From Government of Indonesia

Bio-fuel, Telecom Investment Plans

The Sinar Mas group signed memoranda of understanding on Tuesday (9/1/07) for $5.5 billion in bio-fuel development and said it would work with Russian investor Altimo in the telecommunications sector.

The MoUs were with China National Offshore Oil Corp. (CNOOC) and Hong Kong Energy (Holdings) Ltd.for programs in Kalimantan and Papua.

The project will develop bio-diesel from crude palm oil and bio-ethanol from sugar cane or cassava.

According to a statement from Sinar Mas Agro Resources & Technology (SMART), the three companies will develop the project in three phases and over eight years.

In the Russian deal, Sinar Mas and Altimo will cooperate in PT Indoprima Mikroselindo (Primasel), which earlier said it planned to invest $2 billion in the sector.

Altimo will join as a new shareholder in the subsidiary of the Sinar Mas Group, a company official told the newspaper Investor Daily.

Primasel Director Ubaidillah Fatah said Primasel will commercially launch a cellular product based on CDMA technology in February or March this year.

Meanwhile a new report from the World Bank said Indonesia can mobilize Rp375 trillion ($41.1 billion) from financial institutions parked outside the banking sector to fund development programs, XFN-ASIA reported.

“What is needed is a broad agenda of reforms and the time is now right to broaden the policy debate beyond banks and bring non-bank institutions' issues also center-stage,” said P.S. Srinivas, principal author of the report.

"Non-bank assets currently worth Rp375 trillion ($41.16 billion), representing 14% of GDP, represent substantial resources that can support Indonesia's development," Andrew Steer, Country Director for the World Bank in Indonesia, said in a statement.

Steer said improving non-bank financial institutions has been internationally demonstrated to be a sound route to financing long-term development as well as increasing access to and reducing the cost of financial services.

He said Indonesia needs to spend $5 billion per year in infrastructure investment in order to sustain 6% GDP growth.
State pension fund Jamsostek said it is already looking to invest in areas including financing of low-cost housing and soft loans for small and medium enterprises.

The government is to issue a new regulation allowing Jamsostek to invest a part of its assets in the areas, The Jakarta Post reported.

Under a draft government regulation, due to be issued in February, Jamsostek will be allowed to invest Rp5 trillion annually in the low-cost housing sector, and 10% of its assets, now totaling Rp38 trillion, in SMEs.

Bank Indonesia (BI) Governor Burhanuddin Abdullah said the central bank will relax its guidelines on non-performing loans, credit ceilings and loan dispersion to encourage stronger lending to the real sector.

BI will require banks to strengthen their risk management on loans, rather than setting excessively strict criteria for determining whether a loan has gone bad or not, The Jakarta Post reported.

Coordinating Economics Minister Boediono said Tuesday that economic growth in 2006 is expected to be better than the previous year on the back of stronger exports, investment and government spending.The economy expanded 5.6% in.

Boediono also said he was hoping that the central bank would further cut its benchmark interest rates this year to spur economic growth further.

He said the only potential inflation sources this year might come from disruptions in the supply of goods due to "weather and transportation vagaries".

Boediono stressed that the government has no plans to impose the type of strict foreign exchange controls imposed last month by Thailand's central bank.
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