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

[JoyoNews at aol.com]

The Coordinating Ministry for Economic Affairs
Republic of Indonesia
Jakarta
Monday, October 2, 2006

Trade and Investment News, 2 October 2006

Part 2 of 2

STATE CONCERNS

Move for Pro-Poor Land Reform 

The Ministry of Agriculture is planning to launch a major land reform program 
aimed at giving land to its poor farmers in a bid to cut poverty in the 
country, minister Anton Apriyantono said on Friday (29/9/06).

Apriyantono told Reuters in an interview he had discussed the politically 
sensitive issue with the president and is planning to present it in a cabinet 
meeting this coming week, a move which he said is "very critical" for the country.

"We are planning big programs.  They involve land reform, the use of forest 
and food security.  It was discussed with the president yesterday.  The core 
issue is that small farmers can get land so as they can get out of poverty," he 
said.

He said the government has identified some 8.15 million hectares of land that 
could potentially be distributed to poor farmers.  "If we want to get people 
out of poverty, considering that most of the poor are farmers, the size of 
land owned by farmers must be adequate.  Therefore, land reform is very 
critical," the minister said.

Government data shows about 15 million farmers have less than 0.5 hectares of 
land each, which officials say is too small to help them increase 
productivity.

"The details are not yet available, but the essence is that poor farmers will 
be given land so as they could get out of poverty.  Let's say 2-5 hectares of 
land outside of Java.  Regarding Java, I do not yet know."

China Chili-Cacao Duty Deal 

Indonesia has announced plans to reduce the import duty on dry chili from 
China in return for China's abolition of import duties on Indonesian cacao.

China has purchased one of the largest shares of Indonesia's $506 million in 
cacao exports in the first half of the year, Antara reported on Tuesday 
(26/9/06).

Director General for International Trade Cooperation Herry Soetanto said the 
import duty agreement was part of recent ASEAN-China trade agreements.

SOEs

Dirgantara Signs Contracts Worth Rp125.4b 

State-owned aircraft manufacturer, PT Dirgantara Indonesia has signed three 
new contracts with the Defense Department for the supply of one aircraft and 
three helicopters to the Navy and Army. 

The company said Monday (25/9/06) that the contracts, worth up to Rp125.4 
billion ($13.6 million), were for the supply of an NC212-200 aircraft, two 
NBO-105 helicopters and an NBELL-412 helicopter to the Defense Department, The 
Jakarta Post reported. 

PRIVATE SECTOR

Textile Producers Call for FTA with US

The Association of Textile Producers (API) has urged the government to push 
for a free trade agreement (FTA) with the US.

The call came after the two countries signed a memorandum of understanding to 
jointly fight illegal transshipments through Indonesia of third country 
textiles. "We hope the signing of the agreement will lead to the signing of an 
FTA," API secretary Ernovian G Ismy was quoted as saying by Antara.

Trade Minister Mari Pangestu signed the agreement with US Trade 
Representative Susan Schwab to work together to stop the transshipment of textiles from 
countries without access to the US market through Indonesia.

"Transshipments have jeopardized Indonesia's legitimate textile and apparel 
exports by taking up market space in the United States," Schwab said at a 
ceremony to sign the pact.

Pangestu said the textile accord was part of a "building block" approach to 
increasing trade ties with the US.

Indonesian exports of textiles and garments to the US have continued to 
increase -- up 26.7% to $2.17 billion in the first seven months of the year from 
the same period last year.

Samsung Optimistic on Boosting Sales 

PT Samsung Electronics Indonesia said it is optimistic that it can reach its 
target to boost sales of its consumer electronics in the country by 25% this 
year despite the economic slowdown.

Marketing director of the company Stefanus Indrayana said that in the first 
eight months of the year, sales of its household electronics grew by 20% on 
average, Antara reported on Thursday (28/9/06)

Indrayana predicted the market condition will improve in the last quarter of 
this year, with total sales this year more or less the same as last year.

He acknowledged that sales in the first eight months of the year fell 
compared with the same period last year, but increases were recorded for certain 
products.

BANKS

Clearing System to Help Track Illegal Transactions

The National Clearing System designed to save more accurate banking 
information can help investigators uncover illegal bank transactions, Bank Indonesia 
(BI) Deputy Governor Maulana Ibrahim said recently.

The system, which saves information on customer data and time of transfers, 
the recipients of money transfers, as well as operator identity, has enabled 
the central bank to have more complete data on transactions, Ibrahim said, 
according to Antara.

Highly confidential computer identity and data as well as operator passwords 
are registered at BI's main server.  "With the data, BI can give a better 
contribution to investigators in their efforts to uncover funds suspected to come 
from illegal transactions," he said.

Ibrahim was talking after a ceremony dedicating the National Clearing System 
in Medan, Padang (West Sumatra), Banjarmasin (South Kalimantan), Sibolga 
(North Sumatra), Batam (Riau), Pekanbaru (Riau), Pontianak (West Kalimantan), 
Kendari (Southeast Sulawesi) and Palu (Central Sulawesi).

The nine BI regional offices are the latest to be connected to the system, by 
which all BI regional offices become integrated under a clearing system.

Ibrahim said data on transactions would be provided to investigators upon 
request, or to the state under the prevailing regulations.

ABN Amro to Open Shariah Unit

ABN Amro NV said it plans to open a shariah unit in Indonesia in the first 
half of 2007, its country executive, Henk G Mulder said.

"ABN Amro already has shariah units in Dubai and Pakistan and we hope to open 
one in Indonesia," Mulder was quoted as saying recently by Antara.

POWER

Bukit Asam to Complete 2 Plants in 2010

State-owned coal mining company PT Tambang Batubara Bukit Asam said it will 
start building two coal-fired power plants in South Sumatra.

The company will build a 200-MW plant in Lahat regency, expected to be 
completed by 2009, and a 2,400-MW plant in Muara Enim regency, expected to be 
completed by 2010, company manager Eko Hadianto was quoted as saying by Antara.

Bukit Asam will supply the coal.  The Lahat plant will need about 1.5 million 
tons of coal a year.

OIL AND GAS

Govt. to Spend $1.4b for Bio-diesel in 2007

The government will set aside Rp13 trillion ($1.42 billion) from its 2007 
state budget 
to help spur private sector initiatives aimed at hitting an overall 
bio-diesel output target of 250,000 to 300,000 metric tons a year, an industry official 
said Monday (25/9/06).

Such funding would be a first for the government, which has never allocated 
any part of its budget for the bio-diesel sector.

The budgetary allocation will be broken down into Rp10 trillion in 
infrastructure subsidies, Rp2 trillion in subsidies for seed purchases, and Rp1 trillion 
in interest breaks offered to bio-fuel investors, the chief of the 
government-backed National Bio-fuel Promotion team, Alhilal Hamdi, said, according to 
Dow Jones Newswires.

Hamdi said the government next year would seek a further Rp15 trillion to 
Rp20 trillion ($1.64 billion to $2.2 billion) from banks for bio-fuel development.

President Susilo Bambang Yudhoyono said earlier this year that the country 
ought to prioritize development of bio-fuels -- blends of vegetable oil and 
fossil fuel -- as a potential solution to many economic and social problems.

Meanwhile, air pollution levels are high in many of the country's urban hubs, 
and bio-fuels' cleaner emissions are seen as a way of alleviating this 
problem.  The government sees increased need for bio-fuel feedstocks as a source of 
job creation, which could help to reduce poverty and unemployment in the 
sprawling archipelagic nation.

Tatang H Soerawidjaja, chairman of the Indonesian Bio-diesel Forum, said 
recently that the government would offer Rp10 trillion ($1.1 billion) in subsidies 
for developers of transport infrastructure, such as roads and ports to ensure 
a ready supply of bio-fuel feedstocks from remote plantation areas.

Soerawidjaja said the government will also offer companies investing in the 
bio-fuels sector Rp1 trillion in "interest incentives", whereby the government 
subsidizes part of those companies' interest repayments on bank loans used to 
fund their investments.

Hamdi said some 19.7 million hectares of plantation area in Indonesia are 
suitable for the propagation of bio-fuel feedstocks such as palm oil, jatropha 
and cassava.

While Indonesia's fast-growing bio-fuel sector has so far focused primarily 
on bio-diesel, which can be burned in some diesel engines, the country could 
see construction start on its first ethanol plant at the end of next year, he 
said.  Ethanol is a bio-fuel that can be used in some gasoline-burning cars.

A Pertamina spokesman said recently that it is researching ethanol 
development in Indonesia, but that few available car models in Indonesia can run on the 
fuel.  Pertamina already sells a 5% bio-diesel blend in many of its gasoline 
service stations in Jakarta.

Meanwhile, executive chairman of the Indonesian Palm Oil Association, Derom 
Bangun, said on Monday (25/9/06) that bio-diesel projects would not be hit by 
the fall in crude oil prices as investors feel the current dip is temporary and 
prices will bounce back.

"Even if crude oil prices go down for a while, people believe after one or 
two years they will again go up," he said.  "Developments in bio-diesel will 
continue and investments on new plants will not be hampered.  It is not the 
government but private investors who will decide when and where to build bio-diesel 
plants."

Bangun said Indonesia expects six new bio-diesel plants to be in operation by 
2007, and about 500,000 tons of bio-diesel to be produced from three of these 
plants by early next year.  He estimated about 600,000 tons of palm oil would 
be used for bio-diesel production in Indonesia in 2007.

Indonesia to Halve LNG to Japan

Indonesia has notified Japanese companies that it intends to reduce exports 
of liquefied natural gas (LNG) to Japan by as early as 2010, sources said 
Thursday (28/9/06), according to The Daily Yomiuri.

The two sides have already entered into negotiations on the reduction plan, 
which will be implemented when current long-term export contracts expire, the 
sources said.

LNG imports from the Bontang plant in Kalimantan, which account for more than 
90% of overall LNG imports from Indonesia, will be reduced dramatically, 
according to the sources.  

Japanese companies such as Tokyo Gas Co and Kansai Electric Power Co, which 
signed long-term deals to import a total of 14.54 million tons of LNG annually 
from the plant, will see contracts on about 12 million tons expire from 2010 
through 2011.

2006 Fuel Consumption Lower than Predicted

Indonesia expects to consume 37.9 million kiloliters (kl) (238 million 
barrels) of subsidized fuel this year, lower than previous estimates of 41.6 million 
kl, due to lower domestic demand, an official at the state oil firm, PT 
Pertamina said on Monday (25/9/06).

"Domestic consumption is lower than earlier predicted because the government 
raised oil product prices last October," the official, who declined to be 
identified, told Reuters.

The official said consumption of subsidized gasoline is likely to fall 
slightly to 17 million kl from 17.1 million kl and diesel oil is seen down to 11 
million kl from 14.5 million kl estimated earlier.  Subsidized kerosene 
consumption is likely to be slightly lower at 9.9 million kl compared with an earlier 
estimate of 10 million.

Govt. to Open 40-50 Blocks 

The government plans to invite interested companies for direct negotiations 
over 40 to 50 exploration blocks in the country's frontier areas next year, a 
mines and energy official said Thursday (28/9/06).

While Indonesia has embraced the open tender system for awarding exploration 
blocks, it occasionally still parcels out a few based on direct negotiations 
with the interested parties.

"Major oil companies, including ExxonMobil, Chevron, Conoco and Total, are 
interested in exploring our oil and gas blocks in frontier and deep sea areas.  
They are difficult areas, but may be interesting for them," Priyono said, 
according to Platts Commodity News.

Most of the challenging acreages are located in southern Java, western 
Sumatra, Kalimantan, Sulawesi and Nusa Tenggara, Priyono said.

Under Indonesia's direct-offer mechanism, a company interested in a block 
that has not been offered for open bidding, can take its interest to the 
government.  After discussions with the company, the government opens up the block for 
a limited period to seek competitive offers.  The most competitive offer 
wins. If there are no rivals, the original company wins the block.

ExxonMobil, Total, Chevron, ConocoPhillips, Malaysia's Petronas, Italy's Eni, 
China's CNOOC and Amerada Hess of the US have expressed interest in some of 
the blocks, Priyono said earlier.

Genting Unit Finds Gas in Natuna Block

Genting Oil & Gas Ltd, a unit of Malaysia's Genting Bhd, has discovered gas 
with 
the successful completion of the drilling of exploration well Anambas-1X in 
West Natuna, reported Dow Jones Newswires.  

Both dry gas and gas condensate were found, the company said in statement 
Monday (25/9/06).  Tests found a gas flow of 15.6 million cubic ft of gas a day 
and a condensate flow of 488 barrels of condensate a day.  Drilling commenced 
July 9.

Further evaluation of the results will be taken to determine the reserve 
size, development potential and commercial viability of the discovery.

The Anambas Block is 100% operated by Genting's Oil & Gas' wholly owned unit 
Sanyen Oil & Gas Pte Ltd under a production-sharing contract with upstream oil 
and gas regulator BP Migas.

Genting's oil and gas division will shortly begin the drilling of two more 
exploratory wells, 90 km to the north of Anambas-1X, in the oil-rich Northwest 
Natuna Block.

MINING

BDI Mining Finds Rare Blue Diamond

BDI Mining Corp announced on Monday (25/9/06) that it has recovered a rare 
3.02 carat blue diamond from its Cempaka alluvial diamond mine in southeast 
Kalimantan, Dow Jones Newswires reported.

The company recovered the intense-blue diamond from its Indonesian mining 
operations, where more than 50,000 carats of gem-quality diamonds have been 
recovered since mining operations began in March 2005.  Blue diamonds, along with 
green and red stones, are considered to be among the rarest and most valuable 
of all diamonds.

"The recovery of such a stone is very much a highlight for the mine and the 
company," BDI Mining chairman, David Lenigas said.  

"Given the intense color of the stone and therefore its rarity, we have 
decided to christen the diamond 'Chelsea Blue'," he said, adding that it will be 
sold by private tender within the coming months.  

The discovery of the Chelsea Blue comes at a time when the expansion of the 
Cempaka operations are progressing as planned.  The processing facilities 
upgrade is scheduled for completion within the next two weeks and the initial 
mining expansion phase of the Cempaka main channel is well advanced.

AFX reported that BDI Mining narrowed its pretax loss to $2.22 million in the 
first half of the year from $3.38 million a year earlier.  The company said 
average monthly recoveries of 3,500-4,000 carats prove that the operational 
systems adopted at Cempaka are "extremely effective in the difficult mining 
conditions encountered locally and provide us with the confidence to move forward 
as we seek to develop the mine."

Thai Banpu to Improve Water Treatment

Thailand's largest coal miner, Banpu PCL, said Thursday (28/9/06) 
improvements in water treatment at its Trubaindo mine in Indonesia following complaints 
would not disrupt production.

Banpu said in a statement it was told by Indonesian authorities to improve 
the quality of water in one of the 10 ponds at the mine after an investigation 
following complaints of pollution indicated high acid levels.

The investigation showed the water quality in most of the mine's 10 ponds 
complied with industry regulations and the Trubaindo mine is expected to complete 
improvements and report back to the authorities shortly, it said, according 
to Reuters.

Banpu has six mines in Indonesia, two in China and two in Thailand and has 
said it aims to raise sales to 21 million tons this year from 17 million tons 
last year. 

Local Govt. May Buy 3% Newmont Stake 

West Nusa Tenggara's West Sumbawa regency can proceed to acquire a 3% stake 
in Newmont Mining unit PT Newmont Nusa Tenggara after the central government 
decided not to buy it, a government official said.

Finance Minister Sri Mulyani Indrawati has confirmed that the central 
government will not proceed with the purchase, the Mines and Energy Department's 
Director General for Geology and Mineral Resources, Simong Sembiring, said, 
according to XFN-Asia. 

Under the terms of a contract struck between the government and the Newmont 
unit, the foreign owners must gradually reduce their holding, starting from the 
sixth year of operation, to 49% by the end of the tenth year.  The first 
reduction has to take place this year.

Newmont Nusa Tenggara is an 80%-20% joint venture between Nusa Tenggara 
Partnership and local firm PT Pukuafu Indah.  Nusa Tenggara Partnership is 56.25% 
owned by Newmont Indonesia Ltd and 43.75% by Sumitomo.

Separately, Newmont Nusa Tenggara spokesman Kasan Mulyono said the firm paid 
the government $101 million last year in taxes, non-taxes and royalties.  He 
said the firm produced 550 million pounds of copper and 500,000 oz of gold last 
year from its Batu Hijau mine on Sumbawa.

-End 2 of 2-

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Joyo Indonesia News Service
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