[Kabar-indonesia] 1 of 2: RI Trade and Investment News, 14 August 2006

[JoyoNews at aol.com]

The Coordinating Ministry for Economic Affairs
Republic of Indonesia
Jakarta
Monday, August 14, 2006

Trade and Investment News, 14 August 2006

Part 1 of 2

Highlights 

Politics 

* Indonesia, Malaysia and Brunei ready 
  to send troops to Lebanon

Regions 

* Head of the Aceh Monitoring Mission 
  praises peace process 
* Celebrations to mark first Aceh peace 
  accord anniversary 
* Coordinating minister says no promised 
  bird flu aid has arrived 

Economy 

* Central bank officials point to more 
  rate cuts 
* Retail bond strongly oversubscribed 
* Thailand to invest in fisheries industry 

Macroeconomy 

* Bank Indonesia Governor says conditions 
  conducive to rate fall 
* Economic growth target for 2006 set at 5.8% 

Investment 

* Australian business delegation praises 
  conditions 
* Regional Representatives Council to host 
  investment show 
* Middle East nations ready to invest, 
  says business chief 
* Nissan Motor to source new model 
  components from Indonesia plant 

State Concerns 

* Trade minister says travel warnings 
  damaging to economy 

SOEs

* Sugar company to get technical 
  assistance from Australia 
* Construction company may hold 
  rights issue to fund offshore expansion 

Private Sector 

* Rajawali Corp. buys more cigarette 
  company shares 
* Fitch upgrades PT Telkomsel debt 
* Jakarta super mall expansion to 
  cost $225 million 

Banks

* Sector reports net profit rise of 13.8% 
  in half year despite high rates 

Power

* First nuclear power plant in action in 2011 

Oil & Gas

* PT Pertamina to start production 
  at oil field near Jakarta 
* Foreign operators free to enter 
  bio-fuels business 

POLITICS

Three SE Asian Armies Ready for Lebanon 

Brunei, Indonesia and Malaysia are ready to contribute troops to Lebanon as 
part of a UN-mandated peacekeeping force, the three countries' military chiefs 
said Thursday (10/8/06).

"See how serious we are in preparing ourselves," Indonesian Military (TNI) 
chief Air Marshal Djoko Suyanto said at a joint media conference in Jakarta. 
"This is a peace mission. We agreed not to look at race or religion."

The three commanders said Indonesia was ready to send 850 soldiers, Malaysia 
between 850 and 1,000 and Brunei around 200. 

At least 16 nations have said they are considering sending troops to an 
eventual UN-mandated international stabilization force in southern Lebanon, but 
only once a cease-fire is declared.

Aside from Malaysia, Indonesia and Brunei, they are Australia, Brazil, Chile, 
France, Ghana, Italy, Lithuania, Nigeria, Norway, Portugal, Romania, Spain 
and Turkey.

REGIONS

AMM Chief: Great Progress in Aceh 

Pieter Feith says he believes that the people of Aceh feel that great 
progress has been achieved since the start of the peace process with the Memorandum 
of Understanding between the Indonesian government and the Free Aceh Movement 
(GAM) a year ago. 

Feith, in comments to the Jakarta Foreign Correspondents Club on Friday 
(11/8/06), said he regretted some statements by GAM officials and urged them to 
readjust to a political role in which they could use the channels open to them to 
achieve changes in the law on governance.

"Any comments on a return to conflict, whether through a new generation, are 
entirely inappropriate," he said. 

The government is to commemorate the first anniversary of the August 15, 2005 
peace deal in Aceh with a series of events this week, including a conference 
to build long-lasting peace. 

Presidential spokesman Dino Pati Djalal said Wednesday the conference will 
take place in Jakarta on August 14 and will be opened by President Susilo 
Bambang Yudhoyono. Vice President Jusuf Kalla is slated to close it.

Poll finds Acehnese More Optimistic 

Almost a year after the signing of the Helsinki peace accord that ended 29 
years of fighting in Nanggroe Aceh Darussalam, most people in the province 
believe conditions are improving, a survey revealed.

The poll, conducted by the Jakarta-based Indonesian Survey Circle (LSI), 
found that 67% of people surveyed in the province said they were satisfied with 
the present security and political environment. LSI interviewed 440 people from 
July 18-21 in Aceh for the poll, which has a margin of error of plus or minus 
4.8%. 

The survey finds satisfaction about the peace is equally spread among people 
from different demographic groups. 

Most people - about 56.7% - also believe the peace will last. 

Positive sentiment about the agreement is also shared by a significant number 
of people outside the province. 

In a national survey, conducted between July 28 and August 3, LSI discovered 
that the largest number of people, 47%, believed that things had generally 
improved in Aceh, while another 43% hoped that peace in the province would last. 

For the national survey, LSI interviewed 700 randomly selected respondents 
with a margin of error of 3.8%. 

In the national survey, most Indonesians supported the dissolution of the 
Free Aceh Movement (GAM). 

"In our national survey, 81.2% of respondents said that GAM should disband 
following the passing of the Aceh governance law," said Denny Januar Ali, the 
executive director of LSI. 

Denny also noted many respondents supported former GAM members' involvement 
in local politics in line with the Helsinki accord.

No Funds to Aid Bird Flu Fight: Minister  

As two teenagers died of bird flu within hours of each other Tuesday, 
bringing the country's death toll to 45, Coordinating Minister for Social Affairs 
Aburizal Bakrie spoke up for Indonesia's control program, but implied it was 
limited by the lack of any aid funding. 

He said Indonesia has slaughtered or vaccinated almost 290 million chickens 
since 2004. He stressed that the country has received no financial assistance 
from the international community, despite promises to help fight the virus. 

In January, the international community pledged $1.9 billion to help affected 
countries fight bird flu. The United Nations said in July only $331 million 
had been handed over, but it was not clear how much Indonesia had received, or 
in what form. 

ECONOMY 

More 'Cautious' Rate Cuts: BI  

The central bank still has room to cut key interest rate, but its 
implementation will be carried out cautiously, Bank Indonesia (BI) Governor Burhanuddin 
Abdullah said Friday (11/8/06).  

"We must be cautious, .. not so aggressive," Abdullah said, but added there 
is still room for a further cut of the key interest rate because inflation is 
still under control.

He said the inflation rate for the year reached 3.3% by July and will be 
between 7%-9% by the end of this year, Antara reported.

On Tuesday, the central bank cut its benchmark interest rate by half a 
percentage point to 11.75%, aiming to revive consumer spending and spur economic 
growth.

On Thursday, senior deputy BI governor Amanda Goeltom pointed to another rate 
cut as soon as next month. She also said the target of 8% by year end 
remained in sight. 

Chatib Basri, the director of the Social and Economic Research Institute at 
the University of Indonesia, said the cut would be enough to add to economic 
growth in the third quarter.

A number of major economic indicators had improved from the first quarter, 
Basri added.

A day before the 50 point rate cut, the International Monetary Fund (IMF) 
stated in its annual review of the economy that there was room to ease rates and 
increase public spending. 

"There is scope for fiscal policy to support activity in 2006, while firmly 
pursuing fiscal prudence," the IMF said in a press summary of the review. 

The IMF urged Indonesia to push ahead with privatization of state-owned banks 
that don't have a specific public policy objective. Overall, performance by 
Indonesian banks has been steadily improving, the IMF said. 

Adding to the confident mood was the news that the country's first retail 
bond had been oversubscribed. 

"This is a very good start," said Mulya Nasution, Director General of 
Treasury at the Finance Ministry. "The successful offering is a vote of confidence 
from investors on the government fiscal policies."

The government accepted the entire oversubscription by increasing the issue 
size to Rp3.28 trillion ($362 million) from a targeted Rp2 trillion, Nasution 
said.

In a revised budget proposal, the government has projected economic growth 
this year at 5.8%, according to Kompas, down from 6.2% originally, but still 
higher than last year's growth of 5.6%. 

The latest Bank Indonesia survey of consumer confidence found the overall 
index rose to 95.5 points in July from 91.1 in June, underlined by improvements 
in the present condition index and the expectations index.

Indonesia's new policy demanding investments in the country as part of any 
grant of new fishing licenses won acceptance from Thailand, Indonesian officials 
said. 

The secretary to the Directorate General of Fisheries at the Maritime and 
Fishery Ministry, Nilanto Perbowo, said Thai firms were planning to enter into 
joint ventures for processing purposes with between 10 and 16 local companies. 

Around 500 foreign fishing companies have indicated interest in investing in 
the sector and investment could add up to $500 million, Minister Freddy 
Numberi said Thursday.

Earlier, fishing companies from the Philippines and China had agreed to build 
fish processing plants in Bitung, North Sulawesi and in Papua.

Nissan Motor Co. also announced that it would build a factory in the country 
to serve the local market and as a components export base for the global 
market. No figure was provided for the investment required. 

A South Korean plastic container producer, Hanacobi, said it would establish 
stores and a factory in Jakarta as part of its expansion program.

"Indonesia is a market with a lot of potential for us as it has a huge 
population," Hanacobi President Kim Joon Il said.

Also from South Korea, the Korindo group said it would invest $222 million in 
the plantation sector, according to Forestry Minister MS Kaban. 

Kaban added that Korean investors are expected to take part in the 
government's program to speed up development of 8 million hectares of plantation forests 
in the country.

Chamber of Commerce and Industry (Kadin) chairman MS Hidayat said Middle East 
investors were now interested in investment in Indonesia. They were keen to 
invest in the oil and gas, education and banking sectors, he said. 

A group of Australian businessmen, after two days of talks in Jakarta, said 
they were impressed by the situation in Indonesia. 

The delegation's leader, ANZ Banking Group and Woodside Petroleum chairman 
Charles Goode, said it appeared Indonesia's recent democratic reforms had 
stabilized the country and it was now set to grow.

"The economy looks as if it's got a reasonably solid base and growth will 
improve from here. We're looking at 5% GDP now hopefully moving to 7%."

President Susilo Bambang Yudhoyono spent two days in Singapore at the 
beginning of the week, and told businessmen there that Indonesia was ready for 
investment. He named infrastructure development, bio-fuels and special economic 
zones (SEZs) as areas of strong potential.

He took pains to assure the Singapore business community that Indonesia was 
serious about reform to improve the business climate, The Straits Times 
reported.

BUSINESS BRIEFS

MACROECONOMY

More Room to Cut Rate in Sept. - Governor

Macroeconomic conditions provide the central bank "room" to cut its benchmark 
one-month rate again next month, Bank Indonesia (BI) Governor Burhanuddin 
Abdullah said Friday (11/8/06).

"There is room (for a September rate cut)," Abdullah was quoted as saying by 
Dow Jones Newswires.  He said the bank would monitor softening on-year 
inflation movements before making any monetary policy decision.

He shied away from predicting a repeat of the 50-basis point cut in the 
benchmark rate that the bank announced the previous week.  "We have to be very 
careful (about the pace of monetary easing)," he said. 

The central bank's decision to bring the rate down to 11.75% from 12.25% was 
the third and deepest interest rate cut since BI initiated monetary policy 
easing in May.  Analysts expect the BI rate to reach 11% by end-2006 in line with 
a decline in on-year inflation to about 8% in the same period.

Abdullah also indicated that BI will aim to keep the US dollar from falling 
below the Rp9,000 mark.  "It seems the rupiah will be around 9,000 up to the 
end of the year, I think the trend is like that," he said.

Analysts said the BI rate was cut by 50 basis points to accelerate the shift 
in monetary policy focus from inflation control to economic stimulus.

The rate cut will "boost the optimism of consumers and the business 
community, which in the long run will push activity in the real sector without inducing 
excessive inflation," a central bank statement said.

"With the rate cut, we expect (commercial banks') lending rate will fall 
also, investment will increase and the real sector will move along to create 
jobs," BI Deputy Governor Aslim Tadjuddin said.

Coordinating Minister for the Economy Boediono welcomed the decision by BI to 
cut its rate, and reiterated the government's stated commitment to improving 
the investment climate.  Finance Minister Sri Mulyani Indrawati said that the 
government would also push for higher budgetary spending in the second half. 

2006 Economic Growth Target Set at 5.8%

The government and parliament have agreed to cut the 2006 economic growth 
target to 5.8% from 6.1%, Kompas daily reported on Friday (11/8/06).

The economy must grow 7% on year in the second half to achieve the new 
target, the newspaper quoted Syarif Hasan, deputy chairman of the budget committee 
in parliament, as saying.

The government's statistics agency is slated to announce second-quarter gross 
domestic product data on Tuesday (15/8/06).

Govt. Jan-July Budget Surplus Rp5.78t

The government had a budget surplus of Rp5.78 trillion in the first seven 
months of the year, spending Rp282.73 trillion or 43.65%% of its budget for the 
year, the Finance Department said.

Revenue in the first seven months was Rp288.51 trillion or 46.14% of the 
target for the whole year, the department said in a statement, according to 
XFN-Asia.

The government has proposed to raise its deficit for the year to Rp37.63 
trillion or 1.2% of gross domestic product (GDP) from Rp22 trillion or 0.7% of the 
GDP, envisioning an increase in expenditure to Rp689.54 trillion and an 
increase in revenue to Rp651.91 trillion.

Tax receipts in the first seven months totaled Rp216.98 trillion or 52.12% of 
the target for the whole year, and non-tax revenue was Rp70.84 trillion or 
34.51% of the full-year target.

Central government expenditure in the first seven months was Rp165.51 
trillion or 38.7% of the amount budgeted for the year.

Finance Minister Sri Mulyani Indrawati said the pace of government spending 
has been partly slowed down by a revised presidential decree issued in 2003 
stipulating that government procurement should follow a tender process, which is 
time-consuming.

BI Awards Rp31.4t 1-Month SBIs 

Bank Indonesia (BI) has awarded Rp31.4 trillion worth of BI Certificates 
(SBIs) at 
a fixed rate of 11.75%, XFN-Asia reported on Wednesday (9/8/06).

The one-month SBI rate is pegged to the benchmark rate, called the BI rate, 
which was lowered by 50 basis points to 11.75% on Tuesday (8/8/06).

The central bank also auctioned three-month SBIs worth Rp1 trillion or just 
10.8% of total bids, at a weighted average interest rate of 11.36% against 
12.16% previously.

INVESTMENT

Time 'Nearly Right' to Invest- Australia

A group of Australian businessmen has come away from two days of meetings 
with senior Indonesian politicians, including President Susilo Bambang Yudhoyono, 
saying the time is nearly right to invest in Indonesia.

"They've got a good president and their economic team seems very competent," 
ANZ Banking Group and Woodside Petroleum chairman Charles Goode, the 
delegation leader told The Australian Financial Review.  

"He (Yudhoyono) strikes one as a very fine person -- fair, capable, well 
informed and clearly interested in the future of the country.  The economy looks 
as if it's got a reasonably solid base and growth will improve from here.  
We're looking at 5% GDP now hopefully moving to 7%."

The delegation included senior Australian representatives from five resource 
groups -- BHP Billiton, Newmont Mining, Woodside Petroleum, BlueScope Steel 
and Santos -- as well as executives from Deutsche Bank, law firms Freehills and 
Allens Arthur Robinson, and Deakin University.

"The investment climate is slowly improving," said John Prescott, a director 
of Newmont and chairman of submarine manufacturer ASC.  "It's a few years 
since I've been here and I've noticed a significant improvement in confidence.  
The president stands out.  He was very frank and open with us and it was a very 
impressive meeting."

The head of BlueScope's Indonesian operations, Rob Crawford, said: "The 
access we had to the senior ministers was absolutely phenomenal.  The fact they 
gave their time over a two-day period just indicates the importance in which they 
hold Australia and Australian investors.  They are very determined to improve 
the investment climate as a means to improve the general wellbeing of the 
population of Indonesia."

Meanwhile, Trade Minister Mari Pangestu said the government will set up an 
Investment Policy Committee before the end of the year.

"The formation of the committee was proposed by the coordinating minister for 
the economy.  We have discussed it and agreed that such a committee is 
needed," Pangestu said Wednesday (9/8/06).

The committee will be in charge of identifying sectors that are restricted or 
open to conditionality and tax incentives.

"Our idea is to set up a permanent secretary which will be under the 
supervision of the coordinating minister for economy.  The permanent secretary will 
deal with problems concerning the investment sector," she was quoted as saying 
by Antara.

DPD to Stage Local Investment Forum 

In the hope of encouraging the country's regions to become more proactive and 
receptive toward inward investment, the Regional Representatives Council 
(DPD), in collaboration with a global event organizer, will host the "Indonesian 
Regional Investment Forum" in November.

"We want to make local governments more proactive and to take the initiative 
in encouraging inward investment into their regions.  We hope that this event 
will serve as the catalyst in encouraging the regions to promote their 
potentials," DPD Deputy Speaker Irman Gusman was quoted as saying Thursday (10/8/06) 
by The Jakarta Post. 

Speaking also in his capacity as chairman of the forum's organizing 
committee, Gusman said the two-day investment forum, which will begin on November 2, 
would be attended by delegations from more than 15 countries and would be 
addressed by a number of prominent speakers, including the president, several 
ministers and a number of governors representing the country's local chief 
executives. 

Mid-East Investors Keen to Invest 

Four months after President Susilo Bambang Yudhoyono visited the Middle East, 
businessmen in the region said they want to invest in Indonesia, especially 
in its infrastructure sector, an official of the Indonesian Chamber of Commerce 
and Industry (Kadin) said on Tuesday (8/8/06).

They are keen on investing their money in Indonesia's oil and gas, education 
and banking sector, Kadin's chairman of the Committee for the Middle East and 
the Organization of Islamic Conference (OIC), Sudrajat DP, was quoted as 
saying by Antara.  

He also said that businessmen from Iran, Egypt, Kuwait and Saudi Arabia will 
come to Jakarta to attend the "Visit Indonesia Infrastructure" event to be 
held November 
1-3.

"For the time being, they will be observing and studying the economic 
situation in Indonesia which they hope will be conducive to their planned 
investment," he said.

The businessmen have also expressed interest in marketing Indonesian products 
in their respective countries.  Indonesia's exports to the region stand at 
$1.35 billion. 

Nissan to Build New Factory 

Nissan Motor Co, Japan's second largest carmaker, plans to build a factory in 
Indonesia and make the country a Nissan car and component export base for the 
global market.

The factory will support the marketing of its Livina Geniss multipurpose 
vehicle (MPV) to be launched in 2007, Bisnis Indonesia said.

The plan to operate the export facility has been discussed with the 
principal, sales and marketing director of PT Nissan Motor Distribution Indonesia, 
Teddy Irawan, said.  Nissan has said it plans to increase its market share in 
Indonesia, hoping for a fivefold increase to 30,000 units by 2007.

Yasuaki Hashimoto, vice president of Nissan Motor Indonesia, said various 
parts of the Livinas to be sold in the country will be produced in Indonesia 
while other components will be imported from China and Thailand.

S. Korean Companies to Invest 

South Korea's Korindo Group will make a new investment of Rp2 trillion 
($222 million) to build 500,000 hectares of plantation forests in Indonesia.

Indonesian Forestry Minister MS Kaban, who just returned from South Korea, 
said a team will be set up next month to study potential areas where the 
plantation forests could be developed, Antara reported on Monday (7/8/06).

Kaban said Korean investors are expected to take part in the government's 
program to speed up the development of 8 million hectares of plantation forests 
in the country.  Director General for Forestry Production, Hadi S Pasaribu, 
said he is optimistic Korindo will carry out the project as it is difficult for 
Korean timber processing companies to find land for such investment in Korea.

Meanwhile, South Korean plastic container producer Hanacobi is planning to 
establish stores in Jakarta and build a factory, as part of its expansion 
program.

Hanacobi president, Kim Joon Il, said he wants his firm's product, Lock&Lock, 
to grow faster in Indonesia than the current 30% annual growth.  "Indonesia 
is a market with a lot of potential for us as it has a huge population," Kim 
said, adding that in China, sales of the company's products grew by 50% last 
year.

Surabaya Exchange Designated as Bond Data Center 

The Capital Market Supervisory Agency (Bapepam) has officially designated the 
Surabaya Stock Exchange (BES) as the country's sole bond-transaction 
reporting center as part of Bapepam's efforts to provide an integrated source of 
information on bond prices and yields for investors.

The Surabaya bourse began operating as the reporting center on Wednesday 
(9/8/06), following the issuance of a directive on July 31 by Bapepam director 
Fuad Rahmany announcing its appointment as Indonesia's reporting center, as well 
as the agency's latest regulations on bond-transaction reporting, according to 
The Jakarta Post.

With the appointment of the BES, all trades, swaps, repurchases, transfers or 
other forms of exchange of both corporate and government bonds, conducted on 
or off the market, must be reported to the BES within one hour of the 
transaction taking place. 

-End 1 of 2-

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Joyo Indonesia News Service
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