| Indonesia's Trade and Investment News, 23 April 2007 |
| Written by Mahendra Siregar/Hari S.noegroho | |
| Monday, 23 April 2007 | |
| Highlights Politics · President Yudhoyono said he would reshuffle his cabinet in early May · The President called for more action on money laundering · Israeli delegation to be allowed to visit for parliamentary conference Regions · US and Indonesia in joint program to stop bird flu deaths Business briefs Investment · Daihatsu Mulls Plant Capacity Boost · No Stricter Foreign Stake Limit Proposals: BKPM State concerns · Government to provide program to assist textile companies · Indonesia to import soybeans as bad weather cuts harvest SOEs · Garuda Indonesia books first quarter profit · PT Semen Gresik books sales rise of 11.6% year-on-year in first quarter Private sector · Airbus looks for sales among Indonesian low-cost carriers Banks · Banks start to cut deposit rates · Banking sector loans grew 15.6% in February Power · PT Indonesia Power Indonesia Power Needs Coal Supply Boost Oil & gas · Pertamina reaches cooperation agreement with Russia's Lukoil · Santos to Start Production at Oyong Mining · Workers and Freeport Management agreed on better conditions POLITICS President to Reshuffle Cabinet President Susilo Bambang Yudhoyono stated he will announce a reshuffled cabinet in early May. The president's statement on the reshuffle was made after the head of state attended prayers on Friday (20/4/07) at Baiturrahim Mosque at the presidential office complex, Antara reported. Step Up Fight on Money Laundering: President While arguing that the detection of suspicious transactions had been quite effective to date, President Susilo Bambang Yudhoyono says better interagency coordination is needed to halt money laundering. "To be more effective, we need better coordination, partnerships and information-sharing in our anti-money laundering campaign," Yudhoyono said in a speech to mark the fifth anniversary of the Financial Transactions Analysis Center (PPATK). Dr. Yudhoyono lauded the fact that as of 31 March, out of 7,884 reports of dubious financial transactions, eight convictions had resulted and 453 reports had been forwarded to the police and prosecution service for further investigation. Separately, PPATK spokesman M. Natsir Kongah said the agency would adopt systems similar to those applied in the Philippines and Australia to allow it to more vigorously tackle money laundering. "The planned amendments to the Money Laundering Law (No. 25/2003), if approved by the House of Representatives, will give the PPATK the power to investigate suspicious transactions in more detail, and require more institutions and individuals to submit reports to it so that we can get rid of the loopholes in the money-laundering arena," Natsir explained. The House has yet to deliberate the amendment bill that the government submitted on October 10, even though a special committee has already been set up for the task. The House, in recess since late last month, will resume its deliberations on the bill on May 7. Natsir said the PPATK currently lacked investigative powers so that the enactment of the amendment bill was of the utmost importance. Israeli IPU Delegation to Attend Bali Meet The Indonesian government and the House of Representatives have said they will allow Israeli lawmakers to attend the 116th Assembly of the Inter-Parliamentary Union (IPU) meeting, which will be held in Bali, from 29 April - 4 May. The Israeli delegation has been invited by the IPU, not by the Indonesian government. Foreign Ministry spokesman Kristiarto Soeryo Legowo said that the government could not prohibit the Israeli lawmakers from coming to Indonesia because the event was being held by the IPU, an organization recognized by the United Nations. "The Israeli lawmakers are members of the IPU. The event is organized by our House of Representatives and not the government. And our lawmakers are members of the IPU. So there is no reason why we should ban them from coming, although we will not welcome them," he told The Jakarta Post on Thursday. This is not the first time Israeli officials have visited Indonesia to attend international conferences. Last year, an Israeli delegation attended the United Nations Economic and Social Commission on Asia and the Pacific meeting in Jakarta. Indonesia and Israel do not have diplomatic relations as Indonesia opposes Israel's policy on Palestine, although Indonesia has agreed on the two-state solution to the Israel-Palestine conflict, as stated in several UN resolutions. Several Indonesian lawmakers also agreed that the Israeli lawmakers should be allowed to attend the meeting. Djoko Susilo of the National Mandate Party said that the Indonesian people should look at the problem wisely and not react in an emotional manner, as the Israelis were only coming for the meeting. "We don't recognize Israel but we recognize the IPU as we are members of the organization," he told the Post . Yusron Ihza Mahendra of the Crescent Star Party concurred with Djoko, saying that the Muslim community should not exaggerate the reasons for the Israeli lawmakers attending the conference. Finance Ministry Targets Tax Fraud Indonesian Finance Minister Sri Mulyani Indrawati has pledged to continue a fight against tax fraud in the world's most populous Muslim country. In an interview with The Wall Street Journal , Indrawati said getting more Indonesians to pay tax was a key step to reducing Indonesia's traditional reliance on oil revenues and loans from international donors. Only about three million people are registered as individual tax payers in Indonesia, a country of 220 million people. Many companies also avoid paying tax. She said the government aims to increase the number of individual taxpayers to six million by next year. Indrawati admitted part of the problem in increasing the number of tax payers has been corruption at the tax department, which falls under the finance ministry. Foreign investors have praised Indrawati's tax initiatives, which they say are a step in the right direction. New Audit Standards Issued The Supreme Audit Agency (BPK) launched a new set of public-sector audit standards Thursday (19/4/07) that are expected not only to improve the quality of public sector audits, but also remove misunderstandings arising out of audits. "The new auditing standards must be used as the basis for all audits conducted on institutions and programs funded by the treasury, covering not only the national and provincial budgets, but also state-owned and local government firms," BPK head Anwar Nasution said during the launch of the new standards. The State Financial Audit Standards (SPKN) supersedes the State Audit Standards (SAP), which were drawn up by the New Order administration. The old audit rules failed to take account of public sector accounting standards. It also separated audits on routine and development expenditure, which often overlapped. Nasution said the new set of standards was needed in order to improve transparency and accountability in public finances, especially after the enactment of new legislation on the public-sector finances in 2003 and 2004. This legislation is primarily intended to improve public sector accounting, but different accounting systems continue to be applied, resulting in widespread confusion. Indonesia , US Join Forces in Exercise About 80 US soldiers are in Indonesia, including some Hawaii National Guard members, for what is being described as "opening a new chapter" between the US and Indonesian armies. Garuda Shield 2007 in West Java represents the resumption of brigade-level, army-to-army exercises after US military ties with Indonesia were cut by the Clinton administration in 1999. Washington restored full military relations with Indonesia in late 2005, and is reengaging with Jakarta on military and civilian fronts. Maj. Gen. Stephen Tom, deputy commanding general for the US Army, Pacific, at Fort Shafter, said the exercise is "very important" for the US Army. The last brigade-level exercise conducted between the US and Indonesia was in 1997. The "command post exercise," running through 27 April, involves training with about 70 Indonesian counterparts. It is a precursor to what's expected to be a partnership between US and Indonesia. The US and Indonesia also held a two-day dialogue on defense issues in Jakarta during the week. REGIONS Indonesia , US Team to Tackle Bird Flu US and Indonesian scientists have joined forces in a bid to halt the high number of bird flu deaths in the archipelago nation, a US official said Monday (16/4/07). US deputy undersecretary of agriculture Charles Lambert said the group would focus on stemming the spread of the virus in Indonesia's poultry industry, the Associated Press reported. Lambert opened an office Monday for the team, which consists of four local scientists and one from the US, plus support staff. The group will conduct workshops for Indonesian health and animal husbandry officials and veterinarians to detect the virus and prevent its spread. "Our primary role is working on bird health. Our focus is to improve the poultry industry in order to reduce the potential of human-to-human infection," said Max Coats, a veterinarian who will head the office in Jakarta. "If we can work well on the bird side, we hope you will face less (deaths) on the human side.” Squatters to Be Moved Over Conflicts with Elephants The Lampung provincial government has announced plans to relocate residents of villages that have been attacked by elephants from South Bukit Barisan National Park, The Jakarta Post reported on Friday (20/4/07). Wild elephants have killed seven people in the West Lampung and Tanggamus regencies in the last year, as well as destroying villages and crops. The provincial administration will work with the Bengkulu and West Lampung administrations as well as the West Lampung Forestry Office to immediately relocate residents of the Roworejo, Hantatai, Bandar Agung, Atarlebar and Ringing hamlets, all relatively new settlements located in Suoh district in West Lampung regency. Lampung Governor Sjachroedin Z.P. said there was no other way to overcome the problem but move the residents. More than 10,000 people live in the new settlements, which are located within the national park and the elephants' natural habitat. The national park encompasses dozens of villages, but most of them existed before the area was made an official national park. Newer settlements, however, have emerged as a result of forest conversion and illegal logging in the national park. Lampung Forest Watch director Joko Santoso said that based on a joint study with the Worldwide Fund for Nature (WWF), the elephants that had invaded the villages were all from the same herd. "The elephants invaded the villages because the new settlements were in what had been their original movement areas.” “Based on that logic, the elephants are not wrong, but the humans who set up new villages inside that national park and the officials who allowed this to happen," said Joko. BUSINESS BRIEFS MACROECONOMY BI Rate Expected to Fall Mid-Year Bank Indonesia (BI) is likely to keep its benchmark interest rate at 9% until the middle of the year on concerns of possible inflationary pressure in June and July, Bank Mandiri predicts. "The results of research conducted by Bank Mandiri show that there will still be inflationary pressures throughout 2007 in which core inflation in June and July will move up to 8.5%. The 'headline' inflation in 2007 will average 6.5%, while Bank Mandiri's core inflation until the end of this year is expected to stand at 6.41%," Martin Pangabean, chief of Bank Mandiri's economic division, said Tuesday (17/4/07). The expected inflationary pressures would prompt BI to more careful in lowering the BI rate, he was quoted as saying by Antara. Besides inflationary pressures, the difference between domestic and foreign interest rates would also prevent national banks from lowering their lending rates, he said. The upward trend in Japanese interest rates and the impact of the US inflation on the Fed Rate are other reasons why national banks would maintain their lending rates, he said. "Admittedly, the US inflation shows a downward trend, but it is not directly coupled with a drop in interest rates. The Fed is expected to lower its rates middle of this year," he said. Under these circumstances, he said, BI would engineer soft lending rates so a drop in the lending rates would have no significant impact on the rupiah's stability. Rp3t 10-Yr Bonds Issued The government on Tuesday (17/4/07) raised Rp7 trillion from a monthly bond auction, exceeding its targeted Rp3 trillion, a government official said. The government re-opened a 10-year bond at an average yield of 9.82% and issued Rp3 trillion worth of the bond, the Finance Department's Director General of State Debt Management Rahmat Waluyanto said, according to Dow Jones Newswires. The government issued Rp4 trillion worth of 17-year notes at an average yield of 10.38%, Waluyanto said. Market participants had expected the average yield on the 10-year notes at 9.93% and the 17-year issue at 10.47%. Bids received during the auction totaled Rp19.99 trillion, he said. Analysts expect the government to raise between Rp57.1 trillion and Rp64.9 trillion ($6.3 billion to $7.1 billion) in net proceeds from bond issues this year. The government has raised Rp45.03 trillion so far, including Tuesday's auction. Govt. Allows Regional Bond Issues The government has agreed to allow regional governments to issue bonds starting this year, a government official said Wednesday (18/4/07). However, regional governments are not likely to issue bonds anytime soon as their financial reports must first be audited by the state auditor, which could take some time, said Mardiasmo, director general supervising regional government financing at the Finance Department, according to Dow Jones Newswires. "Ratings are also needed to determine bond prices," Mardiasmo said. "These processes usually take time." He did not say if any regional government is planning to issue bonds but analysts expect resource-rich regions in Sumatra and Kalimantan to be the first to issue bonds. BI Awards Rp94.17t 1-Month SBIs Bank Indonesia (BI) said it has awarded Rp94.17 trillion worth of one-month BI Certificates (SBIs) at a fixed interest rate of 9%, XFN-Asia reported. It said the auction absorbed all bids. INVESTMENT Daihatsu Mulls Plant Capacity Boost Japanese small car maker Daihatsu Motor Co is considering increasing its capacity in Indonesia to meet growing demand, a company official said. Daihatsu has the capacity to produce some 9,600 units per month, but has had to increase shifts and working hours to boost monthly output to 13,000 units to meet strong demand. Daihatsu has introduced a number of fuel-efficient models in Indonesia such as the Xenia mini-van and Terios small SUV, which have become increasingly popular since a big fuel price hike in October 2005. "Currently, we are still able to meet the demand, but if in the future we see more demand we will match this additional demand," Shigeharu Toda, general manager for the Asia division of Daihatsu, told Reuters. He did not provide more details. Last year, a company executive who declined to be named told Reuters the firm planned to increase capacity in Indonesia to 270,000 units a year by 2010. Its market share in Indonesia grew to 10.4% in 2006 from 9.1% a year before. Mastrotto Plans $50m Expansion PT Mastrotto Indonesia plans to increase investment by $50 million to expand the production capacity of its leather-processing factory in Indonesia. Chairman of the Indonesian Association of Shoemaking Companies (Aprisindo) Eddy Widjanarko said the company is prompted to expand its capacity to meet growing demand at home and abroad. Mastrotto's factory produces leather for sofas, shoes, garments and other products. Widjanarko said the additional investment by Mastrotto would create some 2,000 new jobs. No Stricter Foreign Stake Limit Proposals: BKPM The government has not received any formal proposals to tighten foreign ownership limits of companies in certain sectors, an official said Wednesday (18/4/07). "There's no decision on it, and we are still far away from a decision," National Investment Coordinating Board (BKPM) chairman Muhammad Lutfi told Dow Jones Newswires. "There's nothing to worry about." Bisnis Indonesia reported Wednesday that several departments have proposed such policies. Several analysts said President Susilo Bambang Yudhoyono is unlikely to accept such proposals as they contradict the government's efforts to boost foreign direct investment in the country. "I don't see the government is moving toward that direction," said Mirza Adityaswara, head of research at PT Credit Suisse Indonesia. Standard Chartered economist Fauzi Ichsan said such restrictions are against a new investment law that aims to create a "level playing field" between foreign and local investors. Parliament last month passed the law, which allows the government to give various tax and non-tax facilities to local and foreign investors to improve the investment climate in the country. $562m Investment Eyed for Electronics The government hopes to see new investment of $562 million in the country's electronics and information technology sector this year, Antara reported on Wednesday (18/4/07). The additional investment will be needed to keep pace with an estimated 10% annual increase in the domestic consumption of electronic goods, Industry Minister Fahmi Idris said. Idris said the projection was also based on plans by a number of foreign principals to make Indonesia their production base. In its five-year plan ending in 2009, the government has set an investment target of $2.5 billion in the electronics sector. To reach the target, the government is set to create a more conducive investment climate in the country, such as by reducing luxury sales tax, he said. He said a delay in the plan to cut the luxury sales tax has resulted in the sluggish growth of the electronics industry, as the prices of electronic products in the country are higher than those of smuggled products. Govt. Licenses $1.1b of Proposals in Bali The government licensed Rp10.5 trillion ($1.1 billion) worth of investment proposals in Bali last year, confirming investors' high interest in doing business in the island. The investment proposals consisted of domestic investment worth Rp8.5 trillion and foreign investment worth Rp2 trillion, the local office of Bank Indonesia (BI) said in its report on regional economic studies on Tuesday (17/4/07). ASEAN Tourism Investment Forum for Bali Indonesia is scheduled to host the ASEAN Tourism Investment Forum (ATIF) in Bali on September 20, the Tourism and Culture Department's Director General for Tourist Destination Development Sambudjo Parikesit said on Tuesday (17/4/07). ATIF, to be held for the second time in Bali, aims to invite ASEAN countries to invest in the tourism sector, Sambudjo said, according to Antara. "We will invite prospective investors from the ASEAN and Middle East to invest in Indonesia." Emaar International, an investor from Dubai, United Arab Emirates, will build resorts, hotels and recreational sites at Mandalika Beach, Central Lombok, while Limitless, another investor from the Middle East, is also interested in making an investment in Indonesia, he said. "Limitless wishes to invest in the retail and residence businesses in Jakarta, and the retail, residence and tourism businesses in Bali," he said. "They want to conduct a feasibility study first on the relevant financial aspect and regulations." Emaar International will sign a memorandum of understanding on investment late this month, he said. STATE CONCERNS Textile Sector to Get Assistance Textile manufacturers are to benefit from a new financial arrangement announced on Friday (20/4/07), The Jakarta Post reported. Under the program package, the government, through the Industry Ministry, will this year provide financial arrangement worth about Rp255 billion ($28.02 million) to textile firms to help them replace machinery. About Rp175 billion of the total will be used to subsidize the interest payable on bank loans, while the remaining Rp80 billion will be disbursed as loans. Ansari Bukhari, the ministry's Director General of Metal, Machinery, Textile and Miscellaneous Industries, said interest would amount to about 11% of their loans. He said that a company would be eligible to receive the program if it purchased machinery this year. Around 70 textile producers will benefit, with each receiving a maximum of Rp5 billion, he said. Survey firms PT Sucofindo and PT Surveyor Indonesia will oversee the process and select firms worthy of the loans. Soybean Imports Seen Up 7.8% Indonesia may import 1.4 million tons of soybeans this year, an increase of 7.8%, on increasing demand and a drop in domestic output, the US Grain Council said. "The increasing imports of soybean are due to an expected fall in domestic production in 2007, mainly caused by floods and drought which have delayed the growing season," the council's country representative Ali Basry told Reuters on Tuesday (17/4/07). Indonesia's Central Bureau of Statistics said last month that soybean output may drop nearly half a percent this year to 745,530 tons due to a decrease in the planted area. Indonesia imports about 90% of its soybean from the US, with the rest coming from China, Brazil and Argentina. Mills Buy 56,000 Tons of Raw Sugar Indonesia has bought 56,000 tons of Thai raw sugar in three auctions as part of efforts to optimize capacity at mills due to an expected fall in cane harvest this year, officials said on Wednesday (18/4/07). In the latest auction, PT Perkebunan Nusantara (PTPN) XI bought 22,000 tons of Thai raw sugar at $284 a ton, on cost, insurance and freight terms. "Cargill will supply all the sugar. And they will deliver the sugar by July 10 at the latest," said the firm's tender official, who declined to be named, according to Reuters. PTPN XI is allowed to import 60,000 tons of raw sugar. In two earlier auctions, state plantation firm PTPN X bought 22,000 tons of raw sugar at $286.5 a ton, cost, insurance and freight, while its sister company, PTPN IX, bought 12,000 tons at $291.5. Trading house Cargill will also supply the sugar for PTPN X and PTPN IX. The auctions are part of a plan by four Indonesian state-owned sugar mills to buy 173,514 tons of raw sugar this year. SOEs Garuda Books Rp114.85b Q1 Net Profit Indonesian flag carrier PT Garuda Indonesia said Monday (16/4/07) it booked Rp114.85 billion ($12.6 million) in net profit during the first quarter of the year. Load factor during the January-March period rose to 77.3% from 69.9% in the same period last year, indicating that an accident last month had not hurt its business, reported Dow Jones Newswires. The company booked losses for three consecutive years since 2004, hit by sharp increases in fuel prices. Meanwhile, the government has injected Rp950 billion ($10.5 million) in capital to Garuda and Merpati Nusantara Airlines, Antara reported on Tuesday (17/4/07). Garuda shares Rp500 billion and Merpati Rp450 billion of the state capital participation, Said Didu, secretary of the Office of the State Minister for State Enterprises said. Encouraged by the disbursement of fresh funds, Merpati set its net profit target this year at Rp1.8 trillion after reporting a net loss of Rp199 billion last year. Merpati said the funds will be used to improve productivity and repay debts, while Garuda said it has already received part of the funds which have been used to finance its operations and buy spare parts. Semen Gresik Q1 Sales Up 11.6% The country's largest cement maker, PT Semen Gresik, said its cement sales in the first quarter to March rose 11.6% year-on-year to 3.93 million tons, aided by strong exports, XFN-Asia reported on Tuesday (17/4/07). The company said its local sales in the first quarter rose 5.7% to 3.52 million tons while exports more than doubled to 411,396 tons from 195,000 a year ago. It said in March alone, local sales dropped 2.4% year-on-year to 1.21 million tons while exports surged 626% to 168,430 tons. Nationwide cement consumption during the first quarter to March rose 10.2% year-on-year to 7.68 million tons, according to the Indonesian Cement Association (ASI). The association said cement exports in the first quarter also rose 25.8% year-on-year to 625,290 tons. In March alone, domestic cement consumption grew 6.9% year-on-year to 2.68 million tons while exports jumped 144% to 263,032. Telkom to Use PGN Optical Fiber Capacity State gas distributor PT Perusahaan Gas Negara (PGN) said it has signed an agreement with PT Telkom allowing the state telecommunications company to utilize spare capacity on PGN's optical fiber network, XFN-Asia reported on Tuesday (17/4/07). PGN has built an optical fiber network along its South Sumatra-Singapore border gas pipeline and is building another network along its South Sumatra-West Java gas pipeline. The networks are used to monitor the pipelines. In a statement, PGN said the two groups have agreed to "formulate (a) joint business operating scheme that benefits both parties" but gave no further details. "This strategic cooperation will certainly provide additional value-added to both parties," PGN president Sutikno said. PGN was unable to commercialize its optical fiber network, as it has no license from the government. PTPN III Eyes Up to $110m IPO Plantation firm PT Perkebunan Nusantara III (PTPN III) aims to raise up to Rp1 trillion ($110 million) from an initial public offering of its shares, local newspaper The Investor Daily reported on Monday (16/4/07). PTPN III president director said the company aims to have the IPO completed by November and would use the proceeds to develop its palm oil business in North Sumatra. "Informally, the government has given its approval," Amri Siregar said, referring to the Rp750 billion to Rp1 trillion IPO. He also said the company is aiming for Rp3.2 trillion in sales this year, up from Rp2.4 trillion last year, with a net profit target of Rp535 billion compared to Rp293.8 billion in the previous year. PRIVATE SECTOR Airbus Targets Sales to Low-Cost Carriers Airbus is seeking to promote sales of its A320 aircraft for use by low-cost carriers (LCC) operating in Indonesia. Airbus has sent a marketing team from France to the country to offer the Airbus A320. "Indonesia is a potential market for aircraft sales," Airbus Airline marketing manager Marie Amelia Clotteau was quoted as saying by Antara on Wednesday (18/4/07). Clotteau said the A320 Family is highly competitive compared with Boeing B737 series planes. Based on data at the Transportation Department, Airbus aircraft contributed only 10 units to the total of 361 units of aircraft operated in the country. Telekom Malaysia Ups Stake in Excelcomindo State-controlled Telekom Malaysia has bought 7.4% of Indonesia's Excelcomindo for $113 million, raising its stake in the company to 67%, the Malaysian firm said on Thursday (19/4/07), according to Reuters. BANKS Banks Cut Deposit Rates to Below 7% Several banks in the country have begun to cut their deposit rates, following a recent decision by the Deposit Insurance Agency (LPS) to further lower the rate for guaranteed deposits to 9%, The Jakarta Post reported on Monday (16/4/07). Banks are still weighing options for trimming their lending rates as well, which is seen as necessary to spur demand for growth-stimulating credits. Bank Central Asia (BCA), the country's second largest lender by assets, reduced its interest rate for all rupiah-denominated time deposits worth less than Rp1 billion ($110,000) to 6.5%, while offering newly adjusted rates of between 6.5% and 7% for all other rupiah deposits higher than that amount. The bank's rate for all dollar deposits is 3.5%. Bank Permata, the eighth largest lender, has trimmed its rates for one- and three-month rupiah deposits by a half percentage point to 6.5%, and by a quarter percentage point to 6.5% for six-month and one-year deposits. Its dollar deposit rate was kept at 2.5%. BCA spokesperson Dwi Narini was quoted by Antara as saying the bank had been careful in lowering its deposit rates, to prevent any withdrawal of funds from depositors. The bank will also consider trimming its lending rates to between 11% and 12% from the industry's current 14% average. BCA saw its third-party funds -- which include time deposits -- grow by almost 18% to Rp152.7 trillion last year, while its lending grew 13% to Rp61.4 trillion. The LPS during the previous week reduced to 9% the maximum interest rate it will still guarantee for rupiah-denominated deposits for the one-month period from April 15 to May 14. It left the maximum guaranteed rate for dollar deposits at 4.75%. The agency lowered the guaranteed rupiah deposit rate despite the fact the central bank on March 5 kept its key rate at 9%, on concerns of a possible uptick in inflation. Outstanding Loans Rise 15.6% in February Loans grew 15.6% in February, continuing to recover from 2006 when growth was hit by high interest rates, industry data showed on Wednesday (18/4/07). Data from Bank Indonesia (BI) showed outstanding loans grew to Rp826.3 trillion ($90.95 billion) in February from Rp714.7 trillion in the year-ago period, Reuters reported. The country's banking assets expanded to Rp1,693.1 trillion from Rp1,466.3 trillion over the period while the non-performing loans ratio declined to 6.8% in February from 9.3% in the year-ago period, but still above the 5% central bank guidance level. Net interest margins declined slightly to 7.3% in February, from 7.9% in January, but were higher than 5.6% in February 2006. Mideast Banks Seek to Open Shariah Banks Middle Eastern banks Qatar International Islamic Bank (QIIB) and Albaraqah Bank are awaiting approval from Bank Indonesia (BI) to open shariah banks in the country, Antara news agency reported on Thursday (19/4/07). BI's shariah banking director Ramzi A Zuhdi said many foreign banks have indicated interest in opening shariah bank branches in Indonesia as they see the prospects are good, but only the two Middle Eastern banks have officially submitted proposals. He said the operation of foreign shariah banks would increase the market share of Islamic banks in the country to 5% in 2008. By December 2006, shariah banks had a market share of 1.68% with assets totaling Rp27.14 trillion and third party funds at Rp20.25 trillion. Meanwhile, Bank Mandiri is considering selling its stakes at Bank Syariah Mandiri (BSM) through private placement, initial public offering, and inviting strategic investors, as BSM's development has been slow due to lack of capital, Bisnis Indonesia reported on Wednesday (18/4/07). Bank Mandiri corporate director Abdul Rachman said the bank will do that to maintain BSM's shariah market control as well as to prevent BSM from slowing down. POWER Indonesia Power Needs Coal Supply Boost Indonesia Power (IP), a subsidiary of state-owned electricity utility PLN, said Monday (17/4/07) it would need an additional 14 million tons per year of low-rank coal by 2010 in order to fire its new coal power plants in Java, The Jakarta Post reported. The new plants will have a combined capacity of 3,900 MW. As part of the government's crash program to secure additional power supply of 10,000 MW from PLN by the end of 2010, PLN has given a mandate to IP to develop new power plants in Suralaya, Banten (with a total capacity of 600 MW), Labuan, East Java (600 MW), Teluk Naga, West Java (900 MW), northern West Java (900 MW) and southern West Java (900 MW). Indonesia Power's development and commercial director Bambang Isti Eddy said on the sidelines of a seminar that these power plants had been designed to use low-rank coal with calorific levels of less than 5,000 per gram burned and a moisture content of up to 30%. Currently, the company requires 11 million tons of high and low-rank coal per year to fire its existing power plants at Suralaya -- the largest coal-fired power plants in Java with a total capacity of 3,400 MW. The company sources five to six million of high-rank coal per year from the country's second biggest coal producer, PT Bukit Asam Batubara, while its low-rank coal requirements are supplied by other local companies, including Adaro, Kideko and Berau Coal. Of Indonesia's total of 6.7 billion tons in coal reserves, 70% consist of low-rank coal. OIL & GAS Indonesia May Change Crude Price Formula The government will likely decide in May or June whether to change the current formula for calculating the price of crude oil that it sells to international buyers, an official said Monday (16/4/07). One of the options being discussed is to use 50% of the average prices assessed by Japan's Rim and 50% by Platts, Eddy Purwanto, deputy finance director of the upstream oil and gas regulating body BP Migas told Dow Jones Newswires. Currently the government's formula is based 47.5% on Rim's assessment, 47.5% on Platts and 5% on the Asian Petroleum Price Index. The formula has been used since October 1, 2006. The government has said the current formula results in an Indonesian crude price that is $2-$4 a barrel below international oil prices. Such a change would reflect government efforts to raise the price of Indonesian crude oil to boost revenues for the state coffers. It would also come at a time when domestic crude oil output is declining, as faltering investment in the upstream sector has led to falling production, which is pressuring state oil revenues. Pertamina, Lukoil Team Up In Oil Exploration State oil and gas firm Pertamina has reached an agreement with Lukoil Overseas, a subsidiary of Russia's largest oil company, to explore oil and gas in Indonesia and other countries, particularly in the former Soviet Union, The Jakarta Post reported. In an MoU signed Wednesday (18/4/07) in Moscow, the two companies agreed to work together to exploit mature oil fields and in training purposes. Pertamina spokesman Toharso said Friday that the two companies would apply enhanced oil recovery technology to extend the lives of aging oil fields. Pertamina and Lukoil would soon establish a steering committee to prepare for the establishment of joint venture companies to put the cooperation agreement into effect. Lukoil, the world's second largest oil company, conducts oil and gas exploration and production in many countries, including Iran, Irak, Saudi Arabia, Columbia, Venezuela, Egypt, Uzbekistan, Azerbaijan and Kazakhstan. The company, which controls around 1.3% of global oil reserves, and 2.1% of global oil production, dominates the Russian energy sector, with its oil production accounting for 18% of Russia's total oil production. Last year, Pertamina also signed an agreement with Norwegian oil giant Statoil for joint oil and gas exploration in Indonesia. Earlier this month, a joint venture set up by the two companies won the right to develop an oil and gas block at Karama in the Makassar Strait. Using Statoil technology, the joint venture will invest up to $75 million on exploration work in the block, which is estimated to hold potential oil reserves of 200 million barrels. Santos to Start Production at Oyong Santos Pty Ltd said it will start producing offshore oil and gas at the Oyong Block off Madura in East Java, Asia Pulse reported on Wednesday (18/4/07). The block is expected to turn out 6,000 barrels of crude oil and 50 million cubic feet of gas a day starting in June, external relations manager Arie Nuavel said. Nuavel said Santos has seven wells in the block including five oil wells and two wells producing gas to be supplied to a power plant of PT Indonesian Power at Pasuruan through a 60 km pipeline. The Oyong Block is estimated to have an economic life of six years. Santos is also the operator for the nearby Maleo Block, which has been producing gas since late last year. MINING Freeport Miners Return to Work Thousands of workers at the PT Freeport Indonesia mine in Papua returned to work early Sunday after agreeing concessions including a more than 100% pay rise. A four-day strike by Papuan workers at the mine had sent copper prices to seven-month highs, Reuters reported. Frans Pigome, chairman of Tongoi Papua, a group representing native Papuan workers, said on Saturday night that workers would be back on their jobs on Sunday. Freeport had agreed to increase the standard monthly salary to Rp3.1 million ($341) from Rp1.5 million, he told a news conference after a meeting with Freeport officials. Workers had initially asked for Rp3.6 million a month. The company had also agreed to set up a department to handle the welfare of native Papuan workers and had promised to replace a number of senior managers, including Armando Mahler, president director of the company, if it was found that they had failed to meet the company's commitment of improving the welfare of workers. The Papuan workers had demanded more career opportunities for native workers, improved recruiting and better pensions. The protest coincided with talks over a new two-year collective labor agreement (CLA) for Grasberg's 9,000 direct employees. Mindo Pangaribuan, a spokesman for Freeport Indonesia, said that it had agreed to a feasibility study for the creation of a Papuan Affairs Department and remained committed to increasing the number of Papuans in senior posts. "Tongoi Papua agreed to channel their aspirations through the authorized workers' union, SPSI, during the ongoing Collective Labor Agreement negotiation, including an agreed framework for minimum wages," he said via email. Koba Tin Wins License, Tin Price Falls After hitting a new record high of $15,100 a metric ton early Wednesday (18/4/07), news that tin mining giant PT Koba Tin would immediately resume tin exports trickled through the market. "The decision was taken in a meeting of Indonesian ministry representatives and they agreed to issue on April 17 export permits for the companies," an official told Agence-France Presse. Speculators, funds and others liquidated their positions and sent prices down to $13,600/ton, Dow Jones Newswires reported. Wednesday's fall cut into tin's price rise of more than 20% from the start of 2007. "We have been waiting for Koba Tin to get their license for a long time," said a UK-based trader. PT Koba Tin is the country's second-largest producer. Indonesia produces about 120,000 tons of tin a year, around one third of global supply. Some analysts said that due to declining inventories and potential supply disruptions there is a high likelihood of a further price rise, although at a more moderate pace. Inco Sees 2007 Nickel Output Stable PT International Nickel Indonesia (Inco), a 61%-owned unit of CVRD Inco Ltd, said it expected output of nickel matte in 2007 to reach 155-165 million pounds compared with 158 million last year, XFN-Asia reported on Monday (16/4/07). It said the achievement of the output target would depend on water inflows and additional diesel generators to increase its flexibility in maintaining key generating equipment. Last year, the company's output was affected by lower-than-average rainfall during the fourth quarter. Incentives Plan for Low-Rank Coal The government is considering encouraging increased production of low-rank coal with calorific levels of below 4,200 per gram through a program of incentives, The Jakarta Post reported on Monday (16/4/07). Indriatmoko, the head of minerals and coal planning at the Energy and Mineral Resources Ministry, speaking on the sidelines of a seminar, said regulations on incentives had been proposed to the Finance Ministry for approval. The government wants to encourage the construction of coal-fired power plants that use cheap low-energy coal to meet growing electricity demand and reduce the use of expensive oil-based fuels. The planned incentives will likely take the form of cuts in royalty and other payments, such as reducing mandatory payments to the coal development fund to 7.5% of total sales from 13.5% at present. Incentives could also be provided to producers of low-rank coal with calorific levels of between 4,600 and 5,100 per gram so that the mining firms would only have to pay 9% of their total revenues to the state. ===***=== |
Source : The Coordinating Ministry for Economic Affairs