NEWS AND VIEWS ON
INDONESIA
6 December 2004
ECONOMY
Policies
Emerge, Confidence Up
A series of statements on the fringes of the Association of
Southeast Asian Nations (ASEAN) summit and a commitment to cut
fuel subsidies are producing a clear picture of the government’s
intended economic course, while consumer confidence is at a
high.
Coordinating Minister for Economics Affairs Aburizal Bakrie said
Indonesia
will cut its corporate tax rate by a percentage point in 2005
and reduce it by another point each year over four years to spur
investment and jobs and accelerate economic growth, Bloomberg
News reported.
The move will bring the tax rate down to 29% in 2005. “This has
been put on the tax reform draft to be presented to
parliament,'' Bakrie said in
Vientiane,
Laos.
He said the government is also reviewing labor rules that
stipulate minimum wages for workers and require employers to pay
severance even to those fired for misconduct. Laws allowing
administrations in districts and provinces to impose levies on
companies, which have been criticized as increasing business
costs and discouraging new investments, would also be reviewed.
Bakrie said the government would fund as much as 40% of the $72
billion to $75 billion needed to build roads, ports, power
projects and telecommunications infrastructure in the next five
years, with the rest to come from local and overseas investors.
Investors wishing to bid for infrastructure projects such as
toll roads and power plants may be allowed do so as early as
January, which will coincide with an investment seminar in
Jakarta.
Projects such as roads in rural areas will be carried out by the
government, Bakrie said.
The government planned to fund its contribution to the
infrastructure bill by borrowing from domestic banks and by the
use of savings in government-run pension funds.
The government is counting on increased investments to help
accelerate economic growth to 7.2% by 2009, from an estimated
4.8% this year, he said. “If you cut the red tape, the private
sector will move,'' he said.
Fuel
prices
Vice
President Jusuf Kalla settled the debate over what the
government would do over the ballooning fuel subsidy on Tuesday
(30/11/04)
when he said fuel prices would go up by 40%.
Comments by
other senior government figures later suggested that the move
would come during the major harvest period from March to April,
when farm incomes are high, to reduce the impact on the economy.
Minister of
National Development Planning Sri Mulyani Indrawati confirmed
that a fuel price hike of between 10-40% was imminent, and that
a government team was studying a modified, pro-poor subsidy
scheme to replace the existing one.
Kalla said at
the current cost of fuel the government was having to commit
Rp10 trillion a month to subsidies, a price the country could
not afford.
"It is high
time for the government to move away from populist measures that
come at the expense of most people," said Kalla.
The fuel
subsidy is estimated to reach Rp59.2 trillion this year, against
an initial projection of Rp14.5 billion.
Most analysts
say the impact on the poor will be limited, since the majority
of subsidies are enjoyed by rich car owners and smugglers, and
government promises to push more funds into areas such as health
and education are likely to minimize the social impact of fuel
rises. Socially sensitive fuels like kerosene will continue to
be subsidized.
Bond
issue succeeds
Indonesia’s
final bond issue for the year received strong support, with the
offer attracting a total of Rp7.3 trillion in bids, well over
the Rp1.8 trillion the government needed to meet its legislated
target.
The issue
Tuesday completed the full-year target of Rp32.3 trillion,
including the $1 billion sovereign bond in March. The latest
bond carries a 10% coupon rate priced to yield 10.27%.
The World
Bank and the Asian Development Bank (ADB) also prepared to push
more money into the system with the disbursement of $400 million
in loans to meet a request from the government to help it with
the 2004 state budget. The World Bank will provide a loan of
$300 million and the ADB $100 million.
"This is a
not new loan (deal) ... it was agreed to some time ago and the
disbursement was planned for December," said World Bank
spokesman Mohamad Al-Arief.
The
government also raised Rp585.8 billion ($65 million) from the
sale of a 16.8% stake in publicly listed Bank Niaga on Tuesday.
The Niaga
sale follows the recent divestment of the government's 51% stake
in Bank Permata and a 10% stake in Bank Danamon. Proceeds from
the two sales total Rp4.51 trillion ($495 million).
The
government is now planning to sell another 20% in Permata and
minority shares in other listed banks such as Bank Central Asia
(BCA), and Bank International Indonesia.
There was
good news from the real sector. Exports were strongly up and
imports continued to grow, indicating greater activity in the
economy as manufacturers imported raw materials and capital
goods. Inflation remained well within the government’s full-year
target.
A survey
showed that the retail sector will see sales growth of between
25-30% next year. Indonesian Retail Merchants Association (Aprindo)
chairman Handaka Santosa said the confidence was based on the
belief that the new government would create more jobs and boost
incomes.
Consumer
confidence was at a 37-month high, Danareksa Research Institute
announced, up 6.2% in October following the success of the
election process.
POLITICS
House
Delays Legislation Process
The House of
Represantives legislation body (BALEG) agreed on Monday (29/11/04)
to delay consideration of all legislation until the outcome of
discussions between the government and Parliament on what bills
should be dealt with first.
BALEG chairman Muhammad AS Hikam said the deliberations would
not begin until January and could take weeks to reach a
conclusion.
It had been
hoped that Parliament would improve on the lack-luster
performance of the previous House and speed up consideration of
at least 61 backlogged bills.
According to Law No. 10/2004, legislative processes should
follow the priorities set out in a national legislative program
jointly agreed on by the House and the government.
Ba’asyir ‘in Terror Camp’
The alleged
former spiritual leader of the Jemaah Islamiyah (JI) terror
network, Abu Bakar Ba’asyir, addressed recruits at a training
camp in the southern
Philippines
four years ago where Muslim militants learned bomb-making
skills, a radical told an Indonesian district court on Thursday
(2/12/04).
Ba’asyir is accused of heading the organization and of inciting
his followers to take part in the 2002
Bali
bombing and last year’s attack on
Jakarta’s
J.W. Marriott Hotel that together claimed 214 lives.
The 66-year-old cleric denies visiting the
Philippines
in 2000, but prosecution witness Yudi Lukito, a militant serving
a prison term for illegal weapons possession, told the court he
had seen a white-robed Ba’asyir at the camp that year.
"I saw him directly for about five to 10 minutes," Lukito said
during Ba’asyir's continuing trial in
Jakarta.
Earlier in the week, three other Islamic militants serving jail
time failed to directly implicate Ba’asyir in any crimes.
A
Jakarta
court last year acquitted the
Central Java
cleric of heading JI, which has been blamed for the
Bali,
Marriott and the more recent Australian Embassy bombings.
Saleh
Promises Corruption Review
Attorney
General Abdul Rahman Saleh has promised to complete hundreds of
corruption cases throughout the country within the next three
months, including a review of five major graft cases that have
been dropped by the so-called "order to stop investigation,"
known as SP3.
"We want to see if the law has been applied correctly," the
former Supreme Court justice told a hearing with the House of
Representatives' Commission III on law, human rights and
security.
Abdul Rahman, refused to name the five big corruption cases, but
said they all related to the alleged misuse of Bank Indonesia
Liquidity Assistance (BLBI) credits disbursed to bail-out ailing
banks in the wake of the 1998 financial crisis.
Deputy Attorney General for Special Crime Soedono Iswahyudi says
prosecutors across the country will bring 62 corruption cases to
trial in the next two months and begin investigations into 86
more – many the result of increased scrutiny by civil society
groups of local government affairs.
Businessman Gets 15 Years’ Jail
The South
Jakarta District Court has sentenced businessman Rudy Sutopo to
15 years’ imprisonment and fined him Rp1 billion for his
involvement in the Rp1.7 trillion ($185 million) Bank Negara
Indonesia (BNI) scandal.
Both Sutopo
and prosecutor Syaiful Tahir, who had sought a 20-year jail term
for the defendant, said they would decide later whether to
appeal.
The defendant
is a commissioner of PT Mahesa Karya Mandiri, which allegedly
received about $5 million as a result of the scam.
Officers from
BNI’s Kebayoran Baru branch approved export loans to eight
subsidiaries of the Gramarindo and Petindo Groups with fake
letters of credit.
The courts are prosecuting 17 people, including former customer
relations head Edi Santoso, who has been given a life sentence,
former branch manager Koesdiyuwono, who received 15 years in
jail, and five Gramarindo directors who are serving between
eight and 15 years behind bars.
REGIONS
Nine Years for
Ambon
Separatist
The Ambon
District Court Monday (29/11/04)
sentenced Moses Tuanakotta, secretary-general of the Maluku
Sovereignty Front (FKM), to nine years in prison for subversion,
The Jakarta Post reported. Prosecutors had demanded
a 15-year term.
Tuanakotta
was found guilty of violating articles 106 and 110 of the
Criminal Code for leading a South Maluku Republic (RMS)
flag-raising ceremony on
April 25,
2004.
The ceremony,
which marked the 54th anniversary of the self-declared
South
Maluku
Republic,
sparked days of rioting.
BUSINESS BRIEFS
MACROECONOMY
Good Response for Bond
The
government auctioned its last bond issue of the year, receiving
Rp1.8 trillion ($199 million) on Tuesday, the Ministry of
Finance said. The latest bond carried a 10% coupon rate and was
priced to yield 10.27%.
Director
General for Treasury Mulia Nasution said the auction drew Rp7.3
trillion in bids but the offer was restricted in line with the
budget target of issuing Rp32.5 trillion this year.
The issue
Tuesday (30/11/04)
completed the full-year bond issue target of Rp32.3 trillion.
This included a $1 billion sovereign bond that was sold in
March.
Exports Keep Rising
Exports
continued to rise in October, moving up 1.62% to $7.27 billion
from a month earlier, bringing to $58.5 billion the value of
exports in the first 10 months of the year, Antara reported.
Non-oil and
gas exports rose 3.13% to $5.86 billion from $5.69 billion,
while oil and gas exports fell 4.27% to $1.4 billion from $1.47
billion, chief of the Central Bureau of Statistics (BPS),
Choiril Maksum, said Wednesday (1/12/04).
Oil and gas
exports declined due to a 12.84% drop in crude oil exports to
$530.8 million and a 13.05% decline in oil products exports to
$161.9 million. Gas exports rose 5.95% to $712.1 million.
Machinery and
electrical appliances topped the list of non-oil and gas exports
from January to October this year, contributing $5.55 billion to
the total export value.
Animal fat
and oil came in second with $3.35 billion, followed by rubber
and rubber products at $2.47 billion, and unknitted garments at
$2.43 billion.
Japan
was the biggest market for Indonesian products in the first 10
months of 2004, buying $6.94 billion worth of commodities.
Imports
increased by around half to $4.32 billion, bringing the trade
surplus to $2.95 billion in October from $2.19 billion in
October last year.
Inflation Stays Low
The annual
inflation rate slowed in November on lower-than-expected rises
in food prices during a major religious holiday season due to
ample supplies, which should help the central bank keep interest
rates low, Reuters reported.
The
announcement on Wednesday (1/12/04)
by the Central Statistics Bureau (BPS) of 6.18% inflation in the
year through November came as hopes in recent weeks of sustained
low interest rates helped boost share prices to record highs and
attracted strong demand for government bonds.
Inflation
edged up 0.89% month-on-month in November, pushing the
cumulative figure to 5.31% in the first 11 months of this year,
BPS head Choiril Maksum said. Year-on-year, inflation rose 6.18%
in November.
Bank
Indonesia
does not expect the year-end inflation rate to exceed 6.3%,
below the official estimate for the year of 7.0%, deputy
governor Hartadi said.
"Assuming
that the December inflation rate will not be too far away from
November levels, 2004 inflation will not be higher than 6.3%,"
Hartadi told reporters.
The bank also
projects inflation will remain within its 2005 target of 6.5%
despite the government's plan to raise fuel prices next year, he
said.
STATE CONCERNS
Caution on Provincial Bonds
Bank
Indonesia (BI) called Monday (29/11/04)
for provincial governments to exercise caution in issuing bonds,
saying they will have an impact on the country's economy, Antara
reported.
"Even though
the law allows provincial governments to issue bonds, they must
exercise caution in issuing them," BI deputy governor Aslim
Tadjuddin said during a meeting with Regional Representatives
Council (DPD) leaders.
Once such
bonds are issued, the provincial governments will find it
difficult to restrict the number of buyers, either domestic or
foreign, he said.
"If foreign
buyers buy the bonds, there will be conversion risks that will
have a comprehensive impact on our country in case of problem,"
he said.
He said the
government must study carefully any plan to issue provincial
government bonds and provincial governments could issue such
bonds only after they pass a tight selection process.
‘Niche’ Growth Needed: Pangestu
Minister of
Trade Mari E. Pangestu has repeated earlier comments that
Indonesia
must develop expertise in specific niche markets to become a
strong partner in East Asian growth.
In an
interview with The Jakarta Post, Pangestu repeated
a theme she first presented in an address to the Jakarta Foreign
Correspondents Club.
She said
Indonesia
would face continuing problems in competing with
China
and other nations on low-cost consumer items, especially with a
new free trade agreement with
China.
The FTA represented a good opportunity for
Indonesia,
with evidence of Chinese willingness to improve entry conditions
for Indonesian agricultural commodities.
“We will
fight to get into the
China
market,” she said. “In order to do that … we
have to identify which products have the potential to win in
competition against Chinese products.”
Pangestu said
Indonesia could benefit from greater stress on exports of
manufacturing products such as electronics, automotive goods and
textiles, with tariffs to be lowered gradually starting next
year until fully liberalized by 2010.
“We can and
must take full advantage of the increasing tendency of
East Asia
to become a regional production center where
China
is the core.
China
becomes the center due to its big exports and big domestic
market,” she said.
Indonesia
could become an alternative supply source or a complement to
China,
she said. “The bottom line is we must take part in the
production network.”
“For example,
we know that we have potential in electronics. Electronics
export growth is the highest among the country's non-oil and gas
exports. It is our future industry.”
Japan
to Focus on ASEAN
Japan
will favor ASEAN over
China
as an investment destination in the coming years as
China
has been saturated, a Japanese business leader said, according
to Antara.
Hirota
Nakanishi, Japanese chief delegate to the
ASEAN-Japan
Center,
said in
Semarang,
Central Java,
on Wednesday that flows of Japanese investment to
China
will be reduced in favor of ASEAN.
He said
Japan
will soon invest in various sectors in
Indonesia
and other ASEAN countries, with investment in
Indonesia
to concentrate on the manufacturing, automotive, furniture and
mining sectors and agribusiness, he said at a meeting with
Central Java Governor Mardiyanto.
Double Railway Project Planned
The
government hopes to start the construction of a double railway
track between Cikarang in
West Java
and Manggarai in
Jakarta
in 2006, Antara reported.
The 35 km
track will be built with a loan fund of 41 billion yen from the
Japan Bank for International Cooperation (JBIC).
Final land
clearance will take place next year`before construction starts
in 2006 to be completed in 2009, a spokesman for the
Communications Ministry said Tuesday (30/11/04).
The
government will provide Rp281 billion ($31.2 million) for land
clearance as the JBIC loan will be used only for the
construction of railway, railway stations, flyovers and
electricity installations.
Boost for Manufacturing
The
government is to encourage development of manufacturing industry
to stimulate growth equal to pre-crisis rates, National
Development Planning Minister Sri Mulyani Indrawati said
Wednesday (1/12/04),
Antara reported.
She said the
sector had created significant employment during the period when
it was growing at 10-11%, she told a working meeting with the
House of Representatives' commission on finance and national
development planning.
"Since the
crisis, the manufacturing industry has been growing at only 5% a
year. The decline in this sector was marked by capital outflow
and industry relocations," she added.
"We have set
the target for the growth of the manufacturing industry but it
will need private investment as well as public support. Our
growth target in this sector is 8%," she said.
Sri Mulyani
said the government would also increase investment growth from
17.2% in 2004 to its pre-crisis level of 24.4%.
In
agriculture, she said, growth was now 2.9%, below its optimum
level. This was caused by problems including urbanization and
inadequate irrigation systems, among others.
"The
government will make various efforts to enable agriculture to
reach a growth rate of 3.3% in the next few years," she said.
Growth in the
manufacturing and agricultural sectors was expected to encourage
the country's economic growth to reach 6.6% in the next five
years.
Imports of Shrimp Banned
The Maritime
and Fisheries Ministry banned imports of shrimp starting
Thursday (2/12/04)
from six countries accused by the
United States
of dumping, Antara reported. The six countries are
Thailand,
China,
India,
Vietnam,
Brazil
and
Ecuador.
The
United States
has accused
Indonesia
of importing shrimp from
China
and
Thailand
to be re-exported, and threatened to impose the anti-dumping
duty on shrimp from the country as a result.
PRIVATE
SECTOR
S&P Raises Indosat, Telkomsel Ratings
Standard &
Poor's raised its long-term local currency rating on PT
Indonesian Satellite Corp. (Indosat) on Wednesday to 'BB' from
'B+'. The outlook is stable.
At the same
time, Standard & Poor's affirmed its long-term foreign currency
rating on the company at 'B+'. The outlook on the foreign
currency rating is positive.
"The upgrade
in the local currency rating on Indosat reflects the company's
improving financial profile, as well as the better economic
environment in
Indonesia,"
said S&P’s credit analyst Yasmin Wirjawan.
The ratings
reflect Indosat's position as one of the leading telecom
operators in
Indonesia
and its moderate leverage, robust domestic wireless growth
prospects, and a degree of insulation from sovereign debt risks.
The agency
said these strengths are offset by growing competition in the
wireless and international markets, and the risk of further
rupiah depreciation.
S&P also
raised its long-term local currency rating on PT Telekomunikasi
Selular (Telkomsel) to 'BB' from 'B+'. The outlook is stable.
Standard &
Poor's also affirmed its long-term foreign currency rating on
the company at 'B+'. The outlook is positive.
A statement
said the upgrade recognized the company's improving financial
profile, as well as the improved economic environment in
Indonesia.
Cement Sales Up 8.3%
Cement sales
including exports are predicted to reach 35 million tons this
year, an increase of 8.3% from last year, Antara reported.
Agung Wiharo,
president of state-owned PT Semen Gresik, said sales in November
and December are expected to decline because of the long
holidays.
In the first
10 months of this year sales on the domestic market reached
25.25 million tons or an increase of 8.6% from the same period
last year. Exports totaled 6.46 million tons or an increase of
3.5% from the same period last year.
SOEs
Indonesian Aircraft Maker Delivers CN-235 to
Pakistan
Air Force
Indonesia's
state aircraft manufacturer PT Dirgantara Indonesia (PTDI)
delivered a CN-235 aircraft to the Pakistan Air Force (PAF).
The 40-seater airplane is the third of four airplanes ordered by
the PAF, PTDI president Edwin Sudarmo said after delivering the
airplane to the PAF in a ceremony here on
Friday, Dec.
3 2004
as reported by Antara.
Also present at the function were PAF technical representative,
Sajid Mehmood, and Pakistani Ambassador to Indonesia Sayed
Mustafa Anwar Husain.
Under the US$54 million contract signed in 2004, the company
delivered the first of the four airplanes to PAF in February
this year and the second last September.
"Three of the four airplanes will be used to carry troops and
the other will be used as a presidential or a VVIP airplane," he
said.
Tanker Order for PT PAL
State-owned
shipbuilder PT PAL has won an order from an Italian firm for a
chemical tanker, Antara reported. No details of the size of the
vessel were released.
A director of
PT PAL, Adwin H Suryohadiprojo, said the company had also signed
contracts with
Italy's
Cube SpA Lines for the supply of a 18,500 DWT Dry Cargo Vessel,
with
Turkey's
Geden Lines for the supply of 50,000 DWT Double Skin Bulk
Carrier (DSBC) and with
Germany
for the supply of a 50,000 DWT tanker.
PT PAL
Indonesia
recently delivered a 45,000 DWT Double Skin Bulk Carrier (DSBC)
to PT Meranti Maritime Ltd, a joint venture company owned by PT
Bahana Wahana Sejati
Indonesia
and Fairmont Shipping Ltd,
Hong Kong.
BANKS
Bank Niaga Stake Sold
The
government raised $65 million Tuesday (30/11/04)
from the sale of a 16% stake in Bank Niaga, the country's
seventh largest lender, sources familiar with the transaction
said, Dow Jones Newswires reported.
The sale is
the latest effort by the government to raise funds to help
finance the state budget, and follows the government sale of a
10% stake in PT Bank Danamon
Indonesia
for $188 million earlier in November.
The Niaga
stake was sold to domestic and institutional investors at a
price of Rp460 a share, equivalent to 1.5 times book value as of
end-June 2004, and the same price at which the shares closed
Monday.
The block of
shares was 15 times subscribed at the Rp460 price level, which
was priced cheaper than its local counterparts, the source said.
Other Indonesian banks are roughly trading around two times
their book value currently. The Bank Danamon stake sale was
priced about 2.1 times its book value.
The sale
underscores growing investor optimism toward
Indonesia
following the recent presidential elections in September, Dow
Jones said.
The
government will own about 5% in Niaga after the deal. It also
plans to sell its minority ownership in PT Bank Central Asia, PT
Bank Internasional
Indonesia
and PT Bank Permata later this year.
OCBC to Raise NISP Stake
Oversea-Chinese Banking Corp.,
Singapore's
third largest bank, said Thursday (2/12/04)
it has entered into a conditional sale and purchase agreement to
buy an additional 28.5% stake in
Indonesia's
PT Bank NISP, raising its stake to 51%, Dow Jones Newswires
reported.
OCBC also
said it will make a tender offer for the remaining shares in
Bank NISP it doesn't own, in accordance with Indonesian law.
"Assuming
relevant approvals for the proposed investment are obtained,
OCBC Bank expects the tender offer for Bank NISP to be launched
and completed within three to six months from the date of this
announcement," the Singapore bank said.
OCBC said it
will buy the additional Bank NISP shares from several existing
shareholders, including members of the Surjaudaja family, the
previous controlling shareholder.
OCBC
spokesman Koh Ching Ching said a price for the shares hasn't
been fixed, but the amount will be 2.5 times the net tangible
asset of Bank NISP.
In April,
OCBC bought an initial 28.5% stake in Bank NISP for around S$119
million - or around 2.5 times the audited NTA as of
December 31,
2003.
"With
majority control of Bank NISP, OCBC Bank will be well positioned
to achieve its objective of having a significant presence in
Indonesia,
the bank's third major market," OCBC said in a statement.
The Singapore
bank added it plans to keep Bank NISP as a separately managed
entity and to retain the Indonesian bank's name and management.
Bank NISP is
Indonesia's
12th largest bank with total assets of Rp16.6 trillion as of
September 30,
2004.
It has a distribution network of more than 150 branches and
offices and more than 7,000 shared automated teller machines
across the country.
INVESTMENT
Proton Assembly to Start
PT Proton
Tracoma Motors, a Malaysian joint venture between Proton
Holdings Bhd. and Tracoma Holdings Bhd., will start assembling
Proton cars in
Indonesia
from February, the Edge Financial Daily
said.
Proton will
start trial production of its Wira and Gen.2 cars at the
Indonesian plant, the paper quoted Tracoma managing director
Mohamed Shah Abu Bakar as saying. Tracoma, another Malaysian
firm, makes auto parts.
The
Indonesian plant will initially assemble 8,000 cars a year from
knocked-down parts made by Proton in
Malaysia,
the paper said. The plant has a maximum capacity of 50,000 cars
a year.
"For the
first six months, we will focus on assembling the Wira models
for the Indonesian market. We expect (the commencement of the
operations) to be on schedule as we have been working very hard
for the past three months to prepare the factory," Mohamed Shah
said.
China
Automotive Move
Indonesian
firm PT Amazon is negotiating with the Chang'an Automobile
Group, a mini-car maker in southwest
China's
Chongqing
Municipality,
on the import of completely knocked-down vehicles or technology
from the Chinese group, Xinhua news agency reported.
The two sides
recently reached agreement on the purchase of 5,000 sets of
mini-car knock-downs.
Amazon has
just undertaken an inspection of Chang'an Auto, and is hoping to
secure long-term cooperation in complete vehicle manufacturing
and technology imports. Amazon currently has engine, die and
assembly factories.
OIL & GAS
Govt. Posits $35 Oil Price
The
government is likely to set an average oil price of $35 in its
budget for 2005, a move that would dramatically boost
expenditure on fuel subsidies at their present level.
Minister of
Energy and Mineral Resources Purnomo Yusgiantoro told members of
the House of Representatives Thursday (2/12/04)
the figure better reflected the movement of global oil prices,
The Jakarta Post reported.
The
government uses the estimate to set the budget for the fuel
subsidy each year. The current budget estimates for 2005 put the
average price of oil at $24.
"The revision
would, of course, increase the fuel subsidy, should we intend to
maintain the existing policy. That's why we're here, to discuss
options to gradually lift subsidies on fuel," Purnomo said.
Based on the
new price, fuel subsidies would reach Rp53.4 trillion, compared
with the initial estimate of Rp19 trillion, he said.
"We want to
air alternative schemes with legislators so that we can reduce
this subsidy and cause as little impact as possible," Purnomo
said.
On Tuesday,
Vice President Jusuf Kalla said a reduction in the subsidy would
result in a hike of up to 40% in domestic fuel prices.
Government officials say they expect a cut in subsidies early
next year, but Parliament has said it would be better to wait
until at least April.
The fuel
subsidy for this year is estimated to reach Rp59.2 trillion on
the back of record high global oil prices, against an initial
projection of Rp14.5 trillion.
Purnomo said
one option was to lift subsidies on industrial diesel oil,
premium gasoline and bunker oil but retain them on kerosene and
automotive diesel oil, which would result in a subsidy reduction
of up to Rp25 trillion.
Chief
Economics Minister Aburizal Bakrie said the government will
raise the prices of oil fuels to coincide with rice grand
harvest between March and May when farm incomes will be more
resilient to price rises.
Bank
Indonesia
said the government should carefully consider the timing of its
plan to raise domestic fuel prices next year, so as to keep its
effect on the country's inflation rate within manageable limits.
"I agree with
recent suggestions that the hike be done during harvest time,"
deputy governor Hartadi Sarwono said on Friday.
"The
government should also properly channel fuel subsidy funds it
will save from the hike for health, educational, and
infrastructure development purposes," he added.
BP Asked to Boost Tangguh Plans
The
government has asked British energy giant BP Plc to increase
investment in the Tangguh liquefied natural gas (LNG) project in
Papua to build another production unit, Antara reported.
BP originally
planned to build only two production units to meet supply under
contracts already signed with Chinese and American buyers,
Energy and Mineral Resources Minister Purnomo Yusgiantoro said.
Purnomo said
the government has asked BP to build more production units at
Tanggul LNG project to meet growing demand for LNG
He said the
LNG market is expanding.
Chile
is the latest country to express interest in importing LNG from
Indonesia.
Purnomo added
Monday (29/11/04)
that BP is negotiating to extend contracts for natural gas
blocks that will supply Tangguh LNG plants, Reuters reported.
Purnomo said
the Indonesian side was seeking better terms for an extension.
"BP wants the contracts extended because their gas block
contracts will expire before their LNG contracts to supply
buyers finish. The government and BP is still negotiating the
conditions," he said.
The planned
LNG plants at Tangguh will get natural gas feedstock from the
Wiriagar, Muturi and Berau blocks, which together have combined
reserves of 14.4 trillion cubic feet (tcf).
An official
at the Mines and Energy Ministry said the contract for Wiriagar
would expire in 2023, Muturi in 2022 and Berau in 2017.
E. Timor May Go to UN
The
East Timor
government says it may take its dispute over maritime boundaries
with
Australia
that is blocking a major oil and gas deal to the United Nations.
Australia,
in response, says such a move would be unwise, the Associated
Press reported.
Negotiations
between
Canberra
and Dili on sharing some $30 billion in royalties and drawing a
maritime boundary broke down in October.
East Timorese
Foreign Minister Jose Ramos Horta said unless Prime Minister
John Howard intervened in the talks, his country would request
that the UN General Assembly ask the International Court of
Justice to provide an opinion on where the boundary should be
drawn.
Foreign
Minister Alexander Downer said Wednesday (1/12/04)
East
Timor
was free to go to the United Nations. "Can they do it? Of course
they can," Downer told reporters. "Would it be wise for them to
do it? Well, that's a judgment they'll have to make themselves."
Horta accused
Australia
of blackmailing his impoverished country by making a final offer
of $3 billion compensation over 30 years for
East Timor
agreeing to the boundary that
Australia
wanted.
Australia
had previously offered $4.3 billion compensation, he said.
Downer said
Horta's figures were incorrect but declined to make public
Australia's
version of the negotiations.
Australia
has in any case withdrawn from the International Court of
Justice's jurisdiction so that a ruling would not be binding.
Australia
argues the boundary should lie close to the East Timorese coast
off
Australia's
large underwater continental shelf.
Pertamina in Islamic Deal
State oil
company Pertamina signed a deal Monday (29/11/04) that bankers
said was the country's first global Islamic finance facility,
the Financial Times reported.
Indonesia,
home to the world's biggest Muslim population, is often
mentioned as a major potential growth market for Islamic banks
and the Pertamina deal is seen as the precursor of more finance
deals, including a sovereign bond issue.
Brokered by
the local unit of HSBC Amanah, HSBC's Islamic banking
subsidiary, the state oil company is expected to secure up to
$250m in Islamic trade financing to fund the purchase of crude
oil from the
Middle East.
The facility
involves large Islamic financing institutions such as the Kuwait
Finance House, Dubai Islamic Bank, and
Egypt's
Faisal Islamic Bank, which have never done substantial business
with Indonesian companies, according to bankers.
The deal is
seen as a vote of confidence in
Indonesia
by Middle Eastern investors, many of which have been looking for
places other than the
United States
to invest their funds because of
Washington's
deteriorating image in the Islamic world.
MINING
Ban on Silver Exports Scrapped
A ban on the
export of silver designed to encourage the local jewelry
industry is to be lifted, only six months after it was imposed,
Antara reported.
Yuwellis
Yunis, a senior official of the Ministry of Trade, said the
ministry has agreed to revoke its previous decision because
producers had complained that demand in the local market was
inadequate to absorb production.
Earlier, the
Ministry of Energy and Mineral resource asked the Trade Ministry
to review the ban, saying it would cause potential losses to
producers.
In 2003, the
country exported 215.53 tons of its production of 285.2 tons of
silver with sales in the domestic market totaling only 30.3
tons.
Bukit Asam Plans Rail Line
State-owned
coal mining firm PT Tambang Batubara Bukit Asam plans a major
investment next year to improve rail transport facilities for
its coal products, The Jakarta Post reported.
President
Ismet Harmaini said the company, along with power firm PT
Indonesia Power and state railway firm PT KAI, had planned to
invest some Rp1.8 trillion ($200 million) to enhance railway
facilities in South Sumatra and Lampung.
Ismet said
improvement in the railway would help PTBA expand its production
output and prevent disturbance in distribution chains due to the
poor condition of the railway system and associated facilities.
"Transporting
coal by train has always constituted an obstacle for the company
in increasing production and meeting market demand," Ismet told
a hearing of Commission IX for energy and mining on Monday (29/11/04).
The
investment will cover costs for constructing new railway lines,
replacing and repairing old railway lines, and providing new
locomotives and coaches.
Jakarta,
9 December
2004
source :
Dept.of Foreign Affairs,Jakarta