[Kabar-indonesia] 2: RI Trade and Investment News, 17 July 2006

[JoyoNews at aol.com]

The Coordinating Ministry for Economic Affairs
Republic of Indonesia
Jakarta
July 17, 2006

Trade and Investment News, 17 July 2006

Part 2 of 2

STATE CONCERNS

Rice Import Ban Extended 

Indonesia has extended a rice import ban for private traders until December 
on expected higher rice output this year, a senior government official said on 
Monday (10/7/06).

The rice import ban, due to expire on July 31, will be extended to December 
31, said Bayu Krisnamurthi, deputy to the coordinating minister for the economy.

"We decided that rice imports are not needed.  National rice stocks are 
projected to have a surplus of 109,000 tons," Krisnamurthi was quoted as saying by 
Reuters.

Production of milled rice is expected to stand at 31 million tons this year, 
while consumption will be about 30 million, he added.

SOEs

Telkom Buys Back Shares

State-owned telecommunications company PT Telkom has bought back 1.37 million 
shares with Danareksa Sekuritas as the executing broker.

In a report to the Surabaya Stock Exchange, company secretary Harsya Denny 
Suryo said the buyback on July 10 brought the total number of shares bought back 
by the country's largest telecommunications company to 56.81 million, 
including those listed on the New York Stock Exchange, Antara reported on Friday 
(14/7/06).

The company is allowed to buy back up to 1 billion units of shares, Bisnis 
Indonesia reported.  The shares were bought back at a price of Rp7,332 (US$0.81) 
each, lower than the closing price of Rp7,400 the day before.

Meanwhile, Telkom signed a memorandum of understanding (MoU) with seven 
telecommunications companies for the expansion of its Internet streaming service.

The companies are PT Cipta Maya Solusi; PT Cowon Indonesia; PT Namu Solution 
Indonesia; PT Indonusa Telemedia; PT Jaspace Net, which will provide content 
gaming online service; PT Pentacahaya Computindo, which will be involved in 
school community development; and PT Bolehnet Indonesia, which will take part in 
the provision of broadband content internet game services.

Telkom managing director Arwin Rasyid said after signing the MoU in the 
presence of Research and Technology Minister Kusmayanto, that Speedy service users 
are expected to grow from only 30,662 line units in 2005 to 246,151 line units 
by the end of 2006, soaring to 937,706 line units in 2007 and 1,431,137 line 
units in 2008.

Telkom's income from its data and Internet service in the 2005 accounting 
year reached approximately Rp6 trillion ($653.2 million).

Telkomsel Targets 35m Subscribers 

he country's largest mobile phone operator, PT Telkomsel, is targeting to 
list 35 million subscribers by the end of the year.

By the end of June, the subsidiary of state-owned telecommunications company 
PT Telkom, already recorded 29 million subscribers, its president Kiskenda 
Suriahardja was quoted as saying by Antara on Tuesday (11/7/06).

He said its third generation (3G) mobile phone service is expected to add 
270,000 to its subscribers this year.

Telkomsel will build 3G telecommunication networks in nine cities in the 
country to cost Rp3 trillion ($333 million).  Three vendors Nokia, Siemens and 
Ericsson will take part in a tender to build the networks in Medan, Palembang, 
Jakarta, Bandung, Semarang, Surabaya, Denpasar, Balikpapan and Makassar, he said.

Jasa Marga to Sell Stake in Toll Roads

State-owned toll road operator, PT Jasa Marga, said it will sell part of its 
shares in 13 toll roads, which have been granted a concession of 40 years.

The first step toward the share sales will be to establish subsidiaries to 
operate each of the 13 toll roads, Jasa Marga president Frans Satyaki Sunito 
said, adding the sales will be made via public offering.

The company will use the funds raised from the share sales to finance new 
toll road projects, he said, according to Antara.

Jasa Marga is studying three new toll road projects in Java - the 
Gempol-Pasuruan, Semarang-Solo and Bogor Ring roads.

Adhi Karya's H1 Revenue Reaches Rp1.5t

State construction firm, PT Adhi Karya's revenue in the first half of the 
year reached Rp1.5 trillion, compared to Rp1.11 trillion the year before, the 
Investor Daily reported.

The company expects to increase its full-year revenue to Rp4 trillion from 
Rp3.03 trillion last year, the newspaper quoted Adhi Karya finance director M 
Choliq as saying.  He estimated Adhi Karya's pre-tax profit this year to be 6% 
to 7% higher than last year.

Choliq said the company expects to work on contracts worth Rp5 trillion this 
year, half of them carried over from last year and half of them new contracts 
signed this year.

Among the new contracts are overseas construction projects, including a 
railway construction deal in India worth Rp650 billion and building construction 
contracts in Dubai and Saudi Arabia together worth $46 million, the newspaper 
said.

PRIVATE SECTOR

Indosat Expects 4m New Subscribers

Publicly-listed telecommunications operator PT Indosat, which had 14 million 
subscribers as of last month, expects to sign up another 3 million to 4 
million subscribers, an executive of the company said.

"We are optimistic our subscribers will continue to grow in line with the 
marketing initiatives we have made," Wahyu Wijayadi, Indosat's marketing director 
in Purwodadi, East Java, said on Tuesday (11/7/06), according to Antara.

On the registration of Indosat's pre-paid subcribers, Wijayadi said 90% of 
the subscribers had registered.  He further said that the implementation of 3G 
is expected to be launched in Surabaya and Jakarta later this year.

Holcim Indonesia Sees Lower 2006 Sales

Tim Mackay, CEO and president director of PT Holcim Indonesia, said overall 
industry cement sales would likely be 0.5% to 1% lower than last year, 
depending on the pace of recovery in the second half of this year.

Mackay told Reuters in an interview that overall industry sales volumes were 
down 5.6% year-on-year in the first half of 2006 and he would be happy if the 
industry ended up stable this year.

"If we achieve zero cement industry growth overall in 2006, I would be 
pleased.  Of course, I would like more, but if we have zero growth this year it 
would be OK in the circumstances." 

Cement consumption has been falling with the economy slowing due to weak 
purchasing power and high interest rates after a government decision to sharply 
raise fuel prices last October.  Indonesia consumed 31.5 million tons of cement 
last year, but this year's sales are seen down because several infrastructure 
projects have yet to take off.

Holcim's cement and clinker sales last year stood at 6.6 million tons.  "2006 
is the year of correction...  It will establish a more realistically 
sustainable path of the future," Mackay said when asked about Indonesia's prospects.

Handicraft Exports to Hit $400m 

Indonesia expects to export $400 million worth of handicraft products this 
year, $50 million more than last year, chairman of the Handicraft Producers and 
Exporters Association (ASEPHI) Rudy Lengkong said on Monday (10/7/06).

Yogyakarta has so far contributed 5% to 10% of Indonesia's handicraft 
exports, but the quake that hit the region had disrupted the handicraft industry, 
Antara reported.

Yoyakarta ASEPHI chairwoman, Indah Rahayu, predicted that Yogyakarta would 
not be able to produce and export handicraft products at its normal rate in the 
next four months.  "Some 60% of Yogyakarta's handicraftsmen lived in the most 
devastated Bantul district, and they are still unable to resume their 
handicraft production," she said.

About 80% of Yoyakarta's total exports, or about Rp112 million ($12,400) 
consist of handicraft products.

BANKS

Indonesia to Limit Bank Holdings

A Bank Indonesia (BI) plan to accelerate bank industry consolidation is set 
to shake up the structure of foreign ownership in the sector.

The central bank said on July 6 it would soon issue a regulation, to be known 
as the Single Presence Policy (SPP), that will bar a legal entity, individual 
or business group from owning a dominant stake in more than one domestic 
commercial bank.

"The objective of the policy is to make banking supervision more effective 
and efficient... (and) accelerate bank consolidation," BI's director for banking 
research and regulation, Muliaman Hadad, told Dow Jones Newswires.  

Vice President Jusuf Kalla was blunter.  "The government basically doesn't 
want to have (so) many banks," he said.

Analysts say the move is widely seen as part of the government's effort to 
consolidate the banking sector, and not to bar foreign investors.

"Foreign investments are still welcome.  This policy is more about regulating 
the banking sector and is part of the measures to push towards consolidation 
of the Indonesian banking sector," Adrian Chee, financial services director at 
Standard & Poor's, told Singapore's Business Times.

Indonesia has a total of 131 domestic commercial banks, many of them small, 
single-branch firms, according to BI data, and analysts agree that the sector 
is in dire need of consolidation. 

The country's eight or nine largest banks control about 70% of the market, 
while the remainder are "cannibalizing each other's market share," said Ambreesh 
Srivastava, financial institutions senior director at Fitch Ratings.

The government is promoting consolidation to prevent potentially 
destabilizing future bank closures, said Chee.  "Quite a lot of these banks are operating 
adequately and aren't under stress, but as the market opens further... these 
smaller banks will be harder pressed to find capital sources to sustain 
operations."

BI Governor Burhanuddin Abdullah said those who meet the criteria and own 
more than a "controlling interest" -- defined by the central bank as more than a 
25% stake -- in more than one bank must reduce their stakes, merge the banks 
into a single entity or form a holding company that has control over the banks.

The regulation will also apply to shareholders who own less than a 25% stake 
in more than one bank, but "directly or indirectly" exercise control over 
them.  Investors who have a controlling interest in a single domestic commercial 
bank and an Islamic, or shariah, bank will be exempt from the regulation.

Abdullah said the central bank will set an end-2008 deadline for compliance 
with the planned rule.

New Rules on State Bank Debts 

Finance Minister Sri Mulyani Indrawati said Monday (10/7/06) her officials 
are drafting a new regulation that would give state-owned banks the same 
flexibility enjoyed by private banks in resolving non-performing loans (NPLs).

Indrawati said that one of the key points of the new regulation would be that 
state-owned banks would be allowed to apply various debt restructuring 
options without having to first seek the approval of the Finance Department. 

"Our purpose is to provide a strong legal foundation for the handling of 
non-performing loans...  All NPLs should be resolved by the state banks 
themselves," she said, according to The Jakarta Post.  

She said she had held detailed discussions on the proposed regulation, and is 
waiting for a final meeting with the president and the cabinet to decide on 
its final form. 

State-owned banks have long called on the government to revise the 
regulations, which they say have prevented them from restructuring their NPLs, because 
they are unable to provide debt reductions and other common restructuring 
options available to private banks, as the loans are considered state assets. 

Rabobank to Acquire Two Banks

Netherlands-based Rabobank said Thursday (13/7/06) it had signed an agreement 
to buy into the holding companies that own unlisted Indonesian banks, Bank 
Haga and Bank Hagakita, from individual shareholders.

"Bank Haga and Bank Hagakita have an impressive track record of consistent 
growth since their founding 17 years ago.  This is an exciting platform for 
Rabobank to grow our business in Indonesia," Fergus Murphy, head of Asia region 
for Rabobank International, said, according to Dow Jones Newswires.  The press 
release didn't provide the size of the acquisition or its value.

The two Indonesian banks, which primarily focus on serving owners of small- 
and medium-sized businesses in the trading, manufacturing and business services 
sectors, have a combined 1,537 employees and a network of 78 branches in 
Java, Bali and southern Sumatra.  The two banks had total assets of Rp3.97 
trillion ($436 million) as of December 31.

Rabobank, the world's 14th largest bank in terms of Tier I capital, has an 
Indonesian subsidiary, Bank Rabobank International Indonesia, which has been in 
business for 16 years and focuses primarily on corporate clients.

The press release said the acquisitions are consistent with Rabobank's 
strategy of being the world's leading financier in the food and agribusiness sectors.

POWER

Govt. Launches Chinese Power Projects

The government has launched the construction of two power plants in North 
Sumatra financed by several export-financing institutions from China, a report 
said Friday (14/7/06).

The first power project is the 2 by 115 MW Labuhan Angin coal-fired power 
plant in Central Tapanuli regency, estimated to cost more than $201 million.  PT 
Cimex, a joint venture between local firms and Chinese companies, has been 
selected as the contractor for the project, which is expected to be completed in 
2008, reported The Jakarta Post.

The second project is the 2 by 90 MW Asahan I hydropower plant in Toba 
Samosir regency.  Financing for the project will come from the state budget and a 
Chinese investor.  China-based Huan Gian Engineering Corp and Indonesia's PT 
Basra Daya Sentranusa will act as the developer of the $250 million project, 
which is slated for completion in 2009.

The two power plants were part of projects launched Thursday (13/7/06) by 
President Susilo Bambang Yudhoyono.  The projects also include an electricity 
interconnection facility, and a fisheries and agribusiness project, expected to 
help turn the province into a center of manufacturing, services and 
agribusiness activities.

PLN to Start Up Java Transmission Line

State power utility, PT PLN, plans to start running a new extra-high-voltage 
transmission line in Java next month to increase power security in the 
country's most populous island.

The new 500-kilovolt transmission line, running through the south of the 
island, will complement the north transmission line, Herman Darnel Ibrahim, PLN 
vice president of transmission and distribution, was quoted as saying by 
Bloomberg News.

The north transmission line is the only backbone power line running across 
Java.  A second extra-high-voltage transmission line would have prevented a one- 
to two-hour blackout in Java and Bali in August last year after a glitch in 
the north line started a chain of events that shut down two power plants.

"We'll be able to optimize the big coal-fired power plants in East Java" with 
the south transmission line coming into operation, Ibrahim said.  The north 
line cannot accommodate all of the electricity generated by these plants, 
forcing the utility to channel some through 150-kilovolt power lines, which cover 
smaller areas.  

PLN also needs the south transmission line to accommodate 2,660 MW of 
additional capacity this year from two coal-fired plants and one gas-fired station.

The utility had to postpone the scheduled completion of the transmission line 
several times in the last two years because of land acquisition problems.

Indonesia, which has frequent blackouts, needs to spend about $27 billion on 
new plants and power lines by 2012 to avoid electricity shortages, according 
to the 
World Bank.

OIL AND GAS

Santos to Cut Jeruk Oil Reserve Estimate

Australian oil and gas producer, Santos Ltd said on Friday (14/7/06) it would 
likely reduce the reserves estimate at its Jeruk oil discovery offshore in 
East Java to less than the 170 million barrels previously forecast, Reuters 
reported.

The company, which has been testing oil found at its Jeruk-3 appraisal well, 
said the height of the Jeruk hydrocarbon column was probably only 145 m, 
compared with a previous estimate of 379 m, but that further testing is required to 
fully determine reserve levels.

Jeruk is seen as key to Santos' growth as it seeks to replace depleting 
reserves from onshore gas fields in Australia's Cooper Basin and to grow its 
uncertain production profile beyond 2007.

Drilling began at Jeruk-3 in January following ambiguous results and 
indications of complex geology from Jeruk-1 and Jeruk-2 in 2004.

Santos plans to test the bottom section of the Jeruk-3 well this week to 
confirm the location of the oil and water contact and to gather further reservoir 
and pressure data, before moving equipment to other Santos wells in the 
region. 

CITIC Resources Buys into Oil Field

China's CITIC Resources Holdings Ltd will buy a 51% interest in a small 
Indonesian oil field for almost $100 million, the Beijing-backed firm's first-ever 
overseas oil asset acquisition.

CITIC Resources, a plywood-maker turned supplier of commodities and natural 
resources to China, said on Thursday (13/7/06) it planned to buy the 
participating interest from a unit of Kuwait Petroleum Corp for $97.4 million, Reuters 
reported.

Company vice chairman Shou Xuancheng said the company will now seek further 
opportunities in Southeast Asia.  "We are being very prudent, even as we buy 
assets in a high-oil environment," Shou told reporters.  "We will only consider 
fields that are in operation and have growth potential." 

"There is a very, very small chance for oil prices to fall sharply as we saw 
10 years ago," he added.

MINING

Newmont Judges Order News Tests 

Judges at the trial of Newmont Mining Corp's Indonesia unit and its top 
executive, accused of dumping toxic waste into a North Sulawesi bay, on Friday 
(14/7/06) ordered the water to be retested later this month.

Newmont applauded the decision, which it said would help prove its innocence. 
 "We are happy about this, we don't have anything to worry about," spokesman 
Ruby Purnomo was quoted as saying by the Associated Press.

Newmont's top executive in Indonesia, Richard Ness, and his company are being 
held jointly responsible for the alleged dumping of mercury-laced toxins into 
Buyat Bay that prosecutors say caused villagers to develop skin diseases and 
other illnesses.

Various studies on the water in the bay and the sediment on the seabed have 
produced conflicting results.  Newmont denies dumping pollutants into the bay.

Judge Ridwan Damanik said two independent companies had been commissioned to 
carry out fresh tests on July 28.  If the results are significantly different, 
a third round of tests by another company will be held, he said.  Damanik 
said both sides in the trial, which began last month, could use the results as 
evidence.

Govt. to Complete Freeport Audit Soon

A comprehensive audit on the operation of PT Freeport Indonesia, expected to 
be completed last month, is not yet finished, Mines and Energy Minister 
Purnomo Yusgiantoro said.

"Today, we just listened to a report from the audit team on the five 
subjects.  We will have other meetings," he said after a meeting with the audit team, 
XFN-Asia reported on Friday (14/7/06).  The five subjects of the audit are 
environmental impact, security, community development, production and revenue.

Separately, Witoro Soelarmo, the department's technical environmental 
director who chairs the audit team, said he hopes the final result would come out in 
two weeks.

The ongoing audit was partly sparked by protests in March calling for the 
closure of Freeport's gold mine operation in Papua.  The company has been accused 
of not giving enough to the people of Papua in return for the mine, and of 
polluting and being responsible for human rights abuses through their use of the 
military for protection.

Under its contract, Freeport must make royalty payments to the government of 
between 1.5% and 3.5% of its copper sales and 1% of its gold and silver sales. 
 The government is also entitled to receive dividends for its 9.36% stake in 
Freeport.

Company sources have said that Freeport's total payment to the government in 
dividends, taxes and royalties in 2005 was estimated at $1.09 billion, 
compared to $260 million in 2004 and $334 million in 2003.  The sharp rise was 
attributed to price and production increases.

-End 2 of 2- 

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