Highlights
Politics
·         Explosives haul discovered after terrorist arrests
·         Indonesia votes for Iran sanctions
Regions
·         Indonesia studying climate change seriously: minister
·         Papua polls mainly peaceful
Economy
·         House set to pass new investment legislation
·         President aims high for 2030, says energy output to rise 
Business briefs
Macroeconomy
·         Strong demand for second retail bond issue
·         Government bonds stronger as analysts tip new rate cut
Investment
·         House special committee approves investment legislation
·         Central bank says economy safe from capital outflows
·         Strong hopes for automotive sector expansion
State concerns
·         Indonesia, China agree to import duty reduction program
·         Injustice on vaccines could threaten peace: minister
SOEs
·         Six major companies to pay 50% dividend on 2006 net profit
·         House of Representatives Commission calls for telecom sector probe
Private sector
·         World's biggest noodle maker sees profit jump in 2006
·         Hutchison Telecommunications to launch operations
Banks
·         Banks' outstanding credit up 14.5%
Power
·         Indonesian, Chinese firms sign on $2.8 billion investment
Oil & Gas
·         Pertamina expects Cepu production to start in 2009
·         Oil and gas output to grow 30% by 2010, says president
Mining
·         Buyers for PT Bumi Resources coal stakes to be announced

POLITICS
Explosives Haul Found After JI Shoot-out
More than a ton of explosives and ready-to-use bombs were found after a shoot-out at Depok in Yogyakarta late on Tuesday (20/3/07) night, in which police killed one man and arrested six more.
Members of the Police counter-terrorism squad Detachment 88 also seized a large amount of circuitry similar to that used to carry out suicide bombings, The Australian reported.
Police were continuing to scour the city and surrounding area for Abu Dujana, the alleged leader of Jemaah Islamiyah (JI), who was believed to have escaped the police operation.
Sources quoted by the newspaper said the explosives captured in the operation would create a blast twice the size of the bombing of the Australian embassy in Jakarta in 2004.
"The operation has been a significant step towards suppressing terrorist activity in Indonesia," one source said.
Indonesian Police spokesman Sisno Adiwinoto said Friday the operation had prevented attacks. The explosive materials included 100 kg of potassium and 60 kg of trinitrotoluene. About 1,500 rounds of ammunition, 193 detonators, three M-16 automatic rifles and other kinds of guns were also found.
JI is believed to have been responsible for the 2002 and 2005 Bali bombings and other attacks including the attack on the Australian embassy and the Marriott Hotel in Jakarta.
DPD in Push for Constitutional Amendments
The Regional Representatives Council (DPD) is optimistic that the People's Consultative Assembly (MPR) will call a special session this September to consider a constitutional amendment that will give the DPD greater powers as a counter-balance to the House of Representatives (DPR).

Council chairman Ginandjar Kartasasmita said the DPD had been lobbying political parties to win their support for the special session and for the proposed amendment to Article 22 of the 1945 Constitution.

"We are still seeking more support from 98 lawmakers in the MPR to meet the requirement of at least one third of lawmakers to hold the special session,” he told reporters at a joint press conference with MPR Speaker Hidayat Nur Wahid on Wednesday (21/3/07).

"If a special session is held, we are optimistic that two-thirds of the 778 lawmakers will attend it and that half, plus one, of them will support the amendment.”

Kartasasmita said the DPD still held out hope of winning the remaining 98 lawmakers to its side over the next three months.

Wahid said the MPR leadership will be obliged to call the special session after all conditions required under Article 37 of the Constitution are met.

The DPD has proposed the amendment to give it the right to draft legislations on regional autonomy, relations between the central government and the regions, the formation of new provinces, regencies and municipalities, the management of natural resources and fiscal matters.

Kartasasmita insisted the DPD would not have the same powers as the House of Representatives and only wanted to give legal considerations to bills on the national budget, taxation, education and religious affairs.
Indonesia Votes for Iran Sanctions
Indonesia joined the other 14 members of the United Nations Security Council on Saturday (24/3/07) in a unanimous vote to impose new sanctions against Iran for its refusal to stop enriching uranium — a move intended to show Tehran that defiance will leave it increasingly isolated.
Iran immediately rejected the sanctions and said it had no intention of suspending its enrichment program, prompting the United States to warn of even tougher penalties.
The moderately tougher sanctions include banning Iranian arms exports, and freezing the assets of 28 people and organizations involved in Iran's nuclear and missile programs.
In December, the Security Council ordered all countries to stop supplying Iran with materials and technology that could contribute to its nuclear and missile programs. It also ordered a freeze on assets of 10 key Iranian companies and 12 individuals related to those programs. Iran responded by expanding enrichment.
The six world powers that drafted the new resolution spent Friday trying to overcome objections from Indonesia and several other council members, reflecting concerns that anything short of consensus would weaken efforts to rein in Iran's nuclear defiance.
There were several minor concessions but no changes to the key sanctions agreed upon last week by the United States, China, Russia, Britain, France and Germany.
One was the insertion of a reference to a past resolution from the International Atomic Energy Agency (IAEA) calling for the Middle East to be free of weapons of mass destruction.
Indonesia and Qatar had wanted the council to make that appeal outright, but that would have had implications for Israel, a US ally widely believed to possess nuclear weapons, though it has never officially acknowledged it.
On Friday, President Susilo Bambang Yudhoyono called the Iranian and South African president to discuss the resolution and later warned that tough sanctions could create instability in the Middle East.

"We view that the situation in the Middle East is already very tense and every move on Iran or other Middle East countries, if not carefully thought over and calculated, could create new problems," he told reporters. "Negotiations and diplomacy are far better, compared to harsher sanctions that might not necessarily be the best solution.”

Yudhoyono said he told Iranian leader Mahmoud Ahmadinejad to work to reduce tensions and that Indonesia was studying the draft resolution carefully.

On Thursday, US Secretary of State Condoleezza Rice met Indonesian Foreign Minister Hassan Wirayuda to discuss the issue, the third time they had talked since a telephone call from President George W. Bush to Yudhoyono.
The permanent members of the Security Council rejected South Africa's proposal for a 90-day suspension of UN sanctions to allow political negotiations with Tehran and to strip the text of its key provisions.
Bulog Chief Faces Graft Charges
The State Enterprises Ministry on Wednesday (21/3/07) named Mustafa Abubakar as the new head of the logistics agency Bulog, following the arrest of the previous chief for alleged corruption.

A ministry statement said Abubakar, a senior official at the ministry of maritime affairs and fisheries and former acting Aceh governor, replaced Widjanarko Puspoyo, who was taken into custody by the Attorney General's Office on Tuesday as part of a corruption case over cattle imported from Australia.

Puspoyo was named the previous week as a suspect in the case involving allegations of graft that stretch back to 2001, with estimated losses to the state at around Rp11 billion ($1.20 million).

The ministry said in a statement it also replaced Bulog's operational director, finance director and human resources director.

President Susilo Bambang Yudhoyono won the country's first direct presidential vote in October 2004 on a pledge to end corruption.

Since Yudhoyono's high-profile anti-graft campaign started, officials ranging from a former religious affairs minister to the governor of Aceh province have been jailed on corruption charges.

House Passes Trafficking Bill
The House of Representatives has passed a long-awaited bill on human trafficking carrying a maximum 15-year jail sentence and/or a maximum fine of Rp5 billion for involvement in the trade.

The bill also requires traffickers to pay compensation for material and immaterial losses suffered by the victim.
All 10 parties registered their full support for the legislation in a plenary session presided over by House Deputy Speaker Muhaimin Iskandar on Tuesday (20/3/07).

Legislators emphasized that the bill criminalized all forms of human trafficking at home and overseas.

It stipulates that individual citizens, public officials, corporations and syndicates that recruit and move people by force, abduction or deceit in order to exploit them face three to 15 years imprisonment and/or fines of Rp120 million to Rp600 million.

The bill also threatens similar sanctions on anyone bringing foreigners into Indonesia for exploitation.
It raises the punishment by one-third for crimes that cause victims severe injuries, death, pregnancy or loss of their reproductive functions.

Latifah Iskandar, chairwoman of the House special committee that prepared the bill, said it would protect millions of women and children from abuse.

Minister for Women's Empowerment Meutia Hatta hailed the bill, saying it gave legal protection to victims.

"Besides threatening harsh sanctions, the bill requires anyone, corporations, public officials and syndicates involved in human trafficking, to pay compensation for material and immaterial losses suffered by victims," she noted.
REGIONS
Climate Change at Top of Agenda: Minister
Minister of the Environment Rachmat Witoelar told a press briefing that the Indonesian government is taking the conclusions and recommendations of a new British report on climate change seriously.
The need to prepare for and mitigate global warming "has surfaced to the top of conversations of ministers," Witoelar said.
Sir Nicholas Stern, head of the UK Government Economic Service, warned Friday (23/3/07) that the Indonesian archipelago is "very vulnerable" to the impact of potential climate change fueled by global warming.
The potential increase in both sea levels and severity of storms linked to global warming pose a serious threat to island states, including Indonesia, Stern told a World Bank press briefing at which he presented the conclusions of his report about the economic implications of climate change. "Indonesia with 17,000 islands is very vulnerable," Dow Jones Newswire quoted him as saying.
The report issued in October by the UK Treasury called for a globally coordinated fight to curb growth in emissions from energy consumption thought to spur climate change. The report prescribed efforts to combat climate change as a strategy to boost world economic growth and warned that failure to respond to global warming could spell a global economic and environmental disaster.
No Indonesia Tamiflu Warning
Indonesia will not follow South Korea and Japan in issuing warnings on the use of bird flu drug Tamiflu despite reports it had caused severe psychological side affects, an official said Thursday (21/3/07).
"We do not detect any abnormal behavior from recipients of the drug," I Nyoman Kandun, Director General for Communicable Disease Control, told Agence France-Presse.
He said there were no plans to issue a Tamiflu warning and that more than 1,000 doses of the drug had been administered in Indonesia, the country worst hit by bird flu with a human death toll of 66.
South Korean officials said Thursday that they would issue warnings after further reports of abnormal behavior by patients. The health ministry in Tokyo said two teenagers in Japan jumped off the second floor of their houses and broke their legs after taking Tamiflu.
Japan has ordered the importer of Tamiflu to warn that teenagers should not be prescribed the drug. Swiss drugmaker Roche, the manufacturer of Tamiflu, has denied any connection between the drug and the incidents.
The deadly H5N1 strain of bird flu has infected 281 people, mostly in Southeast Asia, killing 169 of them, according to the World Health Organization. There are fears the disease could mutate into a form easily spread among humans, leading to a flu pandemic with the potential to kill millions.
Papua Polls Mainly Peaceful
Local elections were held successfully in a number of areas of Papua, with a minor scuffle in Puncak Jaya over allegations of an under-age voter settled quickly.
In an incident at Turmo hamlet in Fawi district of Puncak Jaya regency on Wednesday (21/3/07) three persons were lightly injured when the scuffle broke out over allegations a 12-year-old had voted.
Puncak Jaya Police chief Adj. Sr. Comr. Jacobus Marjuki said “the problem has been sorted out."
Direct elections in Sorong regency and city in Papua went peacefully Thursday, The Jakarta Post reported.
Four pairs of candidates ran in the municipal election. A total of 117,529 voters attended 286 voting booths across the municipality. The candidates were Jonathan Annes Jumame and Baesara Wael; Edward Kalami and M. Yasin Djamaluddin; Hengky Rumbiak and Harbi; and Dortheis Fred Kambuaya and Edison R Keodoeboen.
In Sorong regency, three pairs of candidates were vying to win votes from 47,419 people casting votes at 180 booths. The three pairs were Stepanus Malak and Tri Budiarto; Marthinus Salamala and Suprapto; and Yosafat Kambu and Wahyono Adi.
Quake Emergency Phase Extended in W. Sumatra
The emergency period in the wake of the devastating quake that hit West Sumatra almost three weeks ago has been extended for another month in five of the hardest hit regencies and cities, The Jakarta Post reported on Saturday (24/3/07).
Agam, Padangpariaman and Tanahdatar regencies and the cities of Bukittinggi and Padangpanjang will remain emergency areas for the next four weeks. "The emergency phase has been extended in the five regencies and municipalities since many residents are still living in shelters and there is not enough logistical assistance. In the other four areas, they have received enough aid," West Sumatra Governor Gamawan Fauzi said.
Solok regency and municipality, Payakumbuh city and Limapuluh Kota regency are now classified as being in the recovery phase.
Of the province's 19 regencies and cities, 11 were hit by the March 6 earthquake, which killed 66 people and left 462 people seriously injured and 364 slightly wounded. The disaster damaged 43,719 houses, of which 12,948 were heavily damaged. The quake also displaced 136,438 residents.
The quake, which has cost the province Rp 1.67 trillion in financial losses, also damaged 2,063 schools, of which 748 were destroyed, 341 government offices, 955 places of worship, 481 public facilities and 410 shop-houses.
Aceh, ICW Link to Fight Graft
The Nanggroe Aceh Darussalem administration and Indonesian Corruption Watch (ICW) announced their partnership Friday (23/3/07) in an all-out battle against corruption in the province.
Based on the agreement, Governor Irwandi Yusuf conveyed his commitment to creating clean and good governance in Aceh, while calling on the public to monitor the administration, The Jakarta Post reported.
Yusuf said he would empower the current supervisory system to ensure the province's budget and special autonomy funds were used for the benefit of the Acehnese people. "No changes will be made to the existing system, but it must be empowered to prevent any financial leakages and to take action against corrupt officials, whom I will never give any protection to," the governor said after a meeting with ICW.
He stressed the importance of creating a model of clean and efficient governance to facilitate a better administrative system. The alleviation of poverty is also top of the administration's agenda, following decades of political instability and the devastating earthquake and tsunami that killed some 210,000 people and displaced hundreds of thousands in 2004.
The provincial budget for this fiscal year is Rp4 trillion, with some Rp6 trillion more to be delivered in special autonomy funds through the central government. Yusuf said he was determined to ensure the close supervision of the budget's allocation.
Papua Officials Get Financial Training
The British government in cooperation with the public sector accounting study center of Yogyakarta-based Gajah Mada University is hosting a 10-day financial management training course in Jayapura, The Jakarta Post reported.
The course started Monday (19/3/07) and is being attended by 100 officers of regional administration offices throughout Papua.
Theressa Mahoni of the British Embassy in Jakarta said the course demonstrated British support to the Papuan provincial administration for implementing special autonomy.
"Good financial management will help the implementation of the special autonomy status succeed, thereby creating a new Papua," she said.
Yesaya Sombuk of the Papua Training Center said participants will be taught new budget regulations in the framework for preparation of the 2008 budget.
ECONOMY
Investment Law to Pass
The new investment law will be put to a plenary session of the House of Representatives on Thursday (29/3/07) after being approved by a special working committee.
The long-awaited bill provides tax incentives for new investors and existing operations that want to expand.
It is the first of a number of new pieces of legislation due to be passed this year, with amended tax laws expected to be approved by the House mid-year.
Irmadi Lubis, a member of the House special commission on the bill, said it was needed to attract more investment and create more employment.
The government's second retail bond issue for the year was received with strong demand, with incoming bids worth Rp7.2 trillion ($790.3 million) by Friday (23/3/07), the treasury director general at the finance ministry told Reuters.
Bidding has now closed and the ministry will announce its targeted sale amount on Monday (26/3/07).
The government sold Rp3.28 trillion bonds to retail investors in August last year, its first such issue, amid strong demand due to expectations of domestic interest rate cuts.
Speculation of a rally in the currency caused Indonesian 10-year bonds to rise for a third day on Thursday, with analysts saying the stronger rupiah would make it easier for the central bank to cut interest rates next month, Bloomberg News reported.
“There's room for improvement” in government bond prices, said Suryandy Jahja, head of debt trading at PT Kresna Graha Sekurindo, which oversees the equivalent of $120 million.  “They will do a further rate cut.”
Finance Minister Sri Mulyani Indrawati downplayed growth prospects, stating Tuesday that the economy is likely to expand by 5.9% to 6% in 2007, off the budget target of 6.3%.
Indrawati called the estimate a "realistic" reassessment of the budget target. "We will maximize economic growth, but we must be realistic... (and) I think that the realistic (growth estimate) is 5.9% to 6% because people say that investment isn't growing," she was quoted as saying by Dow Jones Newswires.

The government expects economic growth of 6.6% in 2008, she said.  The economy grew 5.5% in 2006 and 5.6% in 2005.
At the launch of the “Indonesia Vision 2030”, President Susilo Bambang Yudhoyono stating that Indonesia was on track to become the fifth strongest power in the world by 2030. He said a rise in per capita incomes to $18,000 was possible with good management. The group backing the program said that the feat could be achieved only if the country's economy grew by 7.26%, with an inflation rate of 4.95% and a population growth rate of 1.12%.
Separately, the president said the government was targeting a 30% increase in its total domestic oil and gas output by 2010. Dr. Yudhoyono said Wednesday that the government would intensify oil and gas exploration and development and persuade regional governments to relax regulatory restriction on oil and gas-related investments.
He said the projected production increase aims to address an expected surge in domestic oil and gas demand rather than export markets. The forecast output rise will include an increase in Indonesia's natural gas production to 10 billion cubic feet a day by 2010 from the current level of 8 billion to 9 billion cubic feet, Dr. Yudhoyono said. Indonesia's crude oil output will rise to 1.3 million barrels a day from around 1 million barrels a day during the same period.
There was increasing confidence of a stronger role for Indonesia in the global automotive industry. Investment in the automotive sector in the first quarter of 2007 has already reached $173 million, said Budi Dharmadi, Director General of Transport Equipment and Information Technology Industry, Antara reported on Wednesday (21/3/07).
A number of the world's leading automotive principals have shown strong interest in establishing their production bases in Indonesia, Dharmadi said.  Hyundai is spending $23 million, he said, and Renault and Nissan are both making significant investments.
Dharmadi said the trend is expected to continue through 2008 as foreign firms see strong prospects for the country's economy.
BUSINESS BRIEFS
MACROECONOMY
Strong Demand for Retail Bonds
Indonesia has received "strong demand" for its second planned retail bond issue, with incoming bids worth Rp7.2 trillion ($790.3 million) by Friday (23/3/07), the treasury director general at the finance ministry told Reuters.
Friday was the last day for investors to submit their bids and the ministry will announce its targeted sale amount on Monday.
The government sold Rp3.28 trillion bonds to retail investors in August last year, its first such issue, amid strong demand due to expectations of domestic interest rate cuts.
"The amount accepted depends on the finance minister and will be announced on Monday evening," Rahmat Waluyanto said.
The ministry has set the coupon rate for the planned three-year retail at 9.28%.
The government's plan to sell retail bonds is aimed at expanding its investor base and plugging the state budget deficit.
Bonds Rise, Rupiah Gains Spur Forecasts for Rate Cut
Indonesian 10-year bonds rose for a third day on Thursday (22/3/07) on speculation a rally in the currency will make it easier for the central bank to cut interest rates next month, Bloomberg News reported.
Yields fell to the lowest in almost 10 weeks as the rupiah headed for its biggest three-day advance in eight months.  The gain eased concern that arose in January when a sliding rupiah raised speculation the bank would pause in a series of rate cuts to keep investors from seeking higher yields elsewhere and risking further currency losses.
“There's room for improvement” in government bond prices, said Suryandy Jahja, head of debt trading at PT Kresna Graha Sekurindo, which oversees the equivalent of $120 million.  “They will do a further rate cut.”
The yield on the 10% bond maturing in July 2017 dropped 1 basis point, or 0.01 percentage point, to 9.88% as of the close in Jakarta at the Inter Dealer Market Association.  The price climbed 0.068, or Rp680 per Rp1 million face amount, to 100.715.  Bond yields move inversely to prices.
The rupiah gained 0.3% to 9,107 against the dollar, a level that will help lead the central bank to cut rates for an 11th straight time when policy makers meet on April 5, Jahja said.  When the currency weakened to about 9,250 on March 5, Jahja said he began to doubt Bank Indonesia would reduce borrowing costs next month.
The central bank will probably lower its benchmark to 8.5% by year-end from the present 9%, and the 10-year yield will decline to 9.5%, he said.
No Concern over Capital Outflows: BI
Bank Indonesia (BI) has predicted that capital outflows would reach $10 billion this year as a result of reversed carry trade by global market players, Antara reported on Tuesday (20/3/07).
However, there will be no serious impact on the economy as the country has a sufficiently large foreign exchange reserve, BI Deputy Governor Aslim Tadjuddin said.  The country's foreign exchange reserves stand at about $46 billion, the highest ever.  Indonesia's foreign exchange reserve totaled only $16 billion when the monetary crisis hit the country in 1997-98.

Tadjuddin said funds flowing out of the country consist mainly of short-term funds including those placed in BI promissory notes, estimated at $1.5 billion, state bonds worth $5.5 billion and the rest from share capital.  He said reversed carry trade is already about to end as indicated by the rupiah regaining part of its lost value.

He said he is optimistic that the country will have a current account surplus of at least $8 billion this year and the foreign exchange reserve will rise again to a new peak by the end of the year.
New, Stricter Foreign Loan Policy
The government has introduced new criteria for acquiring foreign loans in an effort to reduce the ratio of such loans to the country's gross domestic product.
In a recent interview with Kyodo News, State Minister for National Development Planning Paskah Suzetta said the new policy will push the government to be “very selective” in choosing projects to be financed by foreign loans.
He said implementation of the new policy has delayed Indonesia's application process for yen loans this year.
“It creates the impression that the Indonesian government is revising its yen loan policy.  What actually is happening is that the government of Indonesia is trying to make yen loans that can be used in a more effective and efficient way,” he said.
He said that under the new policy, the “readiness criteria” for projects financed by foreign loans would be applied to ensure they run smoothly and on schedule to avoid costly extensions.  In addition, Indonesia should also consider limitations in acquiring new foreign loans, its disbursement and repayment capacity and its budget deficit, Suzetta said.
Last year, Japan provided new yen loans to Indonesia totaling 93 billion yen (about $796 million) covering five projects and one program.  Since the 1960s, yen loans to Indonesia total some 4.03 trillion yen.
Indonesia has an outstanding foreign debt of some $60 billion, or 40% of its GDP, and has to pay about $9 billion in debt principal repayments and interest for this year.
Over the last few years, Indonesia had been gradually shifting its budget financing from foreign loans to bond sales and will likely continue to do so, according to Finance Minister Sri Mulyani Indrawati.
BI Awards Rp130t 1-Month SBIs
Bank Indonesia (BI) said it has awarded Rp130 trillion worth of one-month BI Certificates (SBIs) at a fixed interest rate of 9%, XFN-Asia reported on Wednesday (21/3/07).  It said the auction absorbed 62.39% of the bids.
INVESTMENT
Investment Bill to Plenary
A new investment bill will go to a plenary of the House of Representatives on Thursday (29/3/07) after being approved by a special committee.
Irmadi Lubis, a member of the House special commission preparing the bill, said the legislation is needed to attract foreign investment to spur economic growth and create more
job opportunities. 
"After China and other ASEAN member countries, Indonesia has to follow suit, giving access as wide as possible to foreign investors to... the country," he said.
"Granting a 95-year concession to foreign investors has long been implemented by China, Cambodia and Vietnam.  These countries have an accumulation of concessions similar to those which Indonesia has given to many multinational corporations," he said. 
KLK to Expand Plantation Land Bank
Palm oil producer Kuala Lumpur Kepong Bhd (KLK) plans to expand its plantation land bank by another 50,000 hectares to 250,000 hectares, preferably by investing in green field projects in Indonesia, Malaysia's New Straits Times reported on Friday (23/3/07).
The group currently owns 100,597 hectares in Indonesia, half of which has been planted.
Of the 205,300-hectare total land bank that KLK owns in Malaysia and Indonesia, about 150,000 hectares, or 75%, of that area have been planted with oil palm trees.
Last year, the group produced 525,000 tons of crude palm oil and expects the figure to grow by another 10% in 2007 as more trees mature.
Investment in Auto Sector Tipped to Surge
The government predicts the nation's automotive industry will boom this year and in 2008.  In the first quarter of 2007, investment in the automotive sector has already reached $173 million, said Budi Dharmadi, Director General of Transport Equipment and Information Technology Industry, Antara reported on Wednesday (21/3/07).
A number of the world's leading automotive principals have shown strong interest in establishing their production bases in Indonesia, Dharmadi said.  Hyundai has already built a new factory to produce trucks and buses with an investment of $23 million, he said.
Meanwhile, Renault plans to invest $80 million to produce passenger cars and multipurpose vehicles and Nissan is set to expand its production capacity with an additional investment of $70 million. 
Dharmadi said the trend is expected to continue through 2008 as foreign firms see strong prospects for the country's economy.
Meanwhile Chinese auto maker Lifan is studying the possibility of building an assembling plant for its cars in Indonesia, Bisnis Indonesia reported.
Chery and Geely cars from China are already assembled in Indonesia, the newspaper quoted an official as saying.
The official said Lifan has studied the possibility of using the assembling plants of Bosowa, Timor or Texmaco.
The source said Lifan already secured a license and it is expected to make Indonesia as its production base for Asian, African and European markets.
STATE CONCERNS
Indonesia , China Agree to Slash Import Duties
The Indonesian and Chinese governments have agreed to gradually reduce import duties between the two countries to 5% and 0% starting next month, Antara reported on Thursday (22/3/07).
Head of the Finance Department's Fiscal Policy Agency Anggito Abimanyu said the agreement will open wide opportunities for the business sector to increase exports to China.
Until now, the two countries have no bilateral free trade agreement, thus, the import tariff agreement will be implemented under the ASEAN-China Free Trade Agreement (FTA).
Abimanyu said the import duty cut is expected to reduce illegal imports, which are rampant from China.
Vaccine Inequity Could Threaten World Peace: Indonesia
The inability of poor countries to get vaccines in the event of an influenza pandemic could threaten world peace, Indonesia's health minister said on Wednesday (21/3/07).
Siti Fadilah Supari said the virus-sharing scheme under the World Health Organization system did not guarantee poor countries access to vaccines and urged developed countries to help the developing world with the technology to produce them.
"If the rule is not changed there will be a huge gap between rich and poor countries and this will perhaps threaten world peace," Reuters quoted her as of saying.
"If we want the world to be a harmonious place, the poor should be helped with the technology. If the situation remains like this poor nations will become poorer, sicker and more helpless."
Indonesia, the nation worst hit by avian influenza with 66 deaths, has created a controversy by saying it will only share samples of the H5N1 avian influenza virus if it has guarantees they will not be used to make vaccines that will profit a company or another country.
Some health and aid agencies criticized Indonesia for refusing to share samples, while others, including the influential British medical magazine The Lancet, supported the stance because developing countries often struggle to get access to life-saving drugs due to patent laws and high costs.
WHO and health ministers from the Asia-Pacific region are due to meet in Jakarta from March 26-27 to sort out the best ways of making sure companies can make more vaccines against influenza, and that these vaccines will be available to all who need them.
Policy Priority to 10 Major Export Earners
The government, bankers and business leaders agreed in a meeting Thursday (22/3/07) to give priority to financing expansion of 10 major industrial sectors to boost exports, Antara reported.
The sectors - textile, rubber, rubber goods, electronic, automotive component, forest product, crude palm oil, cacao and coffee processing industries - contribute 52% to the country's non oil/gas export earnings.
The Indonesian Chamber of Commerce and Industry (Kadin) and banks will discuss ways to finance the sectors.
Trade Minister Mari Pangestu said the sectors were the main contributors to the country's exports, which grew 17.6% last year.
SOEs
Major SOEs to Pay 50% of Net Profit
The government has asked six major state companies to pay to the state Treasury 50% of last year's net profit in dividend, Antara reported.
Oil and gas company PT Pertamina posted the largest net profit of Rp23.326 trillion ($2.57 billion), followed by telecommunications company PT Telkom at Rp10.5 trillion and Bank Rakyat Indonesia at Rp4,205 billion.
Bank Mandiri, the country's largest lender, posted Rp2,421 billion in net profit, making it the fourth largest contributor to the state dividends.
Other major contributors include the country's second largest lender, Bank Negara Indonesia, gas distributor PT Perusahaan Gas Negara, mining company PT Aneka Tambang and cement maker PT Semen Gresik.
KPPU Asked to Look into Temasek Holdings
The House of Representatives' commission on state enterprises has called on the Business Competition Supervisory Commission (KPPU) to assess Indonesia's national interests in the divestment of two telecommunication firms to a Singaporean holding company, reported The Jakarta Post .
In a hearing with the KPPU on Tuesday (20/3/07), lawmakers questioned the divestment of 49% of the government's shares in state-owned PT Indosat and PT Telkomsel, a subsidiary of another state-owned telecommunications firm, PT Telkom. 
The divestment is alleged to have granted Singaporean firm Temasek a monopoly in the telecommunications sector. 
Nusron Wahid of Golkar Party and Fachry Hamzah Sangaji of the Prosperous Justice Party said the KPPU should conduct a comprehensive assessment of the divestment to evaluate whether the country's interests were protected in the deal. 
KPPU chairman Muhammad Iqbal said his office would conduct an assessment of the government's divestment. 
"Besides looking into the alleged double ownership of Temasek in the two companies, we will also probe the unhealthy competition in the cellular phone business," he said. 
PPA Plans to Sell Dipasena Assets
State assets management firm PT Perusahan Pengelola Aset (PPA) said it plans to sell the assets of shrimp exporter the Dipasena Group, starting next month, XFN-ASIA reported. The sale process may take three months, it said.
Dipasena was among the assets surrendered by Syamsul Nursalim, the owner of Gajah Tunggal Group, in order to settle group debt totaling Rp28 trillion.
PPA said that Symasul Nursalim, as well as Dipasena's creditors -- PT Recapital Advisors and PT Renaissance Capital Asia -- are not allowed to bid for the assets.
Kereta Api Orders New Cars, Locomotives
State-owned railway company PT Kereta Api said it has placed an order for 16 railroad cars at a price of Rp31.2 billion ($3.4 million), and two economy-class locomotives.
State-owned PT Industri Kereta Api (INKA) will build six cars and 10 economy-class luggage cars, and the two locomotives within the year, Kereta Api president Ronny Wahyudi was quoted as saying by Antara in a report on Wednesday (21/3/07).
The order for luggage cars is to meet the growing demand for parcel transport service, he said.
PTPN X to Increase Sugar Production
State-owned plantation company PTPN X said it will increase its sugar production to 450,000 tons this year from 443,000 tons in 2006. 
The company, which has a sugarcane plantation and a sugar factory in East Java, has invested Rp195 billion to revitalize the factory, its president Adi Prasongko said, according to Antara.
Prasongko said the company will also improve its planting system and cane cutting management to increase sugar content to 8.25% from 7.82% last year.  He said the company hopes to contribute significantly to the country's total production of sugar to reduce dependence on
imports.
PRIVATE SECTOR
Indofood's 2006 Net Profit Jumps Five-Fold
The world's top instant noodle maker, PT Indofood Sukses Makmur, reported on Thursday (22/3/07) a more than five-fold rise in net profit last year on firmer sales and after earnings rebounded after hefty one-off charges in 2005.
The company, controlled by Hong Kong's First Pacific Ltd, reported a net profit of Rp661.21 billion ($72.74 million) up from Rp124.02 billion a year ago, while sales revenue climbed nearly 17% to Rp21.94 trillion, according to Reuters.
Last year, the company suffered heavy foreign exchange losses on its dollar-denominated debts, while it also had one-off charges from a currency swap contract and a premium paid on the redemption of its dollar-denominated bonds.
"The company succeeded in achieving its highest growth in 13 years after successfully implementing some initiative strategies that we started in 2004," Indofood president director Anthony Salim said in a statement.
Indofood said it is planning to issue rupiah-denominated bonds in the second quarter of this year to reduce its foreign debt exposure and reduce the risk of exchange rate fluctuation.  It did not provide further details on the bond plan.
Indofood's operating margin improved slightly to 9% from 8.9% in the previous year.  Its operating profit climbed 18.8% to Rp1.98 trillion.
The company, which has a market capitalization of $1.45 billion, has the capacity to produce more than 200 million packs of instant noodle per week.
Hutchison to Launch Service
The Indonesian unit of Hutchison Telecommunications International Ltd, Hutchison CP Telecom Indonesia, said on Wednesday (21/3/07) it is on track to commercially launch its mobile phone service on March 30, Reuters reported.
Hutchison Indonesia said it has successfully completed the trial of its second and third generation service.  "The completion of the trial heralds the official commercial launch of Hutchison CP Telecom's nationwide 2G and 3G service on March 30," the company said in a statement.
Hutchison CP will join other established companies in the fast growing mobile phone market, such as PT Telkomsel and PT Indosat, in catering to some 65 million customers. 
Indonesia's mobile phone industry has grown at a healthy clip in recent years, and industry experts predict the number of users will top 100 million by 2010.  Despite strong growth, the penetration rate in Indonesia is still considerably low at 25% compared to 80% in Malaysia and 60% in Thailand.
Carrefour to Open 10 New Hypermarkets
Carrefour, the largest hypermarket operator in the country, plans an additional investment of $207 million to open 10 new outlets in 10 provincial capitals in the country.
The French retailer, which already has 29 outlets in eight other provincial cities, has secured the license from the government to open the new outlets, Antara reported on Wednesday (21/3/07).
In the Greater Jakarta area alone including Jakarta, Bekasi, Bogor, and Tangerang, it has 20 outlets, a company source told Bisnis Indonesia .
BANKS
Banks' Outstanding Credit Up 14.5%
The amount of outstanding credits of Indonesian banks grew 14.5% in January to Rp817.5 trillion ($90.8 billion) from Rp714.2 trillion in December 2006, data from Bank Indonesia (BI) showed.
Bank assets grew to Rp1,690.5 trillion by the end of 2006 from Rp1,465.6 trillion a year earlier, Antara reported on Wednesday (21/3/07).  Non-performing loans (NPLs) declined to 6.8% on the average from 8.7%, still higher than the maximum limit of 5% to be categorized as healthy by the central bank.
Net interest margin rose to 7.9% from 6.9%, the data showed.  BI forecast an 18% increase in outstanding credit this year, compared to 14.1% last year.
Anti-Money Laundering System for Bank Permata
Publicly listed lender Bank Permata on Wednesday (21/3/07) introduced an "alert system" to help detect illicit transactions and combat money laundering.
"We hope the system will be useful in helping combat money laundering in Indonesia," president director Stewart Donald Hall was quoted as saying by The Jakarta Post .
The system -- co-developed by Bank Permata, and IT services providers 3i Infotech and PT Tridas Widiantara -- enables the bank to identify in real time whether a customer's name appears on Bank Indonesia's internal blacklist.  The system is also able to automatically detect irregular transactions that could indicate money laundering.
BI has been promoting transparency and accountability within the banking sector, requiring the country's banks to adhere to the principles of "Know Your Customer" (KYC), good corporate governance and stricter selection tests for bank managers and owners.
While the newly launched system might displease potential customers as they will be asked for "necessary personal information" based on the KYC principle, Hall said that the system is essential to protect the banks.  "Every bank must comply with the regulations BI has promoted.  If other banks choose not to comply, it will be at their own risk," he added.
Malaysia 's RHB Bank to Expand to Indonesia
Malaysia's fourth largest lender, RHB Bank, which has come under control of the state-owned pension fund, will expand to neighboring Indonesia and Thailand, a senior official said Thursday (22/3/07).
The Employees Provident Fund (EPF) earlier this month won a bid for a 32.8% stake in Rashid Hussain Bhd, which controls RHB Bank's parent, RHB Capital.
"Once we stabilize the company, then we will look into growing the bank regionally through either acquisitions or organically," EPF chief executive Azlan Zainol was quoted as saying by the Associated Press.  "We are looking at Indonesia and Thailand."
Bank Ekspor Indonesia Net Profit Rises
State-owned PT Bank Ekspor Indonesia recorded a rise in net profit from Rp200.51 billion in 2005 to Rp246.22 billion last year, XFN-ASIA reported.
Income from interest rose to Rp839.39 billion from Rp561.38 billion, providing net interest income from Rp343.09 billion to Rp503.27 billion.
Operating profit rose to Rp359.89 billion from Rp293.53 billion.
POWER
Indonesian, Chinese Power Firms Team Up
Indonesian and Chinese firms have signed power-investment deals valued at $2.8 billion, the Ministry of Energy and Mineral Resources told The Wall Street Journal on Wednesday (21/3/07).
The investment involves five projects with a total estimated output capacity of 10,000 MW, a ministry statement said. It didn't say whether the power plants would be coal-fired.
The agreements reflect China's continuing efforts to deepen economic and trade ties with resource-rich Indonesia to help access its abundant energy and commodity reserves. Among the projects is an $863.2 million plan to build three power plants in Indramayu, West Java.
National Machinery Industry Corp., China National Electric Equipment Corp. and Indonesia's PT Penta Adi Samudra are among firms awarded contracts. In addition, China's Chengda Engineering Corp. and Indonesia's PT Truba Jurong signed an agreement to jointly invest $492 million to build two power plants in Labuan, Banten Province.
Harbin Power Engineering and PT Mitra Selaras Utama plan to invest $466.2 million in a power-generation facility in Probolinggo in East Java, the ministry said. The statement added that Indonesia's PT Prianamaya and Tronoh will jointly invest $558 million with Chinese firm Zeelan to build two power plants in Rembang, Central Java.
PLN to Pay $0.045/kWh for Tanjung Jati Electricity
PT PLN said it has reached agreement with a Bakrie Power-led consortium to buy electricity from the planned Tanjung Jati A coal-fired power plant for $0.045/kilowatt per hour (kWh), a PLN official told XFN-ASIA on Thursday (22/3/07). The agreed price was lower than the consortium's offer of $0.048 per kWh.
Bakrie Power, a unit of PT Bakrie Brothers, owns 20% of Tanjung Jati Corp, which will operate the plant once construction is complete. The remaining shares are held by Tomen Power Corporation, International Power and the Maharani Group. The plant is being built in Cirebon, West Java, for a cost of about $1.4 billlion, but no date for completion has been given.
Sumitomo to Build $38M Geothermal Plant
Sumitomo Corp. said Wednesday (21/3/07) that it received a $38 million order to construct a geothermal power station for PT PLN.
Slated to start operations in February 2009, the facilities are to output 20,000 kilowatts, which is enough to supply roughly 10,000 households with power.
According to Asia Pulse, PLN is focusing on curbing its impact on the environment. A key feature of geothermal power is that it does not emit greenhouse gases such as carbon dioxide.
The facility will be assembled on the northern part of Sulawesi using turbines and generators manufactured by Fuji Electric Systems Co. PT PLN will buy the equipment from Sumitomo using funds borrowed from Japan Bank for International Cooperation.
OIL & GAS
Pertamina Hopes for 2009 Cepu Start-Up
Pertamina expects the Cepu block in Java to start production in early 2009 at 10,000-20,000 b/d and ramp up to peak rates of between 160,000 and 165,000 b/d by the end of 2010, a senior official at the state-owned oil and gas company told Platts Commodity News , Friday (23/3/07).
"We will use PetroChina's production facility in East Java to be able to start production in early 2009, but in small volumes," Pertamina's Cepu project president Hestu Bagyo said, adding that Pertamina and ExxonMobil have planned to spend $1.9 billion to develop the Banyu Urip field between September 2005 and 2010.
ExxonMobil and Pertamina have been told by upstream regulator BP Migas to use the production facility owned by the joint operating body between Pertamina and PetroChina in East Java to speed up Cepu production to the first quarter of 2009, the head of BPMigas, Kardaya Warnika, earlier said.
Cepu was initially expected to commence production at 25,000-40,000 b/d three years after final project agreements were signed in March 2006. ExxonMobil later projected delays in first oil to 2010 due to problems with clearing land for the project.
The government hopes the Cepu production will boost the country's fast-declining oil production.
30% Rise in Oil, Gas Output By 2010: President
The government has targeted a 30% increase in its total domestic oil and gas output by 2010, President Susilo Bambang Yudhoyono said Wednesday (21/3/07).
The government aims to meet that target by intensifying oil and gas exploration and development efforts and by persuading regional governments to relax regulatory restriction on oil and gas-related investments, Dr. Yudhoyono said in a speech.

Dr. Yudhoyono said the projected production increase aims to address an expected surge in domestic oil and gas demand. The forecast output rise will include an increase in natural gas production to 10 billion cubic feet a day by 2010 from the current level of 8 billion to 9 billion cubic feet, Dow Jones quoted the president as saying.

He said Indonesia's crude oil output will rise to 1.3 million barrels a day from around 1 million barrels a day during the same period. "We expect in 2010 there will be greater domestic demand (for oil and gas), so we will focus more on how to feed domestic demand rather than exports," he said, without providing any additional details.

PGN, Pertamina, Medco Compete for CBM Areas
State gas company PT PGN, state oil company PT Pertamina and PT Medco Energi International will compete for six coal bed methane (CBM) working areas to be held by the government in the middle of the year, Bisnis Indonesia reported on Wednesday (21/3/07).
PGN development director Adil Abbas stated PGN would participate in the tender for the projects, which will be developed for five to ten years.
PGN has also signed a MoU with an Australian oil company, Santos, to develop CBM.
Pertamina upstream director Sukusen Soemarinda revealed the state oil company was interested in winning CBM working areas put to tender by the government. Pertamina has also signed a MoU with Shell to develop CBM in South Sumatra.
Upstream development director at the Directorate General of Oil and Gas at the Department of Energy and Mineral Resources R. Priyono disclosed the government would put six CBM working areas into tender in the middle of the year.
The tender will be the first for CBM working areas following the completion of the deliberation on CBM development mechanism.
In the meantime, to complete a feasibility study in South Sumatra, PGN will seek grants from major countries. "We are trying to seek grants from Japan and the US," exposed Adil Abbas.
Indonesia has 453.3 trillion cubic feet in CBM reserves, most of which are in South Sumatra and Central Sumatra.
Indonesia Awards Multi-Billion Energy Contracts
The Indonesian government on Wednesday (21/3/07) awarded 37 energy contracts worth billions of dollars in total, a report said.
The contracts included exploration deals worth $4.1 billion, domestic gas supply agreements worth $1.61 billion and oil and gas sector contracts amounting to $1.39 billion.
There were also 21 electricity supply contracts and amendments to coal deals at a signing ceremony, the Detik.com news website said.
The projects are expected to create 26,000 jobs. "From January to March, investment commitments in the energy sector have already reached $19.4 billion," Energy and Mineral Resources Minister Purnomo Yusgiantoroso was quoted as saying. "We are optimistic that by the end of 2007, the investment can rise further and exceed that in previous years.”

Separately, President Susilo Bambang Yudhoyono inaugurated four projects by state oil and gas firm Pertamina. They included the development of two oil and gas fields, a fossil fuel transit terminal and a fuel depot.
Japex, Mitsubishi to Invest $400m in Kangean Block
Japan Petroleum Exploration Co. and Mitsubishi Corp will jointly invest $400 million in the Kangean block to boost its production, Japex's chief said on Thursday (22/3/07).
Energy firm PT Energi Mega Persada has sold a 50% stake in the block to Mitsubishi Corp and Japan Petroleum Exploration Co. (Japex) for $360 million. "We will increase the production in Kangean block to 60,000 barrels oil equivalent per day from 10,000 barrels," Yuji Tanahashi, president and CEO of Japex, was quoted as saying by Reuters.
"The plan is to do it in three to five years time and all the output will be supplied to Indonesia's (domestic) market," Tanahashi said after meeting Vice President Jusuf Kalla.
Kangean has potential natural gas reserves of 1.5 trillion cubic feet, while production is at 60 million cubic feet per day. Mitsubishi and Japex will each control a 25% stake in the offshore block near East Java.
Medco To Spend $450M on Gas Block
The Medco Group and its partner have set aside $450 million to finance the drilling of the Block A resource in Aceh. Medco plans to drill 10 exploration wells in the block in 2008 and its gas production will be supplied to state-fertilizer factory PT Pupuk Iskandar Muda (PIM) in the province.
Lukman Mahfoedz, president of PT Medco EP Indonesia of the Medco Group, told Antara on Friday (23/3/07) that his company has submitted its plan of development (POD) to the government for approval.
Construction is to be completed 30 months after the POD is approved, Lukman said. The government has agreed to cut its production split from the gas block from 70% to 51% in compensation for reduced prices for sale of the gas to the fertilizer industry.
MINING
Bumi Expects to Award Stakes in 2 Coal Units
PT Bumi Resources said it expects to name the winning bidders for stakes the firm is selling in its two coal producing units on March 30.
Bumi is selling 30% holdings in each of the two units. In a statement to the Jakarta Stock Exchange Thursday (22/3/07), it said all six short-listed bidders have completed due diligence and filed their binding bids.
Bumi had previously tried to sell its entire 95% stake in PT Kaltim Prima Coal (KPC) and 100% holding in PT Arutmin Indonesia to PT Borneo Lumbung Energi for $3.2 billion but the deal fell through, prompting it to sharply reduce the amount of shares on offer.
Media reports have said short-listed bidders include Tata Power Co of India, Mitsubishi Corp, Reliance Energy and Korea Electric Power.
Russia 's Luk Oil to Invest In Maluku
Luk Oil of Russia is to invest in the mining sector in Maluku province, Governor Karel Albert Ralahalu told Antara on Monday (19/3/07).

He said he and Andrey Kurzyarf, a representative of the Russian state-owned oil company, signed a MoU on the investment plan in Ambon earlier in the day.
"The agreement is a follow-up to a result of a visit to Russia by me and a Maluku economic team in late December 2006. On the occasion, Kurzyarf guaranteed that within four months at the latest their company would carry out an investment plan in the mining sector in Maluku," Ralahalu said.
Luk Oil was interested in investing in oil and minerals depending on the results of field explorations to be conducted by Russian experts, the governor said. "Luk Oil company's presence in Maluku will be of great significance in showing to the world that since the end of the 1999 communal conflict in this province, the local situation has much improved and become open for investment, tourism and other forms of mutually beneficial cooperation," he said.
During Ralahlu's visit to Russia last year, the Russian government had also agreed on follow-up steps to implement a plan to set up a wind-powered electricity plant in Ambon. The matters were again discussed with the Russian ambassador to Indonesia during his visit to Ambon recently.
Noble to Commission Iron Ore Project
Hong Kong-based Noble Group is expected to bring on stream a 2 million tons per year iron ore mining project in Indonesia by the end of this year.

Noble Group only has a minority stake in the project but it has the "exclusive marketing rights" to the iron ore, Harry Banga, vice chairman of Noble Group, told Metal Bulletin Monday (19/3/07).
"The Indonesian government does not allow majority ownership by foreign investors. We are fine with it, it is the marketing rights that matter," said Banga.
An Indonesian company holds the majority share but its name was not disclosed, nor any details concerning the project.
===***===

Source : The Coordinating Ministry for Economic Affairs