[Kabar-indonesia] 2 of 2: RI Trade and Investment News, 3 July 2006

[JoyoNews at aol.com]

The Coordinating Ministry for Economic Affairs
Republic of Indonesia
Jakarta
July 3, 2006

Trade and Investment News, 3 July 2006

Part 2 of 2

STATE CONCERNS

SME Growth to Cut Poverty - WB

Small businesses, which employ millions of Indonesians, could become major 
engines of economic growth in the cash-strapped country and help reduce poverty, 
the World Bank said.

Indonesia's 15.7 million small enterprises make up more than 90% of all 
businesses and employ up to 60% of the workforce outside agriculture, but their 
growth is hindered by access to credit and poor infrastructure, the World Bank 
Indonesia director said in a report released Wednesday (28/6/06).

"Lack of access to credit, poor roads and unreliable electricity top the list 
of concerns faced by micro and small enterprises," Andrew Steer said in a 
press release accompanying the report, according to Agence France-Presse.

The World Bank argued in its study that outside major cities, small 
enterprises "could become important engines of pro-poor growth if the right policies 
are in place."

While large firms, such as those in manufacturing absorb up to 40% of the 
available workforce in the urban areas, in rural areas the largest employers are 
small enterprises, said the bank.

A number of Indonesian banks actively offer special loans targeted at small 
and medium enterprises. The leading bank involved in micro-credit, Bank Rakyat 
Indonesia, says it could expand the program if it had more staff to look for 
borrowers. 

The government recently raised the ceiling on small loans from Rp50 million 
to Rp100 million. 

Tighter Illegal Fishing Surveillance

Indonesia and Australia have agreed to increase cooperation in the 
supervision of illegal fishing in their respective territorial waters.

The agreement was reached during a meeting between the Indonesian Fisheries 
and Marine Resources Minister Freddy Numberi and his Australian counterpart, 
Forestry and Conservation Minister Eric Abetz in Nusa Dua, Bali, on Thursday 
(29/6/06).

Numberi said Australia would provide A$10 million (US$7.28 million) for East 
Nusa Tenggara fishermen.  Last year, Australia provided A$140 million for the 
handling of illegal fishing in border waters.

Apart from illegal fishing, the two countries also agreed to develop a 
fishing industry in Indonesia so that Indonesian fishermen could also work with the 
fishery industry.

SOEs

Govt. Approves Cemex Stake Sale 

State Enterprises Minister Sugiharto confirmed that the government has 
approved Cemex SA's deal to sell its 24.9% stake in state-run PT Semen Gresik to the 
Rajawali Group, XFN-Asia reported on Friday (30/6/06).

"I have signed the government's approval.  The rest (of the details) to be 
settled are just legal matters," Sugiharto said.

Daryoto Setyawan, managing director and chief of business development at 
Rajawali Group, earlier disclosed that the government had given its go-signal to 
the stake sale.  The closing date of the deal was slated for July 3.

Cemex has agreed to sell its stake to Rajawali for $337 million. 

PRIVATE SECTOR

Kalbe Looks to Buy Overseas 

PT Kalbe Farma, Southeast Asia's biggest publicly traded pharmaceutical 
company, may acquire a drug developer and health food brands overseas to expand as 
competition intensifies at home and growth slows.

The company, Indonesia's biggest drug-maker by value, three years ago set up 
a research and development company in Singapore.  The venture is in the 
process of trying two anti-cancer drugs and one medicine to treat brain trauma.  
Kalbe wants to acquire a company to help boost the number of drugs under 
development.

"Competition is getting tougher," Johannes Setijono, president of Kalbe, was 
quoted as saying by Bloomberg on Wednesday (28/6/06).  "To speed up our drug 
development process, we can acquire companies, which can be in India, Europe, 
US, because there are so many start-up companies in the world."

Kalbe is trying to develop brands that it can sell locally as well as 
overseas instead of just manufacturing formulations under license, as Pfizer Inc and 
local rivals such as state-run PT Kimia Farma and PT Dexa Medica expand.  

The company, which produces the Extra Joss health drink that is advertised by 
Manchester United and Portugal football player Cristiano Ronaldo, also plans 
to acquire foreign consumer brands.

Kalbe is not in talks with any prospective seller yet, Setijono said. The 
company though has been meeting investment banks, he said.  Kalbe may spend as 
much as $60 million on acquisitions.

Indosat Targets 30% of Mobile Market 

Indonesia's second largest phone operator PT Indosat is aiming to take its 
market share back above 30% by the end of this year, after it dropped to 27% in 
the first quarter, company director Wahyu Wijayadi said.

"We hope to add 3 million to 4 million new subscribers this year," he was 
quoted as saying by XFN-Asia report on Thursday (29/6/06).

Indosat's mobile subscriber base dropped by 10.7% or 1.5 million people to 13 
million at end March.

The company also saw its average revenue per user (ARPU) falling 24.4% 
year-on-year to Rp58,836 in the first quarter, from Rp77,816 a year ago.

The company said it had anticipated such falls and attributed them to the 
compulsory registration of prepaid card users and the company's less aggressive 
marketing measures.

Indosat's outgoing president Hasnul Suhaimi previously said that the firm had 
opted to consolidate, rather than aggressively look for new customers in the 
first quarter.

Manufacturing Growth 8%-plus in 2007

The Industry Department said the manufacturing sector is expected to grow by 
8.1% in 2007.  The machine and tool industry is predicted to post the highest 
growth of 12.3%, followed by fertilizer, chemical and rubber goods industries 
and cement and non-metal mining product, which will grow by 9%, Antara 
reported on Tuesday (27/6/06).

The food and tobacco industry is projected to grow by 5.1%, and the textile, 
leather goods and footwear industry by 5%.  

In the first quarter of 2006, manufacturing industry grew by 2.83%, the 
department said.

Chamber Seeks Bigger Role in Int'l Talks

The Indonesian Chamber of Commerce and Industry (Kadin) is asking the 
government to increase the business group's involvement in international negotiations 
so that the talks would be of greater benefit to the nation and its 
businessmen, a spokesman said.

"Indonesian negotiation teams often lack accurate data and Kadin will 
therefore pro-actively provide up-to-date data," Kadin deputy chairman for trade and 
distribution affairs, Ketut Suardana Linggih, said on Wednesday (28/6/06), 
according to Antara.

He said Kadin is preparing a blueprint on the industrial situation at home, a 
roadmap as well as a vision for 2030, all expected to become an input for the 
country's teams in negotiating various regional and multilateral cooperation 
schemes in the economic, investment and trade fields.

"We want to provide realistic data prepared by the business world so that the 
government will not take data only from the Central Bureau of Statistics," he 
said.

BANKS

BI Opens New Credit Info Bureau

Bank Indonesia (BI) officially launched its new credit information bureau on 
Thursday (29/6/06), to help banks better manage lending risks to reduce the 
levels of their non-performing loans (NPLs).

Governor Burhanuddin Abdullah said that through the bureau, which will gather 
and disseminate information on borrowers, full data on borrowers would be 
available on-line to banks and other financial institutions.  He said that this 
would help banks and financial institutions make prudent decisions on extending 
loans, which could help reduce the level of NPLs.

Previously, the central bank's credit information system only provided 
information on borrowers with debts of more than Rp50 million ($5,347).  "Now, data 
on borrowers with loans of as little as one rupiah can be accessed by banks 
and financial institutions on-line," Abdullah was quoted as saying by The 
Jakarta Post.

The information on borrowers would include their names and ID numbers, 
amounts borrowed, amount of collateral pledged and other details.  BI bank licensing 
and information director Yang Ahmad Rizal said to date, the credit bureau had 
recorded information on 16.3 million borrowers.

Abdullah said that while this number is still small, he expects that "in a 
few years, the number of recorded data will increase to tens of millions."

Banks and credit card issuers are obliged to send information on borrowers to 
the bureau.  In the case of other financial institutions outside the banking 
sector, the sending of information to the bureau, while not compulsory, is 
strongly recommended.

POWER

Nuke Plant Tender Set for 2007 

The government will hold a tender next year to select contractors to build 
the country's first nuclear power plant, Mines and Energy Minister Purnomo 
Yusgiantoro said Wednesday (28/6/06).

"The nuclear reactor is part of our national energy policy.  It will come 
on-stream between 2015 and 2016 in Gunung Muria (in Central Java).  We will 
launch the tender next year so as to be able to meet the deadline," Yusgiantoro was 
quoted as saying by The Jakarta Post. 

He said investors interested in bidding should have a proven track record in 
the construction of pressurized water reactors.  Most such companies come from 
the United States, Japan, France and South Korea. 

The reactor is expected to be able to produce 4,000 MW of electricity by 
2025. The National Nuclear Power Agency's (Batan) Nuclear Energy Development 
Center will coordinate the ambitious project.  The first phase of construction will 
involve six generators, each with a capacity of 1,000 MW. 

Earlier, Research and Technology Minister Kusmayanto Kadiman said there are 
already investors interested in building the project if the government agrees 
to buy the plant's output under a long-term contract, Antara reported.

Acting president director of state power utility PT PLN, Djuanda Nugraha 
Ibrahim, said the company would definitely buy power from the nuclear reactor.  
"PLN will need an additional 1,500 MW to 2,000 MW annually after 2016. If the 
nuclear power plant can supply 4,000 MW, we will definitely buy the power based 
on the prices set for independent power producers," he said. 

Apexindo Wins $22.3m Geothermal Contract

Indonesian company PT Apexindo Pratama Duta has won a contract worth $22.3 
million from Star Energy Holdings Pte Ltd and Magma Nusantara Ltd for the 
exploration of geothermal energy sources in the country.

Under the contract, Apexindo will work to support the operation of the Wayang 
Windu geothermal power plant in West Java, Apexindo managing director 
Hertriono Kartowisastro said on Tuesday (27/6/06), according to Antara.

The contract will begin in August in Pengalengan, West Java. Using its Rig 5, 
Apexindo will develop a drilling project for at least one year, with an 
extension option.

Apexindo's Rig 5 is still being used in a drilling project of state oil and 
gas company PT Pertamina and Amerada Hess Jambi Merang in Jambi. After 
completing the project, Rig 5 will be used to work on the geothermal well in West Java.

OIL AND GAS

Pertamina Looks at $18.7b in Investment 

State oil and gas firm PT Pertamina predicts its investment requirement in 
the five years to 2010 to reach $18.7 billion, with the bulk of $10.5 billion 
going to oil processing expansion, company president Ari Sumarno said.

"Investment in the processing sector will be for building new refineries and 
modification of the old ones," he told a hearing with the House of 
Representatives' Commission VII, XFN-Asia reported on Monday (26/6/06).

As for Pertamina's upstream oil and gas sector, the investment requirement is 
estimated to reach $6.3 billion.  He said an investment of $1 billion is 
needed for its distribution and marketing operations while shipping would need 
another $900 million.

Sumarno said Pertamina hopes to double its oil production to 260,000 barrels 
per day (bpd) to 300,000 bpd over the five-year period from the current 
130,000 bpd.  The company is also projected to produce 111,663 bpd in the second 
quarter of the year, higher than the first quarter's 101,963 bpd, he was quoted 
as saying by Xinhua on Monday.

He said a bigger portion of the investment plan is expected to be funded by 
investors who will team up with Pertamina in future projects.  "We can also get 
funding from the capital market and other sources," he said.

Sumarno said the planned investment would transform Pertamina into a strong 
business entity to compete with other industry players by 2010.

RI to Raise Cost of Exploration Rights 

Indonesia will raise the price oil and gas companies pay for the right to 
explore for oil and reserves to weed out under-qualified bidders.

Indonesia will double the minimum bonus that explorers have to pay upon 
winning drilling rights to $1 million in the next bidding round, the Mines and 
Energy Department's director of exploration and production, Novian M Thaib, said 
Friday (30/6/06), according to Bloomberg.

"We want to screen the companies to make sure that qualified ones join the 
bid," Thaib said.  The minimum requirement for the so-called signature bonus in 
the previous bidding round was $500,000.

He said the government is planning to invite bids this month for 12 areas 
through a tender, and 25 areas through a so-called direct offering.  Areas to be 
offered through regular tender in this round include offshore oil and gas 
blocks in the Malacca Strait, Natuna Sea and Java Sea, Thaib said on April 18.  

Those to be offered through direct offering include areas in Sumatra, Java, 
and Kalimantan.  Under the direct offering system, companies identify the 
blocks they wish to develop and the government advertises to see if there are rival 
bids.  

Wilmar Plans Biodiesel Plant 

Singapore-based edible oil producer and refiner, Wilmar Holdings Pte Ltd, 
will build Indonesia's first biodiesel plant by 2007, though another plant 
planned in Singapore for this year has been put on hold, the company said on Friday 
(30/6/06).

The $20 million biodiesel plant in Riau will have an annual capacity of 
250,000 tons, with the potential for further expansion as the firm seeks to 
capitalize on demand for biofuel to cut costly oil imports and greenhouse gas 
emissions.

"Feedstock for this project is mainly palm oil," a Wilmar spokeswoman said, 
according to Reuters.

Indonesia is the world's second largest palm oil producer and plans to 
develop another 3 million hectares of plantations in the next five years, partly to 
meet biofuel demand.

Wilmar's plant will be the first in Indonesia if it comes on-stream ahead of 
a $25 million joint venture between plantation company PT Bakrie Sumatera 
Plantation and construction firm PT Rekayasa Industri, scheduled for the middle of 
2008 with an annual capacity of 60,000 tons to 100,000 tons.

MINING

Boost Tipped for Thermal Coal Exports 

Indonesia, Australia and Colombia will probably increase exports of coal used 
in power generation "markedly" through 2007, helping meet rising demand in 
China and India, Australia's official commodities forecaster said.

Indonesian thermal coal exports may jump 9.4% in 2007 to 145 million metric 
tons, after a 7.5% increase this year, the Australian Bureau of Agricultural 
and Resource Economics said Monday (26/6/06), according to Bloomberg.  
Australian exports may rise 4% next year, while Colombian exports may rise 3%, it said.

Demand for thermal coal is rising, buoyed by growth in coal-fired power 
generation in Asia amid rising crude oil and natural gas prices.  A decline in 
international freight rates since late last year has led to higher demand for 
Australian and Indonesian coal from European consumers.

"Relatively high coal prices in recent years have stimulated additional 
investment in coal production, transport infrastructure and export capacity in 
Indonesia," the bureau said in a report.  "Exports from Australia, Indonesia and 
Colombia are forecast to increase markedly."

World trade is expected to increase by 4% this year to 591.6 million tons, 
and by a further 2.6% next year to 606.7 million, the bureau said.  Asian trade 
may jump 6% this year and 4% in 2007, while European imports may remain 
"relatively stable," it said.

China's imports may increase 12% next year to 29 million tons, while Indian 
imports may rise 11% to 30 million and Malaysian imports may jump 18% to 13.8 
million, the bureau said.  Chinese exports may be unchanged next year at 60 
million tons, compared with 66.5 million tons in 2005, it said.

Thermal coal spot prices reached about $53 a ton in late May, up from about 
$38 a ton in November, the bureau said, noting however that forecast supply 
increases are expected to dampen further rises in spot prices.

-End 2 of 2-

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Joyo Indonesia News Service
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