[Kabar-indonesia] 2 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 2 of 2

STATE CONCERNS

Domestic Air Passengers Up 13.5% in July

The number of domestic air passengers in Indonesia rose 13.5% in July to 2.75 
million from 2.42 million the previous month, the Central Bureau of 
Statistics said.

July is a peak season for air transport because of school holidays, bureau 
chief Rusman Heriawan said, according to Antara.  An increase was recorded by 
almost all airports, with Bali's Ngurah Rai leading with a growth of 23.7%.  
Other major airports that recorded a high increase included Makassar's Hasanuddin 
(18.8%) and Jakarta's Soekarno Hatta Airport (17.2%).

Soekarno Hatta led in the number of passengers totaling 1.09 million or 42.1% 
of the total number of domestic passengers.  In the first seven months of the 
year, the number of domestic air passengers totaled 16.72 million, marking an 
increase of 12% from the same period last year.

SOEs

SOEs' H1 Net Profits Up 25%

State-owned companies reported a 24.83% increase in net profit on the average 
in the first half of the year, compared to the same period last year.

Secretary of the office of the state enterprises minister, Said Didu, said 
less interference by the government and implementation of corporate goods 
governance have improved the performance of state enterprises, Antara reported on 
Tuesday (5/9/06).

"I am confident the government's earnings in net profits from state companies 
will exceed the target of Rp16.18 trillion ($1.8 billion) set by the 
government for 2007," Didu said.

In 2006, the government earned Rp16.3 trillion in dividend payments from 
state companies, excluding interim dividends from state oil and gas company PT 
Pertamina.

PRIVATE SECTOR

Excelcomindo Launches WiFi 

Cellular telecommunications operator, PT Excelcomindo Pratama on Wednesday 
(6/9/06) launched a high-speed internet access service based on wireless 
fidelity technology.

The company claimed that its WiFi internet access gives wider coverage than 
the usual hot spot internet connection.

It hopes that the new service will boost the company's position as the "first 
convergent telecommunication services in Indonesia, backed by its fiber optic 
network".

BANKS

Banks Told to Speed Up Rate Cuts 

Coordinating Minister for Economic Affairs Boediono has called on banks to 
reduce their lending rates at a faster pace after Bank Indonesia (BI) cut its 
key policy rate by another 50 basis points (bps) on Tuesday (5/9/06), XFN-Asia 
reported.

"We hope they will follow the lead of the BI rate cut and not hold for too 
long," he said, noting that banks have often been slow in reducing lending rates 
after cuts in the central bank's policy rate. 

The central bank cut its BI rate to 11.25% from 11.75%, saying inflationary 
pressures were easing.  It was the second time in two months it has cut the 
rate by 50 bps.

Boediono said the decision was a positive reflection of the improved 
inflation environment.  "Hopefully, the trend will be sustained so that the interest 
rate can be lowered further," he said.

He added that the government will do its part to keep inflation under control 
in coming months by ensuring adequate supplies of goods during the upcoming 
Islamic and Christian holidays. 

Separately, BI said in a statement that following its previous 50 bps cut in 
August, bank credit in the month grew to more than Rp10 trillion compared to 
only Rp1 trillion in July.

Single Presence Policy Delayed - Report

The central bank will delay the implementation of its "single presence" bank 
policy to 2010 from the initial target of 2008, Bank Indonesia (BI) Governor 
Burhanuddin Abdullah was quoted as saying by Kompas daily.

"What is certain is that the single presence policy has to be implemented at 
the latest by 2010.  There is still enough time for bank owners (to prepare 
for it)," Abdullah said.

BI plans to limit control by one shareholder to only one bank.  The policy 
will also require banks that share the same owner to merge.

Given the wide range of reactions it has received from the banking industry, 
from those in favor to those strongly opposed to it, the central bank has 
decided to delay the implementation of the policy.

Govt. Sells Permata Stake

The government sold its 25.9% stake in the country's seventh largest lender, 
Bank Permata, as part of an asset sales drive aimed at raising funds to plug 
the budget deficit.

State asset management company, PT PPA said in a statement it sold the stake 
at Rp875 per share, raising a total of Rp1.76 trillion ($193.9 million), 
Reuters reported on Tuesday (5/9/06).

It said the buyers included Asia-focused Standard Chartered Bank and 
automotive giant Astra International, both existing shareholders of the bank.

The Jakarta Stock Exchange halted trading in Permata shares on Tuesday due to 
the government's stake sale plan.  Permata shares jumped 3.9% the day before 
to Rp790, outpacing the 1.7% rise in the Jakarta index.

NISP Sets Aside $222m for Car Loans

Publicly listed Bank NISP said it will set aside up to Rp2 trillion ($222 
million) to finance the purchases of cars and motorcycles this year, Antara 
reported on Friday (8/9/06).

The bank will cooperate with carmakers and financing firms in providing loans 
for the purchase of cars, bank director Muliadi Hardja said, noting that Bank 
NISP's vehicle loans are less than its housing loans, which account for about 
72.29% of consumer credits provided by the bank.

He said consumer loans made up 31.2% of the bank's total loans in 2005.

POWER

Medco to Build Power Plant Next Year

PT Medco Energi International said it expects to begin building the 300-MW 
Sarulla geothermal power plant in North Tapanuli district, North Sumatra next 
year.

"We expect to start construction at the earliest (possible time) next year," 
Medco Energi corporate secretary, Andy Karamoy was quoted as saying by 
XFN-Asia.  He said the company is waiting to sign the agreement with state power firm 
PT PLN before starting the project.

Medco, together with other consortium members Ormat Technologies and Itochu 
Corp, had earlier received a preliminary mandate from PLN to build the power 
plant.  The Medco consortium replaced the original winning bidder Geo Dipa, 
jointly owned by PLN and state-run oil and gas firm PT Pertamina, after the latter 
pulled out of the project.

Bontang LNG Plant Plans Switch to Coal 

In a bid to save more gas for export, the government has decided to convert 
the gas-fired generators powering its Bontang liquefied natural gas facility in 
East Kalimantan into coal-fired ones, Mines and Energy Minister Purnomo 
Yusgiantoro said Tuesday (5/9/06).

Converting the power plants into coal-fired units would save about 220 
million cubic ft of gas daily, equivalent to 22 LNG cargoes annually, Yusgiantoro 
said, according to Platts Commodity News.

The $600 million conversion project for the 16 power units, each of which has 
a capacity of 12.5 megawatts, is expected to be completed by 2009.

The government intends to appoint a third party to undertake the conversion 
project, the minister said.  "If we carry out the program ourselves, it will be 
done only by 2010-2011.  If we appoint a third party, the job can be 
completed by 2009."  

"We need more gas.  On the other hand, we have much coal reserves.  This 
(switching from gas to coal) can also reduce our LNG export shortage," he added.

OIL AND GAS

Pertamina Stops Leaded Gas Production 

State oil and gas company PT Pertamina has stopped producing leaded gasoline, 
in line with the government program to reduce hazardous air pollution.

Head of Pertamina's technical services division, Rusdi Erwin, said Wednesday 
(6/9/06) his company has stopped producing leaded gasoline at all its 
refineries since July.  "All stocks of leaded gasoline are expected to run out this 
year.  Therefore, we will only sell lead-free gasoline next year," he was quoted 
as saying by The Jakarta Post.

Chairman of the Joint Committee for the Phase-Out of Leaded Gasoline (KPBB), 
Ahmad Safrudin, welcomed Pertamina's move, saying it is an important step 
toward cleaning up the air.   He said catalytic converters, which are needed to 
reduce vehicular emissions, could only be installed in vehicles if the fuel 
available in Indonesia is lead-free. 

Health experts have warned that lead-polluted air causes a variety of health 
problems including reproductive, heart and brain damage, particularly in 
children. 

Environmentalists have campaigned to stop leaded gasoline production since 
the late 1990s.  The government promised to stop producing the fuel in 2003, but 
the program was delayed due to financial problems. 

Safrudin said a survey carried out by KPBB, in cooperation with the office of 
the state minister for environment, showed that the lead content in gasoline 
in 20 cities across the country had declined significantly.  He also hoped 
that the government would pursue the development of bio-fuels and the use of 
natural gas for transportation in a further effort to reduce air pollution. 

Pertamina Sets Crude Output Target 

State oil and gas company, PT Pertamina expects to produce 160,000 to 170,000 
barrels per day (bpd) of crude oil this year, its president director Ari 
Soemarno said Thursday (7/9/06).

"But we have a very aggressive plan to make a significant improvement.  We 
expect that we can try to double production within two to three years time," he 
was quoted as saying by Platts Commodity News on the sidelines of an LNG 
conference in Singapore.

Soemarno's estimates are higher than earlier projected figures of 149,000 bpd.

Santos Finds Oil, Gas at Sampang PSC

Australian oil company Santos has discovered oil and gas at its Sampang 
production sharing contract in East Java.

The PSC's first exploration well, Wortel-1, flowed 18.5 million cubic ft per 
day of gas and 130 barrels per day of oil, a senior official at the upstream 
oil and gas regulator BP Migas said Tuesday (5/9/06).  Santos will be drilling 
several more wells in the area, he was quoted as saying by Platts Commodity 
News.

Santos is the operator of Sampang PSC with a 40.5% stake.  The remaining 
equity is distributed between Singapore Petroleum Corp. (36%), Cue Energy (13.5%) 
and local company Petrogas Oyong Jatim (10%).

Meanwhile, ConocoPhilips has sold its stake in all offshore gas blocks it has 
in East Java and plans to develop other blocks elsewhere in Indonesia, a 
deputy at the upstream oil and gas regulatory body BP Migas, Achamad Luthfi said.

The company also plans to sell the Ujung Pangkah and the Ketapang blocks off 
Madura.  "The reason I heard is that they want to concentrate on developing 
their gas blocks in Aceh, South Sumatra and Eastern Indonesia," Luthfi was 
quoted as saying by Antara. 

He said ConocoPhilips would make first offer to its partner Malaysia's 
Petronas for the Ketapang block and to Amerada Hess its partner in Ujung Pangkah.

Pertamina, Statoil to Ink Joint Ops Deal

State-owned oil firm PT Pertamina and Norway's state-owned Statoil ASA will 
sign a joint cooperation agreement in Oslo on Wednesday (13/9/06), a document 
obtained by Dow Jones Newswires indicated.

The memorandum of understanding, the first between the two firms, will be 
signed in Oslo by Pertamina chairman Ari Soemarno and Statoil chief executive 
Helge Lund during a state visit by President Susilo Bambang Yudhoyono, the 
document stated.

"The MoU provides the terms and conditions for analyzing and pursuing joint 
business opportunities in the area of exploration and production, both first in 
Indonesia, Norway and then in other countries," the document said.  "The 
cooperation between Pertamina and Statoil will be based on the latest technology 
from both sides."

The pending MoU reflects Indonesia's efforts to increase foreign investment 
in its oil and gas sector to reverse faltering output.  The deal will also 
boost Statoil's foothold in Asia.

The Norwegian firm is storing about 11.3 million barrels of crude oil in 
South Korea under a joint stockpiling deal with the South Korean government, 
according to Korean National Oil Corp, which oversees crude oil reserves jointly 
held by Seoul and foreign oil companies.

Govt. to Divest 5.31% Stake in PGN 

State Minister for State Enterprises Sugiharto said the government aims to 
divest a 5.31% stake in gas distributor PT PGN by the end of the year.

Sugiharto confirmed reports that the government is planning to sell a 5.31% 
stake in PGN out of its controlling 60% interest in the company.  "Yes, that's 
the portion of shares that will be sold.  That has been set even by the 
previous government," he was quoted as saying by XFN-Asia.

PGN's stake sale was originally planned for last year but was postponed after 
the government managed to raise funds from other revenue sources to cover 
last year's state budget deficit.

Meanwhile, PGN has been awarded "special rights" to manage the 
Cirebon-Karawang-Jakarta-Palembang natural gas transmission pipeline, downstream oil and gas 
regulator BPH Migas said Tuesday (5/9/06).

"The awarding of the special right... is meant to give legal certainties to 
investors," BPH Migas said in a press release, according to Dow Jones 
Newswires.  The holder of the right can lease the pipelines to other companies, the 
body said, without elaborating.

Besides PGN, BPH Migas also granted special rights to PT Energasindo Heksa 
Karya for gas distribution in the Cilegon area.

MINING

Indonesia to Raise Coal Output 

Indonesia expects to increase thermal coal production and coal exports next 
year because of rising demand at home and across Asia, a mines and energy 
department official said on Friday (8/9/06).

The government expects thermal coal output to increase 3.5% to about 175 
million tons in 2007 from an estimated 169 million this year, deputy director of 
coal development, Bambang Hartoyo told Reuters.  Coal exports are likely to 
rise to 128.6 million tons from 123.5 million during this period, he said.

"There has been some expansion of coal mines that will cause production to 
rise in 2007," Hartoyo said. "Demand for Indonesian coal in Asia is still good, 
that's why export will rise slightly in 2007."

Indonesia has coal deposits of about 38.9 billion tons, but about 60% of the 
reserves are of low quality, data from the mines and energy department shows.

Arutmin, Kobe to Develop 'Brown Coal' Plant

PT Arutmin Indonesia said it and Japan's Kobe Steel Ltd have signed an 
agreement to develop Indonesia's first upgraded brown coal (UBC) plant, at a cost of 
$68 million.

Arutmin vice president Kaz Tanaka said his firm will invest $10 million with 
the remaining $58 million coming from Kobe, XFN-Asia reported on Friday 
(8/9/06).

Tanaka said the UBC plant, located in Asam-Asam in South Kalimantan, will use 
technology developed jointly by research agencies and companies in Indonesia 
and Japan.  "We received full support both from the Indonesian and Japanese 
governments in developing the coal plant," he said.

He said the technology enables the upgrade of low-calorie coal of less than 
5,100 kilo calorie per kilogram (kcal/kg), to a level of more than 6,000 
kcal/kg.

The plant is expected to start "semi-commercial" operation in mid-2008 and go 
into full commercial production by mid-2009.  Initially it will upgrade 1,000 
tons of coal per day.

Arutmin, a unit of PT Bumi Resources, together with its partner, will boost 
their investment to $120 million to bring the plant to full commercial 
operation, Tanaka said. The high-calorie coal will be mainly for the export market, 
including Japan.

Mines and Energy Minister Purnomo Yusgiantoro said that by using the new 
technology, Indonesia's annual coal production could increase from the present 170 
million tons to between 200 million and 300 million tons over the next few 
years.

Newmont Offers 3% Stake in Unit to Govt.

An Indonesian unit of Newmont Mining Corp, PT Newmont Nusa Tenggara, has 
offered the government a 3% stake in the firm for $109 million, a Mines and Energy 
Department document showed on Monday (4/9/06).

The offer is part of a 1986 agreement under which Newmont Nusa Tenggara has 
to divest a part of its stake at regular intervals so that the government or an 
Indonesian company controls 51% of the company by 2010, according to Reuters.

The government does not have to buy the shares, but Newmont has to offer them 
first to the government and can eventually sell them to an Indonesian 
interest if the government decides not to take the offer.

The company is 80% held by foreign interests, with Newmont indirectly 
controlling a 45% stake.  Newmont Nusa Tenggara has been running a gold and copper 
mine on Sumbawa island since March 2000.

- End 2 of 2-

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Joyo Indonesia News Service
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