THE COORDINATING MINISTRY FOR ECONOMIC AFFAIRS
REPUBLIC OF INDONESIA
Main Building, Ministry of Finance, Jl. Lapangan Banteng Timur No.2-4 Jakarta 10710
Tel: (021) 351-1178 Fax: (021) 351-1186 Website: http://www.ekon.go.id
Trade and Investment News1, 9 December 2008
Highlights
National
 Government, drilling company reach ‘final’ deal on mudflow compensation
 Asian Development Bank grant to clean up Citarum River
Politics
 Democratic Party improves in opinion polls
 Two-month convention to highlight minor presidential candidates
Terrorism
 Military and police to hold joint exercise after Mumbai, Bangkok incidents
 Singapore admits it does not know whereabouts of escaped terrorist figure
Security
 National security bill to go to House for deliberation
Law & order
 Pakistani, Indonesian arrested on people smuggling charges
Economy
 Government negotiates stand-by loans to maintain spending in 2009
Business briefs
Macroeconomy
 Finance minister says 2009 growth could be as high as 6.0%
 Bank Indonesia cuts key rate to 9.25% as inflation slows
Investment
 PT Unilever Indonesia to spend $42.5 million on new plant
 PT Indofood to spend $350 million to acquire dairy products firm Drayton Ltd
State concerns
 Reluctant Indian buyers accept crude palm oil shipments
 Rubber exports to increase 25% to $6 billion in 2008
SOEs
 PT Telkom calls for cap on cellular licenses
Private sector
 PT Astra International finance units expect 15% downturn in 2009
Banks
 Bank Indonesia to improve supervision of derivatives
 Maybank completes takeover of 97.5% of Bank Internasional Indonesia
Power
 PLN to borrow $262 million, to issue smaller bond issue
Oil & gas
 President says further fuel price cuts possible
Mining
 Minister inaugurates upgraded coal project
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This Trade and Investment News is a publication of the Coordinating Ministry for Economic
Affairs of the Republic of Indonesia. Readers are welcomed to forward it in its original form but no
reproduction is allowed without permission
1
NATIONAL
Minister says mudflow deal is final
The government has brushed aside more protests by victims of the Sidoarjo, East Java, mudflow disaster
over a compensation agreement reached on Wednesday, insisting the deal is final, reported The Jakarta
Post.
On Friday, Public Works Minister Djoko Kirmanto said the deal, which obliges drilling company Lapindo
Brantas to compensate villagers affected by the disaster, was agreed upon by representatives of the
victims and the company during a negotiation mediated by the government-sanctioned Sidoarjo Mudflow
Mitigation Agency (BPLS).
Under the agreement, Lapindo will pay monthly installments of Rp30 million to each family until the
payments are settled.
Each family is entitled to a certain amount of money depending on the value of assets lost.
The disbursement will begin this month and is expected to be completed by next April. According to the
new agreement, in addition to the Rp30 million, the families are also entitled to Rp2.5 million to allow
them to extend their rental period.
"Lapindo is unable to settle the outstanding compensation in one lump sum because of the current
financial crisis. (The payment scheme) is all the company can afford to give. The victims should take it,
otherwise the situation will worsen," Kirmanto said.
Volcano spews hot ash in C. Sulawesi
Residents in Central Sulawesi have been told to stay away from the crater of a volcano that has been
spewing hot lava and clouds of ash high into the air for days, reported The Associated Press.
State volcanologist Saut Simatupang said Friday that no evacuations have been ordered even though
many people live along Mt. Karangetang's volatile slopes.
He says the volcano, located on Siau island, has been spilling lava and shooting ash as high as 400
meters, prompting authorities to raise its alert to the second-highest level.
Indonesia is prone to seismic upheaval due to its location on the so-called Pacific "Ring of Fire," an arc of
volcanoes and fault lines encircling the Pacific Basin.
ADB lends $500M to clean up river
The Asian Development Bank on Friday approved a $500 million loan for cleaning up the Citarum River in
West Java, The Associated Press reported.
The Manila-based lender said the Citarum basin supports a population of 28 million people, delivers 20%
of Indonesia's gross domestic product, and provides 80% of water supply to Jakarta.
Rapid urbanization over the past 20 years has severely impacted its condition, the bank said.
The loan package, available over the next 15 years, will support sanitation projects and construction of
waste treatment plants in the river basin to provide safe water supply to poor families who use the
polluted river for fishing, bathing and laundry.
"Rapid urbanization, climate change, environmental degradation, public health and food security are all
important issues challenging water resources management in Asia and the Pacific region," said
Christopher Morris, an ADB senior water resources engineer.
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The loan also will allow the cultivation of an additional 25,000 hectares of rice paddies, benefiting 25,000
farming families, he said.
The river management program also aims to supply water to 200,000 more households in Jakarta. It will
ultimately increase Jakarta's water supply by 2.5% yearly, and benefit millions by resolving critical water
shortages in Bandung, the bank said.
POLITICS
Democrats improve in polls
A recent survey showed that the Democratic Party founded by incumbent President Susilo Bambang
Yudhoyono is currently the most popular compared to other parties, Cirus Surveyor Group (CSG)
executive director Andrinof Chaniago said at the end of November, Republika reported.
In the CSG survey conducted from November 3 to 10 this year, the Democratic Party won 17.34% of
support from respondents, followed by the Indonesian Democratic Party of Struggle with 15.03%, Golkar
Party with 14.57%, the Prosperous Justice Party with 6.32% and the Greater Indonesian Movement Party
(Gerindra) with 5.55%.
Both the National Mandate Party and the National Awakening Party recorded support of 4.51% and the
United Development Party (PPP) 4.08%.
Chaniago said the increasing number of Democratic Party votes was triggered by two factors: President
Yudhoyono’s position on the case involving his in-law, Aulia Pohan, and the cut in fuel prices starting
December 1.
In an earlier survey by the Indonesian Survey Institute (LSI), the Democratic Party also led in
popularity during September and November. In September, 12% of voters said they would vote for the
party if a general election was held that month, while in November the party gained 16.8% of support.
The significant support depicted by the survey, Chaniago said, pointed to a lower chance for Golkar
Party to dominate the presidential election, while Yudhoyono would be free to select a vice presidential
candidate from a party other than Golkar.
“Golkar has no solid figure for presidential candidate although it has massive support nationwide, but it
now seems that even without Golkar, the Democratic Party can still survive,” said Chaniago.
Underdog candidates to unite
A two-month convention is planned for next year aimed at supporting underdog presidential candidates
as alternatives to front-runners Megawati Sukarnoputri and incumbent President Susilo Bambang
Yudhoyono, The Jakarta Globe reported.
Six presidential candidates have already agreed to take part. Sultan Hamengkubuwono X, Yuddy
Chrisnandi, Fadel Muhammad and Marwah Daud Ibrahim, all members of the Golkar Party, which won
the 2004 legislative election, have signed on. The group also includes Bambang Sulistomo and Rizal
Ramli.
The convention is being organized by the National Integrity Council (DIB) to take place in 10 cities across
Indonesia from January 10 to March 7. "They have confirmed their attendance," DIB chairman
Shalahuddin Wahid said.
Wahid invited additional candidates to join the group, saying all parties would be welcome.
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Sultan Hamengkubuwono X said he agreed to join the underdog convention because he wanted to face
candid questions from the public. "I want to answer their questions and, perhaps, hold a talk with them
directly," he said.
Shalahudin Wahid said the convention would introduce and promote alternative candidates who might
otherwise struggle to compete with leaders in the race on their own.
TERRORISM
TNI, police to hold anti-terrorism exercise
The Armed Forces (TNI) and the National Police will conduct a joint-counter terrorism exercise this month
in light of the recent terrorist attack in Mumbai and the political demonstrations in Thailand, reported
Detikcom.
TNI Commander General Djoko Santoso met with National Police Chief Gen. Bambang Hendarso Danuri
at National Police headquarters in Jakarta on 3 December to discuss arrangements for the exercise,
according to police spokesman general Abubakar Nataprawira.
Nataprawira said that elite TNI and police units would participate in the exercise in order to prepare the
units for scenarios similar to those which occurred in Mumbai and Thailand.
Nataprawira said the exercise would consist of a command post exercise and a field exercise. The date
and location for the exercise were yet to be confirmed however Nataprawira was certain that the exercise
would be held this month.
Also attending the meeting between the two senior commanders was Army Chief of Staff Gen. Agustadi
Sasongko Purnomo and Detachment-88 anti-terrorism commander Brig. Gen. Suryadharma.
Singapore unsure on whereabouts of escaped militant
Singapore does not know if the country's most wanted man is still in the country more than nine months
after he escaped from detention, Singapore Prime Minister Lee Hsien Loong said Friday, reported
Agence France-Presse.
Mas Selamat Kastari, the alleged Singapore leader of the Jemaah Islamiyah (JI) militant group, escaped
in February from a maximum-security detention center. The incident badly dented Singapore's reputation
for tight security.
"We don't know. He could be here, he could be overseas," Lee told a forum of foreign correspondents.
He said Singapore tried its best "to make sure he doesn't go anywhere" but added: "Short though our
borders may be, they are difficult to watch all the time."
Two months after the escape, Home Affairs Minister Wong Kan Seng told parliament that security
agencies believed Kastari was still in Singapore.
"What's the lesson out of this? Never let your guard down," the prime minister said, describing Kastari as
a "very determined man."
Kastari was accused of plotting to hijack a plane in order to crash it into Singapore's Changi Airport in
2001 but was never formally charged. When he escaped, he was being held under a law that allows for
detention without trial.
Singapore has offered a reward of $656,000, put up by local businessmen, for information leading to the
recapture of Kastari whether at home or abroad.
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Born in 1961 in Singapore, Kastari fled the country after an Internal Security Department operation broke
up the local JI network with a series of arrests beginning in December 2001, the government said.
He was arrested in Indonesia in 2006 and handed back to Singapore.
SECURITY
National security bill ready for House deliberation
The Defense Ministry is close to submitting the national security bill to the House of Representatives, a
ministry official said last Thursday, promising that the bill would not serve as a new tool of civilian
repression by state security agencies, The Jakarta Globe reported.
"We expect to complete the draft soon and to submit it to the House for deliberation in 2009," Leonardi,
director of defense facilities at the ministry, said.
Leonardi also stressed that the bill is based on the principles of democracy and human rights.
Makmur Keliat, a military analyst from the University of Indonesia, said there should be no concerns as
the bill is aimed at improving coordination among state security agencies.
He highlighted one article on the role of the military in the fight against terrorism in the country. As soon
as the bill is passed by the House, Keliat said, military personnel would be tasked with protecting the
country against terrorist threats.
"The spirit of the bill is how the police, the military and state intelligence agency should work together to
manage threats to the state," Keliat said.
LAW AND ORDER
Two people smugglers arrested: Police
Police said Friday that they have arrested two people allegedly involved in smuggling migrants by boat to
Australia, Agence-France Presse reported.
"We have caught two people, a Pakistani and an Indonesian, for taking Pakistani and Afghan migrants to
Australia through Indonesian waters," police detective Widjaya said.
The two alleged people smugglers, a Pakistani identified as Sakih and an Indonesian, identified as
Khairudin, had successfully landed a boatload of migrants on Australia's Christmas Island earlier in the
year, he said.
"They are now being questioned by the police. The police had been following them over the last two
months."
Widjaya did not say if the migrants were seeking asylum.
Migrants who travel to Australia by boat usually enter Australia's northern waters from Indonesia.
People who land away from Australia's mainland "migration zone" are processed by authorities at a
centre on remote Christmas Island, a system criticized by human rights activists.
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Supreme Court prepares for increased election-related cases
The Supreme Court has ordered lower courts across the country to assign special panels of judges to
hear criminal cases involving the 2009 legislative elections, The Jakarta Globe reported.
Provincial judges and court clerks from all 33 provinces have been undergoing training in Jakarta to help
prepare them for possible election-related cases, Harifin Tumpa, a Supreme Court justice, said on Friday.
"The training involves some of the technicalities related to hearing such cases," he said.
Under the election law, special panels of judges must be established at district and provincial courts to
handle election disputes. The law also requires each panel to deliver a verdict in election-related criminal
cases within seven days.
Tumpa said the courts would have to speed up procedures to hear the cases.
Provincial courts will hear appeals of decisions handed down by district courts, and their verdicts will be
final and binding, unlike in regular cases, which can be appealed all the way up to the Supreme Court.
Tumpa said that the Supreme Court had organized the training because it expected more election-related
cases next year than in the previous election.
The April 2009 legislative elections will involve 35 political parties, compared to the 24 parties that
participated in the 2004 elections.
In 2004, a total of 1,066 verdicts were issued by courts in election-related criminal cases.
According to the election law, the courts hear all election-related criminal cases, including bribery, voterigging and any form of violence surrounding the voting, while the Elections Supervisory Body hears
cases involving administrative violations.
ECONOMY
Govt. negotiates loans to maintain spending
Indonesia is reported to have negotiated standby loans totaling $5 billion from bilateral and multilateral
development partners to allow the government to push money into the economy.
Director General of Debt Management Rahmat Waluyanto told reporters that the loans would be drawn
upon whenever Indonesia needs them, Agence France Presse reported.
"Donors still perceive Indonesia as an important and strategic country. We should keep the momentum of
our economic development going," he said, adding that raising money through government bonds would
prove expensive due to high interest rates.
Waluyanto said Indonesia would only use the standby loans if economic growth slowed to 5.8% in the first
quarter of 2009. The economy grew by 6.1% in the third quarter of this year.
Finance Minister Sri Mulyani Indrawati stressed that Indonesia saw it important to continue boosting
economic activity. "We need to run a deficit to fund development, alleviate poverty, build infrastructure
and provide health services," she said on Friday, Reuters reported.
Indrawati also said the government will likely fund its budget deficit next year by an equal mixture of
bonds and loans.
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The deficit is projected at 1% of gross domestic product, or Rp53 trillion ($4.42 billion). She said $2.8
billion in loans will go toward funding the remainder of the deficit.
A top official at the ADB told Reuters on Monday it was prepared to lend a "significant" amount to
Indonesia so it can weather the global credit crisis.
Vice President Jusuf Kalla said on Friday that the government will spur economic activities in the real
sector to boost purchasing power, as the country would rely much on the huge domestic market following
the fall of global demand, Xinhua reported.
Kalla said that the government would create more infrastructure projects nationwide to provide more job
and income for the people.
"So the credits for the government infrastructure projects must be added so that it would increase added
value and create more works," he said.
He insisted however that the government would not provide a full guarantee on bank deposits, as
demanded by business and the markets to prevent offshore capital flight. Kalla added that the president
totally agreed with the position. “We are still paying for the cost of the blanket guarantee in 1998,” he said,
according to Kompas.
Despite concern over rising job losses as export markets shrivel up, the longer term investment picture
appeared rosy.
PT Unilever announced it will build a new $42.5 million plant, its eighth, while major food producer PT
Indofood Sukses Makmur said it was acquiring dairy and associated products producer Drayton Ltd. from
Pastilla Investment Ltd for $350 million. An Irish business delegation said it was interested in joint
ventures in the company.
Indicators:
Total exports
Non-oil & gas exports
Inflation
September
October
$12.23 billion
$9.8 billion
October
(y-oy)
11.77%
Full year 2006
5.5%
September
$10.81 billion
$9.0 billion
October
(m-o-m)
0.45%
Full year
2007
6.3%
October
501,000
529,400
GDP growth
Tourist arrivals
October
Cumulative 2008
08/October 07
4.92%
$118.43 billion
8.22%
$92.26%
November
November
(y-o-y)
(m-o-m)
11.68%
0.12%
First half 2008 Third quarter 2008
6.4%
Growth/loss
(m-o-m)
5.66%
6.3%
Growth/loss
(y-o-y)
21.34%
Source: Central Statistics Agency
BUSINESS BRIEFS
MACROECONOMY
Finance minister more confident on 2009 growth
The finance minister said on Tuesday the economy may grow as much as 6% in 2009, although she
admitted that the worst projection was for 4.5%, the slowest expansion since 2002, Reuters reported.
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“The government sees a fairly clear and present risk to 2009 economic growth. However, we remain
optimistic that private consumption growth can stay at the 5% level because of subsiding inflationary
pressures next year," Finance Minister Sri Mulyani Indrawati said.
"In 2009, our worst projection is for the economy to grow only 4.5%, while the optimistic projection is 6%.
So the middle range is around 5-5.5%. The impact of the crisis will be felt in a mild slowdown, especially
in the first half of 2009," she told the House of Representatives.
Indrawati said GDP growth for 2008 would come in at 6.2%, slightly below an earlier forecast of 6.4%.
The economy expanded 6.3% in 2007, the fastest growth in a decade.
Indonesia's economy has grown at an average of about 6% on a quarterly basis since the end of 2006,
and with both parliamentary and presidential elections due next year, the economy will be a critical issue
for voters.
Indonesia needs to maintain growth of over 6% in order to create new jobs.
BI cuts key interest rate to 9.25%
The central bank cut its key interest rate by 25 basis points to 9.25% on Thursday, the first time since
December 2007, as the government seeks to boost consumer spending amid the global slowdown,
Bloomberg reported.
“The decision to cut the rate was taken after evaluating financial and economic prospects, both in the
domestic and global market,” Bank Indonesia (BI) said Thursday. “The impact of the financial crisis on the
global economy is getting real.”
By the end of the week, the market seemed to have accepted the value of a cut, with the rupiah
strengthening to 11,750 to the dollar from 12,350 a week earlier.
“BI wants to signal to the market that it is acting preemptively to prevent growth from slowing sharply in
2009,” said Alexander Sugandi, an economist at Standard Chartered Plc in Jakarta. “A high policy rate
seems no longer effective for defending the rupiah.”
BI also cut its overnight repurchase rate to 9.75%, while the deposit rate was raised to 8.75%, the central
bank said, Reuters reported.
November inflation eases slightly
Annual inflation eased further in November due to lower food price pressures, the Central Bureau of
Statistics (BPS) reported.
The data showed that prices rose 0.12% month-on-month, down from 0.45% in the previous month. The
year-on-year figure stood at 11.68%, down from 11.85% in October. The monthly figures are not
seasonally adjusted.
Price pressure on food has started easing in recent months due in part to lower global commodity prices.
Exports drop as demand, prices fall
Indonesia's exports declined by more than 11% in October, dragged down by weak demand and falls in
prices for the country's products, the Central Bureau of Statistics (BPS) said on Monday, Media Indonesia
reported.
Total export value reached $10.8 billion for the month, an 11.6% decline compared with the previous
month's figure of $12.23 billion, the BPS said.
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Exports for the first 10 months of the year stood at $118.4 billion, up by 26.9% over the same period in
2007, the agency said.
“The shrinking export value was caused by the decline in both the volume and the prices of resourcebased export commodities," said BPS chief Rusman Heriawan.
Heriawan said exports to China and the United States dropped sharply, while exports to Japan remained
stable - but because Japan has declared it is in recession, exports to Tokyo may drop in November or
December.
“Almost all commodity prices declined ranging from 10% to 20%,” Heriawan said.
Indonesia's imports in October were valued at $10.6 billion, a 5.3% decline from the previous month.
Annual imports through October reached $112.1 billion.
Govt. to name retail sukuk agents
The government expects to name the selling agents for the first retail shariah bonds (sukuk) this week, in
a bid to widen the investor base for debt and finance the state budget deficit, a finance ministry official
said on Wednesday, Reuters reported.
According to Director General of Treasury Rahmat Waluyanto, around 20 financial institutions had picked
up the necessary papers by Tuesday's deadline, including shariah banks, conventional banks and
securities firms.
Mahmoud Abushamma, the head of HSBC's shariah arm in Indonesia, said he expected the sukuk
issuance to attract strong demand from investors due to its scarcity value.
"In Indonesia, the potential for sukuk is phenomenal," he said. "Customers in Indonesia never had such
an alternative."
Sovereign credit rating stands: Moody's
Moody's Investor Services said Tuesday that Indonesia's Ba3 sovereign credit rating and stable outlook
remain appropriate, even if risks remain, as the country's underlying credit fundamentals are not likely to
erode significantly, RTTNews reported.
The policy responses by the country to the global financial crisis have been adequate so far, the firm said.
The report said the conclusion was underpinned by the firm's assessment of Indonesia's external
vulnerability and liquidity management coupled with the ability of authorities to maintain fiscal restraint.
Moody's however, noted that the country would require a more robust crisis management framework than
it has now, as without this, a prolonged global crisis could erode its sovereign credit quality more than is
currently anticipated.
Aninda Mitra, senior analyst with Moody's, said even though Indonesia's reasonably healthy credit
fundamentals fit with its rating level, reactive policies could not ultimately substitute for greater access to
hard currency or a wider financial safety net amidst prolonged global de-leveraging.
Indonesia's ability to take a more precautionary or systemic approach would support the external credit
fundamentals and domestic confidence, rather than a piecemeal or reactionary approach, he said.
The firm noted that Indonesia's current account deficit was manageable, with foreign currency also at
adequate levels. However, Moody's said that mobile portfolio capital flows could pose additional
pressures and currency substitution by domestic residents -- if confidence in the rupiah were to decline -could prove more problematic.
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The firm said that the fiscal management supported the rating, and expects the government's net and
gross financing requirements to be 1% and 3% of Gross Domestic Product next year.
INVESTMENT
Unilever builds new plant
PT Unilever Indonesia, the local subsidiary of the consumer goods giant, has announced the start-up of
Asia's biggest plant for skin care products in Cikarang, representing an investment of Rp500 billion ($42.5
million), The Jakarta Post reported.
The factory has a total production capacity of 53,000 tons of skin care products per year and occupies 10
hectares of land with 22,500 square meters of buildings, president director Maurits Lalisang said in a
statement Thursday.
"The plant was expected to help the company in meeting the growing demands for national and export
markets," Lalisang s said.
The plant would help the company in not only fulfilling local market demand, which has been growing at
an average of 10% annually, but also will help meet overseas demand including for markets in Singapore,
Thailand, Malaysia, the Philippines, India and Vietnam.
"It proves that Indonesia is still an interesting investment location with good potential. It is expected that
the new factory can help project a positive view of the Indonesian investment climate in this global
economic downturn," Lalisang said.
The new factory pushes the total number of company plants operating in the country up to eight.
The company's net profit rose 29.7% to Rp2.05 trillion in the first nine months of this year from Rp1.58
trillion in the same period last year on the back of higher sales. Sales rose 22% to Rp11.76 trillion during
the period.
Indofood holders approve $350M Drayton acquisition
Shareholders of food producer PT Indofood Sukses Makmur Friday approved the acquisition of Drayton
Ltd., from Pastilla Investment Ltd for $350 million, Dow Jones reported.
The value of the acquisition includes Drayton's $100.5 million debt, Indofood finance director Thomas
Tjhie told reporters.
Drayton owns a 68.57% stake in PT Indolakto, which produces a range of dairy products, including the
Indomilk, Cap Enaak and Tiga Sapi condensed milk brands, and Orchid butter and Indoeskrim.
Tjhie said Indofood will spend $140 million in internal cash to help finance the acquisition, while the
remainder will be financed through bank loans.
"We will announce the name of the banks that will provide loans to finance the Drayton's acquisition
soon," Tjhie said.
He said that after the acquisition, Drayton could contribute 20% to Indofood's total sales next year.
Indofood's total sales last year were Rp27.86 trillion ($2.3 billion), up 27% on year.
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Irish businesses seek joint ventures
Irish businesses are keen to invest in Indonesia by setting up joint ventures to bolster trade between the
two nations, Ireland's Ambassador to Indonesia H.E Richard O'Brien said on Tuesday, The Jakarta Post
reported.
"Indonesia is very promising and has a lot to offer," O'Brien said.
A group of Irish companies and foreign trade executives were in Jakarta to meet delegates from
Indonesian business, political and academic circles to discuss trade and the joint venture prospects.
Currently, Indonesia and Ireland's trade volume remain fairly small, amounting to around $252.28 million,
with around $151 million accounted for by Indonesia's commodity and textile exports to Ireland.
Michael Smith, the embassy's secretary for Asia Pacific ICT and energy policy, said Ireland expects to
double that amount in three to five years.
The business delegation included ingredients giant Kerry Group, telecommunications company Tango
Telecom and the maritime management company Dublin Port.
On Monday evening, the delegation met with representatives of consumer goods giant PT Unilever
Indonesia, shipping company PT Berlian Laju Tanker and state pharmaceutical company PT Kimia
Farma.
Some Irish companies have already established economic relations with Indonesia. Tango Telecom
partnered with PT Lintas Teknologi Indonesia to enhance Bakrie Telecom's text messages services.
Dublin Port is in a joint venture with Sabang Area Development Institution to pave the way to build an
international container port in Sabang, Aceh. The joint venture will cost the company an initial investment
of around $5 million.
If the port is in full operation by next year, it will give the company turnover revenue of around $40 million
and a profit margin of $15 million, five or six years down the line.
Chinese group plans to invest in biodiesel
A team of Chinese investors is planning to invest in palm oil-based biodiesel production in North Sumatra
and have sent an exploration team to the province, a local official said on Wednesday, Antara reported.
During their stay in the province, the Chinese businessmen were scheduled to visit PT Perkebunan's
palm oil plantation and plant in Serdang Bedagai and the Palm Oil Research Center in Medan, the acting
head of North Sumatra's plantation office, Washington Siregar, said.
"The Chinese investors are interested in financing about 146 biodiesel plants to be built in Indonesia in
2009," Siregar said.
Cambodian businessmen eye Indonesia
Around 25 Cambodian businessmen expressed interest in establishing business contacts with Indonesian
counterparts during a business function in Phnom Penh on Tuesday, Reuters reported.
Harry Warganegara, chairman of the Indonesian Young Businessmen's Association (HIPMI) said the
Cambodian businessmen were interested in cooperation in the hotel and tourism industry.
“They also wish to purchase construction materials and handicraft products from Indonesia,”
Warganegara said.
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Cement maker PT Bosowa's production manager Iwan Zulkarnaen said South Korean businessmen
working in the Cambodian infrastructure sector had showed a great interest in construction and building
materials from Indonesia.
"We will give competitive prices so that Indonesian products can get a wider market in Cambodia,"
Zulkarnaen said.
A South Korean builder operating in Cambodia, JW Kim of Young Shim Trading Co, said Cambodia has
been importing cement from Thailand.
"Indonesian cement is of course good, but it is a question whether the price is competitive or not," Kim
said when attending the Indonesian Trade and Tourism Promotion in Phnom Penh.
Changhong to expand business in Indonesia
Changhong Group Ltd., one of China's largest consumers electronic manufacturers, plans to expand its
business in Indonesia by investing around Rp130 billion ($11 million) for the construction of a new plant,
The Jakarta Post reported.
The company said it would make Indonesia the production base for its Southeast Asia market, it said in a
statement on Monday.
Changhong entered Indonesia in 1999 by setting up PT Changhong Electronics Indonesia, which has
already set up a factory with an annual production capacity of 350,000 television sets, 150,000 air
conditioners, 300,000 DVD players and 100,000 digital network products.
STATE CONCERNS
Indian defaulters ship out Indonesian palm oil
Indian buyers who defaulted on palm oil imports from Indonesia have begun to ship out a portion of the
old contracts following protests from producers, an industry official said, Reuters reported.
"I have received reports that Indian defaulters have asked for shipments although so far they have not
asked for the entire amount," Akmaluddin Hasibuan, chief of the Indonesian Palm Oil Producers
Association (GAPKI), said on Tuesday night.
He said the defaulters are willing to pay prices agreed under the old contracts.
About 30 Indian importers had previously cancelled contracts to buy about 100,000 tons of palm oil from
Indonesia in recent months following sharp falls in prices, he said.
GAPKI has complained about the defaults by sending letters to its counterpart in India as well as the
Indian trade ministry.
The response has been quite good and the relationship between Indonesian producers and Indian buyers
has now improved, Hasibuan said, but Indonesia producers are seeking stricter contract requirements
with Indian buyers from next year.
India, the world's biggest vegetable oil importer after China, buys almost half of its annual edible oil
requirement of around 11 million tons -- mainly palm oil from Malaysia and Indonesia, and soy oil from
Brazil and Argentina.
Indonesia, the world's largest palm oil producer, is expected to export about 13.5 million tons of palm oil
this year, about 4% below the initial forecast of 14 million tons, Hasibuan said.
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He said exports may drop further to 11.5 million in 2009 as Indonesia may use about 2 million tons of
palm oil to produce biodiesel, while some replanting plans may reduce output.
The government will help small farmers replant 125,000 hectares of palms in the next two years to
rejuvenate plantations and control supply, Bloomberg reported.
“Our program is to replant old trees in West and North Sumatra and West Kalimantan,'' Achmad
Manggabarani, Director General of Plantations at the Ministry of Agriculture, said Wednesday.
About 50,000 hectares will be replanted next year, as announced on November 6, and the rest in 2010,
he said. "If we include the trees managed by big companies, there are around 1 million hectares of oil
palm plantations in total that need to be replanted,'' he said.
2008 rubber exports to hit $6B, up 25% on-year
Indonesia expects its 2008 rubber exports to hit the $6 billion mark, up 25% from last year despite a
recent downturn in rubber prices and demand, an industry official said Wednesday, Reuters reported.
"The average price of rubber, up till November, was $2.66% per kg. Last year, the average price was
$2.15/kg. So it's still possible to meet the $6 billion target even though prices have fallen and demand has
slackened because of the global financial crisis," said Suharto Honggokusomo, executive director of the
Indonesian Rubber Association.
Honggokusomo said rubber prices peaked at $3.30/kg on June 27, before declining to current levels of
around $1.20/kg.
This year, Indonesia expects an increase of 3% on the 2.4 million tons of rubber that was exported last
year, due in part to rising demand earlier in the year from China, he said.
The Central Bureau of Statistics said Monday that the country exported $597.3 million of rubber and
rubber-made products in October, down 22.4% from September's $769.8 million due to the global
slowdown.
In a bid to boost flagging rubber prices, Indonesia, Malaysia and Thailand - accounting for a combined
70% of global natural rubber production - jointly agreed to cut rubber output by 210,000 tons next year by
replanting mature trees.
The countries will meet again next week to discuss further measures to arrest the fall in prices.
SOEs
Telkom calls on govt. to cap cellular licenses
State-owned telecommunication company PT Telkom is urging the government not to issue more cellularservice licenses even as it forecasts that next year's penetration rates will rise higher, The Jakarta Globe
reported on Friday.
"We asked the government to limit new telecom licenses because we already have 11 operators," said
Rinaldi Firmansyah, Telkom's chief executive officer.
"Telecommunication penetration in Indonesia will increase significantly in 2009 to more than 80%," he
said, adding that Malaysia only has three operators, India has six and China has just two.
He said the Indonesian market is maturing, with total penetration expected to rise to 67% this year. If
more service providers obtain licenses, the current price war in Indonesia's crowded cellular-service
market could further intensify, possibly putting established providers out of business.
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Denny Suryo, Telkom's vice president for investor relations, said Thursday that Telkom has secured Rp9
trillion ($765 million) from PT Bank Mandiri, PT BNI and PT BRI to fund expansion next year.
Telkom is also planning to build new super-portal Web sites, and has invested $5 million to open a sales
office in Singapore as part of its regional expansion. "We're expanding into news sites," Firmansyah said.
Telkom's total capital expenditure will hit Rp50 billion per year starting in 2009. It will also invest $50
million in the construction of the Asian-American Gateway underwater cable between East Asia and the
United States.
Sucofindo may partner with Swiss firm on inspections
State survey company PT Sucofindo is considering teaming up with a global company to carry out preshipment inspections, to help the government's drive to control the inflow of imported goods in the coming
year, The Jakarta Post reported.
"We are considering working with Switzerland-based Societe Generale de Surveillance (SGS) because it
already operates in 120 different countries," Sucofindo president director Arief Safari said Tuesday.
"But there's always a chance for us to cooperate with other foreign surveyor firms, too."
Safari said an operational joint team, made up from Sucofindo and another state survey firm, PT Surveyor
Indonesia, would soon decide which foreign firm should be chosen to work on this scheme.
A pre-shipment inspection is mandatory under a 2008 Trade Ministry regulation on verification of
particular products in five categories of imports, namely textiles, food and beverages, toys, footwear and
electronics.
He said the imports in the five categories had to be inspected at present at the ports of exporting
countries before being shipped to Indonesia.
Sucofindo's move is designed to help control a potential influx of imported goods as traders turn to
emerging markets, including Indonesia, amid the current global economic downturn.
PRIVATE SECTOR
Astra's financing units expect revenue to drop 15%
Two financing subsidiaries of diversified business giant PT Astra International are forecasting a 15%
decline in revenue next year due to falling purchasing power and slower economic growth triggered by
the ongoing global economic downturn, The Jakarta Post reported.
PT Federal International Finance (FIF), which provides loans for motorcycle purchases, and PT Astra
Sedaya Finance (ASF), which provides loans for cars, said weakening purchasing power would
eventually slow demand for private vehicles.
"We expect the 15% decline to come mainly from Sumatra and Kalimantan as farmers -- our big
customers -- there have been taking a hit from the falling prices in commodities, especially crude palm
oil," FIF marketing director Margono Tanuwijaya said.
According to Tanuwijaya, around 42% of the 761,106 motorcycles financed by FIF during the first nine
months of 2008 were bought by farmers in Sumatra and Kalimantan.
During the January-September, FIF generated Rp3.2 trillion ($250 million) in revenue, up by 3.06% from
Rp3.1 trillion during the same period last year.
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Its net profit reached Rp472 billion in the period, a 54.75% increase from Rp305 billion a year earlier.
Although the company is still upbeat about meeting its 2008 target to finance one million motorcycles, it
has set a lower target of financing 840,000 motorcycles for next year. "If the situation gets worse, it may
fall to 750,000 units," Tanuwijaya said.
ASF also decided to revise down its target for next year. The company's target is to finance between
80,000 and 90,000 cars next year, lower than the estimated 100,000 this year.
November vehicle sales growth slows: Toyota Astra
Toyota Astra Motor, which distributes Toyota vehicles in Indonesia, on Thursday said vehicle sales
growth in the country from all brands slowed to 2.6% in November from a year ago, the weakest since
February 2007, Reuters reported.
The figures suggest that the combination of high interest rates and tumbling commodity prices is starting
to crimp consumption.
A total 47,000 cars and trucks were sold in November, Toyota Astra said, while sales of their own
products grew 29.3% to 20,839 units, a record high monthly volume.
Indonesia's vehicle sales are expected to hit a record high of more than 600,000 units this year, up from
434,473 units in 2007.
Separately, PT Astra Honda Motor, the distributor of Honda motorcycles in Indonesia, said total domestic
motorcycle sales from all producers were expected to reach 6.1-6.2 million units this year, also a record
high for the sector, and up from 4.69 million units in 2007.
BANKS
BI to improve supervision of national banks
Bank Indonesia (BI) Governor Boediono said the central bank will improve its supervision of national
banks, Antara reported. "I think an improvement in supervision is a must," Boediono said.
Several banks have previously sold derivative products which may have been detrimental to the stability
of the rupiah.
BI has issued a circular banning the issuance of speculative products such as double currency deposits
and callable forward of accounts of jeopardizing and putting increased pressure on the rupiah.
Maybank stake in BII raised to 97.5%
Malayan Banking Bhd’s (Maybank) stake in PT Bank Internasional Indonesia (BII) has increased to about
97.5% after completing the acquisition of about 12.6 billion BII shares or 25.3%, The Star Online reported.
Maybank said on Tuesday that its unit Maybank Offshore Corporate Services had received 3,423 valid
acceptances from BII’s public shareholders for the 25.3% stake.
The total cost of acquisition for the 25.3% BII stake was about $54 million.
“As a result, Maybank now effectively holds approximately 97.5% of the equity interest in BII. The
remaining 2.5% of the equity interest in BII is currently held by the public shareholders of BII and BII will
continue to be listed on the Indonesia Stock Exchange,” it said.
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POWER
PLN borrows $262M from China bank group
State power company PT PLN on Wednesday signed a $262 million loan with a consortium led by China
Development Bank (CDB) to finance a power plant project, Reuters reported.
PLN said the 12-year loan included a two-year grace period and was to finance a 630 MW coal-fired
power plant in Central Java, as part of the “crash program” 10,000 MW coal-fired power plant project.
"With the signing of the loan, it will make sure that some of (the) 10,000 MW power plant projects will
conclude in 2009," PLN said.
In April, PLN signed a Rp5.71 trillion ($622 million) loan with five local banks to fund part of project.
The utility on Monday announced it would issue in January bonds worth Rp1.5 trillion ($130 million),
consisting of Rp1 trillion of conventional bonds and Rp500 billion in shariah bonds.
PLN`s vice president director Rudiantara said on Thursday that workers insurance firm PT Jamsostek
was interested in taking 30% of the bonds, Antara reported.
The bonds will be issued in two series, Series A and Series B, which will be offered with an indicative
interest rate of between 15.5% and 16.78%.
PLN has appointed PT Danareksa, PT Trimegah Securities and PT Indo Premier as its underwriters and
set the period of book building from December 2 to 16.
Until the first semester of 2008, PLN's business earnings reached Rp78 trillion, rising from Rp52 trillion
from the same period last year.
The improving performance of the company was driven by demand growth which is expected to stand at
an average 9% for the next 10 years. PLN expects to be able to meet 95.5% of household needs in 2018,
rising from only 60.8% last year.
E. Java geothermal projects to be auctioned: Govt.
The government is to auction off geothermal resources in Ngebel, Ponorogo and Ijen, Banyuwangi, East
Java, to improve power supplies in Java and Bali, The Jakarta Post reported.
Head of the provincial energy and mineral resources agency, Tutut Herawati, said the government was
preparing a joint team from the central government, provincial and regency administrations to open a
tender for the two geothermal projects. The total capacity of the two sites is more than 400 MW.
"The joint committee will offer $3 million per kilowatt hour and will select three winners for each project,"
Herawati said Thursday.
The first winner will be required to pay $10 million in advance as a guarantee and to start operations
within six months.
"If it fails to fulfill this condition, the project will be granted to the second winner," she said.
Herawati said the province had a further nine geothermal deposits that would be offered to investors in
the future.
The nine, located in Madiun, Mojokerto, Probolinggo, Pacitan, Malang and Sumenep, have a combined
potential capacity of 580 MW.
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Separately, the Director General for Coal and Geothermal Minerals at the Energy and Mineral Resources
Ministry, Bambang Setiawan, said the government would continue tapping renewable and
environmentally friendly geothermal energy.
"The government will not impose taxes on the imports of any materials for geothermal exploration as
incentives for investors to produce the energy," he said.
"The government will also explore the geothermal energy in Seulawah and Jaboi in Aceh, Jailolo in North
Maluku, Ungaran in Central Java, Mt. Tapomas, Tangkuban Perahu and Cisolok in West
Java and Sokoria in East Nusa Tenggara," he said.
OIL & GAS
New fuel price cuts possible: President
The government may cut the prices of gasoline and diesel fuel to ease the burden on consumers and
businesses in the country, President Susilo Bambang Yudhoyono said on Friday, Reuters reported.
"When the crude oil price fell, rationally the government cut domestic prices. We are carefully calculating
the chance to lower the price of gasoline again and diesel fuel if possible so people and industries are
less burdened," Yudhoyono said.
"When and how much the price will be cut, this is what we have been calculating in the price formula."
The government cut standard gasoline prices by 8% effective from December 1 after a sharp drop in
global oil prices but left the price of subsidized diesel fuel unchanged. Premium gasoline is now sold at
Rp5,500 per liter.
On Tuesday Vice President Jusuf Kalla said that the government may reduce the price of diesel fuel in
January after the decline in crude prices, Koran Tempo reported.
Reducing diesel fuel prices would help Indonesians cope with the global financial crisis and maintain their
purchasing power, Kalla was quoted as saying.
Govt. sets 2010 oil production target at 1.1 million bpd
The government has set the target of the country’s crude oil and condensate output for 2010 at 1.1 million
barrels per day (bpd), Director General of Oil and Gas at the Energy and Mineral Resources Ministry
Evita Legowo said on Wednesday, Antara reported.
Legowo said the government would rely on a number of fields, including the Cepu Block and those owned
by state oil and gas company Pertamina, to achieve the production target, she said.
It would be difficult for the country to achieve the oil and condensate production of one million bpd next
year, she said.
Both the government and the House of Representatives had agreed on an oil production target for 2009
at 960,000 bpd.
Earlier, the Upstream Oil and Natural Gas Executive Body (BP Migas) projected Indonesia's oil and
condensate production would reach 911,000 bpd in 2010.
The Cepu block, one of the country’s biggest oil finds in a decade, will produce its first oil on December
10, a senior official at oil watchdog BP Migas said on Tuesday, Reuters reported.
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The giant oil block on the Central Java-East Java border is being jointly developed by ExxonMobil and
Pertamina.
Salis Aprilian, Pertamina's director for the Cepu block, said production will peak at around 165,000 bpd in
2012.
"Cepu will produce 20,000 bpd for about three years before reaching its peak level of around 165,000 bpd
in 2012, depending on the development," he said.
Pertamina agrees to buy gasoline from TPPI
State oil and gas company Pertamina has agreed to buy gasoline from Trans Pacific Petrochemical
Indotama (TPPI), an official at the petrochemical company said on Friday, Reuters reported.
"Pertamina has agreed that the price of the ron 88 gasoline will be 1.2% above market price," Amir
Sambodo, president director of PT Tuban Petrochemical Industries, which has a 59.5% stake in TPPI
said.
The deal would spur TPPI to produce less aromatics and more gasoline in a bid to increase profits in a
weak aromatics market, while helping Pertamina, the biggest buyer of gasoline and diesel oil in the Asian
market, to limit its gasoline imports.
Pertamina has a 15% stake in TPPI, while Siam Cement of Thailand and Japanese firms Sojitz Corp and
Itochu Corp hold the rest.
MINING
S. Kalimantan upgraded brown coal project inaugurated
Energy and Mineral Resources Minister Purnomo Yusgiantoro inaugurated an upgraded brown coal
(UBC) project in Satui district, Tanah Bumbu regency, South Kalimantan on Thursday, Antara reported.
The UBC factory is a pioneer project and coal upgrading factory applying technology which could improve
the quality of low quality coal.
The UBC project has a capacity of processing 1,000 tons of low quality coal into 700 tons of high quality
coal per day.
"We hope this pioneer project will become commercially operational next year so in 2010, its capacity
could be increased five times from its present output," Yusgiantoro said.
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