic Conference (OIC) member nations must play a prominent role in 
the United Nations-led international peacekeeping force that may eventually be 
deployed in southern Lebanon.

Noting that a comprehensive ceasefire could be achieved by this week, he said 
the OIC's participation would help ensure proper care for tens of thousands 
of traumatized Lebanese civilians. 

"I do think that a substantial part of the peacekeeping force must come from 
OIC countries. Thus, the OIC can also have a role in formulating the rules of 
engagement, and terms of reference," he told delegates from 18 countries 
during an emergency meeting of the OIC in Kuala Lumpur.

Israel has said the international force should be made up of countries which 
have a genuine concern for change in that part of the world. 

Speaking to reporters after a meeting with Lebanese Foreign Minister Fawzi 
Salloukh, Dr. Yudhoyono said that the rules of engagement and terms of reference 
for deployment of the peacekeeping force could not be designated to one or 
two countries. 

"We fear that troops from the countries will not be fair and evade making 
constructive engagement," he said. 

Delegates from the 18-member OIC urged a comprehensive and unconditional 
ceasefire between the warring parties in Lebanon. They also backed the Lebanese 
government's plea for the enforcement of an agreement reached in Rome.

As part of the commitment agreed in the joint declaration, member countries 
pledged to do their utmost to end the violence within the coming week. 

"We hope that at least within the next one week, there will be a global 
effort spearheaded by the UN to save our brothers and sisters from the war," Dr. 
Yudhoyono said. 

Apart from supplying $1 million in humanitarian aid to the Lebanese people, 
the Indonesian government has also committed a 600-man force to join a future 
peacekeeping force. 

Rice Warned of Lebanon Fall-out 

America's support for Israel's military attacks on Lebanon is making it 
difficult for Muslim countries to counter Islamic radicalization, Foreign Minister 
Hassan Wirayuda told US Secretary of State Condoleezza during recent talks in 
Malaysia.

If the US allows Israel to continue "attacking, burning and killing Lebanese 
(people), it makes difficulties for moderate countries which have Muslim 
populations," spokesman Desra Percaya quoted the minister as having told Rice.

"Seeing such situations, even for moderate Muslims, they could become 
radical, they will do anything to stop Israeli attacks," he said. 

Rice responded that she was aware of the problem and "promised to create a 
sustainable ceasefire" in the Middle East.

President Explores Graft Theory

The government spent time on Wednesday (2/8/06) to focus on identifying the 
theoretical roots of corruption.

President Susilo Bambang Yudhoyono held a long discussion on his 
anti-corruption drive with international experts invited to address a study group 
organized at the Presidential Palace. 

The lecturers were Bertrand de Speville, former commissioner of the 
Independent Commission Against Corruption (ICAC) of Hong Hong, and Robert Klitgaard, 
rector of Claremont University and author of Corrupt Cities: A Practical Guide 
to Cure and Prevention. 

The study group included several ministers, officials from the Corruption 
Eradication Commission (KPK), the police, the Attorney General's Office (AGO), 
the Regional Representatives Council (DPD) and executives from the private 
sector. 

During the session, Dr. Yudhoyono emphasized the need to combat corruption at 
all costs before it further crippled the economy. 

"I am sure that we could draw a benefit from this lecture session by 
understanding the theory, concept and practical (matters) related to the prevention 
and the stamping out of corruption," he said.

Both Klitgaard and de Speville recommended that law enforcers intensify the 
anti-graft campaign within the private sector because of the way it creates a 
high-cost economy. 

REGIONS

Suebu Calls for Better Conditions 

New Papua Governor Barnabas Suebu has started out on a populist platform, 
telling officials that their focus should be about improving the living 
conditions of the poor. He also promised clean, transparent government. 

President Susilo Bambang Yudhoyono meanwhile told the Papuan People's Council 
(MRP) he believes the Law on Papua Special Autonomy should be re-evaluated. 
He was quoted as saying that the president vowed to take action in Papua but 
said it remained unclear what people wanted. 

Jail Sentences for Rioters 

Courts in Jayapura handed down 15-year sentences to Ferdinandus Pakage and 
Luis Gedi on Wednesday (2/8/06), the toughest so far in a series of trials over 
the March rioting in Abepura, the university dormitory of Jayapura. 

Earlier, Selpius Bobii, Elias Tamaka and Elkanal Lokobal received sentences 
of between five and six years, similar to jail terms imposed in another 11 
cases. 

Seven more defendants, including Steven Wandik, 23, are on trial on charges 
they were responsible for the murder of an Air Force soldier. 

TNI 'Vigilant' Against OPM 

The Armed Forces (TNI) will no longer conduct offensive operations against 
the Free Papua Organization (OPM) but will maintain 'vigilance', TNI Commander 
Air Marshal Djoko Suyanto said Monday (31/7/06). 

"Vigilance must be maintained", he told Tempointeractive, but said this did 
not mean troops will be pursuing groups that still exist.

Troops in Papua are to make approaches to the members of OPM groups that are 
still in the mountains to return to society. "We are inviting them to come 
down to the villages, more in the direction of social activities, so no longer 
through military operations", said Suyanto.

According to Suyanto, the TNI's policy of no longer conducting military 
operations to pursue OPM separatists has been applied for several years now.

Suyanto said that the military strength of the OPM groups who are still in 
the mountains is minimal. "In any single group there is less than 10 people", he 
said. They are spread among several groups in villages far in the interior.

GAM Accepts Law, with Reservations 

While the Free Aceh Movement (GAM) says it rejects a number of articles in 
the new Law on Governance in Aceh, it says its accepts the legislation in 
principle and will work to achieve amendments to points which differ from the Law.

Spokesman Yusuf Irwandi announced the rejection of the articles on Wednesday 
(2/8/06) and said a formal request for revisions was being put to the Aceh 
Monitoring Mission (AMM). 

Separately, another spokesman, Munawarliza Zein, noted that GAM did not 
reject the governance law in its entirety. "We have to be realistic and accept that 
articles which do not conflict with the MoU will be kept," he was quoted as 
saying by Republika.

Bali Burns Infected Fowls 

Animal health officials said Wednesday (2/8/06) they had burned almost 1,300 
chickens in Bali after most tested positive for the bird flu virus. 

Officials in the Jembrana district killed some 845 backyard chickens, said I 
Gusti Ngurah Sanjaya, head of the district's animal health office, Antara 
reported. 

Sanjaya also told Agence France-Presse that workers and local residents also 
burned a further 450 sick birds in a three km radius of the outbreak.

"We have carried out bio-security measures by spraying coops in five separate 
locations in Jembrana. Any chickens found dead or sick were burned and buried 
and public awareness of the disease is quite good," Sanjaya said, adding that 
no human infection had been reported. 

Meanwhile six persons suspected of having bird flu who were hospitalized in 
Medan, North Sumatra, on Tuesday, were cleared of infection from the disease. 

The six came from the Karo district of North Sumatra, where earlier seven out 
of eight infected members of a single family died. 

Coordinating Minister for People's Welfare Aburizal Bakrie said on a visit to 
North Sumatra Wednesday that special policies would be introduced to deal 
with the threat of further infections. 

Bakrie told a meeting with local officials that the government would expand 
the area for mass culls of poultry from the location of a human or bird death, 
from the current 1 km radius to 5 km. 

The government also plans to increase compensation for owners of infected 
fowl from Rp10,000 ($1.10) to Rp12,500, meeting a demand put by locals resistant 
to a cull of birds. 

ECONOMY

Per Capita Income Tops $1,500 

Indonesia's per capita income has topped $1,500, the Central Statistics 
Agency (BPS) said Wednesday (2/8/06), technically lifting the country to 
lower-middle income status.  

Agency head Rusman Heriawan told reporters that the figure marked a 
considerable improvement over the depth of the financial crisis, when per capita income 
fell as low as $600 at one stage. 

Rusman said the stronger rupiah, now hovering around 9,100 against the 
dollar, helped lift per capita income.

The comment followed another reduction in inflation to 0.45% for the month, 
or 15.15% year-on-year. 

The trade surplus dropped to $2.81 billion in June from $3.28 billion in May 
as imports grew faster than exports during the month, Heriawan said.

Exports hit a new record of $8.48 billion in June, 1.70% up on May's $8.34 
billion.

Imports, often seen as an indication of capital goods imports for 
manufacturers, picked up by 12% pct to $5.67 billion in June from $5.06 billion in May.

The reduced inflation rate led to hopes that Bank Indonesia will further cut 
its benchmark interest rate when it meets this Tuesday. 

The central bank sees a "very big possibility" of easing monetary policy 
after inflation slowed more than expected in July, said the bank's Senior Deputy 
Governor, Miranda S. Goeltom.

"Inflation in Indonesia is on a downward trend," she told reporters 
Wednesday. "Inflation has been declining faster than expected and therefore there is a 
very big possibility of easing monetary policy." 

The comment prompted speculation that the central bank might cut rates by 50 
basis points. 

On Friday, Vice President Jusuf Kalla said the government hopes Bank 
Indonesia will gradually cut interest rates so they reach a single digit level by year 
end.

"We hope that in the last semester we will return to single digit or more or 
less, so that consumer spending and purchasing power as well as production can 
return to normal levels," he said.

The lower inflation rate also helped boost confidence among business 
operators. The Business Sentiment Index (BSI) edged higher by 0.4% in the April-May 
period to 114.5, The Jakarta Post reported.  

Of the eight business sectors covered by the survey, business sentiment 
improved the most in the construction sector (up 2.6% to 114.9) and the financial 
sector (up 1.6% to 129.4).

Vice President Kalla said Friday lower rates were also producing an upswing 
in the industrial sector. While growth rates would not be as high as the 
government had hoped, there were clear signs that output would increase in the 
second half. The government had predicted growth of 7.7% in the sector.

The country's first retail bond offer appeared to be heading for success, 
with the Director General for Treasury, Mulia Nasution, saying the size of the 
bond would be increased from Rp2 trillion ($214 million) on strong demand. 

"If all of the orders are indeed confirmed, then we will take up all of them 
to meet market demand," he said. Bookings had reached Rp3 trillion when the 
offer closed on Friday. 

President Susilo Bambang Yudhoyono was talking up the economy and the war 
against graft in a visit to Kuala Lumpur on Friday. 

He earmarked four sectors - energy, roads, telecommunications and ports and 
harbors - for possible investment by Malaysian companies, the Associated Press 
reported. 

Indicators: 

                          May 2006    June 2006    Growth on month    Growth 
in first 

              6 months compared        

              to same period 2005

Total exports     $8.34 billion  $8.48 billion     1.7%               15.14%
Non-oil & gas 
exports               $6.55 billion  $6.71 billion      2.38%            
14.4%    

                        June 2006    June 2006        July 2006            
July 2006
                          (m-o-m)        (y-o-y)              (m-o-m)         
       (y-o-y)

Inflation                   0.45%       15.53%              0.45%             
  15.15%

                           Full year 2005  1Q 2006      
GDP growth        5.60%         4.59%       

Tourism arrivals       May 2006       June 2006    Growth/loss

(m-o-m)    
                            332,445        366,100         8.63%    

                           Jan-June 2006 Jan-June 2005  Growth/loss 
                          1.89 million     2.05 million     -7.5%   

Source: Central Agency of Statistics 

BUSINESS BRIEFS

MACROECONOMY

Inflation Eases, Rate Cuts Seen

Indonesia's annual inflation rate fell to its lowest in 10 months in July as 
the pace of food prices eased, data showed on Tuesday (1/8/06), suggesting 
more scope for interest rate cuts to boost a flagging economy, Reuters reported.

The consumer price index in July rose 15.15% from a year earlier, below 
market expectations for an increase of 15.4% and slowing from an annual rise in 
June of 15.5%.  "The room for BI to cut the interest rate is wide open now.  
Thanks to lower inflation, a stable rupiah and signals for an (interest rate hike) 
pause from the US Fed," said economist Roy Bahren of Bank Niaga.

The latest data comes ahead of a central bank rate review on Tuesday 
(8/8/06).  The central bank has said of  could fall in the second half of 2006 if 
inflation eases.  It cut its key BI target rate, now at 12.25%, by 25 basis points 
in May and July.

The Central Bureau of Statistics said the annual rate of core inflation, 
which excludes volatile items such as food, held steady at 9.58%.  Prices of raw 
food rose 15.77% from a year earlier, slowing from June's annual rise of 17% 
after a mid-crop harvest of rice.  Raw food accounts for a quarter of the 
consumer price index.

The bureau also said Indonesia's exports in June rose 23.08% from a year 
earlier to $8.48 billion, above expectations for an 18.41% increase, partly due to 
strong exports of commodities such as palm oil products.

Imports rose in June an annual 17.6% to $5.67 billion, compared with 
expectations for a rise of 6.9%.  That left a trade surplus of $2.81 billion.

"If there are no major shocking factors that cause prices to rise in the 
coming months, I expect inflation to reach single digits at the end of the year," 
said economist Anung Roni of brokerage AAA Sekuritas.

The central bank has said it expects the annual inflation rate to fall to 8% 
by the end of the year as the impact of last year's October 1 fuel price hikes 
fade.  But it has also said the BI rate may only fall to some 11% so that it 
can continue to offer support to the rupiah.

Forex Reserves Rise to $41.13b

Indonesia's international reserves rose to $41.13 billion at the end of July 
from $40.11 billion a month earlier, central bank data showed on Thursday 
(3/8/06), according to Reuters.

Bank Indonesia (BI) said on its website that base money rose to Rp251.14 
trillion ($27.58 billion) at the end of last month from Rp247.74 trillion in the 
previous month.  Net domestic assets however dropped to Rp7.41 trillion at the 
end of July from Rp9.95 trillion in June.

BI Awards Rp59.33t 1-Month SBIs 

Bank Indonesia (BI) said it has awarded Rp59.33 trillion worth of one-month 
BI Certificates (SBI) at a fixed rate of 12.25%, XFN-Asia reported on Wednesday 
(2/8/06).  The SBI rate is pegged to the benchmark interest rate, or the BI 
rate.

-End 1 of 2- 

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Joyo Indonesia News Service
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