[Kabar-indonesia] 2: RI Trade and Investment News, 18 September 2006

[JoyoNews at aol.com]

The Coordinating Ministry for Economic Affairs
Republic of Indonesia
Jakarta
Monday, September 18, 2006

Trade and Investment News, 18 September 2006

Part 2 of 2

STATE CONCERNS

Agreement to Cut Rubber Exports by 10% 

Indonesia, Malaysia and Thailand -- the world's three largest rubber 
producers -- will cut their rubber exports by 10% if prices on the international 
market fall to $1.30 per kg.

The three countries, grouped together under the International Tripartite 
Rubber Council (ITRC), announced the decision after a recent meeting in Bangkok. 

"We've decided to cut our respective exports to boost prices, which have been 
falling in the last few weeks," Indonesian Rubber Producers Association 
executive secretary, Syarbaini Zain told Antara on Tuesday (12/9/06).   He said the 
price of SIR 20-type rubber had dropped from $2.30 per kg to only $1.76 per 
kg in recent weeks. 

Zain attributed the declining price to "incorrect" market speculation that 
Indonesia, Malaysia and Thailand have oversupplied the market.  The three 
countries produced about 6.4 million tons of rubber last year, commanding about 70% 
of the world's market share. 

"Besides cutting exports, we've also agreed to cut production by 4%," he 
said. 

Tighter Criteria for Setting Up New Airlines

The Transport Department said it will tighten the conditions required for a 
new airline to be established so that interested parties will have to produce 
capital of at least Rp50 billion ($5.6 million) and operate at least five 
aircraft.

The airline must also own two of the five aircraft while the remaining three 
could be leased, Director General for Air Transport M. Iksan Tatang said, 
according to an Antara report.

Under present regulations, a new airline is required to have only two 
aircraft with a minimum capital of only Rp10 billion.  "The revision of a government 
regulation on airline operation is final," Tatang said.  "The new policy is to 
improve the feasibility of the operator."

SOEs

Go-ahead for Toll Road Firm IPO

State-owned toll road operator, PT Jasa Marga said on Wednesday (13/9/06) it 
plans to list 15% of its shares in November to raise Rp2 trillion ($218.4 
million).

The firm also plans to raise Rp1 trillion from bonds, Jasa Marga corporate 
secretary Bambang Sulistyo said, according to a Reuters report.  Proceeds from 
the initial public offering (IPO) and the bond issue would be used to finance 
construction of toll roads as well as for working capital.

"We have received the permission from the (State Enterprises) Minister for 
the IPO earlier this month," Sulistyo said.  "The IPO is in the process.  In 
November we will list the shares on the Jakarta Stock Exchange.  We won't wait 
until December."

The firm, which controls more than 75% of the country's toll roads, plans to 
build three toll roads as part of the government's efforts to improve the 
country's creaking infrastructure.

The company had earlier announced plans to sell a 17% stake in PT Citra Marga 
Nusaphala Persada, a publicly listed subsidiary, to raise Rp400 billion.
 
PRIVATE SECTOR

Telkomsel Starts Offering 3G Service 

PT Telkomsel on Thursday (14/9/06) officially began offering the country's 
first high-speed wireless service for mobile phones, following a successful 
trial operation in August, reported The Jakarta Post.

The third-generation, or 3G, service allows users to download video clips and 
surf the Internet on their mobile phones at high speed.  Currently, the 
service is only available in Jakarta. 

Bambang Riadhy Oemar, Telkomsel's director for planning and development, said 
3G service is now available in several main areas of the capital:  

"We have built 300 base transceiver stations in Jakarta to provide 3G 
service," he.  He said Telkomsel would soon expand coverage to other cities, 
including Bandung in West Java, Surabaya in East Java and Medan in North Sumatra. 

Oemar said Telkomsel would increase the number of base transceiver stations 
to 600 by the end of this year to enable it to provide high-speed wireless 
service in these cities.  Telkomsel, he said, will invest about Rp3 trillion 
(about $326 million) to increase the number of base transceiver stations to 3,000 
within three years as it expands its 3G coverage. 

As many as 60,000 customers have registered for the service since Telkomsel 
launched the trial operation last month, he said, noting that the company was 
expecting only about 10,000 people to sign up for 3G during the one-month 
trial.  "We are seeing stronger demand." 

Telkomsel is one of five companies that won licenses to operate 
third-generation mobile telecommunications services in Indonesia.  In addition to 
Telkomsel, the government also awarded 3G service operating rights to PT Indosat, PT 
Excelcomindo Pratama, PT Natrindo Telepon Seluler and PT Hutchison CP 
Telecommunications. 

Excelcom said Thursday it had passed the trial operation and received 
clearance to offer 3G in Greater Jakarta, Bandung, Batam, Denpasar, Surabaya and 
Medan. It hopes to begin providing the service by the end of the year.  

Astra Int'l Considers Coal Mining Entry

PT Astra International is considering buying coal mining companies because of 
the prospects for the coal industry, company president Michael Ruslim said.

"We want to get back into the mining business," Ruslim told reporters 
recently.

According to XFN-Asia, he did not say which companies Astra International 
would like to buy, but he did identify two firms which the company is not 
interested in -- PT Kaltim Prima Coal and PT Arutmin Indonesia, both units of PT Bumi 
Resources.

Astra International used to be in the coal business through 58%-owned 
subsidiary PT United Tractors, which owned 60% of PT Berau Coal.  United Tractors 
sold this stake in 2004.

United Tractors finance director Gidion Hasan said Astra could invest in coal 
mining companies itself, through United Tractors, or through another, 
dedicated subsidiary that has yet to be established.

He said Astra International could buy one big coal firm or a number of small 
ones.  Astra International is 50.09%-owned by Singapore-listed Jardine Cycle & 
Carriage.

BANKS

Banks Set to Reduce Rates for Real Estate Sector

The banking sector will likely cut its interest rate, especially in the real 
estate sector, in an effort to spur business activities following the 
Insurance Deposit Agency's (LPS) decision to lower its rupiah deposit rate by half a 
percentage point to 11.25%, Panin Bank vice president director Roosniaty 
Salihin said Thursday (14/9/06).

The LPS' guarantee rate reduction has not only paved the way for financial 
institution development, but also national economic progress, Salihin was quoted 
as saying by Antara. 

The reduction, she said, is a good move to revive infrastructure development, 
which has been functioning as one of national economic prime-movers.  
Infrastructure project development in the country will hopefully absorb a significant 
number of job seekers that in the long run would improve the purchasing power 
of the public, she said.

Meanwhile Panin Bank's retail director Kostaman Thayib predicted that banks 
may cut their rates by 50 points or more depending on their capability to 
improve business performance.  The lowering of bank interest rates might cut cost 
of funds and increase the net interest margin of banks, he said.

The Insurance Deposit Agency (LPS), which guarantees deposits at the nation's 
banks, cut its rupiah deposit rate by half a percentage point, paving the way 
for lower lending rates after the central bank's own key rate cut to 11.25% 
the previous week, The Jakarta Post reported.

The agency lowered the maximum guaranteed interest rate for 
rupiah-denominated deposits for the one-month period from September 15 to October 14 to 11.25%, 
LPS chief executive Krisna Wijaya said in a statement released Monday 
(11/9/06). 

It left the maximum guaranteed rate for dollar deposits at 5%, and the rate 
for all deposits at rural savings and loan banks at 15.75%. 

Bank NISP Eyes $50m Loan from IFC

The management of publicly listed Bank NISP said it hopes to receive a $50 
million loan from one of its shareholders, International Financial Corp (IFC), 
in the next two months.

NISP president, Pramukti Surjaudaja said the loan from IFC, which owns 7.17% 
of the bank, will be used to finance long-term credit, Antara reported on 
Tuesday (12/9/06).  The bank aims to increase its outstanding credit to Rp15 
trillion ($1.66 billion) by the end of the year from Rp13 trillion at present.

With an increase of 20% in credit disbursement, the company hopes to chalk up 
a proportional rise in income.

POWER

PLN Picks 43 Bidders for Power Plants

PT PLN has selected 43 local and overseas bidders as potential candidates to 
build coal-fired power plants, an official from the state-owned power firm 
said on Monday (11/9/06).

"There were more than 200 companies that applied to build the power plants, 
but only 43 qualified for further evaluation before we announce the winner 
soon," PLN spokesman, Mulyo Aji was quoted as saying by Reuters.  

Chinese bidders selected included Harbin Power, Shanghai Electric and 
Dongfang Electric.  Japanese firms chosen as bidders included Marubeni Corp and 
Mitsubishi Corp, while South Korea's Hyundai Engineering and Construction Co Ltd 
was also named.

OIL AND GAS

Japan Interested in Java Refinery Project - Pertamina

State oil and gas company PT Pertamina has heard from several Japanese 
companies that are keen to participate in a new 300,000 barrel-per-day refinery 
project by Pertamina subsidiary PT Elnusa, a senior Elnusa official said Wednesday 
(13/9/06).

The Japanese companies include Marubeni, Sumitomo, Chiyoda and Toyo 
Engineering, Elnusa president director, Rudy Radjab said, according to Platts Commodity 
News.

Elnusa plans to build a 300,000 bpd refinery in Java.  Venezuela would 
provide 150,000 bpd of crude feedstock for the project, while the remaining 150,000 
bpd would come from Iran.  About 70% of the plant's output would be exported 
and 30% allocated to the local market, Radjab has said.

Sumitomo has expressed interest in taking a 20% stake in the project and 
possibly buy petroleum coke from the plant.  Marubeni has also expressed interest 
in buying an array of products from the refinery, Radjab said.

Meanwhile, Chiyoda and Toyo Engineering are interested in taking part in 
construction of the project, he added.  "I expect Japanese' expression of interest 
could be realized in a memorandum of understanding soon," he said.

Elnusa and the National Iranian Oil Refining and Distribution Co signed a 
memorandum of understanding in May to build the refinery, which would start 
operations in 2010.

Iran's NIORDC would hold 25% and Elnusa 30%.  Venezuela's PDVSA would also 
cooperate on the project by holding 25%, while Japan's Sumitomo has expressed 
interest in having 20% in the project as well, he said.

Elnusa is currently seeking loans from the Japan Bank International 
Cooperation (JBIC) and Islamic Development Bank to help finance the $4 billion project. 
 The 70% of investment is expected to come from loans, while the remaining 
30% will be from the shareholders, he said.

Govt. Expects Rp3t from PGN Stake Sale

The government expects to raise Rp3 trillion from the planned sale of a 5.3% 
stake in state gas distributor PT PGN, State Minister for State Enterprises 
Sugiharto said.

The government may sell the stake at any time from now until the end of this 
year, he said, according to XFN-Asia.

Sugiharto also said the government is only interested in selling at a premium 
price, given that PGN has a number of gas transmission projects coming on 
stream this year.

"I think the current PGN price is still below its fair level," he said, 
adding that Rp16,000 to Rp18,000 represents a fair price.

MINING

Govt. Suspends 5% Coal Export Tax 

The government, effective September 13, allowed coal producers to cease 
paying a 5% export tax on coal while the Finance Department is in the process of 
finalizing the removal of legislation regarding the tax, an official said 
Thursday (14/9/06).

"Beginning September 13, the government has decided that the export tax will 
be removed," Director General of Customs Anwar Suprijadi said, according to 
Dow Jones Newswires.

Earlier this year, the Finance Department announced that it planned to 
replace the export tax with a 10% value-added tax on coal by January 1, 2007.

Thai coal miner Banpu PCL, which has major coal resources in Indonesia, said 
Thursday it will be able to save about $27 million a year from the suspension 
of the 5% tariff on coal exports.

"We were subject to export tax of around $1.5 per metric ton on our estimated 
annual export of 18 million tons.  The tax suspension will allow us to save 
that much each year," Somruedee Sompong, Banpu's group senior vice president 
for finance, said in a telephone interview.

The tax waiver will allow the company to save $7.5 million this year, she 
said.  However, it is still unclear whether the Indonesian government will 
consider reimbursement of export tax previously paid by coal exporters.  "Should the 
Indonesian authorities decide to pay back those taxes, we will be eligible 
for around $20 million of tax refund," said Sompong.

Suprijadi declined to elaborate on reimbursement plans, saying these will be 
determined in a later meeting for that purpose.

The government imposed the coal export tax in October last year, but the 
tariff has been strongly opposed by the country's mining association.

Separately, Indonesian authorities have been investigating Banpu's coal 
mining operations at its Trubaindo mine following complaints by residents in the 
surrounding area who suspect that waste water from the mine has caused 
environmental problems.

Sompong expects the probe to be concluded within one to two weeks, and she is 
confident that Banpu has complied with the country's environmental standards.

Indonesia to Gain from Coal Transport Cost Surge 

Indonesia is expected to gain from a recent surge in coal transport costs 
because it is closer to the market than its rivals.

The coal freight rate has surged 200% this year compared to that in 2005 due 
to the limited number of ships available for lease, the Indonesian Coal 
Society (ICS) said, according to Antara.

Indonesia is closer to major coal markets in East Asia -- South Korea, Japan 
and Taiwan -- compared to its main rival supplier Australia, ICS director, 
Singgih Widagdo said.

Widagdo said most analysts agree that there will be no sharp fall in coal 
prices in 2007 as major buyers, such as Japan, have signed contract prices with 
suppliers such as China.

He said the prices are predicted to fall to $48-$49 per ton in 2007 from $53 
in 2006 in Japan.

Meanwhile, the Indonesian National Ship-Owners Association (INSA) said the 
country needs 15 Panamax ships, worth $390 million, for coal transport, its 
chairman Oentoro Surya said, according to Antara.

Business in coal transport is expected to be brisker with the government plan 
to build coal-fired power plants with a total capacity of 10,000 megawatts, 
to be completed before 2010.

Starting 2010, some 35 million tons of coal will be needed annually to feed 
power plants and more ships will be needed to guarantee supply.

Surya said INSA members should take the opportunity and not to let the 
profitable business fall into the hand of foreign ships.

Timah Discovers 5,000 Tons of Tin Reserves

Indonesian mining firm PT Timah has discovered 5,000 tons of tin reserves in 
Riau Islands, the company said Tuesday (12/9/06), according to Xinhua.

Explorations in Singkep district found tin reserves of 0.385 kg per sq m, the 
company's corporate secretary Prasetyo Saksono said in a report to the 
Jakarta Stock Exchange.  "The preliminary results until August 2006 suggested new 
(tin) reserves of 5,000 tons with the content of 0.385 kg per sq m.  But 
definite results must wait for laboratory tests," he said.

The explorations cost the company Rp10.6 billion.

Archipelago Resource Swings into Profit in H1

Archipelago Resources PLC reported a gain in the first half to end-June of 
$289,050, up from a loss of $293,822 the previous year.

The company said its 85%-owned Toka Tindung gold project in Sulawesi has a 
defined resource of 1.7 million oz gold equivalent of which 0.9 million oz will 
initially be mineable by open pit, AFX reported on Thursday (14/9/06). A 
drilling program is scheduled to commence in October.

A number of operating permits remain to be issued before production can 
commence in 2007 and the company said it thinks it is on track to receive these 
permits in coming months, in line with the current development timetable.

Consortium to Build Ammonium Nitrate Plant

An Indonesian consortium will build a $115 million ammonium nitrate factory, 
said to be the largest in Southeast Asia, in East Kalimantan, Antara reported 
on Monday (11/9/06).

A consortium consisting of state-owned PT Dahana, PT Suma Energi Nusantara, 
state-owned fertilizer company PT Pupuk Kalitim and PT Parna Raya will start 
building the factory next year and complete it by 2008.  The plant will have an 
annual production capacity of 200,000 tons.

The consortium will cooperate with the world's largest producer of ammonium 
nitrate, Norway's Yara AB, which will provide the technology.  Ammonium nitrate 
is a basic material for explosives.

-Part 2 of 2-

------------------------------------------
Joyo Indonesia News Service
------------------------------------------