[Kabar-indonesia] 1: RI Trade and Investment News, 31 July 2006

[JoyoNews at aol.com]

The Coordinating Ministry for Economic Affairs
Republic of Indonesia
Jakarta
Monday, July 31, 2006

Trade and Investment News, 31 July 2006

Part 1 of 2

Highlights 

Politics 

* Nadhlatul Ulama supports pluralism 
* New Timor Leste Prime Minister in talks in Jakarta 
* Three more fundamentalists jailed for harboring terrorist leader

Regions 

* New governors appointed in Papua and West Irian Jaya 
* Animal husbandry officials crack down on avian flu outbreak 

Economy 

* Standard and Poor's raises long-term foreign and local currency ratings
* Senior bank official points to more interest rate cuts 

Business Briefs 

Macroeconomy 

* Central bank may trim rates by 50 points 
* Government restructures $259 million in bonds 

Investment 

* 'Level playing field' for foreign investors in new legislation 
* Cigarette maker to build $307 million factory 
* Eight companies keen to invest in new special economic zone 

State Concerns 

* All villages to have telephone services by 2010 
* Micro-finance units to be set up across the country 

SOEs

* Rajawali group completes purchase of PT Semen Gresik shares
* PT Semen Gresik more than doubles first half net profit
* Construction firm PT Adhi Karya wins work offshore 

Private Sector 

* Car distributor PT Astra buffeted by high interest rates 

Banks 

* First-half results mixed for major banks 
* Central bank urges more credit dispersal 

Power 

* Government to guarantee bio-fuel production 
* Power utility PLN signs gas agreement for Jambi power station 
* Pertamina to spend $27 million on geothermal development 

Oil & Gas 

* Improved conditions for frontier and deepwater blocks 
* Energy minister looks to better oil supply position next year 
* 41 new blocks to be offered 

POLITICS

NU Upholds Pluralism

The mass Muslim organization Nahdlatul Ulama (NU) strongly reiterated its 
opposition on Friday (28/7/06) to efforts to turn Indonesia into a theocratic 
state.

NU lawmaking body chief Sahal Mahfudz said the organization needed to 
reaffirm its commitment to the country's secular traditions amid concerted moves to 
introduce shariah as a legal foundation for drafting legislation.

"The NU upholds pluralism in line with the (Indonesia's state ideology) 
Pancasila," Mahfudz told the opening of a three-day national ulema conference in 
Surabaya. 
"We oppose the implementation of shariah because this will only lead to 
disintegration. Shariah can be implemented without being formalized."

He added that the NU should continue to be at the forefront in campaigning 
for the preservation of local values.

The organization has been particularly vocal in its opposition to the passage 
of shariah-based bylaws in several parts of the country.

East Timor Invites Oil Firms

Choosing Indonesia for his first overseas call, newly-appointed Timor Leste 
Prime Minister Jose Ramos-Horta met with President Susilo Bambang Yudhoyono on 
Tuesday (25/7/06) to discuss the need to boost bilateral economic ties by 
encouraging Indonesian oil and gas firms to take a more active interest in the 
tiny island state. 

"Cooperation in the economic sector, that is in oil and gas, will be further 
discussed between ministers of the two countries," said presidential spokesman 
Dino Djalal. "East Timor wants active participation of our companies in 
exploring untapped oil and gas there." 

Up to now, East Timor has dealt mainly with Australia on oil and gas issues, 
forging a favourable agreement for a split of gas and condensate revenues in 
what was once the Timor Gap, and more recently holding out for a 50-50 share of 
the rich Greater Sunrise field. 

Djalal also said that Indonesia has promised to help East Timor lobby the 
World Bank to obtain loans, especially for the re-construction of roads linking 
towns across the country. 

Dr. Yudhoyono and Horta also discussed remaining border issues, and agreed 
that the remaining 1% of land border areas still in dispute should 
immediately be settled. They expect to sign an agreement in September. 

Djalal said that Horta would have no objection to more Indonesians working 
for the United Nations in the country to help improve relations between the two 
nations. 

In a bid to enhance the fledgling nation's status, Indonesia will support 
Dili's application to join the Association of Southeast Asian Nations (ASEAN), 
although that may still be five years before East Timor can meet all the 
membership criteria.  

Three Militants Jailed

The South Jakarta District Court sentenced three militants to 3 1/2 years in 
prison last week for harboring terrorist leader Noordin Mohammad Top. 

On Monday (24/7/06), the court found Faturahman and Kamal Yudianto guilty of 
violating the country's anti-terror law by sheltering Top in Central Java in 
2004 and 2005 respectively.

Then on Wednesday (26/7/06), Imam Buchori, 36, was convicted of 
"intentionally trying to hide perpetrators of terror" by allowing top to spend a night at 
his house in July 2004. 

The Malaysian fugitive, who was introduced to Buchori as Tolhah or Toha, used 
the defendant's home at least once to meet with other militants, Judge Yosef 
Wisnu Sigit said.

Buchori had also rented a house for Top which he used as a hiding place for 
several days, the judge said.

Bali Executions Delayed

Three militants on death row for the 2002 Bali bombings will file a final 
appeal against their convictions, forcing prosecutors to delay plans to execute 
them until this month, it was disclosed on Wednesday (26/7/06).

Amrozi, Ali Ghufron and Imam Samudra were among more than 30 militants 
convicted in the nightclub bombings, which killed 202 people, mostly foreign 
tourists. 

One of the men's lawyers said he planned to file a final appeal - known as a 
judicial review - to the Supreme Court soon.

Wayan Pasek Suarta, a spokesman for the Attorney General, earlier said that 
officials planned to execute the three men by the end of August. But he said if 
their lawyers filed an appeal then the executions would have to be delayed.  

REGIONS 

Papua Governors Sworn In 

Papua and the new province of West Irian Jaya saw governors appointed on 
Monday (24/7/06). 

In West Irian Jaya, Abraham Atururi and Rahimin Katjong became the province's 
first ever governor and deputy governor, after the province was split off 
from Papua. 

In Papua, the pairing of Barnabas Suebu and Alex Hasegem won a five-way 
battle. 

President Susilo Bambang Yudhoyono visited Papua in a four-day visit 
beginning Wednesday. The president the following day took part in a harvest of sweet 
potatoes in Yahukimo regency in the highlands, earlier this year hit by a 
famine. 

Dr. Yudhoyono also announced he would issue a presidential instruction on the 
acceleration of development in the province which is aimed at speeding up 
infrastructure development, improving the capacity of indigenous Papuans and 
boosting food security. 

Jail Terms for Abepura Rioters 

The Jayapura District Court sentenced two persons accused of taking part in 
the March riot at Abepura in which five security officials and a civilian were 
killed to jail terms of five and six years on Wednesday (26/7/06), Agence 
France-Presse reported. 

The Jayapura district court found Selpius Bobi, 22, guilty of "inciting 
others to commit violence" during the melee and sentenced him to five years, said 
lawyer Iwan Niode.

The court also sentenced 20-year-old Elias Tamaka to six years for "resisting 
authorities by using force" during the clash, Niode said, adding that the 
sentences would be appealed.

The same court on Monday sentenced Nelson Rumbiak to six years while 10 
co-defendants were jailed for five years. 

Govt. Gets Tough on Bird Flu 

Animal husbandry officials launched a raid on poultry infected with bird flu 
on Tuesday (25/7/06) in the Karo area of North Sumatra, killing hundreds of 
birds in an area where residents had earlier defied attempts to cull flocks. 

By Wednesday afternoon, 1,890 birds had been culled by a task force backed by 
military and police. The carcasses were burned. 

The raid occurred in the same area from which eight members of a single 
family were infected by the virus, with only one surviving. Another member of the 
family was buried before samples could be taken for testing. 

Officials said three birds in the area tested positive for bird flu at 6 PM 
on Tuesday, with the raid to cull the birds beginning only three hours later. 

Arrests for Malacca Strait Piracy 

The Indonesian navy arrested three former members of the separatist Free Aceh 
Movement (GAM) for recent pirate attacks off North Aceh on ships carrying aid 
for tsunami survivors, a senior commanding officer said on Wednesday 
(26/7/06), Reuters reported. 

The three men, from two different groups, were caught in Lhokseumawe on July 
18, two days after their latest operation, Rear Admiral Moekhlas Sidik, chief 
of the Indonesian Navy's Western Fleet, told reporters. 

"We are still on alert for more action from their groups because they use 
weapons like rifles and grenade launchers in their operations," Sidik said. 

ECONOMY 

Upgrade as BI Points to Rate Cuts 

International ratings agency Standard and Poor's raised Indonesia's long-term 
foreign and local currency ratings as Bank Indonesia (BI) senior deputy 
governor Miranda Goeltom pointed to more interest rate cuts. 

S&P raised Indonesia's long-term foreign currency on Wednesday to "BB-" from 
"B+" and the long-term local currency rating to "BB+" from "BB", Agence 
France-Presse reported. 

The short-term rating of "B" was affirmed and the outlook on the long-term 
rating remained stable. 

S&P said the upgrades reflected improving fiscal and external performance 
that were resulting in declining debt burdens, with the government's debt, 
assisted by a stronger currency, in sight at coming in under 50% of gross domestic 
product (GDP) this year. That compares to more than 100% in 2000.

Supporting these positive trends is an improvement in Indonesia's political 
environment and wider reforms, it added.

"While implementation remains a challenge, an encouraging development has 
been the speed at which difficult but much-needed reforms have been undertaken," 
said SP credit analyst Sani Hamid.

At the central bank, Goeltom said it appeared that reducing inflation could 
allow the bank to continue its cuts in its benchmark rate. 

She told reporters Thursday that the central bank believed it could lower the 
rate by more than its last quarter-percentage-point cut to 12.25%, The 
Jakarta Post reported. 

"We have all the chances for lowering the rate further. There is still plenty 
of room for that," she said. "We'll see in the coming week." 

She said that the central bank's two quarter percentage point cuts in the 
rate since May had not produced any negative impact on the capital market or the 
currency. Foreign exchange reserves had continued to improve, she noted. 

BI Governor Burhanuddin Abdullah said earlier that the bank remains 
optimistic that the economy will grow between 4.6% and 5.1% on year in the second 
quarter, Dow Jones Newswires reported. 

The bank, in a quarterly report, meanwhile predicted growth of up to 6.3% 
next year on increasing exports and investment. 

There was also more positive news on the investment front, with PT HM 
Sampoerna saying it had received approval to spend $306 million on a new cigarette 
plant in Karawang, West Java.

Riau Islands Governor Ismeth Abdullah said at least eight Singaporean 
companies are expected to immediately invest in the islands of Batam and Bintan after 
the governments of the two countries agreed on June 25 to form a special 
economic zone there. The companies plan to invest $31.6 million and create 2,000 
jobs.

The Islamic Development Bank (IDB) also said Thursday it would help mobilize 
funds in the Middle East for investing in major infrastructure projects.

After a meeting with Vice President Jusuf Kalla, IDB operations vice 
president Amadou Boubacar Crissie told reporters the bank was interested in funding 
projects in the energy, petrochemicals, toll road, airport and housing sectors. 

First half company results showed that most major companies produced 
significantly lower but still positive returns. 

Major retailed Matahari, however, reported sales of Rp3.3 trillion ($366.6 
million) in the first half, up 17% compared with the same period last year.

Company Director Danny Kojongian attributed the increase to the opening of 
new department store and hypermarket outlets.

BUSINESS BRIEFS

MACROECONOMY

BI Sees Room to Cut Rates Further

Bank Indonesia (BI) has room to cut interest rates further due to an expected 
easing in inflation and may consider a reduction of 50 basis points in one 
go, senior deputy governor, Miranda Goeltom, said on Thursday (27/7/06).

The remarks came a day after Standard & Poor's upgraded Indonesia's long-term 
currency ratings because of its improving fiscal position.

"There is room for interest rate cuts as inflation is expected to ease," 
Goeltom was quoted as saying by Reuters.  "There has been no (market) volatility 
and shocks after cutting interest rates twice by 25 basis points each," she 
said. "Our foreign currency rating has even improved, that means we have room to 
loosen (monetary policy) at a faster pace."

BI is expected to review its rate policy on August 8 while the statistics 
bureau is scheduled to release July inflation data on Tuesday (1/8/06).

Analysts said the time is right for a rate cut because of improving market 
sentiment and higher credit ratings.  "It is definitely a very comfortable 
position for BI to cut rates.  More importantly there is a recent BI survey that 
corporates find lending rates too high," said market analyst Patricia Lui of 
Informa Global Markets in Singapore.

Q3 GDP Growth Seen Weaker - BI 

Growth in gross domestic product (GDP) in the third quarter to September will 
decelerate to 4.1% to 5% year-on-year from 5.1% to 6% estimated for the 
second quarter, despite a stronger currency exchange rate and a higher current 
account surplus, according Bank Indonesia's (BI) latest survey. 

The survey said the country's current account surplus is expected to increase 
to 3.1% to 4.5% of GDP in the third quarter from 0.1% to 1.5% of GDP 
estimated for the second quarter, XFN-Asia reported Tuesday (25/7/06).

Increases in exports and imports, however, are expected to slow to 15.1% to 
22.5% and 7.6% to 15%, respectively, in the third quarter, from 22.5% to 30% 
for both predicted for the second quarter.  Real GDP in the first quarter grew 
4.59% year-on-year, against 4.9% in the last quarter of 2005.

The survey shows that respondents expect macroeconomic indicators such as the 
exchange rate, inflation and current account to improve this year and help 
increase fresh investment from both external and domestic investors.

For the whole year, exports are projected to grow 15.1% to 22.5%, while 
imports may rise 22.5% to 30%.  The ratio of current account surplus to GDP is seen 
within a range of 0.1% to 1.5%.

Full-year GDP growth is expected to be in a range of 5.1% to 6%, unchanged 
from the previous two surveys conducted in the first and fourth quarters of last 
year.

For next year, the respondents expect GDP to grow in the same range of 5.1% 
to 6% seen for this year.  Such expectations, however, are short of previous 
expectations of more than 6%.

Indonesia Buys Back Rp2.37t of Bonds 

Indonesia bought back Rp2.37 trillion ($259 million) of bonds and sold the 
same amount of longer-term debt to investors to cut interest payments, Bloomberg 
reported on Tuesday (25/7/06).

The government purchased bonds maturing between February 2007 and July 2009 
and sold bonds due June 15, 2021, the Finance Department said in a statement.  
The government received Rp2.6 trillion of bids for the debt it was seeking to 
sell.

The government has been buying back high-yielding debt to reduce its interest 
costs for more than two years.  Indonesia spent more than Rp450 trillion to 
bail out local banks after Asia's financial crisis of 1997 and 1998, raising 
funds through so-called recapitalization bonds.

The government sold the 2021 bond to investors at a price of 102.59 to yield 
12.41%, said Handy Yunianto, bond analyst at PT Mandiri Sekuritas.  On the 
secondary market, the bond closed at 103.39 to yield 12.29%.

Indonesia's government bought back Rp3.04 trillion of short-maturity bonds 
and sold the same amount of longer-term debt on June 27. 

BI Awards Rp51.45t 1-Month SBIs 

Bank Indonesia (BI) said it has awarded Rp51.45 trillion worth of one-month 
BI Certificates (SBIs) at a fixed rate of 12.25%, unchanged from the previous 
week, XFN-Asia reported on Wednesday (26/7/06). 

INVESTMENT

Foreign Investors Assured of Equal Treatment 

The government's new investment bill will focus on providing a level playing 
field for investors, although certain business sectors will still be closed to 
them.   

Coordinating Minister for the Economy Boediono said recently that an updated 
"negative list of investments" in the bill would only serve as a basis to 
conduct an initial screening of investors, but would in no way be used to apply 
discriminative policies against them, The Jakarta Post reported on Monday 
(24/7/06). 

"The new investment law is expected to clarify the criteria for investments, 
which are allowable," he said.  "But after passing the screening, we want to 
make sure that all investors receive fair and equal treatment in implementing 
their investment plans." 

The government will particularly see to it that investors do not face lengthy 
bureaucratic procedures, or inconsistent policies.  "We will end a situation 
where investors complain of one official holding them back, but then they are 
able to negotiate with another official," he said.   "The new investment 
system will have uniform and transparent rules, procedures and guidelines." 

Separately, Trade Minister Mari Pangestu explained that the revision of the 
negative list of investments in the bill is also expected to protect the nation 
in terms of the environment, health, welfare and morality.  "We want the list 
to be clear and simple, while thoroughly considering whatever is best for the 
country.  It is still being discussed with other departments," she said after 
a meeting with Boediono. 

The new investment will integrate the country's previously separate foreign 
and domestic investment laws, making various improvements, including 
simplifying the current 150-day investment permit process to a one-stop, 30-day 
registration process.  It will also provide legal certainty in case of overlapping 
regional by-laws, and a guarantee for foreign investors against the threat of 
subsequent nationalization. 

The bill is being deliberated by the House of Representatives' trade and 
investment commission.  Boediono anticipates that the new investment law will be 
passed and come into effect next year. 

New Sampoerna Plant to Boost Capacity 

Indonesia's second largest listed tobacco firm, PT Handaya Mandala Sampoerna, 
said on Thursday (27/7/06) its new Rp2.8 trillion ($307.7 million) factory 
would increase the company's machine-rolled cigarette output by 9 billion sticks 
per year, Reuters reported.

It said the factory, which would be located in Karawang, east of Jakarta, 
would also be able to produce 15 tons of tobacco and clove mixture per hour, 
which could be used for the production of 7.5 million sticks of hand-rolled 
cigarettes.

"The funding for this factory would come from our internal resources.  
There's no new borrowing for this project," company director Angky Camaro said 
during the inauguration of the construction of the new plant.

The company, nearly 100% controlled by Philip Morris International, the 
tobacco arm of Altria Group, has a total capacity to produce 50 billion sticks of 
cigarettes.  It sold 49.4 billion sticks last year.

Sampoerna, the sixth largest capitalized firm in the Jakarta exchange, had 
said it obtained the approval to build the factory from Indonesia's Investment 
Coordinating Board (BKPM) earlier this month and the plant would take 24 months 
to be completed.

Singaporean Investors Return to Batam 

At least eight Singaporean companies are expected to invest immediately in 
the islands of Batam and Bintan in Indonesia's Riau Islands province, where a 
special economic zone (SEZ) will be set up by the two countries.

Riau Island Governor Ismeth Abdullah said the Singaporean companies plan to 
invest $31.6 million and will create 2,000 jobs badly needed by the country, 
Antara reported on Monday (24/7/06).

A memorandum of understanding will be signed on August 1 by the companies 
operating in ferry transport, ship-building and repair, and offshore rig 
construction, Abdullah said.

A number of foreign investors have reportedly left Batam due to uncertainty 
in its status as a free trade area and the re-imposition of value added tax.

Bekaert to Expand Production Capacity 

Belgian steel cord manufacturer Bekaert said on Friday (28/7/06) it would 
expand its production capacity in Indonesia for advanced wire products, Reuters 
reported.

"The company wants to anticipate the rapidly growing demand from the paper 
industry in Southeast Asia, which is an important buyer of Bekaert pulp baling 
wires used for packaging the pulp in the initial stage of the paper production 
process," Beckaert said in a statement.

-End 1 of 2-

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Joyo Indonesia News Service
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