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Trade and Investment News1, 8 June 2009

• US President Obama touted Indonesia in a speech directed at the Muslim world


• Disputes over the result of the April 9 legislative election will conclude this week


• Although JI membership is down, some fugitives may still harbor a violent agenda


• Papua security is stable and additional police not needed for the election

Law & Order

• Presidential approval is no longer required for high-level graft investigations


• The rupiah strengthened below 10,000 per US dollar for the first time since October

• Indonesia improved from 51st to 42nd place on the 2009 World Competitiveness


• Year-on-year Inflation fell more than one percentage point in May


• PT Kaltim Nitrate Indonesia signed a $173 million contract to build SEA’s largest ammonium nitrate plant

State Concern

• REI, KADIN file report of alleged cement cartel


• PT Krakatau Steel is set to snap up $381 million in loans this year to boost productivity

Private Sector

• PT Excelcomindo Pratama suffered a $30 million first quarter loss due to the global crisis


• Indonesian banks recorded an increase of 21.9% or Rp16.091 trillion in profit in first quarter

Oil & Gas

• Medco Energi expects to reach an agreement on a huge LNG project in Central Sulawesi


• PT Bumi Resources forecast 13% increase in output from 2008


Obama touts Indonesia in speech to the Muslim world

US President Barack Obama touted Indonesia in a major speech directed at the Muslim world in Cairo, Egypt on Thursday, saying the nation with the largest Muslim population is playing a role in promoting religious tolerance and gender equality, reported The Jakarta Post.

"Islam has a proud tradition of tolerance. I saw it firsthand as a child in Indonesia, where devout Christians worshiped freely in an overwhelmingly Muslim country. That is the spirit we need today. People in every country should be free to choose and live their faith based upon the persuasion of the mind, heart, and soul," Obama said in the speech from at Cairo University.

Obama also highlighted Indonesia's successfully promotion of gender equality.

"Now let me be clear: issues of women's equality are by no means simply an issue for Islam. In Turkey, Pakistan, Bangladesh and Indonesia we have seen Muslim-majority countries elect a woman to lead," he said.

Indonesia has been invoked several times in US foreign policy speeches since Obama assumed the presidency in January.

US Secretary of State Hillary Rodham Clinton mentioned the role played by Indonesia in solving the global crisis during a speech to the US Senate in January.

"Emerging markets like China, India, Brazil, South Africa and Indonesia... are part of the solution and have become partners in maintaining global economic stability,” Clinton said.

Clinton visited Jakarta as part of her Asian tour in February, during which she hailed Indonesia as an example of "a Muslim country where democracy prevails."

Meanwhile, Clinton is scheduled to hold talks with her Indonesian counterpart Foreign Minister Hasan Wirajuda in Washington D.C. on Monday to discuss the two countries’ preparations for more comprehensive partnership cooperation, a Foreign Ministry spokesman said, reported Antara.

"The meeting will be aimed at entering a new stage in bilateral relations," spokesman Teuku Faizasyah said.

During his US trip, Wirajuda is also scheduled to meet members of Congress but the agenda has not been made public, Faizasyah said.

ADB announces $1B govt. loan for social services

The Asian Development Bank (ADB) announced on Thursday it had approved a $1 billion loan for Indonesia to help the government sustain expenditure on poverty alleviation, social protection and infrastructure maintenance, reported Agence France-Presse.

"The global financial crisis has made it expensive for Indonesia to access international debt markets and trade finance, which could constrain spending on essential social services and poverty alleviation programs," Jaseem Ahmed, ADB's Southeast Asia Director said in a statement.

"This loan will enable the government to maintain public expenditures and to respond more effectively to the poverty impacts of the financial crisis."

The loan will enhance Indonesia's financial safety net, better mobilize funds from commercial markets, and maintain financial sector stability, thereby reducing the government's costs for borrowing from the market, the statement said.

The single-tranche loan will have a 15-year term, including a three-year grace period, with an interest rate determined in accordance with ADB's LIBOR-based lending facility.

New air control facilities to improve air safety in eastern Indonesia

New air traffic control facilities at five airports in eastern Indonesia began operations on Tuesday, said Transportation Minister Jusman Syafii Djamal, reported Kompas.

The new facilities, centered at Sultan Hasanuddin airport, Makassar, South Sulawesi, cost the government approximately Rp150 billion ($14.56 million), said Djamal.

The system is reportedly consists of new radars tracking facilities for Sultan Hasanuddin airport, Juanda Airport in Surabaya, Sepinggan Airport in Balikpapan and Syamsuddin Noor Airport in Banjarmasin.

A new air traffic control system was also installed at Ngurah Rai airport in Denpasar, Bali and Juanda airport.

The president director of state-owned airport operator PT Angkasa Pura I, Bambang Darwoto, said the new facilities will help improve air traffic control services and flight safety across the expansive eastern parts of the country.


Constitutional Court to rule on legislative poll disputes this week

Disputes over the result of the April 9 legislative election will conclude next week as the Constitutional Court will start handing down verdicts for almost 600 election-related cases, reported The Jakarta Globe.

“Starting next week, the court will begin reading the verdicts,” Constitutional Court chief Mahfud MD said on Thursday.

He said the court would give its verdicts starting from the simplest cases, but did not elaborate on which ones would be the first.

The reading of the verdicts will take three weeks to complete, from June 8 to June 26, Mahfid said.

Meanwhile, the chairman of the General Elections Commission (KPU), Abdul Hafidz Anshary, said Tuesday poll officials are ready to present evidence in disputes at the Constitutional Court.

He said the state prosecutors representing the KPU were well-trained to face lawsuits filed by political parties and candidates who objected the results of the legislative elections in April.

The Court is hearing a total of 620 cases and is scheduled to issue verdicts next week.

The election law gives the Constitutional Court 30 days to settle the disputes.

176 million voters registered for presidential poll: KPU

The number of registered voters for the July 8 presidential election has reached 176.37 million, the General Elections Commission (KPU) said, reported Antara.

KPU official Andi Nurpati said the number is an increase of five million voters from the list used for the legislative poll on April 9.

“Although the KPU has officially announced the voter list for the presidential election, all Regional Election Commissions should verify their voter lists at the local level,” said Nurpati.

KPU chairman Abdul Hafiz Anshary said there are still problems with the voter list for Papua as not all residential data has been turned in to provincial election officials.

“Despite some minor issues, the KPU has done all it can to fix errors that occurred during the legislative election. All voters are advised to double check with local election officials to make sure they are included on the presidential election voter list,” Anshary said.


JI ranks diminished, now an ‘Indonesian’ group: ICG

The membership of radical group Jemaah Islamiah (JI) has plummeted, but some fugitives may still harbor a violent agenda, says a Jakarta-based terrorism expert, reported The Age.

International Crisis Group senior adviser Sidney Jones said arrests of more than 250 people had weakened the group's structure and sapped its regional strength.

At its height 10 years ago the clandestine organization had about 2000 members, but some have joined an above-ground movement called Jemaah Ansharut Tauhid established last year by spiritual leader Abu Bakr Bay’syir, and the number of "pure" JI members has dropped to about 200, she said.

Its reach through Singapore, Malaysia, Australia and the Philippines had contracted to such an extent that it is now an Indonesian rather than regional organization.

An Indonesian anti-terrorism squad program aimed at de-radicalizing JI prisoners by providing them with better conditions in prison and on release had been effective, Jones said.

JI members were convicted of carrying out the bomb attacks in Bali in 2002 that killed 202 people; members are also suspected of being involved in the second Bali bombing in 2005 and attacks on the Australian embassy and Marriott Hotel in Jakarta.

"There is a very strong consensus within JI that the bombings were counterproductive because they lost public support and ended up getting everybody arrested and really weakening the organization," Jones said.

Fugitives such as Noordin M. Top remain in hiding and are probably under the protection of JI, on the grounds they not take further violent action, she said.

"Violence would not come from JI as an organization, but rather fugitives who have nothing to lose and have the capacity to put together a small group of people who have some element of bomb-making expertise or weapons experience,” she said.

Jones said while you can't rule out the possibility that they would be able to pull something off, their agenda is more against global targets than it is against Western ones.

The US has refused to release JI operations chief Hambali into Indonesian custody, despite permitting the nation's counter-terrorism officials to interview the alleged mastermind of the Bali bombings after more than five years of requests.

JI still has an Emir, a religious and administrative leader, but no longer has the overarching administrative divisions that used to span Australia, Indonesia, Singapore and north-west Indonesia and the Philippines, Jones said.

Its members now focus on “dakwah” - religious outreach - and maintain a strong social network: members intermarry, go into business partnerships and play sport together, she said


No additional officers for presidential poll: Police

The National Police will not station additional personnel in Papua for the presidential election on July 8, a police official said Friday, reported Antara.

“Security for the presidential election will be handled by Papua Police already in the province,” said National Police Operation Deputy Insp. Gen. SY Wenas.

Wenas said the security situation in Papua “is stable with no significant disturbances.”

However, Wenas said, if security deteriorates due the National Police will immediately deploy troops to the affected regions.

A number of security disturbance have plagued Papua since the legislative poll on April 9 and alleged separatists from the Free Papua Organization (OPM) continue to occupy a pioneer airport in Kapeso hamlet, Mamberamo Raya regency.

Incidents of farmers being threatened by armed gunmen have also been reported in Tanah Hitam, Jayapura.

Security forces said they will maintain a persuasive approach in resolving the incidents by involving religious, community figures and local government officials to avoid responding with force.

The legislative election in Papua saw a number of security disturbances, including an attack on the Abepura Police station in Jayapura, an arson attack at Cenderawasih University and an attack targeting police’s Mobile Brigade personnel and at security posts in Puncak Jaya.

On April 9, a bomb also exploded near the Muara Tami Bridge, Jayapura, near border with Papua New Guinea.


Commission probes judges in Munir murder acquittal

A panel of judges that acquitted a former deputy at the State Intelligence Agency (BIN), Muchdi Purwopranjono, of murdering human rights activist Munir Said Thalib in 2004, was questioned by the Judicial Commission on Friday, Detikcom reported.

The probe was led by Judicial Commission chairman Busyro Muqoddas in Central Jakarta, said commission member Chatamarrasjid.

“We questioned Judge Suharto, the head of panel of judges handling the murder case, and two other judges for about four hours,” said Chatamarrasjid.

The court cleared Purwopranjono from all charges and released him from detention on December 31.

The judges declared that none of the statements provided by prosecutors were enough to prove the guilt of Purwopranjono.

On September 7, 2004, prominent activist Thalib on board a Garuda flight from Singapore to Amsterdam.

It was later determined Thalib was poisoned with arsenic on a stopover in Singapore from Jakarta by off-duty pilot Pollycarpus Budihari Priyanto, who was recruited by BIN to carry out the murder, for which Priyanto was convicted and sentenced to 20 years in prison.

Purwopranjono’s acquittal failed to unravel the alleged conspiracy behind the high-profile murder and sparked protests from human rights activists across the globe, who said the verdict disgraced Indonesia’s struggle to uphold human rights and justice.

The Judicial Commission is mandated to make inquiries into cases where there is intense public concern.

The commission cannot charge judges with any irregularities, but can give recommendations to the Supreme Court on their rulings.

KPK imposes travel ban on Natuna regent

The Corruption Eradication Commission (KPK) has slapped a travel ban on the regent of Natuna, Riau Islands, Daeng Rusnadi, and his predecessor Hamid Rizal over their alleged involvement in the embezzlement of oil and gas revenue sharing funds in 2004, reported The Jakarta Post

The travel ban came after a both men were questioned for hours by KPK investigators on Friday.

Head of the Riau Islands Justice and Human Rights Office, Adjat Sudrajat Hafid, confirmed the ban and said the travel ban is a standard procedure and a “policy from the top,” reported Tempo Interactive.

According to the KPK, Rusnadi is accused of disbursing Rp52 billion from oil and gas revenue to 20 members of the Natuna Regional House of Representatives.

The money was allotted to Natuna by the central government to accelerate development in the oil and gas-rich regency.

A local legislator, Mohammad Djamil, admitted to receiving the money, but said he had already turned it over to KPK.

NTT: four arrested over people smuggling

Four suspected people smugglers were arrested and 59 asylum seekers were detained in East Sumba, East Nusa Tenggara (NTT) on Wednesday after their boat began to take on water off East Sumba, police said, reported Okezone.

“Several fishermen rescued the group before their boat sank and brought them to authorities once reaching shore,” said East Sumba Police chief Adj. Sr. Comm. Tetra M. Putra.

The asylum seekers, all Afghan and Pakistani nationals, were heading to Australia after leaving from Bima, East Nusa Tenggara on May 26, said Putra, adding the boat stopped in Singaraja, Bali before heading towards Australia.

According to police, one of the Afghan asylum seekers said he escaped from a UN refugee facility in Bogor, West Java earlier this year.

Presidential approval no longer required for graft probes

Presidential approval is no longer required for graft investigations of lawmakers and government officials, the Supreme Court announced Monday.

The abolition of the requirement is based on a Supreme Court decision dated April 30 that ruled waiting for a presidential approval could hamper investigations.

According to the Supreme Court, officials who can immediately be probed for graft include members of the House of Representatives, the People’s Consultative Assembly, and the Regional Representative Council.

The ruling also applies to regents and regional legislators.

Indonesian Corruption Watch official Febri Diansyah, welcomed the ruling, saying police and prosecutors will now be able to conduct prompt investigations.


Monitors pull 60 ‘tainted medicines’

Health authorities on Thursday banned 60 brands of herbal remedies -- often used as weight-loss and sexual-enhancement supplements -- after they were found to contain dangerous chemical compounds, reported The Jakarta Globe.

“The products were mixed with chemical substances that might cause injury or even death,” Husniah Rubiana Thamrin Akib, head of the Food and Drug Monitoring Agency (BPOM).

Akib identified the products as six brands of weight-loss medicines, nine brands of male sexual-enhancement supplements and 45 brands of traditional herbal medicine.

All the banned weight-loss medicines were found to contain Sibutramine hydrochloride, while the male sexual-enhancement supplements contained Sildenafil citrate, more popularly known as Viagra, and tadalafil, or Cialis.

Akib said the BPOM is very concerned because the 45 traditional herbal medicines were laced with paracetamol.

Paracetamol, which is often used as a pain reliever, can cause liver damage with long-term use or if taken in high doses.

Akib said the products had been tested and banned from the market between June 2008 and May and all of the registration permits of the products and some of the producers’ licenses had been revoked.

Ruslan Aspan, the deputy of BPOM’s monitoring division for traditional medicines and cosmetics, said that every year the agency takes 7,000 random samples of drugs, herbal medicines and supplements from the country’s markets.


Rupiah moves higher, IMF upbeat

In a week in which Indonesia's central bank cut its benchmark interest rate by 25 basis points to 7% and the rupiah moved below 10,000 to the US dollar for the first time since October, the International Monetary Fund (IMF) predicted growth this year of between 3% and 4%.

While the IMF projection remained below other estimates, it marked a rise from its earlier prediction of 2.5%, Kompas reported.

The head of the IMF’s Asia-Pacific division, Thomas Rumbaugh, said first-quarter growth had been “extremely satisfying” based on stronger government spending. The legislative elections had also acted as a stimulus to the real economy, he noted.

IMF senior resident representative in Indonesia Milan Zavadjil said the country's improving fiscal position, surplus current account and comfortable level of international reserves had enabled it to cope with the global crisis. The IMF projected inflation this year to be about 5%, Agence France-Presse reported.

"Indonesia entered the current global financial crisis in a strong position, which was built through sound policies and against the backdrop of favorable conditions in recent years," Zavadjil said in a statement.

Zavadjil said the government and central bank had effectively dealt with the policy challenges associated with the rough economic climate.

"Bank Indonesia's policy rate cuts since December 2008 have been appropriate and in line with the decelerating inflation and declining demand."

"The interest rate reductions already implemented should soon be reflected in higher credit expansion and help support a recovery in domestic investment," he said.

The cut in the Bank Indonesia (BI) benchmark rate of .25% to 7.0% was expected after year-on-year inflation dropped to 6.04% in May from 7.31% in April.

BI said the economy would grow between 3.0% and 4.0% this year, compared with 6.1% in 2008, on the back of the global financial crisis.

Year-on-year core inflation, which excludes government-administered prices such as those of fuel and food, fell from 7.14% in April to 6.64%, a possible sign of deteriorating domestic demand.

The rupiah strengthened past 10,000 against the dollar for the first time since October on speculation political stability and prospects for further interest-rate cuts will attract more overseas investment, Bloomberg reported.

Foreigners plowed money into the nation’s stocks and bonds as the economy outperforms its regional peers.

Deputy Governor Hartadi Sarwono signaled room to reduce interest rates again as inflation slowed to the lowest in 23 months. The rupiah is “still undervalued,” he said.

“The rupiah is still one of our picks because the Indonesian economy is fairly robust,” said Emmanuel Ng, an economist at Oversea-Chinese Banking Corp. in Singapore.

“The way the political climate is evolving is positive from an offshore perspective. Inflation continues to come off and Bank Indonesia continues to keep the door open for rate cuts.”

The Asian Development Bank (ADB) said Thursday it had lent Indonesia $1 billion to help maintain spending on social services in the wake of the global financial crisis, Agence France-Presse reported.

The Manila-based lender said the loan was one of the biggest it had ever provided to Indonesia.

The loan will allow the country to enhance its safety net, better mobilize funds from commercial markets and maintain financial sector stability, the ADB said in a statement. It will also reduce the government's cost for borrowing from the market.

"Economic recessions in several of Indonesia's major trading partners have negatively affected demand for Indonesian exports and hindered investment inflows," the bank said.

"The global financial crisis has made it expensive for Indonesia to access international debt markets and trade finance, which could constrain spending on essential social services and poverty alleviation programs," said Jaseem Ahmed, a director of the ADB's Southeast Asia Department.

"This loan will enable the government to maintain public expenditures, and to respond more effectively to the poverty impacts of the financial crisis."

Meanwhile the IMD World Competitiveness Center showed that Indonesia moved from 51st to 42nd place on its 2009 World Competitiveness Scoreboard, the most dramatic jump of any country in the listing.

On the stock market, the Jakarta composite index closed at 2,078.93 on Friday, while the rupiah was trading at 9,920 to the dollar.

"Inflows have driven the rupiah to strengthen, which in the end should be good for most Indonesian companies as it could reduce their foreign debt burdens," a trader told Dow Jones Newswires.


March April April 09/

April 08 Cumulative 2009

Total exports $8.54 billion $8.46 billion -22.55% $39.95 billion

Non-oil & gas exports $7.27 billion $7.20 billion -22.68% $26.90 billion


(y-o-y) April

(m-o-m) May

(y-o-y) May


Inflation 7.31% -0.31 6.04% 0.04%

Full year 2006 Full year

2007 Full year 2008 First quarter 2009

GDP growth 5.5% 6.3% 6.1% 4.4%

Tourist arrivals March April Growth/loss

(m-o-m) Growth/loss


511,314 487,121 -4.73% 0.5%

Source: Central Statistics Agency



Inflation eases in May: BPS

Year-on-year Inflation fell more than one percentage point in May, officials said Monday, giving the central bank room to lower interest rates to boost the economy, Agence France-Presse reported.

The Consumer Price Index dropped to 6.04% from 7.31% in April, but rose 0.04% on a monthly basis, officials said.

The sharp drop in year-on-year inflation was due in part to a high base effect, as the government raised fuel prices in May last year, Central Bureau of Statistics (BPS) chairman Rusman Heriawan said.

Heriawan said the high base could lead to still lower inflation in the coming months, with the annual figure in June possibly dropping to 5%.

The swing back to month-on-month inflation from deflation in April was driven by a 0.48% rise in processed food prices, he said.

BPS also reported exports in the first four months contracted by 29.51% from the same period last year.

Exports in April contracted by 22.55% from a year earlier, Heriawan said adding that exports in April slid 1.81% from March.

But while exports were valued at only $8.46 billion, there was a 45% drop in imports to $6.38 billion, resulting in a trade surplus of $2.08 billion in April, Reuters reported.

BI cuts key interest rate to 7%

Bank Indonesia (BI) reduced its benchmark interest rate by 25 basis points to 7% Wednesday to help bolster the country's economic growth, Deutsche Presse-Agentur reported.

BI’s seventh-consecutive monthly cut brought the prime lending rate to its lowest level since 2005.

The central bank said inflation at the end of the year would still be in line with earlier estimates of 5 %to 7%.

“Bank Indonesia will always be cautious about the potential for inflationary pressure in 2010, together with forecasts of higher world commodities prices,” the bank’s statement said.

BI deputy governor Hartadi Sarwono told reporters that more rates cuts were still possible, Reuters reported.

"If inflation eases and the exchange rate stable, then there is still room to cut the BI rate,” he said.

BI forecast the country's economy would grow by 3% to 4% this year.

The economy expanded 6.1% in 2008.

Govt. aims to raise Rp2T in bond auction next week

The Finance Ministry plans to raise Rp2 trillion ($197 million) in an auction of government debt on June 9 to help fund the budget deficit, Bhimantara Widyajala, a ministry’s director, said on Thursday, Reuters reported.

The ministry raised Rp4.4 trillion at its last debt auction on May 26, more than double its target of Rp2 trillion, helped by expectations of improving global economic conditions.

Earlier this week, the ministry swapped Rp592 billion of government bonds maturing in 2009-2013 with bond maturing in 2024 with investors, capitalizing on recent strong demand for its long-dated debt.

The government has so far raised about Rp93 trillion, or roughly two-thirds of its 2009 gross debt issuance target, which was increased to Rp142.3 trillion to help plug budget gap.

Trade with Italy sees double-digit growth

Bilateral trade between Italy and Indonesia has more than doubled in four years to $2.90 billion in 2008, an increase of 41.63% from $2.04 billion in 2007, figures from the Central Bureau of Statistics showed, The Jakarta Post reported.

"Trade relations between Italy and Indonesia are significant and on the move. In 2008, our exports to Indonesia increased by 50% and our imports from here have also gone up by 37%," Italian ambassador Palmieri said on Monday.

With this impressive growth, Palmieri said, Italy has now become the third biggest trading partner of Indonesia in the EU after Germany and The Netherlands.

Italy mainly exports industrial machinery, building machinery, chemical products and telecommunications to Indonesia and imports coal, palm oil, footwear, clothes and furniture Indonesia.

"Some of our big companies like Eni oil, are already here. More and more Italian companies want to come," Palmieri said.


Largest explosive plant to be built in E. Kalimantan

State-owned construction company PT Rekayasa Industri on Wednesday signed a $173 million contract with PT Kaltim Nitrate Indonesia to build the largest ammonium nitrate plant in Southeast Asia, The Jakarta Post reported.

Kaltim Nitrate Indonesia, the plant owner, is a joint venture of Australian company Orica Limited and local company PT Armindo.

"This is the largest investment by an Australian investor since the financial crisis in 1997," said Australian Ambassador, Bill Farmer during the contract signing ceremony.

Armindo owns 51% of Kaltim Nitrate shares, the rest being owned by Orica, the world's largest supplier of commercial explosives.

Director General for Agro and Chemical Industries at the Industry Ministry, Benny Wahyudi, said Indonesia relied heavily on imports of ammonium nitrate. Ammonium nitrate is an explosive used mostly in mining industries.

According to Wahyudi, some 90% of the explosives material required for domestic consumption were imported last year.

"Last year, Indonesia paid $150 million to import 350,000 tons of ammonium nitrate to meet domestic demand," he said.

Indonesia's only ammonium nitrate producer PT Multi Nitrotama could supply 40,000 tons last year.

"For this year, the ministry predicted domestic consumption would reach 400,000 tons and this would increase by 10% annually. Therefore, the construction of the plant is vital to cut import costs," Wahyudi added.

The plant will be built on 10 hectares of land in Bontang, East Kalimantan. It will have the capacity to produce 300,000 tons of ammonium nitrate a year, or an average of 970 tons a day.

The project construction will start in July and is expected to be completed in the second quarter of 2011. The plant is designed to have an operating life span of 20 years on completion, according to Antung Pandoyo, president director of Kaltim Nitrate.

The plant would consume 150,000 tons of ammonia annually, provided by PT Kaltim Parna Industri and PT Kaltim Pasifik Amoniak. Both companies are also located in Bontang.

After the construction was completed, the plant would provide about 2,300 new jobs while the construction project would create jobs for about 1,000 workers and engineers.

Kaltim Nitrate had already spent about $70 million to design the project, buy the land for the plant, and buy equipment for the plant's construction.

E. Java to develop seven industrial sectors in Madura

The East Java Capital Investment Board (BPM) plans to develop seven industrial sectors on Madura Island when the Suramadu bridge, which will connect it to Surabaya, is opened on June 10, The Jakarta Post reported.

"We see good prospects for the seven sectors. Therefore, we hope that both foreign and domestic investors will be interested in investing their capital in Madura. It, of course, will boost economic growth on the island," East Java BPM chairman Hary Soegiri said Thursday in Surabaya.

"We expect the development of the seven sectors will able to absorb about 800,000 local workers. Hence, the economic growth in the island will be better," Soegiri said.

Soegiri said the seven sectors will include the development of a cargo seaport on Madura, a project which will be aided by the improvement of Madura's north and south roads; the expansion of a 600-hectare residential, trade and tourism area as well as the development of basic needs, like clean water, sanitation, energy and telecommunications.

The other areas to be developed include a 1,000-hectare international harbor at Tanjung Bulu, Pandan, North Bangkalan; the cattle husbandry industry; the salt industry in Sumenep and a 500-hectare jasmine plantation - to be processed into essential oil - in Tanjung village, Burneh district, Sumenep.

Soegiri said that PT Madura Industrial Seaport City (MISC) has invested Rp3.2 trillion ($317 million) for the development of trade, industry and seaports in Madura.

Other foreign corporations, he added, have had long-standing investments in Madura. Japanese concern PT Dwi Bina Utama invested $126,500 in fish processing in Sumenep in 1998.

PT Aneka Boga Nusantara, a joint Japanese South Korean venture, has invested $1.7 in fish processing in Sumenep since 1997.

Domestic firms have also invested in Maruda. PT Karya Dibya Mahardika has invested Rp16.9 billion on a tobacco plantation in Sumenep, PT Adiluhung has invested Rp7.5 billion on boat manufacture and repair in Bangkalan and PT Maxima Mutiara Indonesia has invested Rp3 billion in the cultivation of pearl shell seedlings in Sumenep.

So far the only way between Surabaya and Madura is by ferry. The opening of the country's longest bridge is expected to increase economic growth in Madura.

11 foreign investment projects approved in Batam

The Investment Coordinating Board (BKPM) approved 11 foreign investment proposals in April worth $6.55 million in Batam, Riau Islands, an official announced, Asia Pulse reported.

According to chief of the Marketing and Public Relations Bureau at the Batam Management Body Rustam H Hutapea, the agency also approved two expansion projects worth $4.95 million under a foreign investment scheme in that month.

"Also in April, the agency received a domestic investment proposal worth Rp15 billion in Batam," he added.

During January to April 2009, the agency approved 29 foreign investment projects worth $23.20 million and six foreign expansion projects worth $11.21 million, he was quoted by Antara.

Shipping firms double investment in ships

The country’s shipping companies more than doubled investment for ship procurement through imports in the first quarter of 2009 amid shrinking ship cargoes, Asia Pulse reported.

Ship imports in the first three months of this year were valued at $352.9 million, up from $167 million in the same period last year, based on data at the Trade Ministry.

The Indonesian National Ship owners' Association (INSA) said the increase in import is to forestall shortage in shipping service when the country fully implements the cabotage principle in 2010.

More vessels especially barges and tugboats will be needed to transport coal in January, 2010, Johnson W. Sucipto, the INSA chairman said.

The cabotage principle is already implemented by phases but coal is still allowed to be transported by ship flying foreign flag until now.


REI, KADIN file report of alleged cement cartel

The Indonesian Real Estate Association (REI) and the Indonesian Chamber of Commerce (KADIN) filed a report Thursday with the Business Competition Supervisory Commission (KPPU) against the country’s three largest cement producers for allegedly practicing a cartel, The Jakarta Post reported.

“In Java alone, they secure 99% of the market share, making it difficult (for other producers) to avoid the market system they create,” REI chairman Teguh Satria said.

He said state-owned cement maker PT Semen Gresik, PT Holcim Indonesia and PT Indocement, which hold over 88% of the market share between them, were capable of controlling cement prices in the country.

KPPU chairman Benny Pasaribu also questioned the fact that domestic cement price was higher than that in other countries such as Malaysia, China and India.

In 2008, cement price in Indonesia reached $91 per ton, compared to $75 per ton in Malaysia and China and $67 per ton in India.

“There is discrimination in price; the price for export is cheaper than the price for domestic consumption. It might be a dumping practice, but since it is controlled by the same companies, no one complains,” Pasaribu said.


Krakatau Steel sets $381M loan deal

State-owned steel producer, PT Krakatau Steel, is set to snap up as much as $381 million in loans this year from state-owned bank PT Bank Negara Indonesia, to help expand and boost productivity, officials said Monday, The Jakarta Globe reported.

“Krakatau has a plan to develop its factories, as well as improve its technology to reduce energy costs at its power plants,” said Muhammad Said Didu, secretary of the State Ministry for State Enterprises.

Krakatau will receive the cash loans for its capital expenditure, and a non-cash loan, or credit line, worth $326 million and $55 million respectively for revamping iron and steel mills.

Krakatau, the biggest contributor of state enterprise dividends from the manufacturing sector, is allocating Rp2.72 trillion this year for capital expenditure, an increase of 320% from the Rp647 billion it spent in 2008.


Excelmindo posts $30M Q1 loss

Publicly-listed cellular phone operator PT Excelcomindo Pratama suffered a loss of Rp306 billion ($30 million) in the first quarter of 2009 due to the global economic crisis, Asia in Focus reported on Wednesday.

"Much of the loss resulted from the US dollar's exchange rate which strengthened (against the rupiah) in the first quarter," Excelcomindo president director Hasnul Suhaimi said.

He said the US dollar's exchange rate was below Rp11,000 a dollar at the end of 2008 and rose to more than Rp11,000 a dollar at the start of 2009 until the end of the first quarter.

As a result, Excelcomindo`s exchange rate losses in the first quarter jumped to Rp306 billion from Rp15 billion in late 2008, he said.


Banks’ profit up 21.9% in Q1

The country`s banks recorded an increase of 21.9% or Rp16.091 trillion in profit in the first quarter of 2009, Bank Indonesia (BI) said, Antara reported.

"Although they were under pressure because of the global crisis, some could still make profit in the period," BI deputy governor Muliaman D Hadad said on Wednesday.

Hadad said the situation in the next one to two years would still be difficult. "Credit expansion remains flat," he said.

The industry is still annoyed by burdens like increasing tendency in non-performing loans (NPLs), capital and credit problems and others.

Based on BI data, NPLs by March 2009 reached 4.5% up from 3.8% by the end of 2008.

Hadad also said although the banks were facing the effects of the global crisis they could still perform relatively well in 2008. He added that the profit of 123 banks in 2008 reached Rp30.6 trillion, lower than Rp35 trillion recorded in the previous year.

BNI to launch separate shariah unit this year

The country’s fourth-largest lender by assets, PT Bank Negara Indonesia (BNI), plans to set up its shariah banking business as a separate unit later this year, an executive said on Thursday, Reuters reported.

Ismi Kushartanto, head of BNI's sharia unit, said that BNI would set aside Rp500 billion ($49 million) in minimum paid-up capital for separating the unit, as required by the central bank.

Last month, BNI president director Gatot Suwondo said that Islamic Development Bank (IDB), owned by states including Saudi Arabia, Egypt and Turkey, plans to invest as much as $500 million in BNI shariah banking unit to help it expand in Asia.

Currently, BNI’s Islamic unit has total assets of $300 million, Suwondo said.


Six oil, gas firms to open joint accounts in state banks

Six oil and gas contractors on Monday signed an agreement with upstream oil and gas regulator BP Migas to open joint accounts in state banks, The Jakarta Post reported.

The agreement will stipulate that the companies place their abandonment and site restoration budgets amounting to $38 million.

"Abandonment and site restoration budgets will be used by contractors to dismantle their production facilities and restore environmental surroundings after they complete their production activities,” BP Migas's deputy for financial controlling Djoko Harsono said during the signing ceremony.

"These activities require a huge budget. Therefore, the contractors must set aside the funds in joint accounts in state-owned banks," Harsono said.

The six companies are: Chevron Makassar Ltd; ConocoPhillips Ltd; a joint operating body between PT Pertamina and Medco E&P Tomori Sulawesi ; and three subsidiaries of oil and gas giant BP, BP Berau Ltd, BP Muturi Ltd, and BP Wiriagar Ltd.

Chevron will set aside as much as $19.8 million in Bank Mandiri, while ConocoPhillips will place $13.1 million also in Mandiri. The joint venture of Pertamina and Medco will allocate $800,000 in Bank Negara Indonesia (BNI).

BP through its three subsidiaries will set aside budgets totaling $4.3 million in BNI and Mandiri.

The obligation to set aside the abandonment and site restoration budget only applies to contracts signed from 1995 onward, after Indonesia ratified the UN Convention on the Law of the Sea (UNCLOS).

BP Migas last year began requiring oil and gas contractors to set aside abandonment and site restoration budgets in joint accounts with government banks.

Previously, contractors used to place the money in individual accounts, which were mostly in foreign banks.

Medco expects deal on Donggi-Senoro gas project

Energy firm PT Medco Energi Internasional said on Wednesday it expected to reach an agreement on a huge liquefied natural gas (LNG) project in Central Sulawesi, but warned against too much government pressure to raise gas prices, Reuters reported.

State-owned oil and gas company PT Pertamina, Medco and Japan’s Mitsubishi Corp have agreed to build the Donggi-Senoro LNG plant at a cost of at least $1.4 billion.

The project has been criticized by legislators who say the price at which the natural gas will be sold is too low. Medco president director Darmoyo Doyoatmojo said there were compelling reasons for an agreement.

“I am quite optimistic... economic reasons for the government are very attractive,” Doyoatmojo said.

“I think it is difficult, it is a limit that we can increase the price, because of the amount of the investment and minimum return requirement,” he said when asked about government efforts to push up the gas price.

The upstream oil and gas regulator BP Migas, has called for a lowest gas price based on Indonesian crude at $40 a barrel at around $3.8 per million British thermal units.

Medco’s oil production is expected to average 36,000 bpd this year, down from 45,000 bpd last year, due to ageing oil fields, Doyoatmojo said, adding that next year it should be stable or show a small decline.

StatoilHydro to explore three wells

Norway's StatoilHydro plans to explore three wells to search for hydrocarbons in Karama block in Sulawesi in 2011, a company official said on Monday, Reuters reported.

StatoilHydro, the operator of Karama block in the Makassar Strait, has a 51% stake while state oil firm Pertamina owns 49%.

"The Makassar Straits has potential hydrocarbon reserves but we have to explore first before we know the amount," the company’s spokesman Ananda Idris said.

He added Indonesia has turned into a net importer of crude in recent years as production has slumped after a failure to tap new fields fast enough.

Indnesia has been offering new exploration rights and financial incentives for oil fields in a bid to stem a steady decline in production.

It has about 8.4 billion barrels of proven and potential oil reserves and 180 trillion cubic feet of gas.

Barito eyes controlling stake in Star Energy

Publicly listed diversified conglomerate giant PT Barito Pacific is eyeing a controlling stake in local energy firm Star Energy, marking its continued expansion drive after last year's two major acquisitions, The Jakarta Post reported.

"We are looking for a stake in the company, if it's possible we want acontrolling stake," investor relations vice president Agustino Sudjono said.

Sudjono refused to mention the value of the acquisition or the percentage of the stake that would be acquired as discussions were still underway.

In 2008, Barito was looking at a 51% stake in Star Energy, estimated to have a total value of Rp5.1 trillion ($494.7 million) at that time.

Barito is controlled by timber tycoon Prajogo Pangestu, who now sits as the company's president commissioner.

It recorded a more than 50 fold increase in revenue last year following the acquisition of PT Chandra Asri and PT Tri Polyta Indonesia, producers of polypropylene resins.

Star Energy, which was established in 2003 as an independent company, is the operator of oil and gas Kakap Block in the Natuna Sea.

It also owns Sebatik Block in East Kalimantan, Banyumas Block in Central Java and Sekayu Block in South Sumatra.


January-April coal exports fall 22.5% on year

Coal exports dropped to 53.5 million metric tons during the first four months of the year from 69.04 million tons a year before, government data showed Tuesday, Dow Jones reported.

Despite the 22.5% drop in volume, earnings from overseas sales rose 21.6% to $3.44 billion from $2.83 billion, the Central Bureau of Statistic said.

Indonesia produced 30 million tons of coal in the first quarter, or only 67% of the target set for the period, due to heavy rains and sharply lower global prices, a government official said last month.

Bumi raises 2009 coal output target

Coal producer PT Bumi Resources raised its 2009 production target and forecast a 13% increase in output from a year ago, a company official said on Tuesday, Reuters reported.

Bumi's coal production was expected to reach 60 million tons this year, up from 53 million tons in 2008 and higher than the company's previous guidance for a 10% increase.

"About 20 million tons will come from the Arutmin mine, while KPC (Kaltim Prima Coal) will produce 40 million tons," Herlan Siagian, general manager of marketing at Bumi Resources, told the Coaltrans conference in Bali.

Siagian also said Indonesia's recent proposal of getting producers to allocate a portion of their output for the local market would pose a challenge for the industry.

Bumi said on Monday it has obtained eight million tons purchase orders from China for 2009.


1 This Trade and Investment News is a publication of the Coordinating Ministry for Economic Affairs of the Republic of Indonesia. Readers are welcomed to forward it in its original form but no reproduction is allowed without permission.

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