[Kabar-indonesia] 17 RI Biz/Econ Reports: Garuda; NYT: WTO Chief Optimistic; Indosat; IMF
JoyoNews at aol.com
JoyoNews at aol.com
Fri Jun 23 13:40:25 MDT 2006
17 reports:
- Indonesian govt proposes debt-for-equity
swap to Garuda's creditors - report
- Bank Indonesia sees forex reserves
at 40.0 bln usd after IMF debt repayment
- IHT/NYT: WTO Chief Is Optimistic
- IMF notified about Indonesia's plan to speed
up debt repayment
- Indonesia's Indosat board approves president's
resignation
- JP: Govt may issue short-term treasury bills
in fourth quarter
- Indonesia's Bakrie projects 20-30 pct in income
growth this year
- Smuggling inflicts 966 mln USD loss to
Indonesia
- Indonesia needs new strategy to boost shoe
export: Consultant
- JP: Semen Padang eyeing 51 percent
increase in 2006 net profit
- Indonesia's Ramayana sets 650 bln rupiah capex
for 2006-07 to open new stores
- Indonesia's Hexindo 5-months unaudited net profit
25.34 bln rupiah
- Thailand to ask Indonesia to ease fishing
regulations
- JP: Govt to guarantee monorail project loan
- Indonesia palm oil prices flat, rupiah
helps olein
- Indonesian president keen to fast-track
EPA with Japan
- India May Restart Privatizations
Indonesian govt proposes debt-for-equity
swap to Garuda's creditors - report
JAKARTA, June 23 (XFN-ASIA) - The government is proposing a
debt-for-equity swap as a way to settle PT Garuda Indonesia's debts,
Bisnis Indonesia reported.
The newspaper quoted Garuda commissioner Aries Muftie as saying the
management is in talks with the airline's creditors about the best way
to restructure its debts.
"[A] debt-for-equity swap is the most open option now," Muftie was
quoted as saying.
Bisnis quoted Garuda president Emirsyah Satar as saying that the
debt-for-equity proposal is being discussed at the Economic
Coordinating Ministry.
"A team has been established by the ministry to finalise the scheme.
The team is calculating the technical aspects," Satar was quoted as
saying.
He said that in the next few days the management will meet with the
team to discuss the scheme, the newspaper said.
State Enterprise Minister Sugiharto has said the government wants to
establish a state enterprise restructuring fund to bail out Garuda in
part and to bail out another state airline, PT Merpati Nusantara
Airlines.
The government and Garuda's management are still negotiating with the
airline's creditors about a scheme to restructure 794.6 mln usd-worth
of debt.
-----------------------------------------------------------------
Bank Indonesia sees forex reserves
at 40.0 bln usd after IMF debt repayment
JAKARTA, June 23 (XFN-ASIA) - Indonesian central bank, Bank Indonesia
(BI), said its foreign exchange reserves will stay at a safe level of
40.0 bln usd after it makes early repayment of 50 pct of the country's
remaining debt to the IMF next week.
"The forex reserves are sufficient to cover imports of 4.7 months and
to service short-term government debt repayments, as well as to
cushion the impact of a possible reversal in short-term fund inflows,"
BI said in a statement.
"BI and the government decided to make early payment after conducting
a comprehensive study on macro economic developments, especially the
sustainability of the country's balance of payments and forex
reserves," the statement said.
IMF senior resident representative Stephen Schwartz has said that the
Fund welcomes the government's move seeing it as a "sign of
Indonesia's improving balance of payments and good macro economic
management."
The BI has issued notice to the IMF for the repayment of special
drawing rights, equivalent to 7.5 bln usd or half the remaining debt
owed to the Fund, next week.
The SDRs are made up of a basket of currencies consisting of euros,
yen, pounds and US dollars. The composition is reviewed every five
years to ensure that it reflects the relative importance of currencies
in the world's trading and financial system.
Indonesia left the IMF's loan assistance program in 2003 with debt of
9.8 bln usd, which it must repay by 2010 under the original schedule.
The central bank reiterated that it wants to settle the entire amount
by the end of this year as the country has adequate forex reserves to
fully cover its the obligation.
----------------------------------
International Herald Tribune
June 23, 2006
WTO Chief Is Optimistic
By Mark Landler
The New York Times
FRANKFURT A month after he warned that the five-year negotiations for a
global trade agreement were in the "red zone," Pascal Lamy, director general of the
World Trade Organization, said that he had grown considerably more optimistic
about the odds of a deal.
Trade ministers are to meet in Geneva to try to revive the talks, known as
the Doha development round. After missing repeated deadlines, the negotiations
have looked increasingly hopeless.
But during a conference call Thursday with journalists, Lamy said, "We are
much nearer to an agreement than ever before."
He attributed his confidence to a change in the tone of the United States,
which had seemed less engaged in trade talks after its chief trade negotiator,
Rob Portman, moved to the White House budget office.
President George W. Bush said Wednesday in Vienna that he was committed to
reaching an agreement, though he acknowledged that differences remained among
the United States, the European Union and developing countries on new trade
rules for agriculture and industrial goods.
"The point is, we're committed to a successful round," Bush said after
meeting with the president of the European Commission, José Manuel Barroso. "My view
is that we can't let this round fail. A failed WTO round would be a missed
opportunity."
Ahead of Bush's trip to Europe, Barroso warned in an interview that global
trade talks would be doomed if the United States was not willing to make more
concessions. While it was not clear whether Washington planned any new
proposals, Lamy said Bush's words suggested that it was open to a compromise. The Union
and a group of 20 developing countries also appear ready to give ground, he
noted.
"Until yesterday, the U.S. side of the triangle had remained locked," Lamy
said. "The good news yesterday was that suggestions of flexibility were given by
the U.S., notably by Bush."
An industry publication, Inside U.S. Trade, reported Wednesday that the
United States was prepared to scale back its demand for deep cuts in agricultural
tariffs. It also said that Washington was willing to make some additional
concessions in the subsidies it pays to American farmers.
But the new U.S. trade representative, Susan Schwab, said the administration
was not planning to soften its position on either tariffs or subsidies.
Speaking to reporters in Washington, Schwab said that she had not signaled new
flexibility in a meeting Monday with the EU trade commissioner, Peter Mandelson.
A spokeswoman for Schwab, Neena Morjani, noted that the existing American
proposal, which calls for an average reduction of 66 percent in tariffs, was not
a "take it or leave it" offer.
"We could adjust it based on the level of ambition we saw in proposals from
other countries," Morjani said. "Nine months later, we are still waiting for
these ambitious proposals."
Lamy acknowledged that persuading the U.S. Congress to accept more cuts in
farm subsidies would be difficult. "The question is whether a reformed farm bill
can make it through Congress," he said.
Some critics said that they were pessimistic a deal would be reached.
"It's difficult to see this working," said Celine Charveriat, a trade
lobbyist at Oxfam International. "The EU and U.S. have failed so far to seize the
political initiative, and this is reflected in the lack of any agreement."
----------------------------------
IMF notified about Indonesia's plan to speed up debt repayment
JAKARTA, June 23 (Asia Pulse/Antara) - The International Monetary Fund
(IMF) has been notified by the Indonesian government about the
country's plan to speed up the repayment of 2.5 billion SDR (Special
Drawing Rights) or US$3.7 billion of debt to the fund, an IMF
spokesman said.
Stephen Schwartz, the IMF chief representative in Indonesia, said in a
statement Thursday, the figure represented half of the Indonesian
government's total debt written in the Extended Fund Facility (EFF)
agreement.
He said the debt's balance would be about 2.5 billion SDR or US$3.7
billion. The debts were due in December 2010.
Meanwhile, IMF Executive Director Rodrigo de Rato said the accelerated
repayment of the IMF loans would show a strengthening of Indonesia`s
economic macro fundamentals as well as improvement in the country`s
balance of payments.
Previously, Bank of Indonesia (BI) Governor Burhanuddin Abdullah said
he had sent a "five-day-notice" to IMF affirming that payment of half
of Indonesia`s debt would be done within five days.
The letter itself was sent by BI after the Indonesian government had
concluded an agreement with JIBC (Japan Bank for International
Cooperation) whereby the Indonesian government was freed from the
obligation to accelerate repayment of its US$780 million debt to JIBC
although it was actually related with the IMF loans.
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Indonesia's Indosat board approves president's resignation
JAKARTA, June 23 (XFN-ASIA) - Indonesia's second largest phone
operator PT Indosat said its board of commissioners has accepted the
resignation of Hasnul Suhaimi as company president effective June 8.
It said vice president Kaizad Heerjee has assumed the duties of the
president until a successor is appointed.
Indosat said Suhaimi resigned for personal reasons.
However, media reports have said Suhaimi, who took office just a year
ago, had wanted to resign as he felt he had less control over Indosat
than the vice-president, who is the representative of Singapore
Technologies Telemedia.
ST Telemedia, through Mauritius-based unit Indonesia Communications
Ltd, owns 40.77 pct of Indosat while the Indonesian government owns
14.41 pct. The rest is owned by the investing public.
-------------------------------------
he Jakarta Post
Friday, June 23, 2006
Govt may issue short-term treasury bills in fourth quarter
The Jakarta Post, Jakarta
The government is planning to issue its first short-term treasury bills
(T-Bills) that could reach up to Rp 3 trillion (US$320.4 million) in the fourth
quarter of this year.
The director general of the treasury at the Finance Ministry, Mulia Nasution,
was quoted by Antara newswire as saying Thursday the treasury bills would be
issued once the primary dealers for the issue had been established.
"The primary dealers will be set up in the fourth quarter at the latest,"
Mulia said.
The issuance of treasury bills will help develop the country's secondary bond
market, analysts say. Primary dealers serve to reduce sharp price volatility
of the bonds if needed.
The government is relying on bonds to help finance the current state budget
deficit, which is expected to widen to 1.4 percent of gross domestic product
from the original target of 0.7 percent. The widening deficit is a result of
higher spending on electricity subsidies, the education sector and reconstruction
of quake-affected areas in some parts of Yogyakarta and Central Java.
It will be the first short-term treasury bills issued by the government,
which has so far issued longer-term bonds.
Finance Minister Sri Mulyani Indrawati has said that the government would
raise the size of bonds to be issued in the local market this year to Rp 38
trillion, from the original target of Rp 24.9 trillion, to help cover the greater
budget deficit.
Elsewhere, Mulia said the House of Representatives had approved the planned
short-term treasury bills.
Asked about the possibility of the government issuing more than Rp 3 trillion
worth of short-term treasury bills, Mulia said that it was unlikely because
it was the first time the government would launch such issue, and also
considering the current jittery market condition.
In addition to the short-term treasury bills, the government will also issue
for the first time retail bonds worth between Rp 2 trillion and Rp 3 trillion,
which is expected to take place later this month.
The bonds will carry face value of Rp 1 million, and investors are required
to make a minimum purchase of Rp 5 million.
The government has appointed 11 selling agents including Trimegah Securities,
Danareksa Securities, Valbury Asia Securities, Bank Mandiri, Bank Bukopin,
Bank Permata, Bank Mega, Citibank, Bank NISP, Bank Danamon and Bank Panin.
Rahmat Walujanto of the Finance Ministry said that to help ensure stability
in the price of the bonds, the primary dealers assigned by the government would
intervene in case of a volatile market.
"We have prepared a buyback program. It's our strategy to ensure price
stability. So when the price plunges, we'll intervene," he said.
------------------------------------
Indonesia's Bakrie projects 20-30 pct in income growth this year
JAKARTA, June 23 (Asia Pulse/Antara) - PT Bakrie & Brothers Tbk
(JSX:BNBR) projected 20-30 per cent growth of income this year, its
president Gafur Umar told reporters on Thursday.
He said that from the company's three core businesses --
infrastructure, telecommunications and agribusiness, the biggest
contributor was its agribusiness arm with a 45 per cent share of
income.
Gafur added that BNBR planned to merge some agribusiness companies to
help realize its projected income.
In the infrastructure sector, the company will join with a consortium
from South Korea and Malaysia to bid two toll road projects offered by
the government.
Last year, the company recorded a 123 per cent increase in net income
to Rp2.7 trillion from Rp1.2 trillion in 2005. Its net profit rose to
Rp279 billion although in 2005 it suffered losses of Rp200 billion.
--------------------------------------------------------------------
Smuggling inflicts 966 mln USD loss to Indonesia
JAKARTA, June 23 (Xinhua) -- The smuggling of manufacture goods
inflicted a loss of 966 million U.S. dollars in unpaid tax for
Indonesia in 2005, a minister said Friday.
"Everybody here agrees that smuggling is already at the alarming and
hazardous level," said Industry Minister Fahmi Idris.
The loss in 2005 is more than double compared with 470 million dollars
a year earlier, he claimed.
The minister said the main smuggled goods include steel products,
textile, garment, footwear, ceramic and electronics.
Steel smuggling caused a potential loss of 860 million dollars,
textile smuggling 59.4 million, footwear smuggling 11.64 million,
ceramic smuggling 21.69 million and electronic smuggling 13.45
million, he said.
Apart from financial loss, smuggling also reduced average capacity
utilization in local industries to 60 percent from 80 percent, lowered
productivity and weakened competitiveness, he said after a meeting
with several industrial associations at his office here.
----------------------------------------------------------------------
Indonesia needs new strategy to boost shoe export: Consultant
JAKARTA, June 23 (Asia Pulse/Antara) - Indonesia needs a new strategy
to enable it to capitalise on EU dumping charges against Chinese
products, according to an industry expert.
"To boost exports, investment would be necessary in casual leather
shoes which are focused on world preferences and tastes, like in Italy
and France," international leather consultant Peter Kern said during a
presentation at the international exhibition of leather products in
Jakarta on Thursday.
He said Indonesia has been too focused on sports shoes, which is more
of a brand and volume oriented sub-sector.
"Such strategy needs to be changed into specialization in certain
products like casual shoes, but not following already existing
products, but of special design," he said.
"Eighty per cent of Indonesia`s leather goods are made of cowhide,
which is more suitable for casual footwear," he said.
He noted that Indonesia's medium-class casual leather shoes, featuring
identifiably Indonesian designs are already popular in the European
market.
In the meantime, Chairman of the East Java Aprisindo office Sutan
Siregar said six companies will be taking part in an international
exhibition of leather products held in Dusseldorf, Germany, on
September 15 through 17, 2006.
He said the government needed to support the leather tanning industry,
to enable the casual (non-sports) shoe industry to increase its market
share from its present level of 2 per cent, valued at US$579 million.
In the meantime, Indonesia's sports shoe market share in 2004 reached
15 per cent, worth US$763.5 million.
"The casual shoe market offers wide opportunities for Indonesia, and
with government support, the tanning industry may become more lively,"
he said.
He noted casual shoe production is highly dependent on leather
supplies. Besides financial support, he said, the government also
needed to support training and facilitate raw material imports.
"We also need the development of yarn, adhesives and accessories
industries, to enable us to join the casual shoe industry," Siregar
added.
Indonesia still has to import casual shoe yarn, adhesives and
accessories from China.
He said that with government support, Aprisindo believed that
Indonesia's footwear exports in 2007 and 2008 could increase to US$7
billion, up from $3 billion in 2005.
---------------------------------
The Jakarta Post
June 23, 2006
Semen Padang eyeing 51 percent increase in 2006 net profit
The Jakarta Post, Jakarta
PT Semen Padang, a subsidiary of publicly listed cement maker PT Semen Gresik
Tbk, is targeting 51 percent growth in net profit this year to Rp 212 billion
(about US$22.3 million) from last year's Rp 139.5 billion.
The company, which accounts for about 30 percent of Semen Gresik's total
cement production, also expects a 24 percent increase in net sales to Rp 2.7
trillion this year from Rp 2.17 trillion last year.
"We are hoping to produce 5.1 million tons and sell 5.24 million tons of
cement (including stocks) this year to meet our sales target," president director
Endang Irzal said Thursday.
He said the company also planned to continue its efficiency and financial
restructuring programs to cut production costs.
Irzal said that this year the company would expand its market to outside
Sumatra, where it controls about 55 percent of the market share. He said Java
island would be the main target of this expansion.
"We see cement demand in Java is increasing, including in Banten. Therefore,
we want to expand our business. One of the ways we will do this is by
constructing a new packing plant in Ciwandan, Banten," he said.
He added that the company also was building a new packing plant in Aceh.
Irzal said the company would invest Rp 70 billion for the plant in Ciwandan
and Rp 20 billion in Aceh.
"We supply 40,000 tons to 50,000 tons of cement per month to Aceh. We also
expect demand in Yogyakarta and Central Java to increase after the quake last
month," he said.
--------------------------------
Indonesia's Ramayana sets 650 bln rupiah
capex for 2006-07 to open new stores
JAKARTA, June 23 (XFN-ASIA) - Retailer PT Ramayana Lestari Sentosa has
earmarked capital expenditure of 650 bln rupiah for this year and next
to open new stores, company commissioner Setiadi Surya said.
He said funding for the capex will come from internal cash flow.
Surya told reporters that for this year, Ramayana may open six new
stores in Java and Sulawesi at an investment of 250 bln rupiah and
open another 10-12 new stores next year at a cost of 400 bln rupiah.
The store expansion program is expected to boost sales by 13 pct this
year from 4.30 trln rupiah last year, the company said.
----------------------------------------------------------
Indonesia's Hexindo 5-months unaudited net profit 25.34 bln rupiah
JAKARTA, June 23 (XFN-ASIA) - PT Hexindo Adiperkasa, a distributor of
Hitachi heavy equipment, said its unaudited net profit in the first
five months reached 25.34 bln rupiah.
It said in a statement that sales stood at 480.09 bln rupiah in the
first five months, while its operating profit came to 23.64 bln.
The company did not provide comparative figures for the period.
Hexindo said it expects to book a net profit of 83.64 bln rupiah this
year, compared to 97.77 bln last year. Sales are expected to fall to
1.343 trln from 1.42 trln last year.
The company did not give any reasons for the fall in sales.
It said sales of heavy equipment, amounting to 281.887 bln rupiah,
accounted for most of its revenue in the five months to May. During
that period, the company sold 293 items of heavy equipment, 274 of
these were hydraulic excavators carrying the Hitachi brand name.
The company said it expects to sell 576 hydraulic excavators this
year, representing a 24 pct market share.
-------------------------------------------------------------------
Thailand to ask Indonesia to ease fishing regulations
BANGKOK, June 23 (Asia Pulse/ThaiNews) - Thailand's Fisheries
Department will ask Indonesia to ease its requirement that nations
wanting to fish in its territorial waters must invest in the country.
Department chief Jaranthada Kannasuta said that investing in Indonesia
would hardly be possible because the country still lacks the basic
infrastructure needed to accommodate investment projects.
Mr. Jaranthada said he will arrange initial talks with Indonesia at
the June 24-25 meeting of fisheries chiefs from Association of
Southeast Asian Nations (ASEAN) countries to discuss the formation of
an ASEAN shrimp alliance to increase bargaining power with shrimp
buyers. He then will fly to Indonesia to officially negotiate on that
issue in July.
Mr. Jaranthada said Thailand should promote deep-sea fishing in
international waters to avoid encroaching on territorial water of
other countries. About 3-4 billion baht (US$78-$104 million) will be
sought for the purchase of deep-sea fishing trawlers, he added.
-------------------------------------
The Jakarta Post
June 23, 2006
Govt to guarantee monorail project loan
Rendi Akhmad Witular, The Jakarta Post, Jakarta
The central government has finally agreed to provide a blanket loan guarantee
for PT Jakarta Monorail (JM) in a bid to secure a US$500 million loan from a
Dubai Bank-led consortium to finance the ambitious monorail project in Jakarta.
The guarantee will ensure that the lender is not at risk in financing the
project, Transportation Minister Hatta Radjasa said Thursday.
"In principle, the government has agreed to back up the loan. The Finance
Ministry is currently handling the necessary procedures. I think it will not be
long before the guarantee is issued," said Hatta at the State Palace.
The Dubai Bank syndicate has expressed its commitment to financing the
monorail project, but it requires a blanket guarantee from the government.
Hatta reiterated that based on a discussion between officials from his
ministry and the Finance Ministry, the Jakarta administration was required to hand
over its regional budget to the central government as collateral.
"The Jakarta administration has a budget that could be used to guarantee the
loans. We are assuring the consortium that the project is financially sound.
If something goes wrong the government will also be responsible," he said.
In a bid to expedite the construction of public infrastructure and
transportation, the Finance Ministry has recently issued a decree that allows private
infrastructure developers to ask for a blanket guarantee from the government if
their projects are deemed high risk.
JM has been urging the Jakarta administration to provide such a guarantee
since last year without success, as under government regulations, the regional
administration is not allowed to issue a blanket guarantee that could burden the
provincial budget. This has stalled negotiations with the foreign creditors.
However, despite the uncertainty over financing, the construction work on the
monorail is going on, at an estimated total cost of around US$650 million.
JM has signed contracts with a number of companies including state-owned PT
Adhi Karya for civil work, PT Bukaka Trans System for rolling stocks, MTRC Hong
Kong for project management and services integration and Mac Donald for
independent engineers.
Bukaka is owned by the family of Vice President Jusuf Kalla.
State train maker PT INKA and state electronics firm PT LEN Industry are also
in involved in the project.
When up and running, the monorail will serve the business districts of the
city through a 14.3-kilometer line as well as a a 13.5-km line from Kampung
Melayu in East Jakarta to shopping mall Mal Taman Anggrek in West Jakarta.
------------------------------------
Indonesia palm oil prices flat, rupiah helps olein
SINGAPORE, June 23 (Reuters) - Indonesia's crude palm oil prices
hardly moved on Friday as dealers awaited leads from Malaysian futures
but the cooking oil sector got a boost from a weaker rupiah and ample
demand.
RBD palm olein in Jakarta rose to 4,265 rupiah a kg ($0.45) from 4,240
rupiah on Thursday.
"Some buyers have showed up to replenish their stocks. Trading is
pretty active today," said a dealer in Jakarta.
On the export front, offers from July crude palm oil were flat at
$392.5 a tonne, free on board at Belawan port in North Sumatra for
July shipment. Buyers bid at $385 a tonne and no trades were reported.
August CPO was also flat at $397.5 FOB Belawan with no deals reported.
Bids stood at $390 a tonne.
Malaysian crude palm oil futures <0#KPO:> edged higher by midday,
reflecting small gains in soyoil futures <0#BO:>, as trading was
generally cautious ahead of export data for June 1-25.
Cargo surveyors Intertek Testing Services and Societe Generale de
Surveillance (SGS) are due to release their estimates of palm oil
exports for the first 25 days of the month on Monday.
SGS reported a slight drop in exports for June 1-20.
--------------------------------------------------------------------
Indonesian president keen to fast-track EPA with Japan
JAKARTA, June 23 (Asia Pulse/Antara) - Indonesia's President Susilo
Bambang Yudhoyono has called for the speeding up of ongoing
negotiations on a proposed Indonesian-Japan Economic Partnership
Agreement (EPA) so that it can be signed this year, a spokesman said.
"The President hopes that the EPA negotiations can be concluded by the
end of this year," presidential spokesman Dino Pati Djalal told the
press here on Friday following a meeting between Yudhoyono and Yasuo
Fukuda, a senior Japanese legislator.
The Indonesian-Japan EPA is very important to intensify bilateral
economic relations between the two countries, Dino explained.
Yasuo Fukuda, a candidate for the Japanese prime minister`s post, is
currently chairman of the Japan-Indonesian Association (Japindo).
Suring a courtesy call on the President, Fukuda was accompanied by
Rahmat Gobel, chairman of the Indonesia-Japan Friendship Association
(PPIJ).
Fukuda expressed his appreciation to the Indonesian Government for its
efforts to improve the country`s investment climate.
The Indonesian government is currently amending the law on investment
- a process expected to be completed in the near future.
In the meeting with the President, Fukuda also expressed his support
to the Yudhoyono administration's steps in handling the various
natural disasters that had occurred in the country such as those in
Aceh, Yogyakarta, Central Java, and South Sulawesi.
Yasuo Fukuda is on a visit to Indonesia from June 22 to 24, 2006, to
strengthen cultural and economic cooperation between the two
countries.
The visit is at the initiative and invitation of the
Indonesian-Japanese Friendship Association (PPIJ), in addition to
Yasuo Fukuda`s own wish, according to Rahmat Gobel recently.
His agenda during his stay in Indonesia include meetings with Vice
President Jusuf Kalla, Foreign Affairs Ministers Hassan Wirayuda and
chairmen of the House of Representatives (DPR) and the Regional
Representative Council (DPD), and a visit to Yogyakarta.
Fukuda, a son of former Japanese prime minister Takeo Fukuda, is also
to address a seminar on "Developing Synergy between Indonesia and
Japan".
--------------------------------------
Dow Jones Newswires
June 23, 2006
India May Restart Privatizations
In a sign that India's government is seeking to jump-start privatization
efforts, the cabinet decided to sell part of the government's stakes in National
Aluminium Co. and Neyveli Lignite Corp.
The green light given yesterday for sales of 10% stakes in the companies,
which together could raise more than $500 million, came despite opposition from
the government's communist allies, who still could scuttle the plan. If the
divestment goes through, it will be the first since the October 2004 sale of
shares in state-run National Thermal Power Corp.
"It is a positive sign of reforms" if the government succeeds, said Sharmila
Joshi, vice president of Mumbai brokerage house Asit C. Mehta Investment
Interrmediates Ltd.
A sale would mark a small but important step forward in revamping the Indian
economy. The Congress Party-led ruling coalition, which depends on the support
of left-leaning parties, hasn't been as successful as the prior government at
bringing more private-sector control to state-run companies that dominate
many industries in India. Opponents of divestment and privatization, which
include India's communist parties and trade unions, have blocked previous proposals
amid concerns about job losses.
The government's communist allies yesterday said they weren't happy with the
cabinet decision. While cabinet decisions usually are final, the communists
have succeeded in reversing at least one divestment plan: Last year the sale of
a stake in Bharat Heavy Electricals Ltd. was abandoned after communists who
back the coalition expressed opposition.
The divestment plan for National Aluminium and Neyveli "was discussed, but it
doesn't mean that we have given our concurrence," said D. Raja, national
secretary with the Communist Party of India (Marxist) in New Delhi. "We don't
agree with the decision, [and] we will protest."
An important question in coming days will be how hard left-leaning parties
protest. Communist parties have influenced government decisions by refusing to
cooperate on other issues, or by calling national strikes. The parties probably
wouldn't withdraw support from the coalition altogether, however, because it
is unlikely they could get more power in a new government.
The news sent shares of both companies sharply higher on the Bombay Stock
Exchange. Shares of National Aluminium, or Nalco, rose as much as 18% before
ending 6.9% higher at 239.60 rupees ($5.23). Neyveli shares rose as much as 29%
before closing up 17% at 66.35 rupees.
The government holds an 87% stake in Nalco, India's largest producer and
exporter of alumina and aluminum by output, and a 94% stake in mining and power
company Neyveli. Based on yesterday's closing prices, a 10% stake in Nalco could
fetch 15.44 billion rupees, ($337.1 million) while the government could reap
11.13 billion rupees from Neyveli. ---- Eric Bellman, P.R. Venkat and Binny
Sabharwal
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Joyo Indonesia News Service
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