[Kabar-indonesia] 18 RI Biz/Econ Reports: WB: East Asia should expand bond, stock markets

[JoyoNews at aol.com]

[Note: also see the previously sent: Palm Oil: Indonesia To 
Gain As Pakistan Imports Rise [+Cocoa Exports May Fall]

18 reports:

- East Asia should expand bond, 
  stock markets, World Bank Says 
- update: Indonesia to take CGI loans
- Indonesia's cellular users tipped to hit
     120 mln by 2010
- Indonesia aims to expand palm oil plantations
- Indonesia's IT sales reaches US$800 mln
    in H1 2006
- WSJ: Chinese Takeover May Unlock Diplomatic 
  Doors [Effort to Acquire Millicom Could Bring 
  New Countries Into Beijing Business Sphere]
- Indonesia's Bank Mandiri targets to have
    25,00 EDCs
- Bank Ekspor Indonesia to pay out US$30 mln
    in bonds
- JP: BAT Indonesia expands production
    capacity
- 3 foreign auto companies interested in
    investing in Indonesia
- Indonesia's Kalbe Farma to speed up 
  repayment of 77 mln usd in debt - report
- Indonesia's Polysindo shareholders approve
    debt conversion - report
- Sharp to move washing machine unit from
    Indonesia to Philippines
- Seven foreign firms invest in Indonesia's
    fisheries industry
- Indonesia confident of achieving trade target
   with China
- Indonesia aims to expand palm oil
    plantations
- Indonesia palm oil prices firm, demand
   slow
- Asian Cocoa: Market Quiet, Watching
    Indonesia Floods, IDR

East Asia should expand bond, 
stock markets, World Bank Says 

SYDNEY, Australia, June 22 (Bloomberg): China, Indonesia, South Korea and 
other East Asian nations should use their "fast accumulating" foreign exchange 
reserves and savings to develop the region's bond and stock markets, the World 
Bank said.

The total amount of East Asian financial-market assets by the end of 2005 
rose to US$9.6 trillion, about 21 percent the size of the U.S. financial market 
and almost half the size of Japan's, the World Bank said in a report released 
in Hong Kong on Thursday. The asset increase reflects offshore investment in 
East Asia nations as well as the region's own savings, it said.

East Asia's financial markets are still dominated by assets held in banks, 
and there is potential for growth in bonds and equities, the Washington-based 
lender said. Nations should lower transaction costs, improve the availability of 
information on prices of securities, and boost the number of investors to 
expand their markets, it said.

"While progress has been made in strengthening the banking sector in the 
region, policy makers need to focus on further developing the securities market 
and the bond market in particular," Homi Kharas, the World Bank's chief 
economist for East Asia and Pacific, said in a statement e-mailed toBloomberg News on 
Thursday.

For example in China, assets in banks were worth almost 191 percent of gross 
domestic product at the end of 2005. By contrast, bonds on issue amount to 29 
percent of GDP and China's stock market capitalization is less than 21 percent 
of GDP. InIndonesia, bank assets are worth 68 percent of GDP while bonds on 
issue total 27 percent of GDP.

In 2005, the local-currency bond market in nine East Asian economies -- 
China, Hong Kong, Singapore, Malaysia, Indonesia, Vietnam, Korea, Thailand and the 
Philippines -- grew less than 14 percent, slowing from a 19 percent pace of 
expansion in 2004 and an average of 21 percent from 1997 to 2003, according to 
Asian Development Bank estimates.

At $1.7 trillion, the bond market in these countries is now equal to about 48 
percent of their combined GDP. The debt market in the U.S. is twice as big as 
the economy.

"Much of the growth in the bond markets have been on account of bonds issued 
by governments, largely to restructure the banking system," Kharas said.

In China, government bond issuance has increased 61 percent between the end 
of the 1997 Asian financial crises and 2004. By contrast, corporate bond 
issuance in China has dropped 0.2 percent. In Indonesia, government bond sales have 
surged88 percent between 1997 and 2004, while company bond issuance has 
increased 6.6 percent in the same period.

"The key issue is the lack of liquidity in the secondary market, which 
affects the efficiency of these markets and limits the overall size of corporate 
bond markets," Kharas said. 

The World Bank will release its final report on the region's financial 
industry later this year.

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Indonesia to take CGI loans

JAKARTA, June 22 (Xinhua) -- The Indonesian government plans 
to take1.2 billion U.S. dollars from the total loan offer of 3.9 billion
dollars from its main creditors grouping in the Consultative Group 
on Indonesia (CGI), an official said Thursday.

"We will take some 1.2 billion dollars from the CGI," state treasury
director Mulia Nasution told reporters here.

The CGI package delivered during last week's meeting with the
government also includes grants, bringing total amount of pledges to
5.4 billion dollars.

"We welcome grants, but they are not channeled to the state budget,"
said Nasution.

The 1.5 billion dollars grants will mostly consist of CGI's
preliminary commitment for the rehabilitation and reconstruction of
Yogyakarta and Central Java, which were devastated the May 27
earthquake that caused 29 trillion rupiah (3.1 billion dollars) in
losses.

The CGI groups 29 multilateral and bilateral creditors, led by the World Bank.

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Indonesia's cellular users tipped to hit 120 mln by 2010

Singapore, June 22 (Asia Pulse/Antara) - The number of cellular phone
subscribers in Indonesia is predicted to reach 120 million by 2010
compared to 48 million users in 2005.

Kiskenda Suriaharja, president of cellular provider Telkomsel, told a
discussion forum of the CommunicAsia 2006 held in Singapore on
Thursday the number of cellular users in Indonesia had risen by 67 per
cent in the last five years.

"Therefore the figure is expected to be 100-120 million in 2010," he added.

According to Kiskenda, cellular penetration in Indonesia was only 22
per cent, compared to that in Singapore (98 per cent), Australia (95
per cent), South Korea (79 per cent), Malaysia (75 per cent), Thailand
(48 per cent), the Philippines (40 per cent) and China (35 per cent).

With its 225 million population and stable economic growth, he said,
Indonesia's cellular business remained prospective to investors.

Currently there are eight cellular operators in the country. Telkomsel
is the biggest with a market share of 54 per cent, followed by Indosat
(22 per cent) and Excelcom (17 per cent).

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Indonesia aims to expand palm oil plantations

JAKARTA, June 22 (Reuters) - Indonesia plans to give subsidies to
small palm oil planters in a move to add 1.37 million hectares of palm
oil plantations by 2010, agriculture minister Anton Apriantono said on
Thursday.

Indonesia, the world's second-largest palm oil producer after
Malaysia, has been been pushing growth of its palm industry in a bid
to capture a piece of the green fuels rush. The area under palm oil in
Indonesia has doubled since 1999.

The country is forecast to produce 14.7 million tonnes of palm oil
this year, up from 13.6 million in 2005. Exports in 2006 are expected
to be 11.3 million tonnes compared with 10.3 million last year.

Indonesia's palm oil area is 5.6 million hectares and 48 percent is
operated by small-holders while the rest is managed by private firms
and state plantations.

"This is a government programme to give a subsidy to small-holders.
The subsidy will be in the form of soft loans to the farmers,"
Apriantono told reporters after meeting Vice-President Jusuf Kalla.

"We believe this programme will encourage farmers to plant palm oil
and boost production in future. The programme will start from this
year to 2010," he added.

Separately, an official said the government would encourage
small-holders to replant 125,000 ha of palm oil through 2010.

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

Indonesia's IT sales reaches US$800 mln in H1 2006

JAKARTA, June 22 (Asia Pulse/Antara) - Indonesia's domestic sales of
information technology in the first half of 2006 are predicted to
reach US$800 million, as part of US$2.1 billion projected for the
whole year, Bisnis Indonesia reported.

Chairman of the software association (Aspiluki), Djarot Subiantoro,
was quoted as saying that the banking sector dominated the country's
IT sales with 30% during the period.

He also estimated that half of $US800 million was spent on software
and related services.

Djarot was optimistic that this year's IT sales target would be
reached, because government institutions started to run their IT
projects during the second semester.

Meanwhile, the association of national banks (Perbanas) predicted that
the banking sector's needs in information technology could be more
than US$1.45 billion this year.

Earlier, the association of computer sellers (Apkomindo) estimated
that domestic sales of personal computers (PC) would increase by 30%
to 1.7 million units.

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The Wall Street Journal
June 21, 2006

Chinese Takeover
May Unlock
Diplomatic Doors

Effort to Acquire Millicom
Could Bring New Countries
Into Beijing Business Sphere

By JASON SINGER

China's pursuit of its biggest-ever corporate acquisition could spread its 
commercial interests into countries that have been off-limits to Chinese 
citizens.

State-controlled China Mobile Communications Corp. has been near a $5.3 
billion deal to buy Millicom International Cellular SA of Luxembourg for more than 
a month, people familiar with the matter said. The deal has been complicated 
by China's lack of diplomatic relations with five of the 16 countries where 
Millicom has operations, mostly in Central America.

In a sign of how the Millicom deal is serving as a beachhead for Chinese 
businesses to enter these markets, all five nations have granted visas to Chinese 
officials, people close to the matter said.

Due-diligence teams of about 15 people, including about three China Mobile 
officials, accompanied by bankers, lawyers and consultants, have visited all but 
two of the countries where Millicom operates and will visit those nations 
this week, these people added.

A person in Beijing familiar with China Mobile's thinking said the lack of 
diplomatic relations had been a problem because it had interfered with the China 
Mobile team's so-called due-diligence study of Millicom's finances and 
operations.

The acquisition is expected to be announced in Beijing next week. A Millicom 
spokesman declined to comment.

Obtaining a visa to visit nations where China doesn't have diplomatic 
relations is no easy feat. Senior government officials in the five countries -- El 
Salvador, Guatemala, Honduras, Paraguay and Chad -- had to be consulted and 
approve the process, the people familiar with the matter said.

In many cases, Millicom's general manager in each country approached the 
president or foreign minister to explain the deal and introduce Chinese officials, 
the people said.

China Mobile's entry in these countries has been encouraged because the 
company has promised to invest heavily to improve and expand Millicom's existing 
telecommunications network. Building telecommunications systems -- particularly 
mobile networks -- has been made a priority across much of the developing 
world.

The acquisition doesn't require regulatory approval in the various countries 
because the deal involves China Mobile buying a holding company that controls 
Millicom. Millicom's management will remain in place, with no change of 
control on an operating level.

Most countries in Central America have traditionally had diplomatic relations 
with Taiwan, which China considers a renegade province. Taiwan has relations 
with 25 small and mostly poor countries in the Caribbean, Latin America, the 
island nations of the Pacific, and Africa, while China has relations with 
nearly 180 countries. China won't establish relations with countries that have 
relations with Taiwan.

China and Taiwan compete for the loyalties of the dwindling group of 
countries that continue to recognize Taiwan. In exchange for continuing diplomatic 
relations, Taiwan provides generous financial assistance to them.

Millicom chose China Mobile after an auction of the Luxembourg company in 
part because of the wide array of suppliers, engineers and other low-cost 
suppliers the Chinese company uses in its home market and said it can bring to the 16 
countries where Millicom operates and needs to expand.

--José de Córdoba contributed to this article.

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Indonesia's Bank Mandiri targets to have 25,00 EDCs

JAKARTA, June 22 (Asia Pulse/Antara) - The largest state bank Bank
Mandiri has targetted to run 25,000 electronic data capture (EDC)
terminals in a bid to support its plan to become a Dominant Multi
Specialist Bank in 2010.

IT Director Sasmita said on Wednesday his bank now had 10,974 EDCs
installed in 909 branch offices, 2,660 automatic teller machines
(ATMs) and 29 outlets.

Next year, the bank will focus on some development projects, including
those on customer relationship management (CRM) and Basel II-based
management system.

"Bank Mandiri already has a core system enabling us to run those
projects," he said.

Sasmita added that his bank had spent US$173 million to build the core
system in 2001-2003. The core system includes payroll, e-procurement
and disaster recovery center.

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Bank Ekspor Indonesia to pay out US$30 mln in bonds

SURABAYA, E JAVA, June 22 (Asia Pulse/Antara) - According to a bond
prospectus of Bank Ekspor Indonesia, dated June 10, 2005 that payment
of Rp 285 billion (US$30.6 million) worth of Bank Ekspor Indonesia
bonds of 2005, Series A(Bond code BEXI02A) would be conducted on June
22, 2006.

Bond division chief of the Surabaya Stock Exchange (SSX) Erna Dewayani
disclosed here on Wednesday that as of June 22, 2006 the bonds were
not registered and could no longer be traded through the SSX and or
its trading reported may means of the SSX.

The payment of the bonds and or its interest will be conducted by KSEI
as Payment Agent on behalf of the issuer (Bank Ekspor Indonesia) in
compliance with the terms and conditions laid down in the Agreement of
the Payment Agent.

Payment to the bond holders through the account holders will be
according to the respective times of payment as agreed.

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The Jakarta Post
June 22, 2006

BAT Indonesia expands production capacity

The Jakarta Post, Jakarta

Publicly listed PT BAT Indonesia plans to increase production of
regular cigarettes by converting its subsidiary PT BAT Kareb into a
manufacturer of cigarettes.

The subsidiary currently focuses solely on tobacco drying.

BAT Indonesia president director Ian Morton said Wednesday that
shareholders had approved the plan, which would be put into effect
after Cirebon-based BAT Kareb received the approval of the
authorities.

According to a feasibility study carried out by PT Ujatek Baru, BAT
Kareb would start with an initial production of about 590 million
cigarettes next year, expandable to 5.68 billion cigarettes by 2015.

The project would cost Rp 23.85 billion -- comprising Rp 6 billion in
initial working capital, Rp 13.2 billion for the conversion of the
tobacco-drying facility into a production plant, and Rp 4.65 billion
in additional working capital to increase production and sales.

Morton said that his company was still assessing whether the project
would best be funded internally out of BAT Indonesia's own resources
or by bank borrowing.

He said the project formed part of BAT Indonesia's strategy of
focusing on increasing the sales of its premium regular cigarette
brands, such as Lucky Strike and Dunhill.

BAT Indonesia board member Wahyu Indrawanto said that the company's
premium brand sales jumped to 1.70 billion cigarettes in 2005, 43
percent higher than 2004's 749 million.

It was expected that BAT Kareb would be able to achieve a
profitability ratio of between 1.21 percent and 14.19 percent for the
period between 2006 and 2016, which would contribute between 1.35
percent and 8.56 percent of BAT Indonesia's profits.

Morton said that the tobacco industry was facing tough challenges, not
only due to high inflation and the drop in consumer purchasing power
resulting from higher fuel prices, but also due to excise duty
increases in July 2005 and in April this year.

In 2005, BAT Indonesia, a subsidiary of London-based British American
Tobacco booked a net profit of Rp 19.4 billion, as compared to 2004's
loss of Rp 20 billion. The company, however, did not distribute a
dividend.

BAT Indonesia board member Mark Drain said that last year's profit
would be used to cover 2004's losses.

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3 foreign auto companies interested in investing in Indonesia

JAKARTA, June 22 (Asia Pulse/Antara) - Capital Investment Coordinating
Board (BKPM) chief M Lutfi said here on Wednesday three foreign
automotive companies in addition to one from the US were interested in
investing in Indonesia.

"Three automotive companies have asked for time to discuss the
automotive industry in Indonesia. Two of them come from Europe and one
from Japan," he said after discussing the draft capital investment law
with the House of Representatives Commission VI.

He said he could not as yet tell in more detail about the investment
plan for the development of the car industry for the production of
1,000 to 2,500 cc sedans.

"The US company plans to invest between US$1 billion and US$4 bllion
and that from Japan US$450 million to US$1 billion," he said.

The decision regarding the three companies` plan would be made known
in July or August. In connection with it he said Indonesia had to be
able to compete with Thailand.

BKPM was preparing an incentive package in the form of harmonization
of value-added tax for luxury goods and fiscal facility for investors,
he said.

It was hoped Indonesia would later not only become the production base
for Multi-Purpose Vehicle production but also for cars with a capacity
of 1,000 cc to 2,500 cc, Luthfi said.

Indonesia would also become the base of motor-bike production as three
companies from Japan, Taiwan and India would come to the country,
according to the investment official.

He said a company from India (TVS) would start the construction of its
factory in Tangerang in two weeks` time. He said the company wished to
produce various motorbikes including one with a capacity of 400 cc.

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Indonesia's Kalbe Farma to speed up 
repayment of 77 mln usd in debt - report

JAKARTA, June 22 (XFN-ASIA) - Pharmaceutical firm PT Kalbe Farma plans
to speed up the repayment of a syndicated loan of 77 mln usd this year
to prevent any losses arising from currency fluctuations, Bisnis
Indonesia reported.

The newspaper quoted Kalbe Farma president Johannes Setijono as saying
that as a result, the management has decided not to pay a dividend for
last year.

Kalbe posted a net profit of 643.32 bln last year.

The early repayment of the 77 mln-usd syndicated loan will mean that
the company's dollar-denominated debts, which are owed by subsidiary
PT Enseval Putra Megatrading, will decline to 25 mln usd.

Setijono said money to repay the syndicated loan will also come from
the proceeds of the sale of bonds worth 300 bln rupiah, which is now
in progress.

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

Indonesia's Polysindo shareholders approve debt conversion - report

JAKARTA, June 22 (XFN-ASIA) - Polyester maker PT Polysindo Eka
Perkasa's shareholders have approved a plan to convert company debt
into 83.48 bln shares worth 1.5 bln usd, Bisnis Indonesia reported,
citing corporate secretary Tunaryo.

Under the plan, Polysindo will issue 40.34 bln shares to secured
creditors, equivalent to a 45.90 pct stake, and 43.14 bln shares,
equivalent to a 49.10 pct stake, to unsecured creditors.

Tunaryo said 26.36 bln shares will be issued to secured creditor
Daminano Investment BV, who will provide the firm with loans for
working capital.

Damiano Investments had previously offered to provide working capital
of 15 mln usd.

After the debt conversion, the share holdings of controlling
shareholder PT Multikarsa Investama and the investing public will be
diluted to 3.0 pct and 2.0 pct, respectively, from the present stakes
of 59.81 pct and 40.19 pct.

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

Sharp to move washing machine unit from Indonesia to Philippines

JAKARTA, June 22 (Asia Pulse/Antara) - Japanese electronic producer
Sharp Corporation will relocate its washing machine production unit
from Indonesia to the Philippines as the price of the product in
Indonesia has become less competitive.

"The price of Sharp washing machines made in Indonesia is no longer
competitive because of inadequate infrastrucuture facilities here,"
senior manager for refrigerators and washing machines of PT Sharp
Electronics Indonesia, Andry, said after visiting the plant here on
Wednesday.

He said almost 80 per cent of washing machine components produced by
Sharp in Indonesia still had to be imported, so that the price of the
product was higher than in the Philippines where the unit is also
producing the components.

"In 2002 the central office of Sharp decided to stop producing washing
machines in Indonesia and would focus on increasing the production
capacity of refrigerators and television sets," he said.

He said the washing machine manufacturing unit would still be
maintained for the next five years but later all its equipment would
be moved to the Philippines.

He said actually washing machine market potential was still high in
Indonesia where on average there is only one machine for every 25
people.

He said washing machine sales in Indonesia reached around 25,000 units
per month. "Sharp expects its market share of washing machines in
Indonesia to increase from 10 per cent to 25 per cent this year," he
said.

In view of that Sharp plans to add 25 more sales networks in the
country with products imported from the Philippines and China.

He said the company would also focus on production and market
expansion of its refrigerators. "We expect exports of refrigerators to
rise to balance at 50:50 with domestic sales," he said.

He said Sharp had been exporting around 20 per cent of its
refrigerators which reached 120,000 a month.

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Seven foreign firms invest in Indonesia's fisheries industry

JAKARTA, June 22 (Asia Pulse/Antara) - Seven foreign companies will
reportedly run businesses in Indonesia's fishery sector with a total
investment of US$82.6 million.

Bisnis Indonesia reported the investment will be used to build
30-gross-tonne fishing vessels and factories in Bitung, Situbondo,
Pontianak, Batam, Tual, Ambon, Mimika and Sorong.

Five of the seven companies -- PT Thai Indo Fisheries, PT Panca Mitra
Multi Perdana, PT Bersama Mitra Sejahtera, PT Bumi Laut Sumber Utama
and PT C&E Mina Nusantara -- are owned by Thai investors. The
remaining two are PT Jin An Xiang Fisheries (China) and PT Signal
Marine Ventures Indonesia (the Philippines).

Minister of Marine and Fishery Freddy Numberi was quoted as saying the
foreign companies were expected to help local fishing companies in
procuring vessels with capacity of more than 15 GT.

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Indonesia confident of achieving trade target with China

Jakarta, June 22 (Xinhua) -- The Indonesian government said Thursday
it was confident that the targeted bilateral trade volume of 30
billion U.S. dollars with China will be achieved by 2010 as scheduled.

"The target will be achieved given that over the last 10 years, the
bilateral trade volume has demonstrated a remarkable growth," Trade
Minister Mari Elka Pangestu said in a statement read by director of
bilateral cooperation Sondang Anggraini in the Jakarta suburb of
Depok.

Pengestu said China as the world's most populous country becomes an
important trade partner of Indonesia.

The minister urged more Indonesians to learn Chinese language to
explore more business opportunities with China.

"Mastering the Chinese language is very important to gather as much
information as possible. Success depends on ability to get
information," she said in a speech delivered at a seminar in the
University of Indonesia.

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Indonesia's CPO price expected to grow 5 pct in 2nd semester

JAKARTA, June 22 (Asia Pulse/Antara) - The price of crude palm oil
(CPO) in Indonesia is expected to increase by five per cent in the
second semester of this year compared to the price level in the first
semester, a CPO chief marketing officer said here on Thursday.

The director of the CPO Joint Marketing Office of state-owned
plantation company PT Perkebunan Nusantra (PTPN), Bagas Angkasa, said
the expectation of an increase in the CPO price was based on the
strengthening of natural oil prices which also boosted other
commodities' prices.

"Demand for CPO for bio-diesel mixture has been on the rise of late," he said.

But the increasing demand for CPO was not balanced with increased
production by PTPN. PTPN production was tending to decline, he said.

Because CPO production was declining, the CPO Joint Marketing Office
had cancelled its plan to hold a tender on Wednesday, Bagas said.

He said the government was now intensifying its oil palm replanting
efforts to increase national crude oil production which was expected
to reach 16 million tons in 2007.

Bagas said that if the program was successful, Indonesia's CPO
production would exceed Malaysia's.

The increasing demand for CPO particularly came from European
countries, which were in need of the commodity, according to Bagas.

Demand for CPO from India has also remained high.

Derom Bangun, chairman of the Indonesian Palm Oil Producers
Association (Gapki) said meanwhile the prediction that Indonesia would
become the biggest CPO producer next year came faster than the
previously expected 2010.

"In 2007, Indonesia's CPO production is expected to reach more than 16
million tons while Malaysia in the same year is expected to produce 16
million tons at the most," he said.

He said that the estimated CPO production of 16 million tons next year
was higher 1.3 per cent than this year's production level which was
estimated at 14.7 million tons.

Indonesia's CPO production in 2005 stood at 13.6 tons.

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Indonesia palm oil prices firm, demand slow

JAKARTA, June 22 (Reuters) - Indonesian palm oil prices were mostly
firmer, supported by gains in Malaysia crude palm oil futures, but
trading remained slow as most buyers still have ample stocks, traders
said on Thursday.

Crude palm oil in an auction in North Sumatra's Medan, Indonesia's key
port for palm oil exports, was quoted at 3,925 rupiah ($0.420) a kg,
up from 3,920 rupiah on Wednesday. Some 800 tonnes changed hands at
the auction.

In Jakarta, CPO prices at the state marketing centre were quoted at
3,912 rupiah, up from 3,902 on Tuesday. The centre, which sells palm
oil from state plantations, did not hold a local auction on Wednesday.

RBD palm olein in Jakarta was quoted at around 4,240 rupiah, compared
with around 4,200 on Wednesday.

"It's just gains in Malaysia that support the prices," said a trader in 
Jakarta.

Malaysian crude palm oil futures closed higher on Thursday on
bargain-hunting following recent losses and on firmer soyoil prices,
with the benchmark third-month September <KPOU6> contract on
Malaysia's derivatives exchange ending the day up five ringgit at
1,463 ringgit ($400) a tonne.

"Buyers still purchase palm oil, but not much. That's why the prices
are not moving much," said a trader in Medan.

On the export front, offers for July shipment stood at $392.5 a tonne,
free on board Belawan port, and buyers bid at $385. No deals were
reported.

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Asian Cocoa: Market Quiet, Watching Indonesia Floods, IDR

JAKARTA, June 22 (Dow Jones)--Asian physical cocoa prices were higher
in the week to Thursday, but the market was quiet as traders monitored
several developments in Indonesia, including the volatile rupiah and
crop damage from erratic weather, traders said. "We're monitoring the
floods in Sulawesi," Indonesia's main production area, a Singapore
trader said. He added that a lack of specific information on crop
damage meant prices were yet to feel much of an impact.

The Indonesian Cocoa Association confirmed Thursday that young fruit
and leaves had been damaged by the Sulawesi flooding, but were unable
to give an estimate on how much the damage would hurt production.

Meanwhile, Indonesia's trade minister announced this week that the
government planned to lift a 10% value added tax on primary
commodities including cocoa, in a bid to boost export levels. However,
the Indonesian Cocoa Association said the proposed lifting of the VAT,
active since 2000 on sales of domestic cocoa to local grinders, could
make local industry buyers more competitive and put a squeeze on
export supplies.

"Exports could go down by 50,000 tons" this year, the association said 
Thursday.

But the Singapore trader said buyers would likely "wait for something
concrete, and see what it does to the market" before reacting to the
proposed VAT lifting. Right now, "it's just politics talk," he said.

A Medan trader said the market was "not too quiet," as local sales
volumes remained steady. However, export buying had been slightly
quiet on the rupiah's strengthening, the trader said.

Cocoa futures on the New York Board of Trade finished higher Wednesday
on predominantly speculative activity driven by a weaker U.S. dollar
and stronger outside commodity markets. The most-active September
contract settled up $10 at $1,538/ton, following a range between
$1,530 and $1,546/ton. December settled up $13 at $1,571/ton.
Estimated final futures volume was 11,217 lots with 700
against-actuals, 126 puts and 40 calls.

On the London International Financial Futures and Options Exchange
Wednesday, cocoa futures pushed higher on speculative buying.

The most active July contract settled up GBP12 a ton at GBP961/ton.
The second most active September contract traded up GBP3 a ton at
GBP907/ton.

Offers for Malaysia's SMC 1B cocoa beans were quoted at MYR5,600/ton,
up from MYR5,425/ton last week.

Offers for Indonesia's Sulawesi fair-average quality cocoa beans were
quoted at IDR11,950 a kilogram, up from IDR11,700/kg last week.

The main crop harvest in Sulawesi traditionally starts in April and
peaks in May, before tapering off in July.

Central, south and southeast provinces of Sulawesi account for 75% of
Indonesia's total cocoa output.

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Joyo Indonesia News Service
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