[Kabar-indonesia] 2 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 2 of 2

STATE CONCERNS

Travel Warnings 'Harming Economy'

Trade Minister Mari Pangestu informed the press about businessmen complained 
that Australia is harming Indonesia's economy and deterring new investment by 
warning travelers of the risk of terrorist attacks in the country. The press 
meeting took place right after the two countries annual trade ministerial 
meeting in Canberra on Thursday 10/08/06. At the same time, business delegates of 
the two countries hold a parallel meeting discussing matters from trade and 
investment cooperation.

In its travel advisory service, the Department of Foreign Affairs and Trade 
urges Australians to reconsider visiting Indonesia because of intelligence 
"indicating that terrorists are in the advanced stages of planning attacks against 
Western interests".

Indonesia has long been critical of the advice and blamed it for a 
significant drop in tourism in the wake of bombings in Bali in 2002 and 2005.  The 2002 
Bali attacks killed 202 people including 88 Australians.

"The travel warnings affect tourism... business travel and most importantly 
education exchange," she said.  "There needs to be a greater understanding of 
each other's situation, our differences and an understanding of each other's 
internal processes." she was quoted as saying by Agence France-Presse.

The ministers meeting focused on the roadmap of the Trade and Investment 
Framework signed late last year. They agreed that both sides need to cooperate 
further to increase trade and investment relations, including through technical 
assistance from Australia to Indonesia. Australia is Indonesia's 11th largest 
trade partner and 7th largest source of investors. Both ministers also agreed 
to set up an expert group consist of 3 to 4 of respective businessmen and 
academician to look into ways to boost economic relations between them. They also 
agreed on how each side should respond positively to market access issues faced 
by some commodities entering the other's market.

SOEs

Cooperation to Develop Sugar Industry

State-owned sugar company, PT Rajawali Nusantara Indonesia, plans to 
cooperate with Australia's Queensland Sugar Ltd to develop the country's sugar 
industry.

The cooperation will include revitalizing the sugar industry, growing 
high-yield seedlings, exchange of experts and expansion of capacity, RNI executive, 
Agung P Murdanoto, was quoted as saying by Antara.

He said the cooperation will be implemented during the planting season next 
year.  "We hope it would help fulfill our target for self-sufficiency in the 
sugar industry," he said on Tuesday (8/8/06).

Govt. Evaluates Adhi Karya Rights Plan

The government is still assessing state construction firm PT Adhi Karya's 
proposed Rp600 billion rights issue intended to fund its toll road projects and 
raise working capital, State Minister for State Enterprises Sugiharto said.

Sugiharto said the company is expanding to the Middle East to construct 
large-scale projects and would therefore need a large capital base.  "This 
justifies the rights issue," he was quoted as saying by AFX.

He said the company may also decide to apply the proposed bond proceeds to 
strengthen Adhi Karya's capital structure.  Whichever option is decided upon 
will have to be approved by his office, Sugiharto said.

PRIVATE SECTOR

Rajawali Raises Stake in Bentoel

The diversified Rajawali Corp has increased its stake in the country's fourth 
largest cigarette maker, PT Bentoel Internasional Investama, to 34.8%, 
Bentoel's chairman said on Thursday (10/8/06), according to Reuters.

Rajawali, the single biggest shareholder in Bentoel, controlled about 20% of 
the company before the increase.  "This is part of the restructuring process 
of the ownership in Bentoel among the Rajawali consortium," said Darjoto 
Setyawan, chairman of Bentoel who is also a managing director at Rajawali.  "We are 
conducting this in a negotiated market, so we have not bought any shares from 
the market."  

Rajawali, which has a wide range of business from taxi firms to department 
stores, has said it would like to continue to lift its stake in Bentoel, the 
country's third largest listed tobacco company.  Recently the company bought a 
24.9% stake in PT Semen Gresik, Indonesia's largest cement company.

Bentoel is one of the strongest performers in the country's tobacco industry, 
one of the world's largest.  It booked a 57% rise in sales volumes in the 
first half of this year while the overall market declined by more than 12%.

Telkomsel Rating Upgraded - Fitch

Fitch Ratings said it has upgraded PT Telkomsel's long-term local currency 
Issuer Default Rating ('IDR') to 'BBB-' from 'BB+' with a stable outlook, 
XFN-Asia reported on Friday (11/8/06).

At the same time, Fitch has affirmed Telkomsel's long-term foreign currency 
IDR of 'BB-' with a stable outlook, which is reflective of the outlook on 
Indonesia's long-term foreign currency IDR of 'BB-'.

Fitch said the upgrade of the local currency IDR recognizes Telkomsel's track 
record of having achieved consistently impressive financial and operating 
results, its entrenched position as Indonesia's leading cellular operator, as 
well as its robust growth prospects.

Telkomsel's total number of subscribers has risen to 29.3 million as of June 
from 24.3 million as of December 2005, implying annualized growth of 41% and a 
market share of more than 50%, it said.  "Medium-term growth prospects are 
robust, with market penetration still low at around 22% as of the first quarter, 
though penetration of the addressable market was higher at around 49%," it 
added.

Property Firm Starts $225m Project

Indonesian property management firm, PT Plaza Indonesia Realty, kicked off a 
$225 million expansion of Jakarta's premier shopping complex on Friday 
(11/8/06) as retailers get ready for a better year ahead.

The project, first planned in the 1990s but put on hold because of the 
financial crisis, will add 201,500 sq m to the Plaza Indonesia complex in downtown 
Jakarta.

The company has appointed Korea's Ssangyong Engineering & Construction Co to 
build the extension, which includes a luxury apartment block and office 
buildings.  The project is expected to be completed in 2009.

"The total development cost, including for drawings and consultant fees, is 
$225 million," finance director Hendra Hartono told reporters after the launch 
where officials rang sirens and handed a helmet to a project supervisor to 
symbolize the start of construction.

Hartono said $150 million will be funded by a syndicated loan and the rest 
from internal resources.

BANKS

Banks' Net Profit Up 13.8%

Indonesian banks posted a net profit of Rp13.69 trillion ($1.52 billion) in 
the first half of the year, 13.8% higher than in the same period last year.

The increase was attributable to service-based income and improvements in 
efficiency, with income in credit interest making little contribution, a Bank 
Indonesia (BI) analyst said.

Contributions from credit interest were small as credit expansion was 
relatively low in the first half of the year, an analyst from the central bank's 
research directorate, Tirta Segara, said Wednesday (9/8/06), according to Antara.

Segara said that in the first six months of the year, credit extended by 
Indonesian banks grew by 3.72%, bringing total outstanding credits to Rp757.3 
trillion by the end of June.  Credits are forecast to grow 15%-16% this year.

Meanwhile, only 37 of 84 banks which submitted their business plans to the 
central bank have revised their targets for the second half of the year.  Segara 
said most banks are optimistic that the economy will improve in the second 
half of the year.

In general, the condition of the banking industry has improved by a number of 
indicators including credit expansion, capital adequacy ratio, NPL and 
efficiency, he said.

Based on data at the central bank, the CARs of Indonesian banks average 
20.5%, higher than in many countries.

POWER

Nuke Plant Projected to Operate by 2011

Indonesia's first 1,200-MW nuclear power plant is projected to start 
operating in 2011, a senior government official said.

Indonesia has intensified its plan to construct nuclear power plants to ease 
its dependence on oil and gas to accommodate the growing demand for 
electricity, senior official at the state-run national Atomic Energy Agency (Batan) Eko 
Hatmo said in a report published on August 6.

"For the preliminary step, a nuclear power plant unit will be built in the 
area of Mt Muria, central Java," Hatmo was quoted as saying by Deutsche 
Presse-Agentur.

Government officials said recently they plan to let contracts next year to 
build four plants with a total capacity of 4,000 MW, expected to be fully 
operational by 2025.

OIL AND GAS

Pertamina Slated to Start Crude Output 

State-run PT Pertamina was slated to commence crude oil production at its 
onshore Pondok Tengah field in Bekasi regency, West Java on Wednesday (9/8/06), a 
company official said.

The field will produce 3,000 barrels per day (bpd) of crude oil at the 
initial stage, Pertamina's vice president Iin Arifin Takhyan told Dow Jones 
Newswires.  "The peak production (of the field) is 16,000 bpd, which is expected to be 
reached by 2008."

Production from the field will help boost the country's crude oil output, 
which averaged 895,000 bpd in July.  The lifespan of the field is estimated at 20 
years, he said.  The field is located about 70 km east of Jakarta.  The crude 
will be processed at Pertamina's Balongan refinery.

Foreign Oil Firms Allowed to Trade Bio-fuel 

A regulatory package will soon be put in place to allow foreign oil firms 
such as Petronas of Malaysia and Shell to distribute bio-fuel, so as to boost 
competition in the domestic market, it was announced on Tuesday (8/8/06).

The coordinating minister for the economy's deputy for agriculture and marine 
affairs, Bayu Krisnamurti, said foreign firms would be allowed to buy 
bio-fuel from growers and producers and sell it back to the public for transportation 
purposes.  

"That way, consumers will benefit from fair prices due to the competition, 
while on the other hand investors and growers will continue to be interested in 
bio-fuel production," he said, according to The Jakarta Post. 

The government had earlier appointed state oil and gas firm PT Pertamina and 
state power firm PT PLN to serve as standby buyers of bio-fuel. 

Derom Bangun, executive chairman of the Indonesian Palm Oil Producers 
Association, said the proposal to allow firms other than Pertamina to purchase 
bio-fuel would encourage investors to construct plants.  

He hoped that with a large number of bio-fuel plants in the pipeline, the 
country would be able to achieve its target of 13 million tons per year by 2009. 

According to the Investment Coordinating Board (BKPM), 15 companies have 
applied for licenses to produce a total of one million tons of bio-diesel per 
year.  The government also plans to construct eight bio-diesel plants, with each 
having a production capacity of between 3,000 and 6,000 tons per year. 

Investment in Bio-diesel to Rise to $1b

The government expects domestic and foreign direct investment (FDI) in the 
bio-diesel industry to increase to about $1 billion in 2007 from $600 million in 
2004-05, National Investment Coordinating Board (BKPM) chairman Muhammad 
Lutfi said.

Lutfi said Indonesia has the capacity to become a powerhouse for the 
bio-diesel industry, as "we have all the resources needed to develop it", XFN-Asia 
reported on Monday (7/8/06).  

He said he expects FDI this year, both approved and realized, to increase by 
15.2% from last year, when actual FDI jumped 93% to $8.91 billion from $4.6 
billion a year earlier.  Indonesia approved investments worth $8.91 billion in 
2005, and $5.96 billion in the first half of the year.

"We see this encouraging level of foreign investments as a testimony to the 
growing confidence of foreign investors in the country," he said, adding it is 
imperative for the government -- and the board in particular -- to intensify 
efforts to attract more FDIs into the country to support the GDP growth target 
of 6% to 7% this year.

Meanwhile, PT Elnusa, a subsidiary of state-owned oil and gas company PT 
Pertamina, said it would team up with PT Indo Biofuels Energy to build a 
bio-diesel plant in Merak, Banten.

The $20 million factory, with an annual production capacity of 60 million 
liters, will be completed n three years, but the first phase is expected to start 
production in April next year, Elnusa president Rudy Radjab said, according 
to Antara.  Elnusa, a producer of Premix gasoline, will supply its bio-diesel 
production to Pertamina, Radjab said.

State-owned trading firm PT Rajawali Nusantara Indonesia (RNI) is planning to 
build a Rp300 billion ($33 million) ethanol factory in Subang, West Java, 
with a capacity of 100,000 liters a day.

RNI's business development director, Son Ramadir, said Thursday (10/8/06) the 
company is in talks with a number of foreign investors to fund the project.  
"The ethanol factory is to support the government's biofuel project.  But we 
also see potential in the domestic biofuel market," Ramadir told Reuters.  
Construction of the factory may start in 2007 and it is expected to begin 
operations in 2008.

Indonesia Urges Operators to Develop Aceh Gas 

Indonesia wants Eni SpA, ConocoPhillips and a consortium led by Medco Energi 
Internasional to develop their respective gas fields in Aceh province soon to 
support the operation of fertilizer firm Pupuk Iskandar Muda (PIM), Mines and 
Energy Minister Purnomo Yusgiantoro said.

Eni SpA has found natural gas in the Krueng Mane block, estimated at more 
than 200 billion cubic ft (5.7 billion cubic m), and has asked the government to 
offer incentives as it is very costly to produce gas from the block.  
Yusgiantoro said Tuesday (8/8/06) the government is prepared to give the Italian 
energy firm a higher revenue split, Reuters reported.

"Eni's gas reserve will be enough to supply the domestic fertilizer firm for 
about 10 years," an official from oil and gas watchdog BP Migas, who declined 
to be identified, said.

Meanwhile, the government has also asked ConocoPhillips and Medco to start 
production at their gas field in Aceh a year ahead of schedule.  The Medco 
consortium, comprising Premier Oil and Japex, acquired half the stakes in Block A 
held by ExxonMobil, ConocoPhillips' partner in the concession in Lhokseumawe 
district, for $51 million.

"They said they may start production in 2010 because they need to 
consolidate, but the government wants the block to have started production by 2009" 
Yusgiantoro said on Monday (7/8/06), according to Agence France-Presse.  Conoco is 
currently negotiating gas prices with PIM, the minister added.

He said the government will be flexible in determining the revenue share 
split with the operators, including the option to change the existing one of 
52%-48% in favor of the government.

"We should also think of other aspects.  The split is just about state 
revenue, while there will be a multiplier effect to help industry grow and reduce 
unemployment," he said, adding that a change in the share split would depend on 
the gas sales price agreement.

W. Java Pipeline Project Gets ADB Loan

The Asian Development Bank (ADB) said Thursday (10/8/06) it will provide 
Indonesia a $75 million loan to aid the construction of a natural gas pipeline 
from South Sumatra to West Java.

"The ADB will also support loans of up to $125 million to PT Perusahaan Gas 
Negara provided by other international financial institutions and commercial 
banks," an ADB statement said, according to Dow Jones Newswires.

The planned 661-km pipeline is one of two that state-owned PGN is building, 
said the statement, without elaborating on the timetable for construction.

The ADB is part of a consortium led by BP Plc that signed an agreement 
earlier this month with international lenders including the Japan Bank for 
International Cooperation, BNP Paribas SA and Standard Chartered for 15-year loans 
totaling $2.61 billion for the Tangguh liquefied natural gas facility.

S Korea E1, Pertamina to Sign Pact on LPG 

South Korea's E1 Corp was slated to sign on Friday (11/8/06) an agreement 
with state-run PT Pertamina to set up a joint venture for a gas-to-liquids 
project.

E1 and Pertamina will invest a total of $150 million to set up a plant that 
will convert natural gas into products such as LPG and naphtha in the Palembang 
region of South Sumatra, the South Korean LPG maker said in a regulatory 
filing, according to Dow Jones Newswires.

The companies will each have a 50% stake in the planned joint venture, but 
have not finalized how to finance the investment for the new plant, Jeon 
Jin-Man, a spokesperson at E1 said.

Once commercial production begins in 2010, the plant will produce 320,000 
tons of LPG a year for the next 15 years, to be sold in Indonesia and Korea, the 
spokesperson said.  Officials at Pertamina were not immediately reached for 
comment.

E1, formerly known as LG Gas, accounted for about 20% of South Korea's LPG 
market at end-March 2006.

-End 2 of 2-

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Joyo Indonesia News Service
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