[Kabar-indonesia] 1: 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 1 of 2

Highlights 

Politics 

* A survey finds that 60% of Indonesians 
  happy with their government
* Terrorists' helper  jailed for 15 years 

Regions 

* Batam sees protests at International 
  Monetary Fund-World Bank meeting 
* UN calls for international aid for 
  Indonesia's avian flu fight 

Economy 

* Coordinating Economics Minister says 
  7% inflation feasible by year-end

Business Briefs 

Macroeconomy 

* Government, house agree on new 
  budget projections 
* Bank Indonesia governor points to 
  benchmark rate of 10% by year-end 
* Foreign exchange reserves tipped 
  at $43 billion by year end

Investment 

* Infrastructure projects detailed 
* Foreign capital inflows in first half 
  hit $6.66 billion 

State Concerns 

* Indonesia, Malaysia and Thailand 
  look to cuts in rubber exports 
* Tighter conditions for establishing 
  airlines 

SOEs

* G0-ahead for Toll Road Firm IPO

Private Sector 

* PT Telkomsel starts offering 
  3G services 
* PT Astra International may 
  enter coal mining 

Banks 

* Interest rate cuts for real 
  estate sector 

Power 

* State Utility PLN short-lists 
  43 firms for power projects 
* PLN to spend $2 billion on 
  transmission networks

Oil & Gas 

* Several Japanese companies 
  keen to join refinery project 

Mining 

* Government scraps export 
  tax on coal 
* Indonesia in sound coal export 
  position as shipping rates rise 

POLITICS

Poll Shows Stronger Support 

A market research firm indicated on Thursday (15/9/06) that there is strong 
popular support for the government of Indonesia. 

Roy Morgan Research found in its Good Governance Monitor that the Yudhoyono 
government scores high marks for trust, management, its anti-corruption 
campaign and its efforts to promote democracy. 

"Only 39% of respondents now agree with the statement, "I don't trust the 
current government," down from 41% at the end of 2005," the survey reported. 

Debnath Guharoy, the Asian regional director for Roy Morgan Research, said 
that as the public recovered from the painful impact of twin fuel price hikes in 
2005 it has once again thrown its weight behind the government. 

"Despite natural calamities in Indonesia and spiralling fuel prices across 
the globe, that's a creditable outcome," Guharoy said. 

Every 90 days Roy Morgan Research interviews more than 6,000 respondents aged 
14 and older, randomly picked across Indonesia's 16 provinces and covering 
more than 90% of the country's population. 

The pollster interviewed 6,233 people during the April-June quarter. It talks 
to more than 25,000 respondents annually.

The survey found 60% of respondents believed the government had done a good 
job of running the country. 

The public has also grown comfortable with democracy. "Seventy-six percent 
agree with the statement that democracy is working in Indonesia," the survey 
found. 

Jakarta Seeks Sole UNSC Candidacy 

With support from the majority of the United Nations members already in hand, 
Indonesia is now trying to persuade Nepal to drop its bid for a seat at the 
UN Security Council, paving the way for it to become Asia's sole candidate.

"Of course, we respect Nepal's right to bid for the Security Council 
membership, and we are sure that we can win the seat, given our current support. But 
we want Asia go out with one voice, and support Indonesia only," Foreign 
Ministry secretary general Imron Cotan told The Jakarta Post on Friday (15/9/06).

After South Korea's recent withdrawal from the race, the only other contender 
for the seat, which is reserved for a single Asian nation, is Nepal.

The election for the non-permanent seat will take place during a UN meeting 
on October 16 in New York.

Cotan said most countries had expressed their commitment to support 
Indonesia's bid in written or verbal form after the Foreign Ministry had lobbied most 
UN members.

"Efforts to win the seat are directly under the foreign minister's (Hassan 
Wirayuda) personal command. I have the responsibility to persuade 15 countries. 
All of these countries support our bid. Ireland, for instance, gave its 
support to Indonesia straight away," Cotan said.

Earlier Wirayuda, who will travel to New York for the UN General Assembly 
meeting at the end of the Non-Aligned Movement (NAM) meeting in Havana, expressed 
confidence that Indonesia would win the seat.

He said the country, as the world's most populous Muslim nation, deserved to 
have wide support from the international community because it had a good track 
record in helping maintain world peace.

Militant Jailed for 15 Years

The Denpasar District Court on Thursday (14/9/06) sentenced a militant to 15 
years in prison for helping plan the 2005 Bali bombings that killed 20 people. 

Anif Solchanudin - one of four men to stand trial for involvement in the 
attacks on three crowded restaurants - also was found guilty of hiding information 
about the whereabouts of Southeast Asia's most wanted terror suspect.

The court handed down a 15-year sentence - five years more than prosecutors 
demanded - because the 24-year-old militant also offered to act as a suicide 
bomber in the October 1, 2005 strike.

UN Force Faces Delays

Indonesia has delayed sending troops to join a UN peacekeeping mission in 
Lebanon until next month owing to congestion on the ground, a military spokesman 
said on Friday (15/9/06). 

Vice Admiral Mohamad Sunarto said an advance team of 125 would now depart on 
October 10 and the main body would leave on October 24. The earlier plan had 
been for the force to be in place by the end of this month. 

He said that the delay had been requested by the UN Interim Force in Lebanon 
(UNIFIL) for logistical reasons. "It is because of the congestion and 
organizing UN troops there." 

Israel had initially objected to peacekeepers coming from nations not 
recognizing the Jewish state, but later relaxed that stance. Indonesia has no 
diplomatic ties with Israel.
 
The UN force, known as UNIFIL II, is being deployed in the south of Lebanon 
after a truce halted Israel's 34-day war with Hizbollah on August 14. 

The UN Security Council resolution that led to the truce called for 15,000 UN 
troops to join a similar number of Lebanese army troops in the south of the 
country. 

Another Indonesian military spokesman, Coll Ahmad Yani Basuki, said the 
Indonesian force would total 850, lower than the roughly 1,000 talked about 
previously.
 
REGIONS

Batam on Stage in Bank-IMF Protests 

Industrial Batam island is getting its chance to star as the venue for 
discussion of First World global financial management, as the World Bank and 
International Monetary Fund (IMF) met in neighboring Singapore. 

The NGO meeting at the island's haj dormitory produced a wave of criticism of 
the effects of World Bank-IMF policies. 

Singapore said Friday it would reverse its decision to bar 22 activists from 
attending the IMF-World Bank meetings, allowing most of them into the country, 
the Associated Press reported, but continued to take criticism for limiting 
the role of activists.

The forum in Batam is being attended by some 600 activists representing 
international civil society organizations, including Oxfam International, Infid, 50 
Years is Enough, South Jubilee, Bank Information Center and the North East 
Civil Society Initiative Against International Financial Institutions. 

UN Calls for Bird Flu Aid 

A senior United Nations official said Friday (15/9/06) that bird flu remains 
a major problem in Indonesia despite enormous progress and called for 
international financial aid to combat the disease. 

"I have been informed about the enormous progress that is taking place in 
Indonesia's war on bird flu, particularly in the last eight to 12 weeks," David 
Nabarro, senior UN system coordinator for avian and human influenza, told a 
press conference, according to Kyodo News.

"I'm very pleased to see an increased focus on animal health services and on 
what we call behavior change communication," he said. 

Nabarro stressed that bird flu remains a major problem in Indonesia and 
expressed particular concern about the time approaching for birds to migrate from 
north to south, which will be an issue of global significance. 

"I'm not at all saying it's under control," he said. "We have come a long way 
in recent weeks, but we have got a long way to go still to make sure that the 
risks caused by avian influenza can be brought properly under control in 
Indonesia." 

"We agreed today that from now on, there will be a checklist to describe how 
we will expand these new efforts so they do cover the whole of the country, 
but of course, the expansion of animal health services and behavior change 
communications needs money," he added.        

Nabarro said he had agreed to cooperate with Coordinating Minister for 
People's Welfare Aburizal Bakrie to get additional resources from national and 
international sources. 

"I am, like you, frustrated that we still have not been able to get to 
Indonesia resources that you need to enable you to fight against bird flu with all 
the energy that is necessary," Nabarro said. 

The World Health Organization on Thursday announced that it had registered 
two more cases of bird flu in Indonesia, including one fatality, which had 
earlier not been recognized by the body, raising the death toll to 49 out of 65 
cases. 

The first case, according to the WHO, occurred in a five-year-old boy from 
Bekasi in the suburbs of Jakarta. The boy developed symptoms on 4 March 2006, 
was admitted to hospital on 6 March, and died on 19 March. 

AMM Extension Confirmed 

The Aceh Monitoring Mission (AMM) said on Monday it would extend its stay to 
December when the first direct elections will be held in the province. 

The AMM, whose term was to have ended on September 15, will stay on with a 
heavily reduced force of 36 monitors, continuing to oversee the peace deal 
between Jakarta and the separatist Free Aceh Movement (GAM) signed last year. 

The AMM, which has twice previously extended its mandate, was originally made 
up of more than 200 European and Asian monitors. 

"The AMM will provide international presence in the run up to local 
elections, confirmed for 11 December 2006. However, the AMM will not observe the 
elections as it is not within its mandate," it said. 

A separate election observation mission from the European Union has been 
invited by the Indonesian government to observe the elections, the AMM said. 

Non-Organic Troops Out of Timor Border

The Indonesian Army says it will pull out all non-organic troops from the 
border with East Timor next month, saying conditions had improved. 

"As of next October, all non-regular troops posted in border areas will be 
pulled out from the areas," District Military Command 161/Wirasakti chief Col. 
Arief Rachman said Friday (15/9/06), Antara reported.

Army Chief of Staff Djoko Santoso during a function in Bandung, West Java, on 
Monday, said that troops coming from Java would be withdrawn because the 
condition in the area was considered already secure.

"We will not assign any more troops to guard the Indonesian - East Timor 
borders because we already have good cooperation with the neighboring country. We 
will withdraw all the troops that came from Java," he said.

ECONOMY

Govt. Gears Up for Infrastructure Push 

With all major economic indicators heading in positive directions, the 
government began to gear up for its November push for investment in infrastructure 
projects. 

Vice President Jusuf Kalla said Friday (16/9/06) that the government will 
offer domestic and foreign investors infrastructure investment 'partnership' 
projects at the twice-delayed conference. Of the amount, Rp70 trillion aims at 
power grid development, Rp50 trillion for roads and Rp50 trillion for housing, 
Kalla told reporters, Dow Jones Newswires reported. 

A Ministry of National Development Planning document cited by Dow Jones said 
the government would offer a total of 110 infrastructure projects for 
investment.

They will include 50 toll road projects, 27 water projects, 14 power 
projects, seven gas pipeline projects, four port projects, one railway project, one 
ferry terminal project and one telecommunications project, the document said.

German Vegarra, International Finance Corporation (IFC) country manager for 
Indonesia and Malaysia, said the World Bank's finance arm would take part in 
some infrastructure work, describing it as "a great opportunity". 

"Our executive vice president, Lars Thunnel, will be in Jakarta this week to 
meet Pak Jusuf Kalla and discuss ways the IFC can quickly support the 
development and financing of a few key projects," he told The Jakarta Post.

He added that the IFC is also prepared to offer AAA global standing to 
partially guarantee infrastructure bonds in the local and international bond markets.

"We are fully committed to grow our support for Indonesia. I personally want 
to see this country among the five largest exposures for the IFC in less than 
two years," Vegarra said.

For its part, the government said it had earmarked Rp2 trillion ($218 
million) for land clearance for infrastructure projects. It is planning to spend a 
total of Rp66.1 trillion on infrastructure in 2007. 

In Singapore, Trade Minister Mari Pangestu was lobbying for more investment 
support for Indonesia at the International Monetary Fund (IMF) and World Bank 
meeting. 

She said she hoped to explain both the economic reform process and the social 
reform program, which was aimed at addressing social inadequacies and 
poverty. 

She was also keen to attract interest to the new Special Economic Zone on 
Batam, Bintan and Karimun islands. "The idea of special economic zones is to have 
islands of best practices which in the end will be replicated nationally. 
This is a manageable way to approach things in the short term".

Senior economic minister Boediono said Friday that the consumer inflation 
rate may be below 7% by the end of the year, although he added that it is 
uncertain whether the central bank's target interest rate will fall below 10% by that 
time.

"Below 7% will be possible," he told Dow Jones Newswires in an interview.

Boediono noted that lower interest rates are less attractive to foreign 
investors, and that the government is aware of the risk of triggering capital 
outflow.

Consumer prices rose 14.90% in August from a year earlier but increased only 
0.33% on-month.

Boediono said he was confident Indonesia could achieve its growth targets 
even with a global trade cool-off, noting that exports represent only 30% of 
gross domestic product. 

Indonesia's recovery was in an "early stage," giving it greater upside growth 
potential. "There is an extra force to move beyond what is dictated by 
global...growth," Boediono said.

Analysts were pointing to gains of up to 20% across the board at the Jakarta 
Stock Exchange in 2007, adding that the market was cheap by regional 
standards, given expectations of strong corporate earnings. 

Finance Minister Sri Mulyani Indrawati said the government was expected to 
have $43 billion in foreign reserves in the central bank by the end of the year, 
allowing it to use around $3.6 billion to pay off its debts to the IMF. 

The move to quit the IMF rescue program completely is politically important 
for the government, and Indrawati said it would save the government $800 
million in saved interest payments. 

On the investment front, San Miguel announced it would build a modern feed 
mill in Manado to produce cheaper feed products for Mindanao's animal and halal 
poultry industries. No investment figure was announced. 

BUSINESS BRIEFS 

MACROECONOMY

Govt. Cuts 2006 Growth Target 

The government and the House of Representatives on Tuesday agreed to cut the 
2006 economic growth target in the current budget to 5.8% from 6.2%.

Government officials had in the past said it would be difficult to achieve 
the original 6.2% target as the economy continues to suffer from the more than 
doubling of fuel prices in October last year.

The government and parliament also agreed to increase the budget deficit 
target to Rp40 trillion, or 1.3% of gross domestic product, from Rp22.4 trillion 
originally, or 0.7% of GDP.  "The government will continue fiscal consolidation 
efforts" despite the rising target, Finance Minister Sri Mulyani Indrawati 
said in a speech to legislators, according to Dow Jones Newswires. 

The government increased the spending target to Rp699.1 trillion from Rp647.6 
trillion, as power and agricultural subsidy costs are expected to rise.  The 
revenue target was raised to Rp659.1 trillion from Rp625.4 trillion.

The budget's inflation target for the year was kept at 8%, while the average 
dollar-rupiah exchange rate was revised to Rp9,300 from Rp9,900.

The projected average price of Indonesian crude oil was raised to $64 per 
barrel from $57 per barrel, and the crude oil lifting target cut to 1 million 
barrels per day (bpd) from 1.05 million bpd.

The state budget deficit in the eight months to August totaled Rp10.16 
trillion, with spending reaching Rp360.97 trillion, the Finance Department said, 
according to XFN-Asia.

Actual tax receipts in the first eight months reached Rp248.44 trillion while 
non-tax revenue totaled Rp101.46 trillion.

BI Sees End-2006 Benchmark Rate at About 10%

The benchmark Bank Indonesia (BI) one-month rate may ease to about 10% by 
end-2006 if on-year inflation declines to 7% in the same period, BI Governor 
Burhanuddin Abdullah said Monday (11/9/06).

BI cut its benchmark one-month rate 50 basis points to 11.25% early this 
month, the fourth such cut since monetary policy unwinding began in May. 

"If we can achieve (on-year) inflation of about 7% this year, hopefully the 
(benchmark) interest rate can approach about 10%," Abdullah said.

Abdullah reiterated official government 2007 budget projections of 6.5% 
on-year inflation and an 8.5% interest rate for the one-month BI Certificate (SBI) 
notes.  These forecasts are "realistically achievable", he said.

Rupiah to Average 9,200 to Dollar in 2006 - BI 

The rupiah is likely to average 9,200 per dollar this year, the central bank 
governor said on Monday (11/9/06), in remarks that dealers said signaled it 
sees the currency holding around current levels for the rest of the year.

"The rupiah's stability has been due to improving macroeconomic indicators, 
attractiveness of investing in the rupiah as well as an easing in upward (US) 
interest rate pressure," Bank Indonesia (BI) Governor Burhanuddin Abdullah was 
quoted as saying by Reuters.  "The rupiah averaged 9,183 to the American 
dollar in the January to August period and we forecast the average rate for the 
rupiah this year to be 9,200 per dollar."

The rupiah has gained about 8% so far this year following a surge of foreign 
fund inflows seeking high-yielding assets such as government bonds, and in 
anticipation of lower local interest rates in line with an expected easing in 
inflation.

Forex Reserve May Reach $43b 

The central bank said Monday (11/9/06) the country's foreign exchange reserve 
could reach $43 billion by the end of the year, which would enable the 
government to repay remaining debts from the International Monetary Fund (IMF).

The international reserves are moving constantly in the upward trend and 
already reached some $42 billion in August, Bank Indonesia (BI) Governor 
Burhanuddin Abdullah said on the sidelines of a hearing with legislators.

"If the international reserves are enough to finance imports for 4.5 months, 
the debts (from IMF) will be paid off," he said, according to Xinhua.

Indonesia in June paid half of its remaining debts to the IMF and still owes 
$3.8 billion.

Indonesia Swaps Rp897b Govt Bonds

An Indonesia auction to swap short-term rupiah debt for long-term paper got a 
positive response on Tuesday (12/9/06), amid anticipation of further interest 
rate cuts after two consecutive months of 50 basis point cuts by the central 
bank, Reuters reported.

Foreign investors have been attracted to Indonesian bonds as they offer one 
of the highest yields in Asia and prices are expected to increase as the 
country has entered a declining interest rate environment.

The government swapped Rp897 billion ($98.35 million) of Indonesian 
government bonds maturing between 2007-2009 into 12-year debt FR0038 through an auction 
on Tuesday, out of Rp1.56 trillion of incoming bids.

The long-term paper was priced to yield 11.64%, lower than a yield of 11.82% 
for the same paper in the previous auction on August 22.

BI Awards Rp37.46t of 1-Month SBIs 

Central bank, Bank Indonesia (BI), said it has awarded Rp37.46 trillion worth 
of one-month BI Certificates (SBIs) at a fixed interest rate of 11.25% during 
Wednesday (13/9/06) auction.

It said all the bids made were absorbed, XFN-Asia reported.

INVESTMENT

Govt. to Seek Investment Reform

Indonesia says it will press ahead with a regulation on labor to improve the 
investment climate.

Labor Minister Erman Suparno told Reuters on Thursday (14/9/06) plans to seek 
parliamentary approval for the revised labor law had been dropped and Jakarta 
instead plans a new government regulation.

"The substance of the proposal is especially how to make the relationships 
between employers and labor more conducive in the future," Suparno said.  "The 
interest of the employees will not be sacrificed, while businesses can still 
survive."

The minister said the timeframe for the regulation would partly depend on the 
results of meetings with labor unions scheduled for Friday (15/9/06) and with 
industrial associations later on.  

Foreign Capital Inflows Total $6.66b in H1 

Foreign capital inflows to Indonesia totaled Rp60 trillion ($6.66 billion) in 
the first half of the year, significantly strengthening the rupiah, Bank 
Indonesia (BI) Deputy Governor Hartadi A Sarwono said.

The capital inflows consisted of Rp30 trillion to the oil and gas sector, and 
Rp30 trillion, including Rp10 trillion in loans, to other sectors, Sarwono 
said, according to an Antara report on Tuesday (12/9/06).

Earlier, data from the Capital Investment Coordinating Board (BKPM) showed 
that foreign direct investment, excluding those in the oil and gas, banking and 
other financial sectors, fell 26.89% to $3.71 billion in the first seven 
months of this year.

San Miguel to Set Up Feed Mill in Manado

Philippine food and agribusiness giant San Miguel Corp (SMC) is reportedly 
planning to establish a modern feed mill in Manado in a bid to produce cheaper 
feed products for Mindanao's animal and halal poultry industries.

Undersecretary Virgilio Leyretana, chairman of the Mindanao Economic and 
Development Council (MedCo), said the company has signified to develop Manado and 
other areas in North Sulawesi as a primary source of cheaper corn and other 
raw materials for its feed processing operations.

He said one of the company's initial considerations in putting up a plant in 
Manado is to supply the needs of the halal poultry industry for corn-based 
feeds.  "The main problem of halal poultry is the price and supply of corn-based 
feeds so this proposed venture will be a big help in our efforts to sustain 
the industry," Leyretana said, according to Antara.

Jakarta Bourse Seeks Growth

Regulations to allow Malaysian companies listed in Kuala Lumpur to also list 
on the Jakarta Stock Exchange (JSX) are being finalized and should be in place 
by next year, The Wall Street Journal quoted JSX president director Erry 
Firmansyah as saying on Thursday (14/9/06).

The exchange offers liquidity that rivals that of Kuala Lumpur's Bursa 
Malaysia Bhd, and has the potential to grow further, Firmansyah said.

The JSX's benchmark composite index has risen nearly 25% so far this year, 
compared to just more than 6% in the Malaysian market, ranking it among the best 
performing markets in the world.  The exchange has a market capitalization of 
nearly $109 billion, according to its website.

So far, the clearest expression of intent by a Malaysian company to list on 
the JSX has come from Kuok Brothers Bhd, which is considering a dual listing 
for plantation vehicle PPB Oil Palms Bhd, the JSX said.  Kuok Brothers is the 
main domestic arm of Malaysia's Kuok Group, and controls PPB Oil Palms through 
listed PPB Group Bhd.

-End 1 of 2-

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Joyo Indonesia News Service
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