[Kabar-indonesia] 1 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 1 of 2

Highlights 

Politics 

* President Yudhoyono has 60% backing from 
  the public for his leadership, poll says
* President to meet Australian Prime Minister 
  John Howard 
* Large and growing majority of Indonesians 
  do not support suicide bombings: Pew
* President to visit Koreas 

Regions

* Minister blames floods in South Sulawesi 
  on deforestation 
* East Kalimantan's governor arrested on 
  corruption charges 
* Supreme Court throws out a challenge to 
  the election of a governor in West Irian Jaya 
* Home Affairs Minister says Aceh poll may 
  be held as soon as August 

Economy

* Credit Suisse upgrades Indonesian growth 
  prospects
* Standard Chartered Bank says there are 
  signs business is picking up 
* Singapore, Indonesia sign framework 
  agreement on economic cooperation 
  to develop Special Economic Zones 

Business Briefs 

Macroeconomy 

* Officials look at ways to fund budget deficit 
* Bank Indonesia to look at interest rate position 
* Foreign exchange reserves at $40 billion 
  after 50% IMF debt pay-out 

Investment 

* Foreign investment realizations up 5%, 
  domestic up 55% 

State Concerns 

* Assistance for farmers will boost plantation, 
  corn crops 

SOEs

* Semen Gresik sales dip on low Java volumes 

Private Sector 

* Motorcycle sales jump in May 
* First half IT sales to reach $800 million 

Banks

* Standard Chartered upbeat on Indonesia 
* US Exim Bank to provide trade funds 

Power

* $7.7 billion sought for network expansion 

Oil & Gas

* Indonesia looks to host November OPEC summit 
* Chinese investors look for 51% stake in Tuban 
  oil refinery 

Mining

* Rio Tinto Plans to Invest $1 billion 

POLITICS

Poll Gives President Strong Support 

More than 60% of Indonesians consider President Susilo Bambang Yudhoyono is 
doing a good job and trust his leadership, according to a quarterly survey by 
Roy Morgan Research. 

The survey also found that consumer Confidence went up 2 points to 107 in the 
first quarter of 2006. 

The positive response for Dr. Yudhoyono was down from almost 70% in the third 
quarter of 2005, but up from 55% during the fourth quarter - the period when 
the government announced a dramatic increase in oil prices. 

Dealing with the problem of corruption has become a major crusade of the 
president, and almost 90% of respondents agreed with him about its negative effect 
on society. 

The research firm said Indonesians seem to be proud of an historic collective 
achievement in advancing the cause of democracy. In March 2006, 
three-quarters of citizens believed that democracy is working in Indonesia, a score that is 
gently moving upwards. 

Over 6,000 respondents 14 years of age and older were interviewed for the 
survey, randomly chosen across 16 provinces, covering over 90% of Indonesia's 
population, every 90 days. 

A total of 6,393 were interviewed during the January-March 2006 quarter, from 
over 25,000 respondents annually. 

Yudhoyono to Meet Howard 

Australian Prime Minister John Howard will meet Indonesian President Susilo 
Bambang Yudhoyono in Batam on Monday (26/6/06). 

The two leaders are expected to discuss Australia's policy on persons seeking 
political asylum and may press for a commitment to Indonesia's territorial 
integrity. 

Indonesia has ruled out a defense agreement with Indonesia. Defense Minister 
Juwono Sudarsono said that Indonesia had never formed military pacts with 
foreign nations. 

He added Wednesday that the terms and conditions of a draft needed to be 
reviewed. 

"From what I hear from the Foreign Ministry, there is too much emphasis on 
the military aspect and we're not keen on any agreement that would be seen as a 
form of bilateral defense treaty, so I would go through the wording first and 
see what happens."

Indonesia will also explain its position on Muslim cleric Abu Bakar Ba'asyir, 
who was released from jail this month in connection with the 2002 Bali 
bombings. Indonesia has imposed a travel ban on the cleric. 

Ba'asyir last week stressed that while Muslims had the right to press for 
shariah law, they should not interfere with the right of people practising other 
religions. 

Theo Sambuaga, chairman of House of Representatives Commission I on foreign 
affairs and defense, said the two leaders should only make efforts to advance 
bilateral relations. 

He said that Indonesia could not accept criticism for releasing Ba'asyir 
because the requirements of the Indonesia legal system had been fulfilled. 

Poll: Terrorism Losing Ground

A large and growing majority of Indonesians do not support suicide bombings, 
according to a survey released on Thursday (22/6/06).

The Pew Global Attitudes Project poll also showed declining support for al 
Qaeda's leader Osama bin Laden in Indonesia.

The poll showed that 71% of Indonesians believe that "suicide bombing and 
other forms of violence against civilian targets" are never justified, up from 
66% in 2005 and 54% in 2002. 

Similar drops in support for suicide bombings were also recorded in Jordan 
and Pakistan, according to the global poll.

The poll also showed declining support for bin Laden, with only 4% of 
Indonesians saying they had a "lot of confidence" in the terror leader, down from 19% 
in 2002.

Moderates Urged: Speak Up

Empowering moderates to speak up in the increasingly divided Islamic world is 
essential in the promotion of peace and to cultivate interfaith harmony, 
Hasyim Muzardi, the chairman of mass Muslim organization Nahdlatul Ulama, said 
Tuesday (20/6/06).

Addressing the opening of the second International Conference of Islam 
Scholars, he said challenges in today's Islamic world required moderates to 
strengthen their voices.

"Moderates are not those without an opinion,:" he said. "Moderates are those 
with strong views based on a conviction about what is right and just. 
Moderates strike the balance between faith and tolerance for peace and social welfare, 
and maintain solidarity." 

Muzadi hoped the conference, organized by the NU and bringing together more 
than 300 scholars from 53 countries, would be able to serve such a need through 
"pooling intellectual resources and integrating efforts to promote 
solidarity." 

He also said there should be concerted efforts to eliminate the use of 
symbols of religion to justify acts of violence and terror. 

"People need to share common ideas about peace, and this conference is 
seeking to promote modernization in Islam," he said. "There is such a discouraging 
phenomenon in the form of conflicts that continue to plague the Islamic world." 

In his remarks, President Susilo Bambang Yudhoyono warned about the rising 
global prejudice against Islam, and urged Muslims to demonstrate the religion's 
teachings were peaceful and encourage a better understanding of different 
faiths. 

"Islamophobia is an emerging issue for today's Muslims," he told the 
conference. "It is pertinent for us to think about how Muslims should live in 
countries where Islam is not the religion of the majority. It's also pertinent for us 
to show, through exemplary deeds and persistent advocacy, that Muslims are 
peaceful." 

Defense Purchases Listed

Defense Minister Juwono Sudarsono said Tuesday (20/6/06) Indonesia plans to 
buy submarines, fighter jets and frigates from nations including Russia and the 
Netherlands.

The list includes two German submarines, which will be purchased next 
year, four Dutch-built frigates to be bought over the next three years, and 
an additional six Russian-made Sukhoi jet fighters to go with the four already 
in service. 

Indonesia is updating its arsenal partly to tackle piracy and potential 
terrorist attacks in the Malacca Strait and elsewhere in its waters.

Sudarsono, who called the purchases "the bare essentials," said the defense 
budget may swell to as much as $3 billion next year from $2.6 billion this 
year. 

Defense planners are relying on economic growth over the next decade to boost 
government revenue and fund additional hardware purchases.

"You can't have a powerful military if you don't have a powerful economy," 
Sudarsono said. "It's nothing threatening, just enough to maintain what we call 
minimum essential force. We must provide some degree of deterrent."

North Korea Dates Set

North Korea is to accept a visit by President Susilo Bambang Yudhoyono on 
July 18-19, Foreign Ministry spokesman Yuri Thamrin said on Friday (23/6/06). 

Dr. Yudhoyono will visit South Korea after leaving the North. He had to 
postpone a trip to the two Koreas planned for June 5 to 9 after last month's 
devastating earthquake in Central Java.

A number of bilateral agreements are expected to be signed during the trip, 
including an agreement on food assistance to North Korea. Dr. Yudhoyono is also 
expected to take up the issue of the stalled six-party talks on North Korea's 
nuclear development programs. 

"We have a special relationship with North Korea," Thamrin said. "The unique 
relationship has given us access to be listened to by its leadership." 

During an interview with Kyodo News in February, Yudhoyono's special envoy on 
North Korea, Nana Sutresna, said North Korea had asked Indonesia to exert its 
influence on the US to lift the financial sanctions, but Indonesia advised 
North Korea to discuss the issue directly with Washington.   

REGIONS

S. Sulawesi Flood a Warning: Kaban  

Indonesia was hit with a new natural disaster with the death of nearly 250 
people in landslides and flooding in Sinjai regency, some 240 km south of the 
South Sulawesi capital of Makassar. 

Rescuers continued to search for victims in mud-filled houses Saturday 
(24/6/06) as survivors were hit by diarrhea and skin diseases after the flood hit 
with teeming rain early on Tuesday. 

Forestry Minister Malem Sambat Kaban blamed deforestation for the severity of 
the flood. He told reporters that residents had cleared the hills around 
Sinjai for farmland, Reuters reported.

"What happened in Sinjai is a warning for the rest of Indonesia if rain falls 
more than three hours," he said, pointing out that the country had lost vast 
areas of forest to farmland and logging.

"Only 27% of Sulawesi's area is covered with forest, protected forest 
included. This is the result of 30 years of mismanagement. This is an accumulation of 
that process," Kaban said, according to The Jakarta Post.  He said the 
country had no other choice but to reclaim its forests. 

E. Kalimantan Governor Arrested 

East Kalimantan Governor Suwarna Abdul Fatah was detained late Monday 
(19/6/06) on corruption charges after questioning by the Corruption Eradication 
Commission (KPK).

He is accused of having permitted the transfer of land use of forest areas 
for a one million-hectare plantation plan which was a ploy to strip timber from 
the land. 

KPK deputy chief Tumpak Hatorangan Panggabean said Fatah was arrested for 
permitting the opening of forest areas, giving a license on the use of logs and 
giving recommendation to PT Surya Dumai Group. 

Panggabean said Suwarna claimed not to know about the permit, "but at least 
he must have known that the plantation does not exist." 

Panggabean denied Suwarna's claim that the plantation program had been 
approved by East Kalimantan's Regional House of Representatives (DPRD), which said 
it had no idea about the program. "In fact, the regional budget did not mention 
the program," he said. 

The deal caused losses of Rp440 billion to the state, Panggabean said. The 
governor's legal team has filed a request to postpone his detention. 

Supreme Court Rejects W. Irian Poll Claim

The Supreme Court on Tuesday (20/6 06) rejected arguments that the West Irian 
Jaya regional election result was tainted by vote manipulation, and threw out 
the complaint filed by Yorrys Raweyai, a candidate for governor in the poll. 

Raweyai threatened a criminal complaint based on accusations that the 
regional election commission (KPUD) manipulated the vote count in favor of former 
Sorong regent, Abraham Autururi. 

Aceh Poll May be Held in August 

The Ministry of Home Affairs says it expects the Aceh regional election to 
start in August to elect a governor, regents and mayors, as long as the law on 
governance in Aceh is passed next month.

"Definitive government officials are very much needed as the current 
temporary officials face some limitations of authority. The sooner regional heads are 
inaugurated, the government's effort in the region can be more stable," 
Minister of Home Affairs M Ma'ruf said Wednesday (21/6/06) in Jakarta. 

The minister said the target was in line with the extension of the term of 
the Aceh Monitoring Mission (AMM), which is due to end on September 15. He said 
the process of providing new identification cards would be accelerated. 

"We have sent a team to assist the Aceh Residency and Civil Registry Agency," 
the minister said. 

More Aid Needed for Quake Victims: UN 

Damage to housing as a result of the earthquake that struck Yogyakarta and 
areas in Central Java on May 27 is worse than first thought, according to a 
statement Saturday (24/6/06) from the United Nations. 

At least one million people have lost their homes and reconstruction is 
expected to take a minimum of two years.  

Funding is still needed to provide emergency shelter for more than 300,000 
people, the statement said.  

"Although more than 106,000 tarpaulins and tents have been distributed by the 
government and humanitarian community to date, current estimates are that 
only 48% of those rendered homeless will have received emergency shelter 
assistance by the end of July," the statement added.

Lack of firm funding commitments also meant that World Food Program aid for 
survivors will last only until the end of July. 

"Without immediate new contributions, food aid for the most vulnerable -- 
mostly women and children -- will have to be drastically reduced," the statement 
said.

More assistance is required to speed up construction of emergency toilets, 
clean wells, distribute hygiene kits and promote awareness among affected 
communities.  

In the health sector, ongoing care of significant and infected wounds remains 
a major challenge.  

The statement said that, overall, "the national response to the earthquake 
has been swift," but the United Nations country team's estimate that $103 
million was needed from the international community for relief activities, only $23 
million has been pledged or committed.

Meanwhile Mt. Merapi continued to send avalanches of hot gas and debris down 
its slopes, as a scientist warned the peak's fragile lava dome still posed a 
threat to thousands of villagers.

The smoldering volcano has been at a near-continuous state of high alert for 
seven weeks, forcing the evacuation of thousands of villagers in a government 
designated danger zone. 

ECONOMY

Optimism on Directions 

Credit Suisse upgraded its real GDP growth forecast for Indonesia this year 
and Standard Chartered said that despite slower growth there were indications 
that the economy was picking up. 

Credit Suisse raised its estimate for growth this year to 5.6% from its 
previous estimate of 5.0%, citing expected acceleration in consumer spending growth 
in the second half of the year, XFN-ASIA reported. 

In what the news agency described as a bullish report on Indonesia, Credit 
Suisse said falling interest rates and inflation are predicted to boost 
consumption. It predicted 6% growth in 2007. 

Simon Morris, CEO of Stanchart's Indonesian operations, said the bank is 
optimistic about expanding its business in Indonesia despite slower than expected 
economic growth.

"Although slow, the economy is showing signs of picking up, both from the 
consumer and the corporate side. The retail and consumer banking sector is very 
attractive to us. It is a competitive space to occupy," Morris told XFN-ASIA in 
an interview.

"We are generally optimistic about the business environment and the business 
prospects here. We have positioned ourselves so that we are able to serve our 
clients as their business expands," Morris said.

Loan demand from corporations, particularly for financing new projects, 
continues to grow.

Figures released by the Investment Coordinating Board (BKPM) for the first 
five months of the year said actual investment by local investors jumped by 55% 
to Rp10.47 trillion compared to the same period last year. 

Actual foreign direct investment (FDI) rose by 5.1% during the same period.

Trade Minister Mari Pangestu also presented reason for optimism when she said 
that Indonesian and China are planning to expand bilateral trade to $30 
billion by 2010 from about $12.54 billion last year, The Jakarta Post reported. 

"We're optimistic we can achieve the target. Our trade has been increasing 
significantly during the last 10 years," said the minister in a speech read for 
her at a seminar organized by the University of Indonesia on Thursday. 

Bilateral trade jumped 43.64% from $8.72 billion in 2004 to $12.50 billion 
last year. 

Indonesian exports to China climbed 44.68% in 2005 to $6.66 billion. Imports 
from China rose 42.46% from $4.10 billion in 2004 to $5.84 billion last year. 

At the House of Representatives, the annual budget was being reviewed by the 
budget committee, with the GDP growth forecast for the year downgraded to 5.9% 
and setting a target of 6.5% for next year. 

A meeting of the committee with senior government and central bank officials 
on Wednesday (21/6/06) also agreed on a projected inflation rate of between 6% 
and 8%, the exchange rate at Rp9000 to Rp9500 per US dollar, the interest 
rate of three-month Bank Indonesia promissory notes at 8.5% to 9.5% per cent, the 
oil price at $57-65 per barrel, and oil production at one million barrels per 
day, Antara reported.

Singapore-Indonesia Sign on Economic Coop to Develop SEZ

Indonesia and Singapore signed on Sunday (25/6/06) a framework agreement on 
economic cooperation by which the two nations will establish special economic 
zones (SEZ) on the islands of Batam, Bintan and Karimun. 

The agreement, signed by Coordinating Minister for Economic Affairs Boediono 
for Indonesia and Minister for Trade and Industry Lim Hng Kiang for Singapore, 
also allows for cooperation on development of SEZs in other areas.   

"The two leaders believed that the successful implementation of the Framework 
Agreement is important to guarantee the development of internationally 
competitive special economic zones in the region, and to serve as a model for the 
development of additional special economic zones in other parts of Indonesia," a 
statement said. 

"It is a clear sign of the political commitment from both sides to develop 
this area into a viable and dynamic center of growth with clear mutual benefits 
for both countries."

Indonesia is developing the SEZ concept as a means of fast-tracking 
identified investment areas. The SEZs will provide industrial sites with clear 
institutional structures, consistent policy framework, streamlined investment 
procedures and other attractions that are taking time to establish in the country as a 
whole. 

The SEZs planned for the three islands near Singapore are expected to 
concentrate initially on the development of shipyards and oil service industries. 

"Indonesia won't try to build a brand-new city from scratch," said the Wall 
Street Journal in an editorial. "Rather, policy makers are searching for 
'economically viable' areas that have a cluster of businesses in certain industries 
and keen local officials. 

BUSINESS BRIEFS

MACROECONOMY

Govt. May Use Idle Funds for Deficit 

The government is hoping to use idle funds amounting to about Rp60 trillion 
($6.3 billion) kept at Bank Indonesia (BI) to help plug the 2006 State Budget 
deficit, which it is estimated will reach Rp42.4 trillion.

Finance Minister Sri Mulyani Indrawati was quoted as saying by The Jakarta 
Post on Thursday (22/6/06) that the department is drafting a special regulation 
which would allow it to withdraw the funds from its accounts in the central 
bank. 

"We and the Justice and Human Rights Department are discussing the content of 
the proposed regulation," she said following a meeting with legislators. 

The government wants to withdraw its money, reportedly about Rp60 trillion, 
because its accounts are not earning any interest from BI. 

The department's fiscal policy agency chief, Anggito Abimayu, said on the 
sidelines of the meeting that using the government funds at the central bank to 
cover the deficit would be the best option because using alternative financing 
would be much more costly. 

"The use of these funds, which after all gain no interest from BI, is cheaper 
than government bonds' issuance.  We can withdraw money from our accounts, 
which have not been used effectively," he said. 

Indrawati recently said that the budget deficit this year will widen to 
between 1.3% and 1.5% of the gross domestic product due to the higher subsidy to 
state power firm PT PLN, more spending on education, and unanticipated 
expenditure required for the rebuilding of quake-stricken areas of Yogyakarta and 
Central Java, estimated to cost $3.1 billion, according to The Jakarta Post. 

Under its budget assumptions, the government had estimated that economic 
growth would reach 5.9% this year, compared to 5.6% last year.  The budget also 
assumed a rupiah-dollar exchange rate of Rp9,300, 8% inflation, 12% interest 
rate on three-month BI certificates and an oil price of $62 per barrel.

She said to help cope with the budget deficit, the government is also aiming 
to increase tax revenues this year.  She said previously that total state 
revenues are expected to increase to Rp647.35 trillion this year from Rp625.2 
trillion last year. 

Indrawati said the government would increase the value of its planned bond 
sales this year to a net Rp38 trillion from the initial target of Rp24.88 
trillion. 

The government also plans to use domestic and foreign loans, consisting of 
Rp9.9 trillion to Rp15.8 trillion for program loans and Rp25.2 trillion to 
Rp25.9 trillion for project loans.

T-Bill Issue 'Under Rp3t'

The first issue of treasury bills in Indonesia, likely after parliament 
passes a revised 2006 budget, would be for less than Rp3 trillion ($320 million), 
Director General for Treasury Mulia Nasution said on Thursday (22/6/06).

The government said in January it had no plan to issue treasury bills this 
year but it faces a wider budget deficit than expected -- the equivalent of 1.4% 
of gross domestic product rather than the 0.7% planned -- and needs to find 
additional sources of revenue.

"The amount will not be huge.  It will not exceed Rp3 trillion," Nasution was 
quoted as saying by Reuters, when asked about the treasury bills, which will 
have a maturity of less than a year.  "We have to present this to parliament 
first in the revised budget."

The government plans to present the revised budget to parliament in the 
middle of July.

Finance Minister Sri Mulyani Indrawati said on Monday (19/6/06) the 
government may raise Rp80 trillion via new bond issues in 2006, which could take net 
financing from treasury bonds to Rp38 trillion, up from an earlier target of 
Rp24 trillion.

The government said a month ago that Indonesia planned to sell Rp2 trillion 
of bonds to retail investors by the end of June. 

BI to Look at Inflation to Set Key Rate

Bank Indonesia (BI) will look at inflation, the current account balance and 
"probably" exchange rate movements before deciding on interest rates on July 6, 
BI Deputy Governor Aslim Tadjuddin said.

"We have to look at domestic factors before deciding on rates," Tadjuddin was 
quoted as saying by Bloomberg on Monday (19/6/06).  "We also have to look at 
the US Federal Reserve."

BI on June 6 left the rate used as a reference for bill sales unchanged at 
12.5%, after cutting it by a quarter point on May 9.  The central bank paused 
this month as a falling rupiah threatened to make imported wheat and fuel 
costlier, fanning inflation.  

BI may cut its benchmark interest rate by another half percentage point as 
inflation slows, Governor Burhanuddin Abdullah said June 15.  He said 
Indonesia's inflation rate is forecast to ease to 7.3% by the end of the year from 15.6% 
in May.

Indonesia's current account, the broadest measure of trade, had a $1.25 
billion surplus in the three months to December 31, the latest period for which 
figures are available, compared with a $101 million deficit in the previous 
quarter, according to Bloomberg Data.

BI Sees Forex Reserves at $40b 

Bank Indonesia (BI) said its foreign exchange reserves will stay at a safe 
level of $40 billion after it makes early repayment of 50% of the country's 
remaining debt to the International Monetary Fund (IMF) this 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 macroeconomic developments, especially the sustainability of 
the country's balance of payments and forex reserves," the statement said, 
according to XFN-Asia.

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 macroeconomic management."

The BI has issued notice to the IMF for the repayment of special drawing 
rights, equivalent to $7.5 billion or half the remaining debt owed to the Fund.  

Indonesia left the IMF's loan assistance program in 2003 with debt of $9.8 
billion, 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 the 
year as the country has adequate forex reserves to fully cover its the obligation.

BI Auctions Rp48.68t 1-Mth SBIs 

Bank Indonesia (BI) said it has auctioned Rp48.68 trillion worth of one-month 
Bank Indonesia Certificates (SBI) at a fixed interest rate of 12.5%, XFN-Asia 
reported on Wednesday (21/6/06).

The SBI rate is pegged to the so-called BI rate, which has been used as the 
new benchmark interest rate since last July, replacing the SBI rate.

INVESTMENT

FDI Up Slightly in First 5 Months 

Actual foreign direct investment (FDI) in Indonesia rose by 5.1% during the 
first five months of the year compared to the same period last year, the 
Investment Coordinating Board (BKPM) reported Tuesday (20/6/06).

The board said that FDI increased to $3.13 billion involving 377 projects 
between January and May this year from $2.98 billion involving 321 projects in 
the same period of 2005, according to The Jakarta Post. 

Investment in the electronics, machinery and metal sector accounted for 23% 
of the total FDI.  The new projects provided jobs for 114,114 workers during 
the first five months of the year, up from 49,428 jobs in the same period last 
year.  The value of newly approved FDI during the same period dropped to $3.66 
billion from $5.47 billion previously. 

Actual investment by local investors jumped by 55% to Rp10.47 trillion 
involving 78 projects during the first five months of the year from Rp6.72 trillion 
involving 89 projects during the same period last year. 

The electronics, machinery and metal sector and the food processing sector 
attracted the most attention from investors.  

Meanwhile, the number of new projects planned by local investors more than 
doubled to Rp56.82 trillion from Rp20.9 trillion previously. 

The agency's figures excluded investments in the oil and gas industry, banks 
and non-bank financial institutions, and the capital markets as business 
licenses for these sectors are issued by other government agencies. 

E. Asia Should Expand Markets - WB 

Indonesia, China, 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 (WB) said.

The total amount of East Asian financial-market assets by the end of 2005 
rose to $9.6 trillion, about 21% the size of the US financial market and almost 
half the size of Japan's, the World Bank said in a report released in Hong Kong 
on Thursday (22/6/06).  

The asset increase reflects offshore investment in East Asian 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 to Bloomberg News on 
Thursday.

Japanese, S. Korean Firms to Invest 

At least eight investors from Japan and five from South Korea are expected to 
invest in Indonesia's manufacturing, automotive and shipbuilding industries, 
officials said.

Trade Minister Mari E Pangestu said eight of 30 Japanese companies whose 
representatives visited the country recently indicated strong interest in doing 
business in the country, Antara reported on Monday (19/6/06).  

The Japanese companies operate in the chemical, mold and dye and automotive 
industries, Pangestu said upon her return from Japan to attend the World 
Economic Forum.

Meanwhile, five Korean companies plan to invest in the shipbuilding industry 
in Batam, Riau Island, Governor Ismeth Abdullah said, adding that the island 
has 84 shipbuilding companies and they have received orders beyond their 
capacity.

Meanwhile, chief of the National Investment Coordinating Board (BKPM), M 
Lutfi said on Wednesday (21/6/06) that two European, one Japanese and an American 
car company have expressed interest in investing in Indonesia.

He said the US company plans to invest between $1 billion and $4 billion and 
the Japanese company $450 million to $1 billion.  The companies' decision will 
be made known in July or August.

He added that motorbike manufacturers from Japan, Taiwan and India would set 
up business in the country.

-End 1 of 2-

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Joyo Indonesia News Service
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