[Kabar-indonesia] 1: RI Trade and Investment News, 17 July 2006

[JoyoNews at aol.com]

The Coordinating Ministry for Economic Affairs
Republic of Indonesia
Jakarta
July 17, 2006

Trade and Investment News, 17 July 2006

Part 1 of 2

Highlights

Politics 

* President Yudhoyono delays a planned trip 
  to North and South Korea
* Indonesia, Singapore aim to make SEZs 
  more attractive 
* New citizenship bill allows dual nationality 
  for children of mixed marriages

Regions 

* President welcomes new law on governance 
  in Aceh 
* Tough sentences demanded in Timika killings 
  cases 

Economy 

* Total eyes $1.2 billion investment, Tata looks 
  at steel plant 

Business Briefs 

Macroeconomy 

* Government focuses on macroeconomic stability 
* Consumer confidence rises 

Investment 

* Astra Daihatsu Motors to invest in capacity expansion 
* Dubai bank looks for new projects 

State Concerns 

* Government to focus on poverty reduction 
* Rice import bans stay on strong harvests 

SOEs

* PT Telkom buys back shares
* Toll road operator PT Jasa Marga to offer shares 
  in roads 

Private Sector 

* Cellular operator looks to strong subscriber growth 

Banks 

* Central bank to limit cross ownership of banks 
* Finance minister says new rules on state-banks 
  loans on the way 
* Rabobank to buy two small Indonesian banks 

Power 

* Construction of two North Sumatra power plants 
  to start 
* New high-voltage transmission line for major grid 

Oil & Gas 

* CITIC Resources Buys into Oil Field

Mining 

* Courts orders new test on water at Buyat Bay 
* Freeport audit expected to be completed soon 
 
POLITICS

Yudhoyono Delays Korea Visit

President Susilo Bambang Yudhoyono delayed his planned visits to North and 
South Korea scheduled for later this month, citing the tension caused by 
North Korea's test-firings of missiles, his spokesman said Thursday (13/7/06). 

Dr. Yudhoyono was to visit North Korea on July 18-19 and South Korea on July 
19-22. 

Presidential spokesman Dino Djalal told a press conference the postponement 
was related to the emerging tension caused by missile tests by North Korea last 
week, Kyodo reported. 

It was not the right time for Yudhoyono to make the visits, Djalal said.  

The government has called on all concerned parties to return to dialogue to 
prevent the situation on the Korean Peninsula from deteriorating, the spokesman 
said. 

"President Yudhoyono reiterated the wish of the Indonesian government for all 
concerned parties to immediately return to the six-party talks and make 
efforts to eliminate every barrier to that way," the spokesman said.        
 
Asked whether the delay was made because of pressures from other countries, 
particularly the United States, Djalal said, "No, we are independent. This is 
our own decision." 

"However, we have been actively consulting with Japan, Russia, China, South 
Korea and the United States, even (Prime Minister) John Howard of Australia. 
So, the decision is based on informed judgment," he added. 

Special presidential envoy Nana Sutresna said Monday his recent visit to 
Pyongyang was accepted positively by North Korea and that he saw no signs the 
country wants to abandon the dialogue over its nuclear ambitions.  

"Since the beginning, North Korea has said it wants to solve this through 
dialogue," he said after a meeting with Yudhoyono. "They said they want their 
willingness to talk to be equally responded to by other members in the six-party 
talks."

"They also respect the sending of an envoy to Pyongyang in this uncertain 
situation, which shows Indonesia's commitment to maintain a strong relationship 
with North Korea," he added. 

The six-party talks among North and South Koreas, China, Japan, Russia and 
the United States have been stalled since late last year. 

Indonesia has maintained a strong relationship with North Korea since the era 
of Indonesia's founding father and first President Sukarno and North Korea 
leader Kim Il Sung, father of Kim Jong Il, North Korea's current top leader. 
     
Indonesia Condemns Israel

President Susilo Bambang Yudhoyono on Friday (14/7/06) urged Israel to stop 
its military strikes against Lebanon, which have killed at least 50 people, 
including women and children.

"Indonesia has repeatedly called on Israel to stop its military action . . . 
the United Nations has to take action to prevent the conflict from 
escalating," the Antara news agency quoted him as saying.

Previously, Foreign Minister Hassan Wirayuda condemned the Israeli air raids. 
"We condemn the military actions that have killed many innocent civilians," 
he told the Associated Press. "We urge the UN Security Council to exercise its 
mandate to end the conflict."

Indonesia, Singapore aim to make SEZs more attractive

Indonesia and Singapore are working on ways to make the special economic 
zones (SEZs) on Indonesian islands more attractive, Channel NewsAsia reported.

The SEZs are on the Indonesia's islands of Batam, Bintan and Karimun.

The Indonesia-Singapore Joint Steering Committee (JSC) met for the first time 
on Saturday (15/7/06) in Jakarta to work out the details to improve the 
investment climate in these zones. The JSC was formed after Indonesia and Singapore 
signed an agreement last month to work together to develop the three islands.

The Indonesian and Singapore teams acknowledged that quick action is needed 
to resolve issues and problems currently faced by investors in the SEZs.

Boediono, Indonesian Coordinating Minister for Economic Affairs, said: "The 
action starts immediately. As I mentioned, the focus, the immediate, is 
improving the existing climate within the existing rules." 

And, simplifying complex procedures for investors is high on the agenda for 
the Indonesian authorities. To do this, a one-stop centre will deal with a wide 
range of issues. The integrated service facility located in Batam will be 
connected online to various departments such as the tax and customs office.

Marie Pangestu, Indonesian Minister of Trade, said: "We're going to simulate 
the implementation this month and we hope by September it can be already 
running."

A roadmap to identify specific actions to be taken in the next 12 months to 
make the SEZs more attractive, is also being worked out. Jakarta is also 
prepared to amend a number of laws.

Singapore's Trade and Industry Minister, Lim Hng Kiang, said that the SEZs 
are in a strong competitive position. At their peak, the areas were able to 
bring in streams of investors and generate 200,000 jobs. But in recent years, the 
areas have not attracted the same proportion of investments.

In formulating policies and procedures for the SEZs of Batam, Bintan and 
Karimun, Indonesia will be tapping the best practices that Singapore has acquired 
from joint SEZ ventures with China, India and Vietnam. And, Indonesia plans to 
make the SEZs a model for future zones in the country.

House Passes Citizenship Law 

The House of Representatives passed new immigration laws on Tuesday (11/7/06) 
that give children born to mixed nationality marriages the right to hold dual 
citizenship until the age of 21.

Under the old law, citizenship could only be handed down via a child's 
father, meaning children born to an Indonesian woman and a foreign man could not 
become Indonesian citizens.

Such children could only live in Indonesia on temporary permits that were 
expensive and time-consuming to obtain.

A group of Indonesian women married to foreign husbands had lobbied for the 
1958 law to be replaced and were in parliament when the new bill was passed. On 
reaching 21, children from mixed marriages must choose their citizenship, the 
law states.

The new law also stipulates that foreigners who have been living in the 
country for five years will be able to apply for Indonesian citizenship, but they 
must give up their original citizenship and be able to speak Indonesian, among 
other conditions.

The law also removes remaining elements of discrimination against Indonesians 
of Chinese descent, describing them as 'indigenous' Indonesians. 

KPK Urges Reversal of Proof

The Anti-Corruption Commission (KPK) is pushing for an amendment to give 
judges broader powers to reverse the burden of proof in difficult cases.

"The amendment has to allow for a pure reversal of the principle of the 
burden of proof so that we can proceed with a case when a suspect fails to prove 
that he or she is innocent," KPK deputy chairman Tumpak Panggabean, told The 
Jakarta Post on Wednesday (12/7/06). 

The legislature is currently considering amendments to the 2002 
Anti-Corruption Law, the key weapon in President Susilo Bambang Yudhoyono's war on graft. 

Panggabean said the commission often encountered stumbling blocks in using 
the current legislation because it was ambiguous about the burden of proof of 
innocence.

The KPK, on the other hand, has to provide clear evidence that a suspect's 
wealth has been   accumulated illegally through his or her position. 

"It is difficult to prove such practices because firm evidence can be hard to 
find," Panggaqbean said, adding that the commission had yet to find concrete 
proof of reciprocal gifts in corruption cases. 

REGIONS 

Yudhoyono Upbeat on Aceh Law 

President Susilo Bambang Yudhoyono said Friday (14/7/06) the new Aceh 
governance law, passed by a plenary session of the House of Representatives on 
Tuesday, would help speed up the recovery of the province from the December 2004 
tsunami.

He said the law should be accepted for its goals of realizing a secure future 
for the people of the province.

"What we must do now is, with peace in our heart, develop Aceh sincerely and 
faithfully so prosperity and security will emerge soon," he said in Bireuen, 
Aceh, Antara reported.

Dr. Yudhoyono said the passing of the law was not the final aim of the 
government, but rather it was the complete rehabilitation of the province. He added 
that Aceh must remain an integral part of the country.

The Aceh Monitoring Mission said the law was sufficiently close to the 
Memorandum of Understanding signed between the government and the Free Aceh Movement 
in Helsinki in August last year. 

At a meeting between representatives of the AMM, government and the Free Aceh 
Movement (GAM), the AMM's head of mission, Pieter Feith, said it was not 
necessary for the law to be a "word by word reflection of the MoU". 

Rather, he said, it should "be based on the set of principles agreed upon in 
Helsinki."

"Most of these have been accommodated even though interpretations might 
differ. In conclusion, AMM considers the (law) to broadly cover the principles in 
the MoU," a statement from the AMM released after Wednesday's meeting said.

Feith added that the AMM would not get involved in the debate on the law. 
"What we must stress about is that this is not an incident, but the work of a 
parliament. And all parliaments in democratic countries work independently and 
there must be no interference." 

Feith described the law as comprehensive and fairly accommodated the elements 
of the agreement between the government and the GAM. 

Home Affairs Minister Muhammad Ma'ruf said Indonesia plans to hold elections 
in Aceh in September.

"After the Aceh governance bill is passed, we will start disseminating 
information to the people, including the ex-rebels, on the planned elections," 
Ma'ruf said on Monday, before the passage of the legislation. "We expect to hold 
the local elections in September."

Tough Sentences Demanded for Papuans 

Six of seven Papuans charged with the killing of three teachers at the 
Freeport mine in 2002 are facing the death penalty, says one of their lawyers. 

The seven are accused of murdering two Americans and one Indonesian in the 
attack on a convoy of vehicles at the mine in Timika, Papua. 
 
The accused include Anthonius Wamang, a member of the separatist group 
Operation Free Papua, who admits he took part in the attack, but says he shot at the 
vehicles thinking it was an Indonesian military convoy.
 
The other six are civilians, who face death sentences for conspiracy in the 
attack, says David Sitorus, one of a team of lawyers defending the Papuans.

Stiff sentences were also demanded at the Jayapura District Court in the 
trial of 19 people accused of involvement in rioting in Abepura on March 16 that 
led to the deaths of six people, five of them security officers. 

Prosecutors on Wednesday (12/7/06) demanded judges sentence the 19 to between 
four and 15 years in jail. 

Fifteen years is being sought for Luis Gedi, who is on trial for killing 
three security officers and assaulting others. 

Top Bird Flu Official Sacked 

Indonesia has sacked its top official for animal health for failing to crack 
down on bird flu, The Straits Times reported. 

Sjamsul Bahri, director of animal health at the Agriculture Ministry, was 
removed from his post Thursday (13/7/06) after being in office for less than a 
year.

The disease has so far a confirmed 41 Indonesians - just one short of the 
number in Vietnam, which has the world's highest number of fatalities. Experts 
believe a number of other cases were not identified before the victims were 
buried. 

"This move is in line with my promise that I would evaluate performance every 
six months," Agriculture Minister Anton Apriyantono told Koran Tempo daily. 
He said Sjamsul's performance was 'not satisfactory', but did not elaborate.

Sjamsul has been replaced by Mr Musny Suatmodjo, the former head of the 
animal health division in the ministry's West Java office.

Meanwhile the director of communicable disease control at the Health 
Ministry, Mr I Nyoman Kandun, said more help from the international community is 
needed to tackle the problem. 

Kandun also reported that the World Health Organization had said the 41st 
victim was a three-year-old girl from Cisauk village in West Java, who died on 
July 6 in hospital in Jakarta. 

Saudi Aid for C. Java Quake 

A donation of $2 million from the Saudi Arabian government has allowed the 
World Food Program to keep handing out aid in Yogyakarta and parts of Central 
Java hit by the May 27 earthquake, the Associated Press reported. 

The earthquake, which killed more than 5,000 people and left another 1 
million homeless, was the most devastating natural disaster to hit the archipelago 
since the 2004 tsunami.

The World Food Program initially estimated it would need $5.3 million for six 
months of emergency aid, but has so far only received $800,000, said Bradley 
Busetto, the WFP deputy country director.

He said Saudi Arabia's $2 million donation came at a crucial time. "If we 
didn't have this injection of funds now, we probably would have had to really 
curtail or completely cut our program in Yogyakarta," Busetto said, adding that 
the agency had already been forced to divert resources from other programs in 
Indonesia.

A six-member Saudi delegation made the decision to donate the funds near the 
end of a five-day visit to the Indonesian capital and Yogyakarta, where they 
inspected the damage caused by the 5.9-magnitude quake.

Aid agencies said additional funding is still urgently required to address 
the need for shelter for over 350,000 families.

Praise for Tsunami Work 

The World Bank and the European Union on Thursday praised the progress of 
reconstruction in Aceh, saying it was better than the rebuilding effort in the US 
following Hurricane Katrina, Agence France-Presse reported.

"When you look at reconstruction elsewhere, they (Indonesia) are actually 
doing every well, compared to what's going on in Louisiana" and other major 
disaster sites, said Scott Guggenheim, operations manager at the World Bank.

"So I think that on that scale, it's within the realm of very good," he told 
a press conference.

Jean Breteche, the European Union's chief of delegation in Indonesia, said 
rebuilding Aceh was a long-term project. "It's not done overnight," he said, 
adding that the work in Aceh was quite good.

Officials of the Aceh Rehabilitation and Reconstruction Agency (BRR) admitted 
the work could have gone faster, but said the devastation of areas like 
Calang and the loss of land titles had slowed work. 

The World Bank and the European Union make up the so-called Multi Donor Fund 
of 15 countries and international institutions contributing $550 million to 
the reconstruction effort in Aceh and Nias.

The fund announced Thursday that it had built or repaired 2,800 houses, more 
than 1,000 km of roads, renovated 400 bridges and schools and provided work 
for nearly 24,000 people.

ECONOMY 

Dubai Bank Keen on Indonesia 

Total SA said it would spend more than $1.2 billion in Indonesia this year, 
and the Dubai Islamic Bank said it was looking at a number of investment 
opportunities, including power and infrastructure projects. 

The Indonesia expenditure by French oil major Total SA is part of the $10 
billion the company plans to spend globally this year, said Christopher de 
Margerie, Total's president for exploration and production.

He didn't provide details on where will the money be spent in Indonesia but 
said the company aims to boost natural gas production and produce 80,000 
barrels of crude oil a day.

Aref Koheji, chief executive officer of the Dubai bank, said the bank was 
committed to the Jakarta monorail project but also saw much more potential. 

Koheji said a lot of projects such as electricity, oil and gas, 
infrastructure projects and sports facilities could be built in Indonesia, Antara reported.

"We came here to meet and to talk with the government officials about the 
investment prospects here," Koheji noted.

Tata Steel Ltd. said it may invest in a plant in Indonesia to expand 
production amid rising demand for the alloy in Asia.

"We're looking at opportunities in Indonesia and are happy to have plants 
there," deputy managing director T. Mukherjee said in an interview with Bloomberg 
in Bangkok.
 
"Steel consumption in Indonesia will be much more in the next 10 years with 
more than 200 million people." He didn't provide further details.

Other positive investment news included a deal in which South Korea's 
Ssangyong Engineering & Construction Co. will spend $130 million to add a 41-story 
office building, a 47-story apartment block and a six-story shopping center at 
Jakarta's Plaza Indonesia.

Also in the property market, Indonesia's domestic Palazzo Group said it will 
build 15,000 units of apartments and houses for $775 million in the Kemayoran 
area of Jakarta in the next five years.

The government also said it plans to provide tax incentives for investors in 
the chemicals industry, Antara reported.

Benny Wahyudi, the Industry Ministry's Director General of Agro and Chemical 
industries, said tax facilities would be given to firms interested in building 
or expanding their businesses in the chemicals, petrochemical, oleo-chemical 
and pharmaceutical industries. 

Bank Indonesia said it remained optimistic that its target of 18% growth in 
credit could be reached this year, even though expansion in the first five 
months came in at only 2.4%, Antara reported. 

Signs of recovery in credit extension are more obvious and it is expected 
that the condition will continue to improve toward the end of this year, Bank 
Indonesia Deputy Governor Maman H. Somantri said.

Consumer confidence rose in June to its highest since October, a central bank 
survey showed on Thursday 13/7/06).

Although the index remained in overall negative territory, the consumer 
confidence index rose by 2.9 points to 91.1 points in June from 88.2 in March, 
Reuters reported.

Car sales were reported to be picking up slowly, with sales up 6.4% in June 
to 24,564 units from 23,022 the previous month. 

Toyota and its subsidiary Daihatsu announcing expansion plans. Toyota said it 
would boost production by 20% while PT Astra Daihatsu Motor said it would 
spend $70 million to push sales from 114,000 to 150,000 cars per year by 2007.

The Daihatsu officials said they intended to make Indonesia a new production 
base. The company was increasing capacity with a view to exporting some 
models, especially its low-cost Xenia, to a number of countries such as the 
Philippines and Mexico.

In changes in the banking sector, central bank Governor Burhanuddin Abdullah 
said companies that own more than a "controlling interest" -- defined by the 
central bank as more than a 25% stake -- in more than one bank must cut their 
stakes, merge the banks into a single entity or form a holding company that has 
control of the banks, Dow Jones Newswires reported.

He said the central bank will set an end-2008 deadline for compliance with 
the rule.

"The objective of the policy is to make banking supervision more effective 
and efficient...[and] accelerate bank consolidation," Muliaman Hadad, central 
bank's director for banking research and regulation, said in an interview with 
Dow Jones.

The banking sector also saw a new entrant, with Holland's Rabobank saying it 
had acquired Bank Haga and Bank Hagakita for an undisclosed sum. A bank 
official said Rabobank would concentrate on the small and medium enterprise sector 
and retail lending. 

The government submitted its budget revisions to the House of 
Representatives, setting the oil price assumption at $62 a barrel from $57, and the deficit 
forecast to 1.2% of gross domestic product (GDP) from 0.7%. 

The rupiah is expected to trade at a stronger average rate of Rp9,300 against 
the 
US dollar -- from Rp9,900 -- while inflation is still seen coming in at 8% by 
the 
year's end. 

BUSINESS BRIEFS

MACROECONOMY

Govt. Looks for Stability  

The government said it is pinning its hopes on improving macroeconomic 
indicators, including the rupiah exchange rate and inflation, to help limit the fuel 
subsidy and debt repayment burdens, reported The Jakarta Post.

"The cost of fuel subsidies is determined by oil prices, the rupiah exchange 
rate and the volume of fuel consumption," Finance Minister Sri Mulyani 
Indrawati told reporters after Thursday's (13/7/06) hearing with the House of 
Representatives. 

In its mid-year budget revisions, currently being discussed by the House, the 
government has proposed increasing the fuel subsidy allocation to Rp60 
trillion ($6.6 billion), from the previously budgeted Rp54.2 trillion.  It has also 
proposed revising the oil price assumption upward to $62 a barrel from $57 
previously. 

The fuel-related budget revisions are designed to take into account a recent 
surge in global crude prices, which hit a record high of $78 a barrel on 
Thursday. 

The rising oil prices, however, came amid the recent strengthening of the 
rupiah against the US dollar, prompting the government to revise the budget's 
rupiah exchange rate assumption to Rp9,300 per dollar from Rp9,900 previously. 

Separately, state oil and gas firm PT Pertamina's vice president, Iin Arifin 
Takhyan, said fuel consumption for this year would likely come in at about 59 
million kiloliters, lower than the 61 million kiloliters previously expected.  
This would result in fuel subsidies costing the taxpayer some Rp62 trillion, 
he said. 

Consumer Confidence at 10-Month High

The consumer confidence index rose to a 10-month high of 91.1 points in June 
from 88.2 in May amid improvements in both the current economic condition 
index and the consumers expectation index, a Bank Indonesia (BI) survey said.

According to survey results, the current economic condition index surged to 
76.8 points in June from 74.1 in May while the consumers expectation index, 
which measures the level of confidence on the prospects of the economy in the 
next six months, rose to 105.4 points from 102.2, XFN-Asia reported on Wednesday 
(12/7/06).

It said 35.4% of the respondents in June compared to 32.5% in the previous 
month expected their income to be higher in the next six months on expectations 
of salary or bonus increases, better business output or the opening of a new 
business.

Meanwhile, 55.4% of respondents expected their income to be stable in the 
next six months and were therefore planning to reduce consumption of primary 
goods and cut spending on recreation.

On the general trend of prices, 66.7% of respondents expected inflation to 
persist until yearend due to price rises in housing and transport, prepared 
foods, soft drinks, cigarette and tobacco.

On the interest rate trend, 60.1% of the consumers expected a stable interest 
rate for the next six months.

As in the previous month, 57.5% of respondents held the view that now is not 
the appropriate time to buy durable goods.  However, the survey indicated that 
14.7% of consumers still plan to buy motorcycles, 13% to buy computers and 
11.2% to buy television sets.

BI Awards Rp24.63t 1-Month SBIs 

Bank Indonesia (BI) has awarded Rp24.63 trillion one-month Bank Indonesia 
Certificates (SBI) at a fixed interest rate of 12.25%, XFN-Asia reported on 
Wednesday (12/7/06).

The SBI rate is pegged to the central bank's key policy rate, the BI rate, 
which was cut by 25 basis points from 12.5% last week.

INVESTMENT

Daihatsu to Up Investment 

To meet increasing demand both at home and abroad, PT Astra Daihatsu Motor 
plans to increase its investment in Indonesia, with the firm's sales expected to 
jump from 114,000 to 150,000 cars per year by 2007.

"There are a number of investment plans in the pipeline, but I cannot 
elaborate on them at the moment as they are still under discussion.  What is certain, 
however, is that we are going to invest $70 million to increase production 
capacity in early 2007," Astra Daihatsu vice president Sudirman MR was quoted as 
saying by The Jakarta Post on Wednesday (12/7/06). 

Sudirman said Daihatsu intends to make Indonesia its new production base, 
after Japan. 

Apart from producing the low-cost Xenia, the company also produces the 
look-alike Toyota Avanza as part of a collaborative venture between Daihatsu and 
Toyota.  Both products are sold on domestic and overseas markets. 

The company is also increasing capacity with a view to exporting some models, 
especially the Avanza, to a number of countries, such as the Philippines and 
Mexico.  To date, it has been exporting car kits for assembly to Malaysia. 

Tata Steel May Invest to Tap Rising Demand

India's second biggest steelmaker, Tata Steel Ltd, may invest in a plant in 
Indonesia to expand production amid rising demand in Asia.

"We're looking at opportunities in Indonesia and are happy to have plants 
there," deputy managing director T. Mukherjee was quoted as saying by Bloomberg 
News in an interview in Bangkok.  "Steel consumption in Indonesia will be much 
more in the next 10 years with more than 200 million people." 

Tata Steel plans to spend about 700 billion rupees ($15 billion) to more than 
triple output in the next decade by building plants and buying rivals to 
expand in Asia, which uses more than a third of the world's steel.

Mittal Steel Co, Posco and other global steelmakers plan to expand in Asia to 
benefit from some of the world's fastest-growing economies. Mittal, which 
last month agreed to a $34.1 billion takeover of Arcelor SA, expects steel demand 
in India and China to grow three times faster than in Europe and North 
America over 10 years.

-End 1 of 2-

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Joyo Indonesia News Service
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