[Kabar-indonesia] 1 of 2: RI Trade and Investment News, 11 September 2006

[JoyoNews at aol.com]

The Coordinating Ministry for Economic Affairs
Republic of Indonesia
Jakarta
September 11, 2006

Trade and Investment News, 11 September 2006

Part 1 of 2

Highlights 

Politics 

* President Yudhoyono leaves for overseas for ASEM 
  and NAM meetings 
* Indonesia calls for access to terrorist figure Hambali 
* 18-year sentence for Bali II bomber 

Regions

* Indonesia to vaccinate 60 million chickens in fight 
  against avian flu 
* The term of the Aceh Monitoring Mission extended 
  by the EU 

Economy 

* Bank Indonesia cuts benchmark, forecasts more 
  reductions 
* President Yudhoyono points to doubling GDP 
  in a decade 

Business briefs 

Macroeconomy 

* Analysts say rate cut will boost spending 
* Bank Indonesia sees 7% growth rate in 2008  
* Consumer sales grew 10% in first half, survey 
  finds 

Investment 

* Coordinating Minister says investment on the rise 
* Fish processing plant for Aceh, North Sumatra 

State concerns 

* Domestic air passengers jump 13.5% in July 

SOEs

* State-owned enterprises report average 24.83% 
  profit growth in first half

Banks

* Coordinating Minister calls for banks to bring 
  rates down 
* Single Presence Policy put off until 2010
* Government share in Bank Permata sold 

Power 

* PT Medco Energi International to start work 
  on geothermal plant 
* Bontang power to be sourced from coal 

Oil & gas 

* PT Pertamina phases out leaded gasoline 
* Santos discovers oil, gas at Sampang, 
  East Java 
* Sumitomo Corp to take 20% in new 
  refinery consortium 

Mining 

* Higher production of thermal coal next year 
* PT Arutmin, Japan's Kobe Steel to develop 
  first upgraded brown coal plant

POLITICS

President Heads for Europe 

President Susilo Bambang Yudhoyono on Saturday (9/9/06) celebrated his 57th 
birthday on board a chartered presidential plane carrying him on a 10-day tour 
of Finland, Norway, and Cuba, capped by his participation in two major summit 
meetings. 

In Helsinki, Dr. Yudhoyono joins leaders from 25 European and 13 Asian 
countries at the Sixth Asia-Europe Meeting (ASEM).

Subjects to be discussed at the summit include globalization, security 
threats, energy, climate change, the recently-collapsed world trade talks, cultural 
dialogue, and competitiveness.

The president is scheduled to meet his French counterpart, Jacques Chirac, on 
the sidelines of the two-day meeting to discuss the participation of 
Indonesian troops in the United Nations peacekeeping force in Lebanon.

An advance team of Indonesian troops is scheduled to leave on September 20 
and will be followed by more troops at the end of September or early October.

Dr. Yudhoyono is also scheduled to give a lecture before the Finnish 
Parliament and a local think-tank, before travelling to Norway for a state visit and 
meeting with Prime Minister Jens Stoltenberg.

He will also make a courtesy call on Norwegian Crown Prince Haakon and give a 
lecture before the Nobel Institute.

Dr. Yudhoyono will then travel to Havana on September 13 for a summit of more 
than 100 heads of state and government of the Non-Aligned Movement.

He is scheduled to meet with ailing Cuban leader Fidel Castro, and with 
leaders from Vietnam, Venezuela, and the G-15 group of developing nations.

Jakarta Wants to Meet Hambali 

Jakarta will ask Washington for consular access to Indonesian-born terrorist 
Riduan Isamuddin, better known as Hambali, who is currently detained at Cuba's 
Guantanamo Bay, a government spokesman said on Friday (8/9/06).

A former key member of the Jemaah Islamiyah (JI) extremist network, Hambali 
is one of 14 terror suspects who US President George W.Bush announced on 
Thursday will soon be tried by military commissions.

"Now it is clear where he is, we're going to request consular access to 
ensure a fair trial," said Foreign Ministry spokesman Desra Percaya.

Australia is also poised to push the US for access to Hambali, who is blamed 
for the 2002 Bali bombings that killed 202 people. 

Indonesian officials have complained bitterly at the refusal by the US to 
make Hambali available.

Hambali is believed to have been al-Qaeda's Southeast Asian representative, 
obtaining funding from Osama bin Laden's organization for at least the 2002 
bombings and perhaps other JI attacks.

He was captured in a Central Intelligence Agency (CIA) operation in Thailand 
on August 11, 2003, and has been detained since at a secret location.  

Bali Militant Gets 18 Years

Bali's Denpasar District Court on Thursday (7/9/06) sentenced a bomb-maker to 
18 years in jail for providing the materials for last year's suicide bombings 
on the island, which killed 20 people.

Chief judge Gusti Ngurah Astawa said Mohammad Cholili, 28, was found guilty 
of supplying the equipment used in the October 2005 attacks after learning his 
skills from slain Malaysian bomber and chemist Azahari bin Husin.

His sentence came hours after Dwi Widyarto, a 33-year-old telephone 
repairman, was handed eight years in jail for his role in the same bombings.

Widyarto was accused of helping to transfer onto a compact disc a video 
recording showing Malaysian-born Noordin Mohammad Top, one of the alleged 
masterminds of the 2005 attacks, threatening Western nations.

Thirty-year-old schoolteacher Abdul Aziz was found guilty on Tuesday and 
received eight years for his part in the 2005 bombings. 

Aziz was convicted of creating a website for Top and Azahari. He is alleged 
to have met with Top at least 10 times before the bombings, once allowing him 
to stay overnight at his school in Central Java.

Confidence on Security Council Seat 

Foreign Minister Hassan Wirayuda said on Tuesday (5/9/06) Indonesia was 
confident it would win a United Nations Security Council seat, boosting the clout 
of the world's most populous Muslim nation on the international stage.

Wirayuda said his nation "had a big chance" of winning a non-permanent seat 
on the council next month following South Korea's apparent withdrawal from the 
race.

The seat is reserved for an Asian nation, and that would leave Nepal as 
Indonesia's only challenger.

"We lobbied almost all UN members during the first half of the year ... and 
have secured commitments of support from many countries," Wirayuda said, adding 
that his nation had a good track record in helping maintain world peace.

Indonesia has been seeking to raise its international profile in recent 
months, offering to help mediate in the Iranian and North Korean nuclear disputes.

US increases Military Aid

The US Government will increase its military cooperation with Indonesia by 
25% beginning next year, Indonesian Armed Forces (TNI) Commander Air Marshal 
Djoko Suyanto said after a meeting with the chairman of the US Joints Chief of 
Staff, Gen Peter Pace, in Washington on Tuesday (5/9/06).

Under the enhanced military cooperation the number of education and training 
programs will be raised from 120 to 170 in 2007, Suyanti told reporters.

The International Military Education and Training (IMET) project will include 
technical and counter-intelligence subjects as well as post-graduate degree 
programs.

Djoko said Indonesian military personnel taking part in the program will 
study at various US educational institutes and receive scholarships from the US 
government.

The increased military cooperation, he said, was a follow-up to a dialog on 
bilateral defense cooperation held last August in Jakarta.

UN Warms to Truth Commission

The joint Indonesia-East Timor Truth and Friendship Commission has received 
overwhelming support from the international community in uncovering human 
rights abuses in the then Indonesian province in 1999, helping to build trust 
between the two countries, Foreign Minister Hassan Wirayuda said Thursday (7/9/06).
 
Speaking at a one-day seminar on Indonesian-East Timor relations in Jakarta, 
Wirayuda said that in the beginning most people were pessimistic about the 
commission, believing it would only serve to pardon people involved in abuses. 

But recent developments, he said, showed that many countries had begun to 
place their trust in the commission. 

"UN Secretary-General Kofi Annan, for instance, has recommended that the 
Security Council welcome efforts by Indonesia and Timor Leste, and to support the 
commission to increase its efficiency and credibility," he said. 

Wirayuda pointed to Security Council Resolution No 1704, issued on August 25, 
which expressed the UN's trust in the commission's work. 

Indonesia and East Timor established the 10-member commission in August 2005, 
with five representatives from each country charged with investigating human 
rights abuses committed before and after the independence referendum in the 
former province. 

The commission, with a mandate until August 2007 and modelled on similar 
bodies set up in South Africa, Chile and Argentina, has no powers to prosecute 
human rights violators. 

REGIONS

Indonesia Plans 60 Million Bird Flu Shots 

Indonesia is planning to vaccinate some 60 million chickens against bird flu 
ahead of the coming rainy season, when experts fear the virus might spread 
more easily, an Agriculture Ministry official said Wednesday (6/9/06).

The vaccinations will take place in areas of the sprawling country where the 
virus is most entrenched, said animal health director Musni Suatmodjo, 
according to the Associated Press. 

Suatmodjo said the vaccines, mostly imported from China, would be ready next 
week.

Third Extension for AMM 

The European Union on Thursday (7/9/06) extended its peace monitoring mission 
in the Indonesian province of Aceh for the second time, Agence France-Presse 
reported from Brussels. 

"Both the government of Indonesia and the Free Aceh Movement (GAM) have 
indicated their support for such an extension," the EU said in a statement 
announcing a three-month extension until December 15.

The Aceh Monitoring Mission (AMM) was initially scheduled to wrap up its work 
in March, but the slow pace of discussion of the law on governance in Aceh 
saw an initial extension to July, and then another to September 15. 

Elections are now expected to be on December 11. Nearly 200 monitors were 
initially stationed in Aceh but only around 35 will stay on to the end of the new 
term.

ECONOMY

More Rate Falls Likely: BI

Bank Indonesia (BI) cut its benchmark interest rate by 0.5 percentage point 
and indicated further rate reductions were to come. 

The central bank's board of governors cut its Bank Indonesia rate to 11.25% 
on Tuesday (5/9/06), the fourth reduction since monetary easing began in May. 

Coordinating Economics Minister Boediono said he expects more rate cuts in 
coming months as inflationary pressure continues to ebb. 

"It seems that we have been successful in taming inflation," Dow Jones 
Newswires reported Boediono as saying. "Hopefully, inflation will continue to fall, 
and be followed by rate cuts."

BI spokesman Budi Mulia also said there is room for additional rate cuts this 
year, citing an improved domestic economy and the pause in interest rate 
rises in the US, adding that external factors such as oil prices remained a threat 
to growth. 

Mulia added that lower rates had already led to an increase in bank lending, 
which rose to Rp10 trillion ($1.1 billion) last month from Rp1 trillion a 
month earlier.

President Susilo Bambang Yudhoyono meanwhile told a business conference in 
Singapore that Indonesia aims to double its GDP in the next 10 years.

"I am convinced that with the right policies and lots of hard work -- and 
perhaps a little luck -- Indonesia's GDP will double in the next 10 years."

The president said Indonesia would continue its efforts to attract foreign 
investment. "With the success of reforms, Indonesia is going to be an easy, 
attractive and profitable place for business to grow," he said.

The government sold its 25.9% in the country's seventh largest lender, Bank 
Permata, raising Rp1.76 trillion ($193.9 million).

State asset management company, PT Perusahaan Pengelola Aset (PPA), said 
buyers included a consortium of Standard Chartered Bank and PT Astra 
International, Reuters reported.

There were also indications that, despite problems on the foreign investment 
front, the domestic economy was set for a rebound. Research organization AC 
Nielsen found that total sales of consumer goods rose 10% in the first semester. 

The research shows year-on-year sales of consumer goods up to June 2006, of 
Rp60.1 trillion ($6.5 billion), a 12% increase from last year's Rp53.8 
trillion. On 2005 figures, Indonesia was in second place in Asian sales growth, after 
India. 

BUSINESS BRIEFS

MACROECONOMY

BI Cuts Key Rate to 11.25% 

Bank Indonesia (BI) cut its key interest rate on Tuesday (5/9/06) by 50 basis 
points to 11.25%, the fourth cut this year, seeking to boost spending and 
reflecting confidence inflation will fall further.

Analysts see the trend of rate cuts helping to fuel a recovery in spending 
but not immediately causing banks to cut their lending rates due to the risk of 
non-performing loans.

BI Governor Burhanuddin Abdullah said the central bank is confident of 
meeting its inflation target for this year of about 8% and 6% next year.  
"Considering the improvement in macroeconomic stability, and the confidence from the 
central bank on the inflation target... the board of governors decided to cut the 
BI rate by 50 basis points," Abdullah said. 
 
"Now we expect deposit rates will be cut faster.  If that happens, then we 
expect consumption for people in the middle and higher income brackets to 
increase," Kahlil Rowter, economist at CIMB in Jakarta, told Reuters.

Economy Likely to Grow 7% in 2008 - BI

The economy is likely to maintain its growth momentum at a rate of about 7% 
and single-digit inflation in 2008, Bank Indonesia (BI) spokesman Budi Mulya 
said Friday (8/9/06).

"For 2008, we expect gross domestic product growth at 7%, plus or minus one 
(percentage point), and (end-2008) inflation at 5%, plus or minus one 
(percentage point)," he was quoted as saying by Dow Jones Newswires.

The central bank's optimistic 2008 forecast comes as internal and external 
constraints have begun weighing on the 2006 expansion targets.  The government 
has forecast 2006 and 2007 growth of 6.2% and 6.3% respectively, which would 
outpace the 5.6% in 2005.

However the 4.97% on-year GDP rise in the first half of 2006 suggests the 
full-year target will be difficult to achieve without a significant uptick in 
investment and fiscal spending.  To achieve the 2008 target, the investment 
climate "must be improved to attract local and foreign investors," Mulya said.

Consumer Sales Up 10% in H1 - Study

Research by AC Nielsen shows there was no setback in sales of consumer goods, 
which -- modern and traditional markets combined -- grew by 10% in the first 
half of the year compared to the same period last year, The Jakarta Post 
reported on Monday (4/9/06).

"I estimate that by the end of 2006, we will see growth of at least 15%," 
said AC Nielsen retailer and business development director Yongky Surya Susilo.

The research also shows consumer goods year-on-year sales up to June of 
Rp60.1 trillion ($6.5 billion), a 12% increase from last year's Rp53.8 trillion.

Susilo said the 120% fuel price increase in October 2005 did have a 
significant effect, especially on 2005's total sales.  "In August 2005, I was so sure 
sales growth would reach around 25% by the end of the year, but then came the 
fuel price hike in October, forcing the growth to rest at 18%," he said.

According to an AC Nielson study in 15 Asian countries, Indonesia's 18% sales 
growth in 2005 was the second highest after India's 21%.  In 2004, when the 
country saw a 14% growth, Indonesia was the fastest growing in terms of 
consumer goods sales in Asia, as compared to India, in ninth place, with a 5.5% 
growth.

"Judging from the trend of sales in terms of volume from 51 product 
categories, excluding fashion goods, there are almost no decreases resulting from the 
fuel price hike," Susilo said.

"Recently, we collected data from bankers showing the use of credit cards in 
the first semester increased by 20%.  This proves that Indonesian people 
continue to consume regardless of the conditions at hand," he said.

Susilo also noted the high demand for electronics, such as televisions, DVD 
players, cellular phones and other tech-gadgets, in the country. 

Foreign Reserves Rise to $42b 

Indonesia's international reserves rose to $42 billion at the end of August 
from $41.13 billion at the end of July, central bank data showed on Tuesday 
(5/9/06).

Bank Indonesia (BI) said on its website that base money fell to Rp250.05 
trillion ($27.53 billion) at the end of last month from Rp251.14 trillion in the 
previous month, according to a Reuters report.

BI Awards Rp31.5t 1-Month SBIs 

Bank Indonesia (BI) said it has awarded Rp31.5 trillion worth of one-month BI 
Certificates (SBI) at a fixed rate of 11.25%, XFN-Asia reported on Wednesday 
(6/9/06).  The auction absorbed 80.32% of the incoming bids.

The one-month SBI rate is pegged to the benchmark BI rate, which was cut by 
50 basis points on Tuesday (5/9/06).

INVESTMENT

Boediono: IFC Report is an input not a target

Coordinating Minister for Economic Affairs Boediono downplayed a report by 
the International Finance Corporation on Indonesia's attractiveness as an 
investment destination, saying the reality was that investment was increasing. 

Caralee McLiesh, program manager and co-founder of the Doing Business 
Project, told reporters that improvements had been noted in Indonesia's regulatory 
environment, but more was needed. 

Boediono said that new foreign investment is picking up despite the slide in 
Indonesia's ranking in the IFC "ease of doing business" index.

"We should look at it as an input, not a target," Boediono was quoted as 
saying by XFN-Asia.  "We want the rank to improve but what is more important is 
that investment continues to rise."

He said investors believe that Indonesia has made progress in boosting the 
business climate.  The government should now focus on implementing planned 
reform packages, he added.

"In Batam, the situation is getting better," Boediono said, referring to a 
new Special Economic Zone established in cooperation with Singapore.  "If in the 
past, investors had left (the island), now they are coming in."

He also said he believes the investment climate will continue to improve in 
line with improved macroeconomic stability.

Meanwhile, Vice President Jusuf Kalla said Friday (8/9/06) he would work to 
streamline the process of starting new businesses.  Kalla said the approval 
process for business investment needs to be simplified, in part to attract more 
foreign investors to Indonesia.  

He said he hoped to move the average start-up time down to 50 days by next 
year, by partially deregulating the investment approval process and improving 
bureaucracy. 

IFC to Provide $350m for SMEs 

The International Finance Corp (IFC) said it will set aside $350 million to 
finance small and medium enterprises in Indonesia for the year ending July 2007.

IFC's programs are mainly related to SMEs offering technical assistance 
involving the banking sector in financing, IFC general manager, Chris Richards said 
here Wednesday (6/9/06), according to Antara.

IFC's investment in Indonesia since 2002 is expected to total $1 billion 
until June next year, mostly under the Program for Eastern Indonesia SME 
Assistance, Richards said.

In the previous year ending July 2005, IFC provided $167 million to finance 
SMEs in the country, up 21% from a year earlier.

Investors Build Fish Processing Plants

Two joint ventures of foreign and local companies have begun building fish 
processing plants in Aceh's Sabang and North Sumatra's Bungus for a total 
investment of Rp221.2 billion ($24.3 million).

The two are PT Sinar Pure Food International, a joint venture between 
Indonesian and Philippine companies, and PT Panca Mitra Multi Perdana, a joint 
venture between investors from Indonesia, Thailand and Singapore, Antara reported on 
Thursday (7/9/06).  They are part of nine fishing companies seeking a license 
to operate in the country.

The government has issued a regulation that foreign fishing companies will be 
allowed to operate in Indonesian waters only if they build fish processing 
plants in the country.

-End 1 of 2-

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Joyo Indonesia News Service
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