Indonesia's Trade and Inv News-20 March 06
Written by Mahendra Siregar/ Hari S.noegroho

Tuesday, 21 March 2006

Highlights
Politics

·         US Secretary of State praises Indonesia’s ‘moderation, tolerance and inclusiveness’
·         Former East Timor militia leader to serve a 10-year jail sentence
Regions
·         President rejects calls for Freeport closure, says contract sacrosanct

Economy
·         Cepu deal goes through, work to begin soon
·         Merrill Lynch’s Jakarta head says investors positive on Indonesia
·         Strong demand for domestic bond issues

Business briefs
Macroeconomy
·         Bank Indonesia to move to ‘neutral stance’ on stronger investment
·         Rupiah movement within tolerable limits, says central bank
·         Tax breaks for designated industries to be spelled out
Investment
·         Fast track for eight Special Economic Zones
·         Singapore looks to agriculture, SMEs
·         Infrastructure regulations for review

SOEs
·         Predictions up for Telkom 2005 net profit
·         Jasa Marga aims for Rp1 trillion in IPO

Private sector
·         Motorcycle sales start to strengthen
Banks
·         Full-year loans tipped to rise 21.7%

Oil & Gas
·         Energy minister urges fast start on Cepu development
·         Deal near in price talks with CNOOC: report

Mining
·         Bumi deal may lead to coal liquefaction plant
·         Freeport McMoran says business as usual at Grasberg mine

POLITICS
Rice: Good Words for Indonesia
Condoleezza Rice, in her first visit to Indonesia as US secretary of state, praised its government on Tuesday (14/3/06) for setting an example of "moderation, tolerance and inclusiveness," the <em>Washington Post </em>reported.

At a joint news conference with Foreign Minister Hassan Wirayuda, Rice defended the Bush administration's anti-terrorism policies, which have aroused criticism and violent protests in many Muslim countries, including Indonesia.

"I understand that the United States has had to do things . . . that are not that popular in much of the world," she said. "We are fighting a very tough enemy, an enemy that has been felt here in Indonesia with bombings in Bali and Jakarta."

She also suggested that the United States is sometimes misunderstood, and she stressed "how much the United States respects people who are of Islamic faith." Before the news conference, Rice visited an Islamic school, where she announced an $8.5 million grant to develop a version of  the long-running children’s program "Sesame Street" for Indonesia.

The "Sesame Street" grant is part of a $157 million, five-year program to improve Indonesian education. The program, announced by President Bush on his visit to Bali in October 2003.

In separate meetings with Wirayuda and President Susilo Bambang Yudhoyono, Rice discussed the strengthening relationship between Indonesia and the United States.

"Indonesia is an inspiration to those around the world who struggle with the many differences" people may have "in terms of race, ethnicity and religion," Rice said.

Yudhoyono, in his hour-long meeting with Rice, stressed the importance of education in fighting radicalism, a senior US State Department official said.

Earlier, Rice sought to expand a "strategic partnership" with Indonesia, including increased military cooperation.

In a speech on Wednesday morning, she also sought to assure Indonesia that the United States believed strongly in the role of the Association of Southeast Asian Nations.

Rice was well received at her speech, to 500 business, academic and civic leaders at the Indonesia World Affairs Council, but she faced pointed questions about American policies, especially in Iraq and the Israeli-Palestinian conflict.

Guterres Jailed for E. Timor Crimes
The Supreme Court on Monday (13/3/06) overturned a high court ruling that had halved the prison term for former pro-Jakarta East Timor militia leader Eurico Guterres, convicted of gross human rights violations in 1999, and restored the original 10-year term set by a lower court, the Associated Press reported.
Supreme Judge Masyur Effendi said the five-member judicial panel of the top court rejected a Jakarta High Court ruling that had reduced by five years the jail term for Guterres, saying he had been proven guilty of committing human rights violations" and mitigation of the sentence "did not reflect justice."
Guterres, who led the Aitarak pro-Jakarta militia group, was found to have failed to control his men on April 17, 1999, when they attacked 136 pro-independence refugees taking shelter at the residence of pro-independence leader Manuel Viegas Carrascalao.

In the attack, the militiamen killed 12 people, including Carrascalao's adopted son.
Guterres' men also attacked and damaged the residence of Leandro Isaac, another pro-independence leader, later the same day.

Secure Sea Lanes Mooted
The Philippines is talking with Indonesia and Malaysia about establishing secure sea lanes connecting the three Southeast Asian nations to make it easier to spot militants, Defense Secretary Avelino Cruz said on Monday (13/3/06).

Indonesia and Malaysia have welcomed the idea and the Philippines will submit, in
a few months, details of the proposed sea lanes, where human and cargo traffic would be required to pass to prevent rigid inspection by security patrols, Cruz said.

Bali Prepares Bomb Indictments
Bali prosecutors said on Wednesday (15/3/06) they are preparing an indictment against three
Muslim militants accused of involvement in last October’s suicide bombings of three restaurants, which left 20 people dead.

"We have now begun the process of preparing the indictment against the three," Bali prosecutor office's spokesman Endrawan told Agence France-Presse.

He said that police earlier on Wednesday handed over the three suspects, Abdul Azis, 30, Anif Solchanuddin, 24, and Muhammad Cholili, 28, into the custody of the prosecutors along with supporting evidence.

Endrawan declined to say how long it would take the indictment to be prepared but said it would be done "as rapidly as possible."

Myanmar Minister to Visit
Myanmar's foreign minister is to visit Indonesia next month as part of efforts by the military junta to implement its "roadmap to democracy", Indonesian foreign ministry spokesman Desra Percaya said on Friday (17/3/06).

Percaya also said Indonesia has formed a joint commission with Myanmar to discuss the seven-stage roadmap, proposed by the junta in 2003.

"We were once an authoritarian country under the military and that's what Myanmar is now. With our experiences we can offer them to Myanmar to follow or we could offer them the lessons we learned in the past," Percaya said at the ministry's weekly media briefing.

He said the foreign ministers' meeting would take place in late April in Bali.

"This would be part of the effort for us to engage with Myanmar and help Myanmar
to successfully implement the roadmap to democracy, especially the pledged seven steps," he added.

The meeting follows up a high-profile visit by President Susilo Bambang Yudhoyono to the nation earlier this month in which the Indonesia pledged assistance to Myanmar on reforms and democratization.

Percaya said the joint commission is expected to help Myanmar open up to the outside world.
"If we become harder on Myanmar then they would close themselves even more," he added.
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REGIONS
President Guarantees Freeport Contract
President Susilo Bambang Yudhoyono has guaranteed that the government’s contract with PT Freeport Indonesia over the Grasberg mine in Papua will remain in place, despite calls from some elements of society, including some politicians, for it to be cancelled.
Violent protests against the mine in the Papua capital of Jayapura on Thursday 16/3/06 saw three police officers and an air force trooper killed by a mob.
President Yudhoyono called for restraint and warned that some people were turning discontent against Freeport into a campaign for Papuan independence. He sent his senior security minister, the National Police Chief and the Armed Forces Commander to Papua overnight Thursday.
He rejected demands for the closure of the mine.
ECONOMY
Signature of Cepu Deal
Subsidiaries of US oil major Exxon Mobil Corp. and state-owned Pertamina signed an agreement Wednesday on operation of the Cepu oil block.
Commenting just before the deal was sealed, Merrill Lynch’s president and head of investment banking for Indonesia Roger Suyama told <em>The Jakarta Post</em> that the market understood Indonesia and was generally positive.
“The Cepu imbroglio, for example, the settlement has not been quick. . .  . It takes a lot of time, but in a democratic country -- especially in a new democracy -- sometimes taking hard decisions takes a lot of time to do. But investors overall are very positive,” said Suyama.
Suyama said natural resources remained the main interest with foreign investors.
Cepu confirmed growing investor confidence, Syama said. “The economic team and the administration are very positive for investors. International investors are quite confident about what the administration has been doing.”
Local residents at Bojonegoro in East Java, who will take the main impact of the Cepu project, held a blessing ceremony for the project, at which the regent looked forward to a cooperative relationship.
Merrill Lynch’s Suyama noted there was already far more interest in investment in Indonesia from the US, with more appreciation of the likely threat of terrorism anywhere in the world, reducing earlier security concerns about the country.
He again praised the government for this improvement in image. “I think people are very positive about what this administration is doing,” he said.
The government, only weeks after a $2 billion global bond issue, again won market backing when it launched two tranches of domestic bonds, netting Rp7.2 trillion ($785 million), up from the Rp3 trillion target.
Bids had reached Rp13.3 trillion, said Mulia Nasution, Director General of Treasury at the Finance Ministry.
The government said it would amend regulations on tax breaks for designated industries. It said eight new special economic zones would be created within a year around existing industrial clusters.
Visiting US Secretary of State Condoleezza Rice offered Indonesia investment and trade facilitation as well as grants to combat poverty and corruption, said Foreign Minister Hassan Wirayuda Tuesday.
The grants would come from US Millennium Development Goals (MDGs) funds, he said, adding that the US would also help Indonesia resolve a number of bilateral trade and investment disputes under the two countries' Trade and Investment Facilitation Agreement (TIFA).
Vice President Jusuf Kalla told a business seminar that he hopes to fix the problems that have plagued the economy within the next two years.
“One solution to deal with the bureaucracy is to create more Batams, and we have set up a national committee to study the seven or eight new locations where we can set up special economic zones that can act as one-stop centers for foreign investments,” <em>Business Times</em> quoted Kalla as saying.
He added that he is also studying ways to improve the country's oil and gas sector and its electricity sector to help industries be more competitive.
BUSINESS BRIEFS
BI may ease monetary policy in 2nd half
Bank Indonesia (BI) will take a "neutral stance" on monetary policy in the second half of the year as increased investment helps boost economic growth, Governor Burhanuddin Abdullah said.
"From the first half of this year and going into the second half of this year, we see a more conducive condition," Abdullah said.  "With the investment climate starting to improve in the second half of the year, we see there is room for Bank Indonesia to adjust its monetary policy to a more neutral stance from a more tight-biased stance now."
Indonesian inflation may slow to 6% next year and 5% in 2008, a statement issued by the office of Coordinating Minister for Economy Boediono said after a meeting with central bank officials, Bloomberg reported on Friday (17/3/06).
The Coordinating Minister’s office also said in a statement that economic growth during the first quarter was slow “but based on our observation, there have been signs of a recovery over the past two months”, AFX reported.
It said imports of capital goods, which dropped in the third and fourth quarter of 2005, were on the uptrend again in January and February.
“It is expected that this (import growth) will drive investment activity in the manufacturing sector after the second quarter of 2006,” it added.
Rupiah Movements ‘Tolerable’ - BI
The rupiah's direction against the US dollar remains "tolerable", Bank Indonesia Governor Burhanuddin Abdullah said late Tuesday (14/3/06).
Abdullah said Bank Indonesia would keep the rupiah's appreciation or depreciation within a tolerable range, declining to identify the rupiah level that the bank prefers.
The rupiah continued rising Wednesday (15/3/06) as foreign investors bought the local unit to settle purchases of government bonds in an auction Tuesday.
Inflows of speculative funds seeking high yields have been driving the rupiah up from a four-year low in August 2005, when the dollar climbed to Rp11,900. The dollar traded at Rp9,125 on Wednesday, versus its close at Rp9,170 the previous day.
BI Awards Rp32.5t of 1-Mth SBIs
Bank Indonesia (BI) said Wednesday (15/3/06) it has awarded Rp32.5 trillion worth of one-month BI Certificates (SBIs) at a weighted average interest rate of 12.7%, down from the previous week's 12.74%, AFX reported.
The auction absorbed 80.45% of incoming bids, the central bank said.
The cut in the one-month SBI rate by four basis points is the biggest drop so far this year.
Analysts have said the move raises hopes of further interest rate cuts going forward and sends the signal that the central bank is confident of easing inflation in the months ahead.

Govt. to Better Define Corporate Tax Breaks
In an effort to help rejuvenate the real sector, the government will amend a regulation to better define the rules for providing tax breaks to a number of designated industries, an Industry Department official said.
"We have set out a much clearer classification of the industries that are eligible for tax reductions in the draft amendment," Director General for Metal, Metal Products and Miscellaneous Industries, Ansari Bukhari, was quoted as saying by <em>The Jakarta Post</em> on Wednesday (15/3/06).
The tax breaks, mostly in the form of corporate income tax reductions, have been in place since 2000, when the regulation was issued.
However, Bukhari said, only a few industries have benefited from it as the regulation is unclear.
Government Regulation No 148/2000 provides that new investment projects, as well as the expansion of existing projects, in particular industries, are eligible for various incentives, including a cut of up to 30% in corporate income tax.
The tax breaks are provided annually -- for a maximum period of six years from the commencement of production -- with the firms being allowed to set off 5% of the value of their annual investment against their annual corporate income tax bill.
Under the draft amendment, the department defines the categories of businesses eligible for tax breaks as those that export a minimum of 50% of their output, pioneering firms, firms located in eastern Indonesia, and manufacturers of production machinery.
"The export-oriented category includes furniture, plastics, footwear and the spinning and yarn industries," explained Bukhari.
Meanwhile, aeronautical, shipping and maritime manufacturing firms would fall within the pioneering industries category.
The list could still be extended or reduced, depending on the input received from the relevant sectors.
Bukhari said stationery and natural fiber producers stand a good chance of being added to the list.
INVESTMENT
Jakarta to Roll Out SEZs Within a Year
Indonesia plans to speed up the development of special economic zones (SEZs) and will take steps to get these up and running within a year.
It will do so by carving out such zones from existing clusters of industries across the country.  Investors will get incentives and be freed from red tape if they set up in these areas, Vice President Jusuf Kalla was quoted as saying by <em>The Straits Times</em> on Thursday (16/3/06).
The plan is to speed up development of at least eight new SEZs in various provinces where there are existing industries to cut the time needed to get the zones off the ground, Kalla said.
“We have appointed a national committee to develop (the SEZs) within one year,” he told Indonesian and Singaporean businessmen attending an investment seminar in Jakarta.
Trade Minister Mari Pangestu said on the sidelines of the seminar that in the next six months, the government would work on a regulatory framework before deciding on the SEZ locations.
“We are playing a catch-up game here, so we want to have something that we can start relatively quickly,” she said.
At least eight new areas have been identified as possible locations -- Banten, West Java, Central Java, East Java, East Kalimantan, North Sumatra, South Sulawesi and Aceh's Sabang Island.  The number of zones could change once the government settles the criteria for them.
Pangestu said that to qualify as an SEZ, an area should already have a cluster of industries, developed infrastructure and receptive local government.  The area must also be large enough to accommodate expansion.
Although the SEZs will not be designated specifically for any industries, some of them would cater to sectors already operating in the area, she said.
For example, the petrochemical sector will likely dominate the SEZ in Bojonegara, Banten, home to many petrochemical refineries. East Kalimantan has oil, gas and coal mines, while North Sumatra is known for its plantation industries of commodities such as oil palm and rubber.
Meanwhile, the government is also planning to submit a much-awaited investment bill to parliament as part of its investment incentive package to be implemented during the year.
The bill will simplify procedures.  Sofyan Wanandi of the Indonesian Employers Federation (Apindo) hailed the moves.
Singapore to Invest in Agriculture, SMEs
Singapore is exploring investment possibilities in agriculture and small- and medium-sized enterprises in Indonesia, Singaporean Trade and Industry Minister Lim Hng Kiang said Thursday (16/3/06).
"Indonesia is very rich in resources," the minister said, adding that these resources could be useful to Singaporean manufacturers, Dow Jones Newswires reported.
"We are looking at agriculture and aquaculture as well as small-medium enterprise collaboration," he said.
According to Indonesia's Investment Coordinating Board, Singapore was Indonesia's largest foreign investor in 2005, with investment amounting to S$6.3 billion ($3.9 billion), up from S$1 billion in 2004.
The minister did not give a projection for Singaporean investment in Indonesia this year.
"It will be up to the private sector.  The more attractive the environment, the more investment (will come)," he said.
Govt. to Review Infrastructure Regulations
The government will review all regulations hindering investment in the infrastructure sector before a second infrastructure summit, chief economic minister Boediono said Monday (13/3/06).
"Regulations that are only burdening investors unnecessarily will be reviewed, including those concerning land, default and others," Boediono said after a limited cabinet meeting led by Vice President Jusuf Kalla, according to Antara.
He said the review of various regulations aims to create a better climate to expedite infrastructure development in the country in line with a recent presidential instruction.
He said he believes the effort could be completed before the Second Infrastructure Meeting in June.
Meanwhile, Malaysian state company Khazanah Nasional said it is eyeing a number of infrastructure projects in Indonesia.
Company director Dato' Azman Hj Mokohtar said Khazanah plans to take part in the tenders for toll road, power generation and airport projects in Indonesia.
"Our priority is infrastructure projects as we are competitive in this sector.  We have companies experienced in the construction and operation of toll roads," Mokohtar was quoted as saying by Antara.
Khazanah, which has assets valued at $16 billion, has already invested in a number of Indonesian companies, acquiring stakes in Bank Lippo, Bank Niaga and cell phone operator Excelcomindo.
Siam Cement to Build Factory in Banten
Asia's largest cement producer Siam Cement of Thailand plans to build a cement plant in Indonesia's Banten province, with an investment of $300 million.
The factory, to be built in the district of Bojongmanik, Rangkasbitung, is to have an annual production capacity of 1 million tons, said Mutia Farida Tahir, president of PT Semen Prima, which will partner with Siam Cement in the project.
Part of the production will be exported, Tahir told <em>Bisnis Indonesia</em>.
The raw material deposit in Bojongmanik will be enough to feed the factory for 100 years, she said.

Malaysia Buys 30% of Plantation Company
Malaysia’s Ayer Molek Rubber Co Bhd said it has agreed to acquire from Indonesia’s Gautama Hartato a 30% equity interest in PT Varita Majutama on a willing buyer-willing seller basis for RM2.4 million, AFX reported on Thursday (16/3/06).
In a statement to Bursa Malaysia, Ayer Molek said the proposed acquisition is part of the company's long-term objective to expand its oil palm operations in the region, taking advantage of suitable agriculture land and labor resources.
Varita Majutama is engaged in the trading business, as well as in plantation and transportation.
SOEs
Telkom 2005 Net Seen at Rp6.97t-Rp9.73t
State telecommunications company PT Telkom is expected to report a net profit of Rp6.97 trillion to Rp9.73 trillion for 2005, up from Rp6.13 trillion a year earlier, analysts said, according to AFX.
They said the company's cellular phone business would have driven revenue growth last year, while the rapid growth of its CDMA-based wireless service to households would have also offset slowing growth in the traditional fixed line operations.
For the nine months to September, Telkom reported a net profit of Rp5.78 trillion, up 19% from Rp4.85 trillion a year earlier.  Over the same period, sales rose to Rp30.15 trillion from Rp25.09 trillion.
Revenue from its cellular phone unit PT Telkomsel rose 29.2% year-on-year to Rp2.24 trillion.  The unit contributed 33% of Telkom's total revenue for the nine-month period.
“The cellular phone business led the growth in revenue throughout last year,” said Mandiri Sekuritas analyst Agus Pramono.
Telkomsel's subscriber base stood at 23.48 million as of September last year, representing a growth of 72% from a year earlier and driven by new prepaid customers.  It controlled a 54% market share in terms of subscribers, enjoying the status of being the largest cellular phone operator in Indonesia.
Pramono said he expects Telkom's 2005 net profit to have risen to Rp8.64 trillion on sales of Rp41.15 trillion.
BNI Securities analyst Adrian Rusmana expects the company to report a net profit of Rp8.96 trillion on sales of Rp41.49 trillion.
Jasa Marga Hopes to Reap $108m from IPO
State-owned road builder PT Jasa Marga hopes to earn Rp1 trillion ($108.7 million) from the initial public offering (IPO) it plans to launch by the end of the first semester of the year.
The fund expected to be raised from the sales of up to 30% of the company's shares will be used to repay part of its Rp7 trillion debt, its president Frans Satyaki Sunito was quoted as saying by Antara.
Last year, the company posted Rp290 billion in net profit, up from Rp240 billion the previous year.  This year, it hopes to post a 15% rise in income.
PRIVATE SECTOR
Jan-Feb Motorcycle Sales Rise
Sales of new motorcycles in Indonesia rose 24% to 330,767 units in February from 266,618 in January, although the figure was down 8.98% from 363,406 in February last year.
The increase from the January data showed the industry is beginning to recover from the government's move to more than double domestic fuel prices in October in an effort to reduce its subsidy bill, PT Astra International said, according to Reuters.
Astra said it sold 168,916 motorcycles in February, up 45% from 116,873 units in January.
Meanwhile tight monetary policies continued to rein in sales of automobiles. Domestic new vehicle sales in the first two months of 2006 dropped 42% to 52,566 units, from 91,198 units in the same period last year, car manufacturer PT Toyota Astra Motor said Monday (13/3/06).
"As predicted, the increase in fuel prices and high inflation cut purchasing power, shrinking car sales volume," Toyota Astra president director Johnny Darmawan said in a statement, according to Dow Jones Newswires.
Rubber Exports Up 20%
Indonesia's exports of natural rubber were valued at $300 million in the first two months of the year, a 20% increase year-on-year.
The association of rubber companies Gapkindo said the country's exports in January and February totaled 200,000 tons, with the increase in earnings caused by a rise in prices, Antara reported.
Rubber prices averaged $1.85 per kg in January and February this year, also up 20% year-on-year, Gapkindo chairman Asril Sutan Amir early last week.
The price rise follows a 20% rise in demand from China, India and Asia-Pacific countries.
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BANKS
Bank Loans to Grow 21.7%
Bank Indonesia (BI) predicted that banks' new loans would rise 21.7% year-on-year in 2006, central bank Governor Burhanuddin Abdullah told <em>Bisnis Indonesia</em>.
The report said bank loans grew 22.7% in 2005, totaling Rp695.9 trillion at the end of the year.
Abdullah said the banking system's loans-to-deposits ratio is expected to reach 65% this year with assets expected to grow 12%.
He also noted that if the monetary authority is able to reduce interest rates over 2006, the economy should be able to grow 5% to 6%.
OIL AND GAS
Govt. Wants Fast-Track Program for Cepu
Mines and Energy Minister Purnomo Yusgiantoro has urged state oil and gas company PT Pertamina and ExxonMobil Corp to speed up the development of the Cepu oil block so production could begin before its scheduled 2008 start date.
"We can apply a fast-track program for Cepu, like we did with the Natuna and Caltex oil fields, which have been proven to accelerate production," he said following the signing of the joint operation agreement between Pertamina and the American oil giant, reported <em>The Jakarta Post</em>.
The minister said the government would provide support policies for the accelerated program to smoothen the procurement of the equipment for the oil block's development.
Pertamina and ExxonMobil officially signed on Wednesday (15/3/06) an agreement to jointly operate the Cepu oil block, which is expected to generate $3.3 billion in annual revenue.  Pertamina is considering various schemes to finance its share in the $2.6 billion project.
"This is the maximum result of Pertamina's efforts to start production from Cepu as soon as possible, for the sake of national interests to increase our oil and gas supply, and increase government revenue," Pertamina president Ari H Sumarno said after witnessing the signing.
"With this, we are expecting production of 165,000 barrels a day from Cepu, bringing in $3.3 billion in annual revenues, most of which will be for Indonesia."
Under the agreement, Pertamina, represented by its subsidiary PT Pertamina EP Cepu, and ExxonMobil, through Mobil Cepu Ltd and Ampolex (Cepu) Pte Ltd, will form Cepu Organization to develop the block under a production-sharing contract with the government until 2035.
ExxonMobil will hold the posts of general manager, operating manager and deputy planning manager of the block's main Banyu Urip oil field, while Pertamina was allotted deputy general manager, deputy operating manager and planning manager.
Pertamina and ExxonMobil will run a joint operation committee overseeing the organization, with the authority to decide on operational plans, working programs and budgeting.  The committee also will be on the management lineup at the other fields -- Alas Dara or Kemuning, Alas Tua Cendana, Jambaran and Sukowati.
Production from Cepu is expected to commence at 25,000 to 40,000 barrels per day (bpd), with full output reaching 165,000 bpd, or about 20% of the country's total daily production.
Pertamina and ExxonMobil each holds a 45% stake in the project, with local governments in the two provinces controlling the remainder. The government is entitled to 85% of its revenue.  Pertamina and ExxonMobil each receive 6.75% and the local governments 1.5%.
Oil and gas regulatory body BP Migas said it would speed up the approval of the development plan for the block.
"This normally takes several months but we will try to complete it in one month," BP Migas chairman Kardaya Warnika was quoted by Agence France-Presse as saying.
Mobil Cepu will likely submit the development plan to BP Migas within the next two weeks, said an ExxonMobil official.
Meanwhile, ExxonMobil Oil Indonesia spokesman Deva Rachman said in a press release Tuesday (14/3/06) that the development of the Cepu block will create $3 billion to $8 billion worth of multiplier effects for people in Cepu and its surrounding areas.
The local community will enjoy the multiplier effect in the form of economic growth, job opportunities and development programs, he said, according to Antara.

Deal Close on CNOOC Tangguh LNG price
Jakarta is close to finalizing a deal with the China National Offshore Oil Corp (CNOOC) to raise its contracted LNG price from the BP-led Tangguh project for the Fujian terminal, oil and gas regulator BP Migas said on Friday (17/3/06).
In January, Indonesia said it had asked CNOOC to revise the price of contracted liquefied natural gas (LNG) because of high crude prices.
Indonesia's current LNG contract with CNOOC has set an oil price ceiling of $25 per barrel.
"We have reached an understanding (on the price).  We are finalizing the agreement," BP Migas chairman Kardaya Warnika was quoted as saying by Reuters.
"I can't give the details right now.  We will announce the details when we have an agreement," he said.
The multi-billion dollar Tangguh project in Papua, operated by energy giant BP Plc, has secured contracts to supply 2.6 million tons per year (tpy) to China over 25 years, 3.7 million tpy to the US West Coast via Mexico, and 1.1 million tpy to South Korea.
Tangguh will produce 7.6 million tpy from two trains, with output expected from the fourth quarter of 2008.
CNOOC is building a string of terminals to receive imported LNG along its coast, including Fujian.
Medco to Spend $300m
PT Medco E&P said it would spend $300 million on oil and gas explorations this year.
Some $70 million of the fund will be used to finance exploration and the rest to finance construction of production facilities, president of the subsidiary of the Medco Group, Lukman Mahfoeds, was quoted as saying by Antara.
All oil and gas fields of Medco E&P are old and will be exhausted, therefore, more explorations will be needed, Mahfoeds said.
This year the company plans to operate 12 oil rigs, he said recently, noting that explorations are expected to result in additional oil and gas reserves operational in 2008.
In 2008, the company hopes to be able to increase its gas production to 100,000 barrels of oil equivalent per day (BOEPD), up from 80,000 BOEPD at present, he said.
MINING
Bumi Agrees to Sell Mines for $3.2b
Indonesia's largest coal exporter, PT Bumi Resources, said it agreed to sell its biggest mines for $3.2 billion in order to work of plans for a coal liquefaction plant, Bloomberg reported.
Some of the money will be used to build plants that produce diesel from coal, president Ari Saptari Hudaya said Friday (17/3/06).
The buyer is Renaissance Capital, based in Jakarta, run by Samin Tan, a former Deloitte Touche Tohmatsu partner.  Marubeni Corp may join the buyers, a spokesman for the Japanese company said.
Bumi is realizing a more-than-fourfold increase in the value of the Kaltim Prima and Arutmin mines over the past five years.  Record coal prices helped Bumi's shares gain 49-fold since October 2002 after the former property developer invested in coal to tap rising demand in China.
Isnaputra Iskandar, an analyst at PT Danareksa Securities in Jakarta, said Kaltim Prima is one of the best open-pit coal mines in the world,
Hudaya said he's planning to spend $1.5 billion on a plant that would turn coal into diesel in Kalimantan or Sumatra.  The sale includes 95% of Kaltim Prima Coal and 100% of Arutmin Indonesia and IndoCoal Resources Ltd, he said.
Renaissance Capital is seeking a $2 billion loan to buy the mines, bankers involved in the transaction said.  The Credit Suisse Group is advising the company on the deal and arranging the financing. 
Marubeni, Japan's fifth biggest trading company, is studying participation in the Bumi acquisition though a decision has not been made, a spokesman said.  The company has mines in Australia and Canada.
Freeport: Business as Usual
Freeport-McMoRan Copper & Gold Inc said Friday (17/3/06) it is business as usual at its Grasberg mine in Indonesia despite four deaths Thursday (16/3/06) in protests against the giant gold and copper mine, Dow Jones Newswires reported.
"There's no disruption or impact on the mine operation," Freeport's Indonesian spokesman Mindo Bangaribuan said.  "The incident happened in (the port city of) Jayapura about 500 km northeast of the mine."
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