Indonesia's Trade and Inv News-27 March 06
Written by Mahendra Siregar/ Hari S.noegroho
Monday, 27 March 2006HighlightsPolitics
Indonesia recalls its Ambassador to Australia
· A poll shows voters continue to back major partiesRegions
· Bloody protests in Papua may have been engineeredEconomy
· Major banks to lower interest rates
· Coordinating Minister Boediono says 2006 growth ‘close to 6%’
· Growth next year tipped to hit 6.4%
<div>· Positive comment on the economy from major finance houses</div>Business briefs
· $698 million bond swap extends debt term
· Trade surplus of $3.3 billion predictedInvestment
· FDI approvals slip but realization surges
· Resource sector to boom on China, India demand
· JP Morgan Chase & Co upbeat on economyState concerns
· Talks with US on trade and investment cooperationSOEs
· Vice President tells Krakatau Steel to expand to Kalimantan
· Garuda Airways to spin off commuter service
· PT Telkom expects 20% revenue growthBanks
· Bank Buana reports 19.25% profit boostPower
· Power station contracts may be issued directlyOil & gas
· CNOOC agrees on new price for Tangguh LNG
· Unexplored blocks have potential 8.5 billion barrels of oilMining
· Coal producer Bumi Resources to merge with oil and gas firm Energi Mega Persada
Indonesia Recalls Canberra Envoy
Indonesia recalled its ambassador to Australia on Friday (24/3/06) in protest at Canberra’s decision to grant temporary visas to Papuan asylum seekers, Reuters
reported from Sydney.
Ambassador Hamzah Thayeb flew out of Canberra on Friday night over what the Indonesian government described as Canberra's "deplorable" decision to grant temporary protection visas to 42 of the 43 Papuan refugees.
The ambassador "will have consultations with the ministry and related institutions. From that we can determine our further steps," Foreign Ministry spokesman Desra Percaya told Elshinta news radio on Saturday.
This is the first time Indonesia has recalled an ambassador to Australia.
Kusnanto Anggoro, an analyst at Jakarta’s Centre for Strategic and International Studies said on Saturday: "I hope Australia will be careful and not make the situation worse."
The 43 Papuans landed on Australia's northern Cape York in a traditional dugout boat in January. Indonesia has guaranteed their safety and urged them to return.<div>Big Three Parties Still Ahead
If general elections were held today, Indonesians would cast their votes in the same way as in 2004, when the three biggest parties – Golkar, the Indonesian Democratic Party of Struggle (PDIP) and the Democrat Party -- took the lead, according to a survey by the Indonesian Survey Institute (LSI).
In the survey, the three came out ahead of the four other big parties, which each won less than 10% of the vote.
In the survey, the majority of potential voters opted for Golkar. The Democrat Party, which had the highest score of 28.4% in the survey in January 2005, ended up in second place.
This is apparently due to the fact that Democrat Party voters are pragmatic and prioritize the benefits it has over other parties, rather than holding any emotional attachment to it, said LSI executive director Saiful Mujani.
"If the people think a party is no longer making things better for them, they will shift allegiances," he said.
PDI-P and Prosperous Justice Party (PKS) voters also tended to be pragmatic, with PKS in particular taking a surprising dip in popularity.<div>PM Blair to Visit Jakarta
Prime Minister Tony Blair will visit Indonesia at the end of this week, the first trip by a British prime minister since the Conservative leader Margaret Thatcher in 1985.
Blair's spokesman said Britain was keen to strengthen ties with Indonesia. "Indonesia is the largest Islamic country in the world. It now, under the current presidency, is not only a democracy but a democracy that is championing and promoting moderate Islam," he told reporters on board Blair's jet soon after it left London.<div>Sulawesi Naval Exercises End
The Indonesian and US navies Monday (20/3/06) wrapped up a joint exercise aimed at halting the movement of terrorists into the Sulawesi Sea, military officials said.The two navies practiced maritime interdiction using two US Navy vessels, a number of Indonesian patrol ships and troops from Indonesia's elite naval special warfare unit, known as the frogman commandos or Kopaska, the US Embassy in Jakarta said in a statement.
The two-week exercise was designed to help personnel from Indonesia's nearby Tarakan and Bitung naval bases be "more prepared and capable of facing terrorist actions in or through the (Sulawesi) Sea" from neighboring Malaysia and the Philippines, said Indonesian Lt. Col. M.Faisal, chief of Kopaska at the Eastern Fleet Command.
In the past, the Sulawesi Sea has been a hotbed of illegal weapons smuggling. Lt. Col. K. Comer, the chief of the Office for Defense Cooperation at the US Embassy, said the naval exercises were valuable training that would "increase mutual cooperation between our two forces." Crews practiced such skills as navigation and command and control. <div>REGIONS
<div>Protests Driven by Separatism: Jakarta
The Indonesian government says deadly protests in Papua were planned as a stepping stone to full independence for the restive province, Australian Associated Press reported.
Defense Minister Juwono Sudarsono said it was believed organizers of the protest in Abepura near the Papua capital of Jayapura on March 16 in which six people died had hoped to turn the incident against Indonesia.
They had hoped that security authorities would have become enraged and opened fire on the demonstrators, Sudarsono told <em>Koran Tempo </em>daily.
Four Mobile Brigade Police officers and an Air Force detective from the airport were killed in the incident.
Spokesman Sr. Comr. BHP Sitompul said Thursday that police were repairing university dormitories damaged during searches for those responsible for the violence.
The repairs were intended to demonstrate the police's responsibility and their intention to reestablish positive relations with the students, he said.
Fifteen suspects had been detained over the incident, said National Police spokesman Brig. Gen. Anton Bachrul Alam on Friday, adding that more were being sought.
</div><div>Bank Rates Start to Fall
Major banks said they were moving to lower interest rates, ahead of analysts’ predictions, as government officials pointed to higher growth rates in 2007.
Panin Bank said it had already cut its lending rates by one percentage point to 16% and Bank Mandiri said it would cut rates by half a point.
<em>The Jakarta Post
</em>quoted banking analyst Ryan Kiryanto as saying the trend toward lower lending rates was due to signals from Bank Indonesia (BI) that it would soon begin lowering its reference rate against a backdrop of easing inflation and a strengthening rupiah.
"These signals have become particularly strong since the government decided to cancel the planned power price hike, which had been giving BI worries about higher inflationary pressures ahead," he said.
An investment conference in Bali on Monday (20/3/06) saw positive predictions from government officials and from major investment firms.
Coordinating Minister for Economic Affairs Boediono told the conference that the economy was expected to grow by close to 6% this year, adding that the government was moving to push debt to 30% of gross domestic product by 2009. The figure currently stands at around 48%.
Boediono said growth was based on the government’s solid preparations. "We believe that at last we have now succeeded in establishing the first part. Government stability is firmly restored, growth is steady on the upward trend and democratic reforms continue," Boediono said.
Central bank Governor Burhanuddin Abdullah, speaking separately on Monday, put this year’s growth figure at between 5% and 5.7%, with inflation slowing to between 7% and 9%, Bloomberg reported.
Vice President Jusuf Kalla also played a role in talking up the economy, telling the Bali conference that the government was taking concrete measures to improve the investment climate.
He said the government would make energy prices in Indonesia the cheapest in the world by starting to convert some 1,000 MW of oil-fueled power plants into gas, coal and geothermal by 2008, <em>The Jakarta Post
"With lower energy prices, we could dramatically slash production costs, which will eventually create business efficiency," he said.
World Bank country director Andrew Steer was also upbeat, saying that investors should not think Indonesia was heading for another recession. The state budget was now at its healthiest condition since the Asian economic crisis began in late 1997, he said.
"For the first time since the crisis, the government is now starting to learn to spend the state budget to fuel its economic growth at a time when the private sector has yet to pick up until the second semester of this year." He put this year’s likely growth figure at between 5% and 6%.
Sheldon Trainor, head of Merrill Lynch's Asia Investment Banking, told the <em>Post </em>that the macro and micro economic environment outlook was very positive.
Ralph Parks, chairman of Asia Pacific JP Morgan, said the government had ‘adequately’ launched policies and packages and investors were watching to see if the government followed through on the promises. “This is the right time for Indonesia to make real action," Parks said.
Elsewhere, Finance Minister Sri Mulyani Indrawati said in an internal document that growth in 2007 was expected to reach 6.4%, Dow Jones Newswires reported.
"The better forecast of the economic growth in 2007 should be supported by a more stabilized macro economy situation and an improvement in foreign direct investment," Mulyani said in the
She said foreign direct investment next year is expected to increase by 10% over this year.
Mulyani also cited an expected increase in non-oil exports and the development of infrastructure across the country as factors that could support economic growth.
</div><div>Govt. Swaps Rp6.28t Worth of Bonds
The government has swapped Rp6.28 trillion ($698 million) worth of treasury bonds maturing between 2007 and 2009 for new ones due in 2011 as part of its efforts to restructure the country's outstanding bond debt.
It received bids worth Rp8.55 trillion from bondholders during Thursday's (23/3/06) open auction, the Finance Department's Director General of Treasury, Mulia Nasution, was quoted as saying by <em>The </em><em>Jakarta</em><em> Post</em>.
Investors traded in fixed- and variable-rate bonds with average weighted yields of between 11.77% and 13.19% for new five-year, fixed-rate FR0022 bonds, carrying a 12.12% coupon.
The government has been refinancing its bonds as part of an effort to better space their redemption and reduce the interest burden. It faces the risk of having to pay as much as Rp40 trillion in maturing bonds between 2007 and 2009 if they are not refinanced.
The government plans to raise Rp24.9 trillion in net proceeds from bond sales this year to help plug the budget deficit, expected to come in at Rp22.4 trillion, or 0.17% of the gross domestic product.
Nasution meanwhile said the government would also consider financing options from the sale of bonds issued by the Asian Development Bank, the proceeds of which would later be channeled to the government as loans.
He further said that the government still wants to raise Rp3 trillion ($329 million) from sales of government bonds through an auction next month, Reuters
Asked whether Indonesia would still aim to get Rp3 trillion, he said, "Yes, the target stays." The government plans to raise a net amount of Rp24.8 trillion in bonds this year.
</div><div>BI Expects 2006 Trade Surplus at $3.3b
The central bank expects a trade surplus of $3.3 billion in 2006, turning around from a deficit of $400 million in 2005.
"The trade surplus this year will be supported by a decrease in imports and capital flight," Bank Indonesia (BI) Governor Burhanuddin Abdullah said in a document presented to the public Monday (20/3/06), according to <em>The Jakarta Post
Abdullah said an expected increase in foreign direct investment would also add to the trade surplus this year.
Analysts said the trade surplus should further boost the rupiah against the US dollar this year.
Since the start of the year, the rupiah has strengthened about 8%.
Abdullah said the central bank also expects core inflation in 2006 to fall to 6% to 8% from about 9% at end-December, mostly due to a stronger national currency and better food distribution.
"A better distribution of food could minimize the increase of food prices, which in turn would reduce inflationary pressure," he said.
</div><div>Indonesia Expects Growth Spurt in 2007
Indonesia's economy may expand by as much as 6.4% next year amid rising foreign investment, Finance Minister Sri Mulyani Indrawati said Tuesday (21/3/06).
"We do hope that macroeconomic stability continues to improve and investment increases next year," Indrawati said, according to Bloomberg. "Funding for infrastructure development will also
start to pour into the country."
The rupiah has climbed 15.6% from a four-year low on August 30 as foreign investors return to Indonesia. The nation wants to attract more investment to build $150 billion of roads, seaports, airports and power plants and create employment.
A 6.4% pace of growth next year would be the fastest since before the Asian financial crisis of 1997-98. The $258 billion economy will probably expand from 5% to 5.7% this year, Bank Indonesia (BI) Governor Burhanuddin Abdullah said Monday (20/3/06).
Indonesia's economy grew 4.9% in the last three months of 2005, the slowest pace in six quarters, after the government more than doubled fuel prices and the central bank raised interest rates, reducing demand for homes, cars and other consumer goods.
The 5.6% growth last year was faster than the 5.1% pace in 2004.
Indonesia also expects a budget deficit of 0.3% to 0.7% of the gross domestic product (GDP) next year, Indrawati said. The budget deficit was 0.5% of the GDP in 2005. The government had forecast a deficit of 0.9% in 2005.
The government expects foreign investment to increase 12% to about $10 billion this year, from $8.9 billion in 2005.
In January, overseas investment surged 11-fold to $1.31 billion, led by investments in paper and pulp and food industries, according to the Indonesian Investment Coordinating Board (BKPM).
Foreign direct investment helped Indonesia add 34,100 jobs in January, the board said.
The government expects the rupiah exchange rate to average 9,700 against the US dollar next year compared to 9,900 under this year's state budget estimate, Indrawati said.
Full-year inflation should be 6% in 2007 against 8% estimated for this year while the three-month Bank Indonesia Certificate benchmark rate is seen averaging 7.5% against 9.5% this year, Indrawati said, according to AFX.
World oil prices are seen averaging $55 per barrel in 2007 compared to this year's estimate of $57. Daily oil output is seen lower at 1.04 million barrels per day (bpd) next year against 1.07 million bpd this year.
The government expects a budget deficit of 0.3% to 0.7% of gross domestic product (GDP) for 2007 compared to this year's estimated deficit of 0.7% of GDP, she said.
Indrawati said the above assumptions would form the basis for drafting the 2007 state budget.
Meanwhile, the strengthening of the rupiah has not yet affected the exports of small and medium enterprises (SMEs), which are forecast to jump 19.2% on-year to Rp130 trillion ($14.3 billion) this year, Antara reported.
Cooperatives and Small Scale Enterprises Deputy Minister for Marketing and Business Network Hasan Jauhari said on Tuesday (21/3/06) it is too early to evaluate the effect of the stronger rupiah on the export of SME products.
He said SMEs are not yet feeling any effect while the competitiveness of their products in the global market remains high.
He said the rupiah's appreciation could have affected SMEs' retail products but not SME products with long-term purchase contracts.
</div><div>BI Awards Rp27.34t 1-Month SBIs
Bank Indonesia (BI) has auctioned Rp23.34 trillion worth of one-month Bank Indonesia Certificates (SBIs) at a weighted average interest rate of 12.73%, up from 12.7% the previous week. The auction absorbed all incoming bids, reported AFX.
</div><div>Jan-Feb FDI Realizations Jump
Foreign direct investment (FDI) approvals in Indonesia fell 61% in the two months to February but realizations jumped dramatically, the National Investment Coordinating Board (BKPM) said.
Approvals fell to $1.27 billion from $3.25 billion in the same period last year, However, actual FDI surged 287% to $2.21 billion during the two months from $572 million a year earlier, the agency said in a report, according to AFX.
For domestic investment, investment plans approved during the first two months of the year rose to Rp8.17 trillion from Rp5.72 trillion a year ago, while actual investment climbed to Rp3.26 trillion from Rp2.46 trillion.
BKPM's figures excluded investments in the oil and gas sector, non-bank financial institutions, insurance and leasing, mining and coal mining, portfolio and household investment, and investments licensed by technical agencies.
The report said new FDI projects approved during the two months dropped in value to $801.9 million from $2.45 billion a year ago despite a rise in the number of projects to 217 from 187.
It said FDI expansion projects approved fell both in number and value, with 49 projects involving $166 million approved during the January-February period compared to 62 projects worth $229.1 million approved a year earlier.
Meanwhile, some 35 projects worth $303.9 million were approved to change their status into FDI projects compared to 26 projects worth $571.7 million a year ago.
Construction was the most dominant sector with five FDI projects worth $322.9 million approved during the two months followed by the food sector in second spot with six projects worth $245.1 million. Chemical and pharmaceuticals was in third with nine projects worth $199.6 million
As for domestic investment, the report said new project approvals increased in value to Rp6.71 trillion from $5.99 trillion a year ago but the number of project fell to 20 from 29. It said some 15 expansion projects worth Rp858.7 billion were approved against 17 projects worth Rp721.8 billion a year ago, while five projects worth Rp595.6 billion involved change of status to domestic investment projects compared with only one such project worth Rp4.7 billion a year ago.
BKPM chairman Muhamad Lutfi said FDI approvals this year could still exceed last year's level of $13.58 billion despite a sharp drop in the first two months of the year.
He cited the expected passage of a new investment law and tax incentive plan as reasons for being optimistic about Indonesia's prospects for attracting more FDIs.
He said the drop in the January to February FDIs could have been the impact of last year's fuel price hikes.
The government submitted an investment bill to the House of epresentatives on Tuesday (21/3/06) and will soon name a team to discuss the bill with legislators.
The bill aims to reduce the cost and time needed to set up businesses in Indonesia to about 30 days from 150 days at present.
It will also reduce the authority of the investment board from an approving agency to one that handles registration.
</div><div>Resources Investment to Surge in 2006
Foreign investment in Indonesia's natural resources sector to help power China’s and India's economic engines will surge in 2006, a senior executive with Merrill Lynch & Co Inc said recently.
Foreign and domestic investors see Indonesia's natural resources firms as a relatively safe and lucrative investment destination while demand from China and India is driving up commodity prices on the global market, PT Merrill Lynch Indonesia president director Roger Suyama told
Dow Jones Newswires.
"What you'll see in 2006 is many more structured transactions in the natural resources sector... more tie-ups from companies in India and China and maybe Middle Eastern companies," Suyama said.
Indonesian firms producing resources including coal, oil and gas, cold-pressed crude palm oil and base metals are attractive to investors as "they’re dollar-denominated because they're exported and also demand for these exports will grow as China and India grow," he added.
Fast growth in the economies of China and India has driven up the prices of commodities these countries need to feed their booming export manufacturing sectors.
</div><div>Visiting US Financiers Upbeat
US investment firms JP Morgan Chase & Co and Capital International Inc are upbeat that foreign direct investment in the country will pick up soon following several concrete signs of an improved business climate.
The recent settlement of the Cepu oil block dispute and the trengthening of the rupiah against the US dollar are just some of the factors fueling confidence among members of the international
"The policies of this administration are being viewed very favorably by international investors.
There has been $4 billion in direct foreign investment into this country during this administration, and more, we believe, will be coming soon," JP Morgan's Asia Pacific region chairman, Ralph Parks, was quoted as saying by <em>The Jakarta Post
Parks, along with JP Morgan Indonesia president Gita Wirjawan and Capital International managing director Chapman Taylor, met President Susilo Bambang Yudhoyono on Tuesday (21/3/06) to obtain firsthand information on the government's economic policies.
Parks said that compared to some of Indonesia's regional competitors, such as China and India, investment opportunities in this country are huge and free from protectionism for particular industries.
"Indonesia may be expected to have an advantage in expanding its agriculture-based industry as it has all that it needs -- land and labor – to expand the sector," Taylor said.
</div><div>Indonesia May Enforce Overseas Dispute Arbitration
Indonesia may enforce international arbitration awards arising from business disputes under a government-sponsored law that aims to boost investment in the country.
The new law will “give more certainty to our foreign investors for them to clarify disputes,'' National Investment Coordinating Board chairman Muhammad Lutfi said in an interview in Bali on Tuesday (21/3/06), according to Bloomberg.
If we have “certainty of law, (allow) repatriation of money, honor arbitration from overseas, simplify licenses, we will be at par with others in the region,'' Lutfi said.
President Susilo Bambang Yudhoyono's administration will seek parliamentary approval for the law in April.
While Indonesia is a signatory to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitration Awards, companies often struggle to enforce rulings. The arbitration award must be recognized by the Supreme Court and cannot violate public policy.
Indonesia only recognizes international arbitration rulings from countries with which it has a treaty covering the mediation of business disputes.
</div><div>RI Seeks Closer Trade Ties with US
After four years of stagnant trade relations, the government plans to start intensifying talks with the United States and support a joint-study group on a possible free trade agreement (FTA) with the country, Trade Minister Mari Pangestu said Friday (24/3/06).
"This is an important meeting because it will be the first ministerial meeting after the one in 2002," Pangestu was quoted as saying by <em>The Jakarta Post
A delegation, involving both the government and the private sector, will head for Washington DC, Chicago and New York in mid-April to meet with their counterparts to discuss matters under the Trade and Investment Framework Agreement (TIFA), the first in four years.
The US is Indonesia's second largest business partner, with exports to the country of $9.46 billion accounting for 14.46% of total 2005 exports.
Meanwhile, import of goods from the country amounted to $3.8 billion, or some 9.45% of Indonesia's total imports in 2005.
"Before proceeding with FTA, we have to go through a process and it is through TIFA. We will first start intensifying senior official and ministerial meetings," Pangestu said, adding that the government would also support the planned FTA joint study group.
According to a study by Center for Strategic and International Study researcher Hadi Soesastro, an FTA could not only help enhance Indonesia's market access but also improve competitiveness
due to the economic reforms undertaken in relation to the implementation of the FTA.
The most important products to be discussed will be textile and apparel, footwear, electronics, processing machines, telecommunication equipments, shrimp, cocoa, rubber and wood.
In the manufacturing sector the sensitive sectors are foods, beverages and tobacco, chemical products, and the automotive sector.
</div><div>VP Tells Krakatau Steel to Expand in Kalimantan
In an effort to restore efficiency and competitiveness in the country's steel industry, Vice resident Jusuf Kalla has told state-owned steel producer PT Krakatau Steel to build its new lant in resource-rich Kalimantan.
"All production expansion plans for Cilegon should be rerouted to Kalimantan," Kalla said thursday (23/3/06), according to <em>The Jakarta Post
"And this is not just some plan or policy, but rather a direct order intended to help our steel industry," he said.
Kalla said that Kalimantan, particularly South Kalimantan province, is an ideal place to site a steel plant as it enjoys abundant supplies of iron ore and coal.
This would reduce production costs and increase the overall ompetitiveness of Indonesia's steel industry.
The building of a steel plant in Kalimantan would also be in line with the government policy of optimizing the use of the country's natural resources -- including iron ore, natural gas and coal --
for domestic purposes.
Industry Minister Fahmi Idris concurred with Kalla on the importance of increasing both the efficiency and production of the country's steel industry to ensure security of supply on the domestic steel market and beat off overseas competition.
Relocating Krakatau Steel's expansion to South Kalimantan would be the ideal way of achieving this, he said, especially given the availability of deep water harbors in the area.
Meanwhile, Krakatau Steel has tied up with China's Chengda Engineering Corp and Sichuan Chuan Wei Group Co Ltd to build a $1 billion iron sand and iron ore processing plant in Central Kalimantan province, <em>Investor Daily </em>reported.
“The construction of the plant may begin in the third quarter of 2006,” the report quoted Krakatau Steel marketing director Kemal Masduki as saying. He added that the plant might have a capacity of 2.5 million tons per annum.
</div><div>Garuda May Hive Off Citilink
Indonesian flag-carrier Garuda Indonesia said it plans to spin off its low-cost unit, Citilink, as a separate entity in September to enable it to compete against other budget airlines.
The airline will soon submit to the government its final proposal on the spin-off plan, Garuda vice president in charge of Citilink, Joseph Saul said Wednesday (22/3/06), <em>The </em><em>Jakarta</em><em> Post </em>reported.
Saul said that if the plan proceeds well, Citilink would expand its fleet from four aircraft to 10 by leasing Airbus airplanes.
Citilink, which has a 2.4% share of the domestic market, leases its aircraft from GECAS, the Singaporean branch of an American company.
He said that Citilink would probably use the additional aircraft to increase its services from Jakarta to other cities in western Indonesia, such as Padang, Palembang, Pekanbaru and Banjarmasin.
As part of its plan to reduce costs, Citilink would introduce electronic ticketing (e-ticketing) early next month, Saul said. "By August 1, we hope to have fully introduced it," he added.
</div><div>Telkom Expects 2006 Revenue Up 20% - CEO
The country’s largest telecommunications company, PT Telkom, expects its revenue this year to increase by 20% on-year due to growth in its customer base, its president said.
Telkom expects to get a total of 12 million new customers, which include cellular, fixed line and fixed-wireless users, chief executive Arwin Rasyid told Dow Jones Newswires on the sidelines of an international investment conference on Monday (20/3/06).
Telkom owns 65% of Indonesia's largest cellular operator by assets and subscribers, PT Telkomsel.
"For Telkomsel itself, we expect the company to get up to eight million new cellular subscribers this year," Rasyid said.
Analysts said this target is realistic given the low level of penetration of mobile phones in Indonesia.
Only about 19% of Indonesia's population of 220 million owns cellular phones, providing considerable room for growth. Analysts expect penetration to increase to 25% in 2006 and 35% in 2007.
Telkom had some 8.5 million fixed line subscribers at end-December 2005, and expects an increase of up to 2% this year.
For 2005, Rasyid expects Telkom's revenue to grow by up to 25% to Rp42.5 trillion from Rp34 trillion in 2004. Telkom will announce its 2005 earnings by March 31.
Telkom plans to spend about Rp11 trillion ($1.2 billion) in capital expenditure this year, the same as last year, and is looking for ways to finance the investment, Rasyid said. "We are looking for the best option," he said, without elaborating.
Kim Eng Securities expects Telkom's 2005 net profit to increase to Rp7.1 trillion, or 18% from Rp6 trillion in 2004. The securities firm expects Telkom's 2006 net profit at Rp8.72 trillion on revenue of Rp46.66 trillion, compared with Rp40.18 trillion in 2005.
</div><div>Bank Buana's Gross Profit Up 19.25%
Publicly listed Bank Buana booked a 19.25% increase in gross profit last year, largely due to significant growth in total lending.
The bank’s gross profit stood at Rp492.2 billion ($53.2 million) in the year to last December, compared to Rp412.74 billion in the same period of 2004, it said Monday (20/3/06), according to <em>The </em><em>Jakarta</em><em> Post</em>.
The bank's total lending last year amounted to Rp10.31 trillion, a 31.23% increase from the Rp7.85 trillion recorded in 2004. Out of the total loans, 76.46% was extended to small and medium enterprises.
The bank's third party funds dropped to Rp12.89 trillion at the end of 2005, compared to Rp13.42 trillion at the end of the previous year. Savings accounts contributed 55.6% of the third party funds in 2005.
The bank's equity grew 14.05% to Rp2.17 trillion in 2005. Meanwhile, capital adequacy ratio (CAR) reached 20.2%, higher than the central bank's minimum level of 8%.
Total assets dropped by about Rp354.18 billion to Rp15.9 trillion as of December 2005. About 97% of these consisted of productive assets such as loans and securities.
An increase in income from foreign currency transactions and a 6% decline in operating costs contributed to a 38% increase in other operating income (non-interest earnings) to Rp134.01 billion from Rp97.07 billion the previous year.
Profitability ratios also showed an increase in 2005, with the bank's return on assets amounting to 3.13% compared to 2.66% in 2004, return on equity coming in at 18.91% from 17.75% previously, and net interest margin standing at 6.51% compared to 6.12% the year before.
</div><div>No Bond Issue for BRI
State-owned Bank Rakyat Indonesia (BRI) has no plan to raise funds by issuing bonds or subordinated debt this year, a senior bank official said Monday (20/3/06).
"We are benefiting from the central bank's new lending regulation that gives leniency on smallscale and consumer loans," BRI vice president I Wayan Alit Antara told Dow Jones Newswires on the sidelines of an investment conference.
He said the new rules, which cut the provision for such loans to 85% from 100%, will enable the bank to increase its working capital this year to 18%, from 15% last year.
Last year, BRI’s expansion in consumer lending helped fuel a 10% increase in net interest income to Rp12.44 trillion from Rp11.26 trillion a year earlier.
BRI had a healthy net interest margin largely due to its strong focus on small- and medium-sized businesses. The bank's net interest margin at the end of December was 12.17%, compared with 12.16% a year earlier.
</div><div>Govt. to Speed Up New Power Projects
To speed up the construction of coal-fired steam turbine power plants with a total capacity of 8,000 MW, the government is looking at mechanisms that would allow it to appoint firms directly to take charge of the projects.
"It would take at least a year for the projects to get off the ground if we do it by tender. Therefore, we are reviewing the existing regulations to enable us to directly appoint the contractors," the Mines and Energy Department’s Director General for Electricity and Energy Yogo Pratomo was quoted as saying by <em>The Jakarta Post
</em>on Monday (20/3/06).
The government has said it wants to speed up the construction of power plants fired by fuels other than oil amid high crude prices and fears of power shortages in Java.
Electricity demand in Java and Bali reached 15,830 MW last year, with annual growth estimated at 6%, while PLN's installed capacity stands at 19,615 MW.
Meanwhile state electricity company PT PLN said it needs $10 billion to $11 billion to construct new power plants to provide an additional 3,300 MW of electricity within the next two and a half years.
PLN president Eddie Widiono was quoted as saying by <em>The Jakarta Post
</em>PLN is considering tapping the bond market to help finance the projects.
“The construction of the plants, which will be coal- and natural gas-fired, has to be completed by 2009 to meet the increasing demand for electricity and simultaneously reduce our reliance on oil,” Widiono said.
He further said that PLN would invite private sector investors to build plants with a total capacity of 8,300 MW within the period, to increase the country’s power generation capacity by 11,600 MW by 2009.
Most of the plants would be coal-fired as the number of gas-fired plants needs to be limited, considering that gas supply could be reduced as more factories turn to gas instead of oil.
Meanwhile, PLN said the 200 MW Tarahan coal-fired power plant being built in Lampung province is expected to start operating in September 2007.
PLN secretary Moh Harry Jaya Pahlawan said the construction of the Rp2.47 trillion ($270 million) project, which began in 2001, is 35.27% complete, Antara reported.
The plant will use low-calorie coal from PT Bukit Asam’s coal mine in Tanjung Enim, South Sumatra.
</div><div>PLN Seeks Total's Gas to Cut Oil Use
French oil group Total has signed a preliminary agreement to supply natural gas to Indonesian state power firm PT PLN, a PLN official said on Wednesday (22/3/06).
PLN has been trying to cut its power plants' use of oil products – diesel and fuel oil -- by about 18% this year as it looks to counter soaring oil costs.
Total will supply 20 million cubic ft of gas per day to PLN's 100-MW power plant, to be built in East Kalimantan and expected to begin operations in 2008, PLN deputy director Tonny Agus Mulyantono was quoted as saying by Reuters
"The signing of the memorandum of understanding is important and we will have further talks on pricing and other issues," Mulyantono said.
He said PLN expects to sign a final agreement with Total as soon as possible, helping PLN trim its diesel oil use by as much as 4 million kiloliters (kl), about 25 million barrels, over 20 years.
Mulyantono said PLN and state-controlled gas distribution firm PT PGN would also sign a preliminary agreement soon to supply 200 million cubic ft per day of gas to PLN's Muara Tawar power plant, near Jakarta.
PLN needs the gas from PGN for its power plants with a combined capacity of 1,900 MW, which it plans to expand by another 225 MW.
He said PGN, as distributor, would get the gas from state oil and gas firm PT Pertamina and ConocoPhillips from the fields in South Sumatra.
</div><div>Shaw Group Unit Gets Geothermal Plant Pact
A Shaw Group Inc unit received an engineering, procurement and construction contract from state oil company PT Pertamina for a new 60-MW geothermal power plant.
Financial terms were not disclosed, Dow Jones Newswires reported on Wednesday (22/3/06).
The US construction and engineering company said the contract was awarded to the Indonesian unit of its Shaw Stone & Webster subsidiary, which will work with Indonesian construction company PT Rekayasa. The project is scheduled to be completed in 2008.
Shaw said the plant, to be built in Kamojang, Java, will be Pertamina’s first independent power project to sell electricity to Indonesia's state power utility, PT PLN.
The company said Shaw Stone & Webster has worked on several projects in Indonesia. Shaw is also working with Pertamina on other feasibility studies for geothermal projects.
OIL AND GAS
</div><div>Indonesia, China Agree on Higher LNG Price
Indonesia has agreed with China National Offshore Oil Corp (CNOOC) to increase the price of its liquefied natural gas (LNG) sales from the BP-led Tangguh project, oil and gas watchdog BP Migas said on Thursday (23/3/06), Reuters
Indonesia has been pushing since January to raise the price in the long-term Tangguh contract, initially agreed in 2002 with a ceiling at the equivalent of $25 per barrel of oil.
Oil is currently trading at more than $62 and LNG prices have soared along with it as top consumers Japan and South Korea compete with new buyers such as China, India and the US.
"We have concluded our talk with CNOOC over an adjustment of the LNG Tangguh contract.
The result is very profitable and very good for Indonesia. However, the government must approve this result," BP Migas chairman Kardaya Warnika said.
"There is no change in the LNG volume (to CNOOC). I will give you the details after the government gives its approval," Warnika said.
He gave no other detail on the price for the sales to China, which is due to begin in late 2008.
</div><div>Govt. Claims Remote Blocks Have 8.5b Barrels of Oil
Indonesia said it has 22 unexplored blocks with potential reserves of up to 8.5 billion barrels of oil and 175 trillion cubic ft of gas.
The 22 offshore blocks have not been explored, as exploration is very costly, spokesman of the Upstream Oil and Gas Regulatory Body (BP Migas) Amir Hamzah was quoted as saying by Xinhua
on Thursday (23/3/06).
Exploration in offshore blocks is three times as expensive as onshore blocks, he said.
Most of the blocks are located in eastern Indonesia, including Sulawesi, Maluku and Papua, he said.
"We invite domestic and foreign investors to explore and exploit oil and gas in Indonesia," he was quoted as saying by Antara during a visit to Jambi province.
</div><div>Petronas Keen on Building Oil Refinery
Malaysian state oil firm Petronas is interested in building an oil refinery in Indonesia following its recent entry into Indonesia's oil and gas downstream business, <em>Kompas
</em>quoted the company's chief executive officer Tan Sri Dato Mohd Hassan as saying.
“We are seeking the opportunity to invest in oil refinery and petrochemicals (business),” Hassan said.
Petronas is a long time investor in Indonesia's upstream oil sector but marked its entry into the downstream business earlier this month with the opening of its first retail outlet for fuel products and services in Indonesia.
It has said that it will initially focus its retail business on the greater Jakarta region before expanding to other parts of Java, Sumatra, Kalimantan and eastern Indonesia with some 200 service stations planned to be set up by the end of 2010.
The Indonesian government has opened up the oil and gas downstream sector to competition but still keeps state oil company PT Pertamina's monopoly in distributing subsidized fuels, including premium gasoline and high speed diesel.
</div><div>Kulim, US Firm Plan Biodiesel Plant in Batam
Malaysia’s Kulim Bhd plans to build a biodiesel plant on Batam together with an American partner, mainly for export, <em>Business Times </em>reported on Monday (20/3/06).
The plant's capacity and cost are not immediately known, but a biodiesel plant which produces 60,000 tons per year costs some RM40 million in Malaysia.
An industry source said Kulim has shortlisted three American candidates, one of which is from California, and they all specialize in producing ethanol from crops such as corn.
Abundant raw material can be sourced from Indonesia's oil palm-rich Riau province and Kulim also has more than 60,000 hectares of oil palm estates in Central Kalimantan, said the source.
The initiative is part of Batam's Development Authority's push for high-growth industries such as plantations and manufacturing in Riau and nearby Singapore.
</div><div>PGN Expects 25% Jump in 2006 Net Profit
State owned gas distributor PT PGN expects a 25% jump in its net profit to Rp1 trillion ($109 million) this year from Rp800 billion last year.
PGN president Washington MP Simanjuntak said the forecast was based on the assumption that the rupiah would continue to strengthen.
An increase in the sales and gas price would contribute to the rise in net profit, Simanjuntak told <em>Bisnis </em><em>Indonesia</em>.
In 2005, its foreign exchange loss was reduced to Rp250 billion, compared to the previous year.
</div>MININGBumi, Energi Mega to Merge in July
Coal producer PT Bumi Resources announced on Tuesday (21/3/06) a plan to merge with oil and gas firm PT Energi Mega Persada, with the merger expected to take effect in July.
The two publicly listed companies plan to merge through a share-swap mechanism, in which they will exchange some of their shares, Bumi president Ari Saptari Hudaya said during a briefing by the company in Jakarta, <em>The Jakarta Post
"We have opted for a share-swap deal... to keep costs down," he said. "We plan to use our capital to expand into new businesses."
The merger plan came after Bumi signed a binding sale agreement last March 16 to sell three coal mining firms for $3.2 billion to a consortium controlled and led by local company PT Borneo Lumbung Energi, an affiliate of Indonesia-based PT Renaissance Capital. The company will seek approval for the divestment deal from its shareholders in May.
As part of the deal, Bumi sold its 95% stake in PT Kaltim Prima Coal and 100% stakes in PT Arutmin Indonesia and IndoCoal Resources Ltd.
The company plans to acquire other assets related to its core business within the next six months.
"After the merger, Bumi will set up a plant to process coal into crude synthetic oil in South Sumatra in order to add value to our coal output," Hudaya said.
For the project, he explained, Bumi had signed a deal to acquire coal producer PT Pendopo Energi Batubara in South Sumatra, which is valued at about $3 million.
The plant would produce crude synthetic oil with a capacity of 80,000 barrels per day (bpd). To achieve this production target, the company would need 47,500 tons of coal per day. The plant will require an investment of $3 billion.