[Kabar-indonesia] 2 of 2: RI Trade and Investment News, 26 June 2006

[JoyoNews at aol.com]

The Coordinating Ministry for Economic Affairs
Republic of Indonesia
Jakarta
June 26, 2006

Trade and Investment News, 26 June 2006

Part 2 of 2

STATE CONCERNS

Govt. to Boost Plantation Output 

The government will provide assistance to farmers engaged in planting oil 
palm, cacao, rubber and corn in an effort to boost the country's plantation 
output and create jobs.  

Agriculture Minister Anton Apriyantono said the assistance would take the 
form of loans channeled by banks to oil palm, cacao and rubber farmers. Corn 
farmers will receive seeds. 

"The special interest-rate will be for farmers in Sumatra and Kalimantan, 
while the free seeds will be for corn farmers in Sulawesi," Apriyantono was 
quoted as saying by The Jakarta Post after meeting with Vice President Jusuf Kalla 
on Thursday (22/6/06). 

He expected the subsidies to help the government meet its target of expanding 
plantations by 500,000 hectares annually.  The government will allocate Rp1.7 
trillion ($182 million) this year to cover the subsidies, some Rp200 billion 
of which would be distributed through state-owned Bank Rakyat Indonesia (BRI). 

BRI president director Sofyan Basir said that of the 18% interest rate 
imposed on farmers, the government will pick up 8% while farmers pay the remaining 
10%.  

"The amount of the assistance will depend on developments with the interest 
rate.  The loan will have a grace period of five years for oil palm farmers and 
seven years for cacao and rubber farmers," said Basir.  The bank will use the 
farmers' plantations as collateral. 

The government has yet to finish calculating the amount of the subsidies 
allocated for cacao and rubber farmers. 

With the aid, oil palm farmers are expected to be able to establish some 
50,000 hectares of new plantations this year, with as much as 300,000 hectares 
estimated for next year. 

SOEs

Kereta Api, Angkasa Pura to Build Airport Railway

State railway company PT Kereta Api and state airport management company PT 
Angkasa Pura II have agreed to set up a joint venture to build railways to 
three airports.

The joint venture will build railway systems at the Soekarno-Hatta 
International Airport in Jakarta; the Kuala Namu Airport in Deli Serdang, North Sumatra; 
and the Minangkabau International Airport in Padang, West Sumatra, Kereta Api 
president Ronny Wahyudi was quoted as saying by Antara on Tuesday (20/6/06).

Wahyudi said the venture will start building the 25-km railway from Manggarai 
to the Soekarno-Hatta airport this year at a cost of Rp1 trillion.  He said 
the project, to be completed in two years, has become urgent because the 
passengers at the airport have reached 26 million a year.

Kereta Api will have a 60% stake in the venture, and Ankasa Pura II the 
remaining 40%.

PRIVATE SECTOR

May Motorcycle Sales Up 19% 

Industry-wide motorcycle sales grew 19% to 322,680 units in May from 271,092 
in April, but were down 23% from 419,608 in the same month last year, the 
Indonesian Motorcycle Industry Association (AISI) said.

In the first five months, total sales reached 1.47 million units against 1.98 
million a year earlier, with PT Astra International's Honda brand maintaining 
its leading 51% market share, XFN-Asia reported on Tuesday (20/6/06).

Yamaha came in second spot with five-month sales of 526,909 units or 36% of 
the total market, while Suzuki followed with 176,159 units or 12% of the market.

IT Sales Reach $800m in H1 2006

Indonesia's domestic sales of information technology in the first half of 
2006 are predicted to have reached $800 million, as part of $2.1 billion 
projected for the whole year, Bisnis Indonesia reported.

The banking sector dominated the country's IT sales with 30% during the 
period, chairman of the software association Aspiluki, Djarot Subiantoro, said.  He 
estimated that half of the $800 million was spent on software and related 
services.

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

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

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

Telkomsel Aims for 33m Subscribers 

Indonesia's largest mobile phone operator, PT Telkomsel, said on Tuesday 
(20/6/06) it is aiming for a total of 32 million to 33 million subscribers by the 
end of 2006.

Telkomsel chief executive Kiskenda Suriahardja was quoted as saying by 
Reuters that the company wants to add about 8 million new subscribers by the end of 
the year, up from 24.3 million last year.  As of end of May, the operator had 
28.1 million subscribers.

Telkomsel is 65%-controlled by Indonesia's largest telecommunications firm, 
PT Telkom, with the remaining 35% stake owned by Singapore Telecommunications 
Ltd, Asia's fifth largest phone company.

The number of mobile phone users is expected to grow strongly this year, 
after expanding by 50% in 2005.  Many experts in the industry predict the number 
of mobile phone customers will hit 100 million by 2010.

BANKS

StanChart, Astra to Buy More Bank Permata

Standard Chartered Bank and PT Astra International are planning to increase 
their stakes in Bank Permata by acquiring additional shares from state asset 
management firm PT PPA, a source who declined to be identified told Bisnis 
Indonesia.

"They have expressed their intention to raise their stakes in Permata because 
in the near term, PPA will sell its remaining stake in the two banks (Permata 
and Bank Internasional Indonesia)," the source said recently.

PPA plans to dispose of its remaining 26.16% stake in Bank Permata and 5.53% 
holding in BII to raise funds for the country's budget, the report said. 
Standard Chartered and Astra each holds 31.55% of Bank Permata.

The report also quoted PPA president Mohammad Syahrial as saying that Astra 
and Standard Chartered have requested information about the method of the stake 
sale though he did not confirm if the two investors are willing to buy.

"We told them that it will be executed via a market placement, which we think 
is the best option," Syahrial said.

US Exim Bank Provides Trade Facility

The US Exim Bank has announced a change in its import policy toward 
Indonesian importers and exporters.  

For the first time since 1998, export-import funds will be provided on one- 
to seven-year terms depending on commodities imported and exported by private 
Indonesian companies, US Ambassador to Indonesia B Lynn Pascoe was quoted as 
saying by Antara.

The new policy took effect last May 31, Pascoe said in a statement issued on 
Monday (19/6/06).  He said the US has become the largest market for Indonesian 
non-oil and gas commodities.  He said the policy is expected to have a 
positive impact on opening more jobs both in Indonesia and the US.

Bank Mandiri Targets 25,000 EDCs

The country's largest state bank, Bank Mandiri aims to run 25,000 electronic 
data capture (EDC) terminals to support its plan to become a Dominant 
Multi-Specialist Bank by 2010, Antara reported.

Bank Mandiri information technology director Sasmita said on Wednesday 
(21/6/06) the bank has 10,974 EDCs installed in 909 branch offices, 2,660 automatic 
teller machines (ATMs) and 29 outlets.  Next year, it will focus on some 
development projects, including those on customer relationship management and the 
Basel II-based management system.

"Bank Mandiri already has a core system enabling us to run those projects," 
he said, adding that the bank has spent $173 million to build the core system 
in 2001-03.  The core system includes payroll, e-procurement and disaster 
recovery center.

Bank Ekspor to Pay Out $30m in Bonds

Some Rp285 billion ($30.6 million) worth of Bank Ekspor Indonesia bonds of 
the 2005 Series A was slated to be paid out on June 22, the bank's bond 
prospectus, dated June 10, 2005, showed.

Bond division chief of the Surabaya Stock Exchange (SSX) Erna Dewayani 
disclosed on Wednesday (21/6/06) that as of June 22, the bonds were not registered 
and could no longer be traded through the SSX , Antara reported.

The payment of the bonds and/or its interest will be conducted by KSEI as the 
payment agent on behalf of Bank Ekspor Indonesia.  Payment to bond holders 
through the account holders will be according to the respective times of payment 
as agreed.

POWER

PLN Needs $7.7b for Network Expansion 

State power firm, PT PLN, needs to invest $7.7 billion to expand and upgrade 
its transmission and distribution networks.

PLN transmission and distribution director Herman Darnel Ibrahim was quoted 
by Antara as saying on Monday (19/6/06) that the expansion of the transmission 
and distribution networks is essential for the government to construct new 
coal-fired power plants with a combined generating capacity of 10,000 MW by 2009. 
 

"If we only construct the power plants without the transmission and 
distribution networks, the electricity will not reach the consumers," he said. 

Ibrahim said some $4.3 billion would be needed to expand the transmission 
network, and another $3.4 billion to expand the distribution network.  

PLN to Swap Energy-Saving Bulbs 

State-owned electricity company PT PLN will allow its household customers to 
swap regular light bulbs with a total of 18 million energy-efficient ones to 
help reduce electricity consumption amid high fuel prices, PLN officials said 
Thursday (22/6/06).

PLN commercial and customer service director Sunggu Aritonang told Dow Jones 
Newswires that six million households would be allowed to swap three light 
bulbs each.  PLN will receive a $30.3 million loan from the Asian Development 
Bank to fund the program.  

Medco Estimates Sarulla Plant to Cost $600m 

Construction of PT PLN's Sarulla geothermal power project is estimated to 
cost $600 million, PT Medco Energi Internasional president Hilmi Panigoro was 
quoted as saying by Koran Tempo. 

The project is set to be awarded to a Medco-led consortium, which includes 
Japan's Itochu Corp and US-based Ormat Technologies Inc.

Panigoro said they would seek funding from local and international banks.  
"They (banks) have already stated their readiness to extend the money.  However, 
I cannot disclose right now who they are," he said.

The Sarulla power project is to be turned over to the Medco consortium after 
the winning bidder, Geo Dipa Energi, decided to pull out.  The reason for its 
withdrawal has not been disclosed.  Panigoro said they are awaiting formal 
notification from PLN for the automatic award of the project to their consortium, 
as the Medco group was the next best bidder for the Sarulla tender.

Geo Dipa, jointly owned by PLN and state-run oil and gas firm PT Pertamina, 
had offered to sell to PLN electricity generated by the Sarulla plant at 
$0.4455 per kilowatt hour (kWh), beating Medco's offer of $0.4642 per kWh.

The Sarulla power plant project was first awarded to Unocal North Sumatra 
Geothermal Ltd, a unit of Unocal Corp.  But due to the 1998 economic crisis, 
several power plant projects including Sarulla were suspended by the government.  
PLN acquired the project from Unocal for $60 million.

OIL AND GAS

Rig Shortage Might Delay Cepu 

A severe shortage of rigs and other oil field equipment as well as scarce 
availability of contractor services could push back Indonesia's Cepu oil field 
start-up beyond the current end-2008 schedule, state oil and gas company PT 
Pertamina's president Ari Sumarno told Platts Commodity News in a recent interview.

Pertamina is gearing up to commercialize the sizeable field between Central 
Java and East Java along with its equal partner ExxonMobil.  The field's final 
plan of development was put together after the companies inked their final 
project agreement in mid-March this year and was signed off by Mines and Energy 
Minister Purnomo Yusgiantoro last week.

ExxonMobil's estimates in March this year had pegged first oil in 31 months' 
time, at initial rates of 25,000-40,000 barrels per day (bpd).  Peak 
production from the field is expected at 170,000 bpd.

Pertamina's vice president Iin Arifin Takhyan said in April the initial 
drilling plan would need to be pushed back from September/October this year to 
early 2007 because of a shortage of rigs.  

In the interview, Sumarno acknowledged that the previously assumed timeframe 
for bringing the field on stream would need to be re-examined.

"We are making preparations and going forward so we can start production at 
the end of 2008 or early 2009," he said.  But "the schedule must be reworked, 
because the present situation is different than (that of) three to four years 
ago," he said.  

"There is a shortage of rigs, equipment has longer delivery times.  
Construction contractors' order books are full... This must be reworked again, looked 
at again."

"End-2008 (start-up) is only the first guesstimate, not based on detailed 
evaluation," Sumarno said, declining to estimate a new timeline.  

Indonesia May Host OPEC Summit: Report 

Indonesia has offered to host a summit of the Organization of Petroleum 
Exporting Countries (OPEC) in November, according to Abdul Gafur, the chairman of 
the parliament's team in charge of Indonesia-Venezuela relations. 

He told reporters of the offer after a meeting with Minister of Energy and 
Mineral Resources Purnomo Yusgiantoro, Dow Jones Newswires reported. "Indonesia 
is willing to host the OPEC summit," he said.  

Gafur said he will convey Indonesia's offer to host the meeting to Venezuela, 
a fellow OPEC member, during his visit to the country later this month. 

Saudi Arabia is also seeking to host the summit, but some hawkish OPEC 
members are resisting the offer of the de-facto OPEC leader, said an Indonesian 
official at the Energy and Mineral Ministry, according to the Dow Jones report. 

The official said Indonesia was regarded as neutral by other OPEC members. 

Chinese Seek Majority in Tuban Refinery

Chinese investors want to have a majority 51% stake in a $5 billion oil 
refinery to be built in Tuban, East Java, which also involves investors from Iran 
and Indonesia.

Under a recent agreement, Indonesia's PT Elnusa is to own 20% of the project, 
the National Iranian Oil Refining and Distribution Company (NIORDC) will own 
30%, and the remaining 50% will be split between China National Offshore Oil 
Corp (CNOOC) and China National Petrochemical Corp (Sinopec), Antara reported 
on Monday (19/6/06).

Elnusa president Rudy Radjab said the Chinese investors want the majority 
stake to secure supply of the products to that country.  He said negotiation is 
underway with CNOOC and Sinopec to determine the shares for the Chinese 
investors.

Construction of the project will start in 2007 and operation will begin in 
2010.  Radjab said a final deal is expected to be signed in August to be ready 
for construction next year.

LPG to Replace Kerosene by 2012 - Minister

The government plans to fully phase out the domestic household use of 
kerosene, and replace it with liquid petroleum gas (LPG) by 2012, Mines and Energy 
Minister Purnomo Yusgiantoro was quoted as saying by Dow Jones Newswires last 
June 16.

He said in the event of a deficit between domestically produced LPG and local 
demand, Indonesia would import the needed supply from other Asian markets.

The government wants to cut the use of kerosene to reduce fuel subsidy costs 
amid surging prices of crude oil on the global market.  

The substitution of kerosene with LPG as cooking fuel will help save the 
government Rp21 billion in fuel subsidies in 2006, government predictions issued 
in May indicated.

Exxon Wins Bid on Surumana Block

ExxonMobil Corp said on Monday (19/6/06) it successfully bid on one block in 
Indonesia's latest oil and gas exploration licensing round, Reuters reported.

It said it was the high bidder on the Surumana block in the Makassar Straits 
off the coast of Sulawesi. 

MINING

Rio Tinto Plans to Invest $1 billion  

The government will not allow UK-Australian mining group Rio Tinto to sell 
its nickel mine in Lasamphala, Central Sulawesi before the mine has begun 
production, a Mines and Energy Department official said.

The restriction is in the contract that will be awarded to Rio Tinto in 
September, director for mineral resources and coal management, Mangantar S 
Marpaung, said, XFN-Asia reported on Wednesday (21/6/06).

It is the first contract to be awarded by the government to have such a 
clause.  The government will charge a royalty of 3% of sales, he said.

Rio Tinto is planning to invest $1 billion in the nickel mine.  With the new 
investment, the world's third largest mining company is expected to produce 
46,000 metric tons of nickel and employ about 5,000 workers, the company's chief 
executive for copper and exploration, Tom Albanese, said. 

"We have been successful with exploration, but before we can move to the next 
stage, we need to put together a contract of work in conjunction with the 
government of Indonesia and the provinces of Sulawesi," he was quoted as saying 
by The Jakarta Post after a meeting with Vice President Jusuf Kalla on Monday 
(19/6/06). 

The government hopes that the Rio Tinto investment would lure more 
investments to the country's mining industry. 

French mining firm Eramet SA recently announced that it would invest $1.5 
billion in a nickel mining project in Halmahera, North Maluku, through its newly 
acquired subsidiary, Weda Bay Mineral Inc.  Indonesia supplies about 16% of 
the world's nickel. 

Osela Gold Drilling Might Yield 500,000 Oz

Avocet Mining PLC said its first-phase resource-definition drilling at Osela 
in Bakan district in Indonesia has the potential to find 500,000 oz of gold, 
higher than initial expectations announced last year, AFX reported on Tuesday 
(20/6/06).

This is the second advanced prospect in Bakan in the company's 80% owned 
Mongondow contract of work, the other being the Durian prospect.

The company further said that Bakan has the potential for a significantly 
larger resource.  It chief executive, John Catchpole, said, "We remain confident 
that Bakan district has the potential to host at least 500,000 oz and possibly 
much more."

-End 2 of 2-

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Joyo Indonesia News Service
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