THE COORDINATING MINISTRY FOR ECONOMIC AFFAIRS

REPUBLIC OF INDONESIA

Main Building, Ministry of Finance, Jl. Lapangan Banteng Timur No.2-4 Jakarta Pusat

Tel: (021) 380-8384    Fax: (021) 344-0394    Website: http://www.ekon.go.id

Trade and Investment News, 6 November 2006

 Highlights

 Politics

Regions

• Praise for Malacca Strait piracy crackdown

• Aceh polls likely to be peaceful: EU observer

Economy

• Government sees successful outcome to infrastructure conference

• Inflation drops to 6.29%

Business briefs,  Macro economy

• Bank Indonesia sees growth at up to 5.6%

Investment

• Indonesia is off US IPR Priority Watch List

• Investors reassured on corruption crackdown

• Texas Pacific Group sees ‘growing interest’ in Indonesia

• Keen interest in water projects

• Subway deal with Japan to be signed soon: Minister

State concerns

• China tops import list

•  Indonesia is off US IPR Priority Watch List

S O E s

• Govt. to look at dividend policy

• Danareksa to partly finance new cement plant

• Pension fund PT Taspen looks to double share investments

Private sector

•  Indofood reports net profit leap

• Cellular operator Excelcomindo posts 57% net profit boost

Banks

• Bank NISP net profit up 105%

• Bank Mandiri posts 16%-18% growth next year

Power

• Nuclear power plant to start construction by 2010: Minister

• Deal signed on 1,200-MW plant in South Sumatra

Oil & gas

• Government looks at options for Natuna block

• Pertamina to seek $500 million in offshore loans

Mining

• PT Inco nearly doubles net profit

 Oil & gas

POLITICS 

Highlights

 REGIONS

 Haze Fades, New Measures Planned

Fires had largely died out in Sumatra, as Indonesia announced plans to stop a repeat of the fires in coming years.

 "We are planning an increase of spending to tackle haze, stressing on the preventive side," Deputy Environment Minister Masnellyarti Hilman told Agence Frace-Presse.

 Hilman said representatives from Brunei, Indonesia, Malaysia, Singapore and Thailand met in Jakarta on Thursday (2/11/06) to "review the action plan and evaluate the regional action plan".

"Indonesia proposed a list of activities to prevent forest fires, to be carried out by related ministries, for haze prevention -- this amounts to $60 million per year for the next three years," another official from the ministry said.

Two Russian fire-fighting planes rented for six weeks were reported to be on their way to Kalimantan, where fires are still persisting in areas with underlying peat deposits, after helping douse fires in Sumatra.

 Piracy Falls, Praise for Patrols

The Strait of Malacca saw a decline in pirate attacks for the year through to the end of the third quarter.

 Incidents of piracy and armed robbery in Indonesian waters dropped to 40 in the first nine months of the year from 61 in the same period last year, according to the International Maritime Bureau (IMB).

 Chittagong in Bangladesh saw the greatest jump in piracy in the region, with 33 cases in the nine months, The Shipping Times reported.

 IMB director Captain P. Mukundan credited “those law enforcement agencies responding to incidents in high risk areas” for the lower figures from the Malacca Strait. 

 The IMB report also noted that the Malacca Strait has been dropped from Lloyd's of London's list of dangerous waterways.

 No Sign of New Virus Strain: Official

No sign of a new ‘Fujian-like’ strain of the H5N1 avian flu virus has been identified in Indonesia, the official in charge of the national bird flu program, Bayu Krisnamurti, told Dow Jones Newswires.

 The new variant was first detected late last month by scientists, who had said it appeared to have spread as far as Thailand and that it had already infected humans.  

Krisnamurti said research on bird flu in Indonesia is so far yet to detect the existence of the Fujian strain, Agence France-Presse reported. 

 "All over Indonesia, for the last three years, we've studied the DNA and strains of the virus," he said.

According to local research, "the virus is in the original forms in which it was first detected in Indonesia," he said.

 The discovery of the new H5N1 strain, made by researchers at the University of Hong Kong, was reported in the Proceedings of the National Academy of Sciences on Tuesday (31/10/06).

 Aceh: Hopes for Peaceful Polls

European Union poll monitors started work in Aceh ahead of regional elections scheduled for December 11, and the team leader, Glyn Ford, said he expected the polls to be peaceful.

 "I think that it's the people of Aceh that makes me feel optimistic," the team's head, Glyn Ford, told a press briefing on Friday (3/11/06).

 "It seems there is goodwill on both sides (government and the former separatists) in Aceh that exists."

 The Indonesian government and Free Aceh Movement (GAM) signed a peace pact in August last year, ending 30 years of conflict that claimed some 15,000 lives, mostly civilian

 Ford said his job would include convincing losers that they had lost. Eighty EU observers will eventually be deployed in the province, supported by local observers and volunteers, who will bring the total number up to 300.

 ECONOMY

 Infrastructure Conference ‘Positive’

The three-day infrastructure conference received a ‘positive response’ from international investors, Coordinating Minister for Economic Affairs Boediono said Thursday (2/11/06), the second day of the conference.

 Government officials said interest was strong and that while far less projects were offered than at the first conference early last year, they were far better prepared.

 "With this conference we regain the momentum to boost the development of our infrastructure.  We now see that we're on the right track toward reaching our goal," Boediono was quoted as saying by The Jakarta Post. 

"We haven't yet reached any deals with foreign investors.  But we've seen very strong interest from them during this conference.  I'm optimistic that we'll win their commitments to develop the projects we're offering," he said, adding that he believes this year's meeting would prove to be more productive than the previous one.

 The event drew about 1,200 executives of mostly foreign companies.

 The strongest interest was in water projects, Public Works Minister Joko Kirmanto said. Three private firms had expressed a keen interest in investing in three water supply projects worth Rp1 trillion ($109 million) that were tabled by the government.

 "Many investors are interested in our water projects.  At least three of them have directly approached me today and stated their intention of tendering for piped-water projects," he said Thursday.

 Kirmanto said the three companies were Tyco Water of the US, Ami Water from Singapore and a local firm from East Kalimantan.

 Separately, daily Koran Tempo quoted Transportation Minister Hatta Radjasa as saying that the governments of Indonesia and Japan will sign an agreement on the construction of a Jakarta subway line by the end of this month.

 Finance ministers of both countries will sign the agreement on the $800 million project, which is expected to get under way by the end of 2008, he said.

 Radjasa said it had been agreed that 30% of the project's components will be from Japan, 30% from Indonesia and 40% will be opened for tender.

 In the power sector, state electricity firm PT PLN signed a preliminary deal with US energy firm AES Corp, Japanese trading firm Sojitz, and local firm PT Triaryani to build a $1.5 billion 1,200-MW coal-fired power plant in South Sumatra, Mines and Energy Minister Purnomo Yusgiantoro said Wednesday.

 On the macroeconomic front, inflation figures for October dropped to a year-on-year figure of 6.29%, sharply down from September’s 14.55%.

 Government spokespersons said growth for this year would come in at around 5.6%. Bank Indonesia (BI) Deputy Governor Hartadi Sarwono noted, however, that economic recovery "appears to be gaining momentum" on the back of rising consumption and exports in the third quarter.

 In the real sector, PT Telkom overshot analysts’ predictions, reporting an 82% rise in net profit for the third quarter, largely on improved receipts from its cellular unit, PT Telkomsel. PT Indofood Sukses Makmur turned in a net profit figure 10 times larger than the same period last year, when the company was saddled with one-off costs.

 Sales were up around 25% at leading retailer PT Matahari Putra Prima to Rp5.6 trillion, Bakrie & Brothers nearly doubled its revenue figure, but leading car distributor PT Astra International saw revenue fall by a third, although company spokespersons said automotive and motorcycle sales had begun to pick up.

 Indicators:

Source: Central Agency of Statistics

 BUSINESS BRIEFS

MACRO ECONOMY

 BI to Maintain ‘Gradual’ Benchmark Cuts

Indonesia's economy is on track to expand to 5.6% this year, Bank Indonesia (BI) Deputy Governor Hartadi Sarwono said Thursday (2/11/06).

 That growth will be built on likely growth in gross domestic product (GDP) of about 5.4% in the third quarter of 2006, he was quoted as saying by Dow Jones Newswires.

 Sarwono's full-year GDP growth projection is below an official government forecast of 5.8% for this year, compared with the 5.6% expansion last year.

 He indicated that ongoing monetary policy loosening will continue.  "The central bank's intention is basically to maintain a gradual pace of interest rate reduction, providing inflationary pressure continues to ease," he said, without providing specific projections. Inflation in Indonesia "remains subdued," he said.

 Indonesia's on-year inflation fell to 6.29% in October from 14.55% in September on the back of a high base effect created by the government's move to effectively more-than-double fuel prices in October 2005. Inflation was up 0.86% on month, higher than September's 0.38% gain.  October's core inflation, which excludes prices controlled by the government, was 6.86%, down from 9.13% in September.

 Coordinating Minister for the Economy Boediono said inflation data indicate the economy has stabilized and that inflation will continue falling to the "regional norm" of about 3% to 4% in the next few years.

 The benchmark BI rate, currently at 10.75%, will likely fall to 9%-9.5% by the end of 2006 in tandem with a decline in on-year inflation to 7%-8% in the same period, BI Deputy Governor Aslim Tadjuddin said last month.

 BI’s Board of Governors will decide on possible adjustments to the benchmark rate at a regular monthly meeting on Tuesday (7/11/06). 

 Sarwono projected that Indonesia's foreign exchange reserves would hit $47 billion by the end of 2007, equivalent to "5.4 months of foreign debt repayments".

 Reserves were $42.36 billion at the end of September, according to the most recent official data.

 Meanwhile, other official data issued Wednesday (1/11/06) by the Central Bureau of Statistics indicated a trade surplus narrowed slightly to $3.12 billion in September from $3.27 billion in August.

 That decline hinged on an increase in oil product imports to supply demand during the Ramadhan holiday period, analysts said.  The value of imported petroleum products in September rose 10.9% on-month to $1.22 billion in September from $1.1 billion in August due to heightened consumer demand during the holiday, which ended on October 23.

 A decline in the average Indonesian crude oil price to $62.49 per barrel in September from $72.82/bbl a month earlier also weighed on Indonesia's September export performance, data from the bureau showed.

 Total exports declined 1.2% in September from a month earlier to $8.78 billion.  The value of exports of petroleum products dropped to $204.2 million in September from $279.2 million in August, and natural gas exports fell to $771.9 million from $908.1 million in the same period.

 The total trade surplus for the January-September period was up 48% to $27.84 billion from $18.84 billion a year earlier.

 The government's challenge is to ensure that easing inflation doesn't turn into deflation "like in Japan", Boediono said.  "To prevent that, the government will keep the macroeconomy stabilized according to commodity supply and demand," he said.

 INVESTMENT

 Indonesia is off US IPR Priority Watch List

The Office of the United States Trade Representative (USTR) announced today (Monday, 6 November 2006) its decision to improve Indonesia’s standing on the Special 301 Watch List after completion of an “Out-of-Cycle” review (OCR).  This review examined in detail the adequacy and effectiveness of intellectual property rights (IPR) protection in Indonesia, stated in the USTR release. 

“We are encouraged by the steps that Indonesia has taken to improve enforcement of intellectual property rights,” said U.S. Trade Representative Susan C. Schwab.  “The United States urges Indonesia to build upon the foundation it has laid to make further progress on the protection of IPR, in order to achieve its objective of attracting high-quality foreign investment and providing more jobs and economic growth opportunities.”

In its release, USTR stated that Indonesia bolstered implementation of its regulations designed to stop illegal production of pirated optical discs such as CDs and DVDs by controlling the licensing of factories and conducting raids against pirate optical disc production facilities.  Indonesia’s authorities also conducted numerous raids on retail outlets selling pirated goods.  During this period, the Indonesian Government activated its minister-level National Intellectual Property Task Force and its working groups to coordinate IPR enforcement strategy among agencies as well as to conduct public awareness campaigns. Indonesia also passed a new Customs Law that clarifies the authority for Customs officers to seize goods that infringe on IPR.

 Indonesia Trade Minister Mari Pangestu welcomes the development since it is in line with the Government’s priority in improving IPR protection in the country. “We hope it would also provide conducive environment to sectors and industries which rely on IPR protection, as well as improving investment climate in general,” as she was quoted from her ministry’s release.

Investors Reassured on Corruption, Red Tape

Indonesia sought to reassure investors attending a key infrastructure summit that the government is fighting hard to end corruption and slash red tape in the country.

 Hundreds of foreign and domestic investors attended the event at which 111 projects worth $19.1 billion were offered in an urgent bid to rejuvenate the nation's crumbling infrastructure.

 Vice President Jusuf Kalla said regular media reports of arrests of corrupt officials were evidence that the government is serious about tackling entrenched graft, Agence France-Presse reported on Thursday (2/11/06).

 Kalla told delegates that efforts to improve the huge bureaucracy's efficiency were also forging ahead.  “I know that the bureaucracy is slowly moving.  That's why we have many reforms of the law to make the bureaucracy work well," he said.  "We will deliver confidence to anybody who will be starting business in Indonesia."

 State Minister for State Enterprises Sugiharto said the president had sent a clear message that all state officials must improve their work ethic or face dismissal.

 "In the coming three years, for those bureaucrats who cannot follow the patterns handed down by the president to the ministers and first echelon officials, we are going to carry out leadership reforms at the lower levels," he told a press conference.

 He cited two recent presidential instructions aimed at trimming down red tape on electricity projects as an example.  Under these regulations, Sugiharto said, the process of starting project tenders to signing a deal which used to take more than 800 days to complete has been reduced to 12 months.  "No slippage can be tolerated, otherwise we will be experiencing power shortages in 2009," the minister said.

 On Wednesday (1/11/06), President Susilo Bambang Yudhoyono also moved to assure investors that Jakarta could provide a stable environment for their funds.  He said the nation needs some $22 billion per year to devote to infrastructure over the next few years.

 Dimitri Pantazaras, a participant from a Bahrain-based private equity fund investor, said while there were limited projects ready to go, “I'm sure the government is committed to making these reforms happen," he said.

 Coordinating Minister for Economic Affairs Boediono said Thursday that Indonesia had received a positive response from foreign investors on developing infrastructure projects.

 "With this summit we regain the momentum to boost the development of our infrastructure.  We now see that we're on the right track toward reaching our goal," Boediono was quoted as saying by The Jakarta Post on the second day of the three-day conference.  The event drew about 1,200 businessmen, mostly representing foreign companies.

 "We haven't yet reached any deals with foreign investors.  But we've seen very strong interest from them during this summit.  I'm optimistic that we'll win their commitments to develop the projects we're offering," he said, adding that he believes this year's meeting would prove to be more productive than the previous one.

 This year, the government is highlighting 10 so-called "model projects" valued at $4.4 billion.  A further 101 projects valued at approximately $14.7 billion are on offer.

 The 10 model projects and the 101 potential projects include toll roads, drinking water, electricity, gas, transportation, and telecommunications infrastructure.

 Boediono said the government is also designing regulations to keep land acquisition problems from hampering highway projects in the future.

 The administration has established a revolving fund to be used to acquire land for infrastructure projects.  Later, investors concerned will repay the government for the land.

 US Firm Sets Sights on Purchases in RI

US-based private equity company Texas Pacific Group (TPG) said Thursday (2/11/06) it had set up a local subsidiary, Northstar Equity Partners, as a reflection of its growing interest in investing in Indonesia.

TPG is the world's second biggest buyout firm and is reported to have about $45 billion in assets at its disposal.  It has acquired stakes in several major international corporations, such as Baxter International Inc and Burger King.

TPG chairman David Bonderman met with President Susilo Bambang Yudhoyono at the latter's office on Thursday (2/11/06).

"Indonesia's economy is growing, a resource-based economy, so we feel now is the right time to start investing," Bonderman was quoted as saying by The Jakarta Post.

Northstar Equity Partners managing director Patrick Wallujo said Northstar had start-up capital of $100 million, although he said this figure could grow depending on the value of prospective investments.

"We are looking at the infrastructure sector as well as natural resources, such as bio-fuel energy and plantations," he said.

Firms Eye Water Supply Projects

Three private firms have expressed a keen interest in investing in three water supply projects worth Rp1 trillion ($109 million) that have been tabled by the government at the Infrastructure Conference and Exhibition 2006.

 "Many investors are interested in our water projects.  At least three of them have directly approached me today and stated their intention of tendering for piped-water projects," Public Works Minister Joko Kirmanto said at the conference on Thursday (2/11/06).

 Kirmanto said the three companies were Tyco Water of the US, Ami Water from Singapore and a local firm from East Kalimantan.

 During the three-day conference, the government offered three water supply projects that will serve as models for private-public partnership projects in the water sector -- the Rp300 billion Bandung water supply scheme, the Rp300 billion Tangerang water supply scheme, both in West Java, and the Rp400 billion Dumai water supply project in Riau.

 Kirmanto said the three companies have already conducted studies at the project locations, which would give them an advantage in submitting unsolicited bids.

 The tenders for the projects and pre-feasibility studies will be conducted in November, prequalification in December and acceptance of the final bids by as early as January 2007.

 The minister further said there would be no restrictions on which parts of the country investors, whether local or foreign, would be allowed to develop projects.

 "Any restrictions will be set by the market itself.  I don't think that many big overseas companies will want to invest in rural areas that can only generate insignificant revenues.  They will aim for the big cities and leave the rest to the local government water utilities," he said.

 Subway Project Deal Soon: Report

The governments of Indonesia and Japan will sign an agreement on the construction of a Jakarta subway line by the end of this month, Koran Tempo reported Wednesday (1/11/06).

The daily quoted Transportation Minister Hatta Radjasa as saying that the finance ministers of both countries will sign the agreement on the $800 million project, which is expected to get under way by the end of 2008.

Earlier this year, the two sides were having difficulty agreeing over local content, as Indonesia wanted more use of local content or domestic products. In the latest negotiations, according to Radjasa, it was agreed that 30% of the project's components will be from Japan, 30% from Indonesia and 40% will be opened for tender.

The 32-km subway will stretch from Kota in West Jakarta to Lebak Bulus in South Jakarta, passing by National Monument (Monas) Park in Central Jakarta.  The Monas-Lebak Bulus line will be the first of two stages of the south-north subway project, while the second line will run from Monas to Kota.  The Lebak Bulus-Monas section is estimated to cost about $767.66 million, while the cost of the second is yet to be calculated.

The subway network is estimated to carry some 322,400 passengers per day in 2009 and 440,700 passengers per day in 2015.

PLUS Buys Stake in Highway Firm

Malaysia's largest highway toll operator, PLUS Expressways, has agreed to acquire a 55% stake in Indonesia's toll road company, PT Lintas Marga Sedaya.

 PLUS said in a statement to Bursa Malaysia on Wednesday (1/11/06) that it has entered into a preliminary agreement with PT Baskhara Utama Sedaya, parent of Lintas, on the planned acquisition, Agence France-Presse reported.

 Lintas has been awarded a 35-year concession to build and operate the 16-km Cikampek-Palimanan highway in Jakarta.

 A purchase price was not disclosed as final terms had yet to be agreed upon, the statement read.

 Russia Eager to Invest in Mining Sector

The Russian government expressed interest in investing in the mining sector, particularly in coal and natural gas, in Maluku in view of the province’s untapped and abundant natural resources.

 "We plan to invest our capital in the mining sector in Maluku, considering that the province is rich in natural resources and the investment will bring about prosperity to the local people," Russian Ambassador to Indonesia Mikhail Bely said on Monday (30/10/06), according to Antara.

 The Russian ambassador said he had received accurate data on one of the potential mining commodities, which has a high price in the world market.

 He said he is waiting for the result of President Susilo Bambang Yudhoyono's visit to Russia for talks on cooperation between the two countries.

 STATE CONCERNS

 China is Largest Import Supplier

China for the first time became the largest supplier of Indonesia's non-oil imports in the first nine months of the year, data released by the Central Bureau of Statistics (BPS) showed on Wednesday (1/11/06).

 Non-oil imports from China were valued at $4.01 billion, surpassing Japan and the US, traditionally Indonesia's largest suppliers.  Japan followed closely at $3.97 billion.  Trailing behind were the US with $3.2 billion and Singapore with $2.7 billion.  "We already expected that China will slowly but surely dominate Indonesia's imports," BPS head, Rusman Heriawan was quoted as saying by Xinhua.

 Indonesia's total imports in the period rose by 4.04% to $45.63 billion -- comprising $31.2 billion worth of non-oil imports and $14.5 billion worth of oil and gas imports -- against $43.86 billion in the corresponding period last year.

 Monthly imports in September barely changed at $5.66 billion against $5.62 billion a month earlier.

 China topped the list of individual non-oil suppliers with $525.5 million dollars in September, followed by Japan with $434.2 million, the US with $358.6 million and Singapore with $347.7 million.

 SOEs

 Govt. May Revise Policy on Dividends

The government will consider determining the amount of dividends state firms must channel to state coffers based on each operation's business plans, State Minister for State Enterprises Sugiharto said.

 "There is no iron rule that state companies must pay dividends of 50% or 45% of their profits to the state," Sugiharto said recently, according to Antara.

 The government may reduce the dividend payout ratio of state-owned enterprises (SOEs) if they can indeed reap more yields by reinvesting their profits as equity.  "We will consider accepting a lower dividend if each rupiah reinvested will generate a higher return.  If not, then part of the SOEs' net profits would be better paid in the form of dividends instead," he said.

Sugiharto's remarks came in response to requests from several state firms that their dividend payout ratios be reduced, or that they be exempted from paying dividends altogether.  Among the state-owned companies that had requested such an exemption were construction firm PT Adhi Karya and worker insurance company PT Jamsostek.

The government is expecting to raise Rp19.2 trillion ($2 billion) from the dividend payments of SOEs to help finance next year's state budget deficit.  The figure, up from the government's initial Rp18.5 trillion proposal, has been approved by the House of Representatives.

 The dividend payment figure is based on the assumption that all of the country's 131 state companies would pay half of their net profits, expected to total about Rp44.5 trillion, as dividends to the state.

SOE Monopolies to be Phased Out

Coordinating Minister for the Economy Boediono said the government plans to phase out state-owned companies' monopolies in managing ports, airports and railways, in a bid to bring in investors and improve efficiency in these sectors.

Boediono said the phase-out plan is contained in new draft laws on ports, airports and railway, which the government hopes the House of Representatives would pass into law early next year.

"One important theme in these laws is the phasing out of the monopoly power of state-owned companies in infrastructure services which we think has so far hindered efficiency and stifled investment in these sectors, " he was quoted as saying by XFN-Asia.  “If the laws are passed, opportunities will open up for private investments in ports, airports and railways."

 Currently, state-owned port company PT Pelindo manages ports management, with railways controlled by PT Kereta Api Indonesia and airports by PT Angkasa Pura.

 Meanwhile, the government hopes to hold a tender for a contract to build the $600 million Lamongan container port in East Java next month, Transportation Minister Hatta Radjasa said, adding that several major investors have expressed interest in the port, among them Dubai Port and major port operator from the Philippines, International Container Terminal Services Inc.

 Rajasa said the Lamongan container port will become an alternative facility in East Java, since Tanjung Perak, is already "too congested".

 Telkom’s Q3 Net Profit Jumps

PT Telkom posted a better-than-expected 82% rise in quarterly net profit on Tuesday (31/10/06) on strong performance by its mobile unit, which is seen driving growth for the rest of the year, Reuters reported.

 Telkom, with a market capitalization of about $18 billion, booked a net profit of Rp3.4 trillion ($373.8 million) for the July to September period, compared to Rp1.87 trillion in the year-earlier period.  The company saw its operating profit soar by nearly 41% from a year ago to Rp6.37 trillion, improving its operating margins to 48.3% from 42% over that period.

 Its revenue climbed by about 23% to Rp13.2 trillion in the third quarter – about 40% of which came from its mobile phone business, PT Telkomsel, which saw its total number of mobile phone subscribers rise 38% to 32.47 million as of September from the year-ago period.

 Tjandra Lienandjaja, a Jakarta-based analyst at BNP Paribas Peregrine, said the mobile phone business and interconnection revenue were the key reasons for the company's performance.  "I expect the company to have good fourth-quarter results due to the festive season, which had increased mobile phone usage," he said. "I think in the fourth quarter they could post around Rp3 trillion in net profit."

 Lienandjaja said the company might be able to beat its full-year net profit forecast of Rp10.3 trillion if it maintains the same performance over the final three months of the year.

 Meanwhile, Telkom president director Arwin Rasyid said on Wednesday (1/11/06) the company had agreed to buy Rp722 billion ($79.27 million) worth of telecommunication equipment from two Chinese firms to increase its capacity.

 Huawei Technologies and ZTE Corp won tenders to boost the firm's fixed-wireless telecommunication network by 9.7 million lines, Rasyid said, adding that the project would be completed by 2010 and would increase its capacity in Jakarta, West Java and Kalimantan.

Jasa Marga May Raise Up to $219m

State-owned toll road operator PT Jasa Marga hopes to sell between 20% and 25% of its shares to the public in an initial public offering next year, raising up to Rp2 trillion ($219 million) in proceeds, a company official said Monday (30/10/06).

 "Hopefully (the IPO) will be in March, and raise between Rp1.5 trillion and Rp2 trillion ($219 million) in proceeds," Jasa Marga's president director Frans Sanito was quoted as saying by Dow Jones Newswires.

 The company will use the funds to finance the development of several toll roads in Java, Sanito added.

PRIVATE SECTOR

 Indofood's 9-Month Net Profit Surges

The world's largest instant noodle maker, PT Indofood Sukses Makmur, said on Monday (30/10/06) its January to September net profit leapt more than 10 times from the year-ago period when it was saddled with one-off payments.

 The company, controlled by Hong Kong's First Pacific Ltd, said in a statement net profit rose to Rp506.1 billion ($55.62 million) from Rp42.2 billion a year ago while sales revenue climbed 18.5% to Rp16 trillion during this period.

 "We believe these positive trends will continue in the fourth quarter of 2006," Anthoni Salim, chief executive officer of Indofood, was quoted as saying by Reuters.

 However, its gross and earnings before interest, tax, depreciation and amortization (EBITDA) margins were lower due to higher raw material and fuel costs, as well as increases in selling and general administrative expenses.

 Indofood's gross margin fell to 23.6% from 24.4% a year ago while the EBITDA margin declined to 9.2% from 9.7% over the period.

Indocement’s 9-Month Net Profit Up 3.6%

The country’s second largest cement maker, PT Indocement Tunggal Prakarsa, reported a 3.6% rise in its nine-month net profit despite higher costs, which pushed its operating profit lower.

 The company's financial statement, seen on its website on Wednesday (1/11/06), showed a net profit of Rp557.84 billion ($61 million) for the January to September period compared to Rp538.27 billion a year ago.  Its sales jumped 15.7% to Rp4.82 trillion and gross profit rose 12.2% to Rp1.75 trillion.

 The company, controlled by Heidelberg Cement, saw its gross margin fall to 36.3% by the end of September from 37.4% a year ago and its operating profit margin fell to 19.9% from 23.8% over the period.

 Indocement's chief financial officer, Christian Kartawijaya, had said the company sold 9.9 million tons of the building material in the January to September period, compared to 9.2 million tons a year before, mostly due to higher exports.

 Domestic cement sales volume from all producers fell 2.1% in the first nine months of the year to 23.6 million tons.  Last year, domestic sales volume expanded 4% to 31.51 million tons but some experts warn of flat or slightly lower volume growth this year.

 Kartawijaya had said he expects volume to grow by 4% to 5% next year although some analysts surveyed by Reuters predicted a growth rate of about 9% in 2007 and expect Indocement to post a net profit of Rp821.84 billion this year and Rp1.11 trillion in 2007.

 Excelcom’s 9-Month Net Profit Up 57%

Indonesia's third largest mobile phone operator, PT Excelcomindo Pratama, reported on Tuesday (31/10/06) a 57% increase in its nine-month net profit, boosted by strong subscriber growth.  Excelcom posted a net profit of Rp712 billion ($78.14 million), compared to Rp453 billion a year ago.

 "The growth was supported by an increase in our subscriber base by 43% to 8.4 million at the end of the third quarter this year," Hasnul Suhaimi, Excelcom's president director said in a statement, according to Reuters.

 The company boosted its capital spending to Rp988 billion over the nine-month period from Rp892 billion to support higher subscriber growth.

BANKS

Bank NISP’s Net Profit Up 105%

Publicly-listed Bank NISP's net profit rose by 105% to Rp171.5 billion ($18.8 million) in the third quarter of the year from Rp83.8 billion in the corresponding period of last year, director Pramukti Surjaudaja said Tuesday (31/10/06).

Surjaudaja attributed the bank's improved performance to the country’s macroeconomic growth and to a 21% increase in net interest income to Rp638.2 billion from Rp528.4 billion as well as to a 29% surge in non-interest earning to Rp132.1 billion, Antara reported.

The rising funding structure, he said, was in line with corporate efforts to increase fee-based income through trade finance and bank assurance.

Bank NISP's net interest income was gained from rising credit expansion by 12% to Rp14.2 trillion last September, compared to Rp12.6 trillion in the corresponding period of last year.  Net interest income would likely reach Rp15 trillion late this year, he said.

The bank's capital adequacy ratio stood at 18.1% by September, much higher than the minimum 8% required by the central bank.  Third-party funds rose 10% to Rp17.3 trillion in September this year, an increase from Rp15.6 trillion in the corresponding period last year.

Bank NISP, which has 231 branch offices and more than 18,000 ATMs across the country, received a Straight Through Processing 2006 award from the Bank of New York for its high accuracy in foreign exchange transfer transactions.

Panin Bank's Operational Profit Rises

Publicly-listed Pan Indonesia (Panin) Bank's operational profit before reserve funds and tax in the third quarter of the year increased by 33% to Rp813 billion ($81.3 million), a bank official said Tuesday (31/10/06).

 The operational profit was earned mainly from a net income of Rp1,071 billion from interest and fee-based income of Rp378 billion, Roosniati Salihin said, according to Antara.

 The value of the bank's credits rose from Rp3.4 trillion to Rp17.4 trillion in nine months, increasing its loan-to-deposit ratio from 55.4% to 77.9%.  Its credits were mostly absorbed by consumers and small and medium enterprises.

 Panin Bank reduced its non-performing loans to 1.8%, while its net interest margin increased to 4.86% from 4.11% in December 2005.  Third-party funds were recorded at Rp22.8 trillion in the third quarter of the year.

 Bank Mandiri Sees Loan Growth

Bank Mandiri said on Monday (30/10/06) it is targeting 16% to 18% lending growth next year, in line with central bank expectations for the sector.

The state bank's president director, Agus Martowardojo, also said he is optimistic the net non-performing loans (NPL) ratio would fall to less than 5% next year, compared to 14.3% at the end of September.

"The loan growth in 2007 was estimated around 16% to 18%.  We have not finalized that, but the number should be around that," Martowardojo was quoted as saying by Reuters.

Bank Mandiri reported on October 19 a 39% drop in its third-quarter net profit to Rp371.6 billion, hit by higher provisioning against bad loans.  Its nine-month net profit stood at Rp1.19 trillion, 3.2% lower than a year ago. 

Growth in Bank Mandiri's outstanding loans as of September slowed to 1.81% year-on-year compared to an expansion of 3.78% in June.  Bank Indonesia (BI) deputy governor, Hartadi Sarwono, forecast the industry's loan growth would be 15% to 16% this year, lower than the previous target of 20%, due to the high interest rate environment.

BNI May Offer More Shares - Minister

State-owned Bank Negara Indonesia (BNI) may offer more shares to the public next year to boost the liquidity of its shares in the stock market, State Minister for State Enterprises Sugiharto said Wednesday (1/11/06).

 "I prefer the public offering mechanism (to other mechanisms)," Sugiharto was quoted as saying by Dow Jones Newswires.  He said the government will study the size of the planned offering carefully.

 The government owns 99.12% of BNI, the nation's third largest bank by assets, leaving a tiny portion in the public's hands.

 Financing by Shariah Banks Up

Financing by shariah banks grew 20.84% in the first nine months of the year to Rp19.66 trillion ($2.18 billion) by the end of September.

 The largest parts of the fund went to the mining and trading sectors, Bank Indonesia (BI) data showed, Antara reported on Wednesday (1/11/06).

 In the nine-month period, funding in the trade sector rose from Rp1.71 trillion by the end of 2005 to Rp2.55 trillion by the end of September, while funding in the mining sector grew from Rp395.04 billion to Rp724.12 billion.

 Financing in the small and medium enterprises sector grew Rp3.55 trillion to Rp13.74 trillion by the end of September while funding in the non-SME sector grew only slightly from Rp5.07 trillion in the nine-month period to Rp 5.92 trillion by the end of September.

 Shariah banks operate on Islamic rule prohibiting interest and financing projects on a profit-sharing basis.

 POWER

Nuke Plant to Start in 2010 - Minister

The government has set 2010 as the start of the construction of the country's first nuclear power plant, Mines and Energy Minister Purnomo Yusgiantoro said Thursday (2/11/06).

 "We have set our roadmap for the power plan and we have the goal to (begin to) construct the plant in 2010 and operate it in 2017," Yusgiantoro was quoted as saying by Dow Jones Newswires during a presentation at the infrastructure investment conference.

 The government hopes that nuclear power will contribute a total of 4,000 megawatts to the national electricity grid by 2025, he said, adding that the government is still "shopping" for potential nuclear technology suppliers for the planned facility.

PLN Signs Deal on Power Plant

State electricity firm, PT PLN signed a preliminary deal with US energy firm AES Corp, Japanese trading firm Sojitz, and local firm PT Triaryani to build a $1.5 billion 1,200-MW coal-fired power plant in South Sumatra, Mines and Energy Minister Purnomo Yusgiantoro said Wednesday (1/11/06).

 "PLN will have further negotiation on the electricity price that will be supplied by those companies," Yusgiantoro was quoted as saying by Reuters after the signing ceremony during the country's second major infrastructure meeting. 

 He did not say when the plant is due to start production.

 OIL AND GAS

 Govt. Mulls Options for Natuna

The government is considering three options for the future of Block D in the Natuna gas field, after terminating the contract of ExxonMobil because of its lack of performance.

 The options are to retender the contract, give the exploration rights to state-owned oil firm PT Pertamina or to renegotiate the deal with ExxonMobil.  "The three options are still available to us now, but we will have to make a decision soon," Mines and Energy Minister Purnomo Yusgiantoro was quoted as saying by The Jakarta Post on Thursday (2/11/06).

 Yusgiantoro said that given that the exploration work would cost billions of dollars, the decision would not be made by his department alone but would have to go to the full cabinet.

 Exxon Mobil spokeswoman Deva Rachman told the Post that "ExxonMobil has agreed to enter mutually beneficial discussions.  We expect that these discussions will take place over the next couple of months," she said.

 Yusgiantoro said the government would never violate the sanctity of contract.  He said ExxonMobil's contract had been automatically terminated as the company failed to follow the required procedures for extending it.

 "If a company wants to extend a contract, it has to present feasibility studies.  You've got to give the government the complete facts, the economic analysis.  You have to tell us your reasons for extending the contract," he said.  "At that time, the company only submitted one letter (requesting an extension) to Rachmat Sudibyo, then head of BP Migas (oil and gas regulatory body). This was not enough."

 Vice President Jusuf Kalla also defended the government's stand on the contract, saying that the government had not broken its agreement with ExxonMobil.  "The fact is that Exxon obtained the contract 20 years ago and the contract was extended twice.  Within that 20-year period, they did almost nothing (to bring the gas field on stream)," Kalla said.

 Separately, Pertamina chief Ari Soemarno said it should be possible to resolve any dispute over the Natuna gas block.  Pertamina has a 24% stake in the block, while ExxonMobil has 76%.

 "I think the contractor and the government can find a solution on Natuna gas, considering the current high oil price development," Soemarno was quoted as saying by Reuters.  "If the government is unhappy with the current gas split, then we can talk about how much the new split is.  However, the contractor must get enough benefit from the operation of Natuna gas."

 Based on the contract, the production split between Exxon and the government is 100% to 0% in favor of ExxonMobil, as compared to 35% to 65% in favor of the government in other gas fields.  The government has argued that given current high oil prices, the production split needs to be changed.

Pertamina Looks to Raise $500m

PT Pertamina is seeking to raise $500 million in loans from the international markets to finance its projects at home next year and will go on a road show to Hong Kong and Singapore this week, said a senior official at the state-owned oil and gas company.

 The funds will be used to develop the Cepu oil field, purchase vessels, build fuel transit terminals in Indonesia, and modify refineries, finance director Ferederick Siahaan said Monday (30/10/06), according to Platts Commodity News.

 Of the total, the company plans to allocate $250 million for the Cepu project development in Java next year, Siahaan said, noting that corporate loans do not require a financial performance audit of the company, like the issuance of bonds.

 Pertamina earlier postponed its plan to issue $500 million worth of bonds from last September to next year, as its financial audit is not yet complete.  Pertamina's bond plans, unveiled by former finance director Alfred Rohimone in January, called for issuing a combination of rupiah and US dollar bonds worth at least $500 million.

SPC Eyes Retail Marketing

The Singapore Petroleum Company (SPC) is looking at retail marketing opportunities in Indonesia, including selling gasoline and diesel, although it has no concrete plans at this time to launch petrol stations in the country, CEO and executive director Koh Ban Heng told The Business Times.

SPC applied for an “oil trading license” earlier this year, he said, after reports on Wednesday (1/11/06) cited an Indonesian Energy Department official as saying that Jakarta should be giving the listed Singapore oil company a license soon.

Reuters quoted Erie Soedarmo, the department's director, as saying, “The government is processing the license for SPC to operate in the downstream business in Indonesia.  I think we will give them a license in not too long a time.”  Commenting on this development, Koh Ban Heng said, “that's good news.”

Indonesia first opened up its domestic oil business, including retail oil sales, to foreign firms in 2004.  It now allows them to directly import oil products for sale to local customers, after revoking state oil firm PT Pertamina's monopoly.

This has allowed companies like Shell and Malaysia's Petronas to open petrol stations around Jakarta to retail high-octane gasoline, while others, like BP, supply oil products to Indonesian companies.

Koh Ban Heng said that SPC had applied for the oil trading license on its own.  Soedarmo told reporters during the country's second major infrastructure meeting in Jakarta that SPC plans to supply oil products to Indonesian firms PT Aneka Kimia Raya and PT Redeco, then sell the products to some industries.  He said SPC might supply about 10,000 tons of oil products a month to Indonesia if it gets a license, but gave no other details.

On potential partners, Koh Ban Heng only said that SPC has been in ongoing business discussions with several Indonesian parties to expand its sales of oil products in the country.

SPC currently gets 2,300 barrels per day (bpd) of oil from Kakap in West Natuna, and expects to start production at the Oyong oil and gas field next year.  SPC has a 40% stake in Oyong, which is slated to produce between 10,000 and 20,000 bpd in the oil phase, followed by a gas phase. 

Under an agreement with PT Indonesia Power, which operates a plant in Grati, East Java, gas sales from Oyong are expected to be between 40 billion and 60 billion British thermal units per day.

Another upcoming oil field prospect is Jeruk, although its partner Santos had recently warned that the reserves there are expected to be lower than the 170 million barrels figure (or 90,000 to 100,000 bpd) which the Australian company earlier cited.

MINING

 Inco’s 3Q Net Profit $124.6m Vs $62.4m

PT International Nickel Indonesia (Inco) said Monday (30/10/06) its net profit nearly doubled to $124.6 million in the third quarter of the year from $62.4 million a year earlier due to higher nickel prices.

 Sales during the July to September period rose to $307.6 million from $219.4 million a year before.  Meanwhile, net profit increased to $247.9 million during the January to September period from $211.1 million a year earlier.  Sales rose to $748.1 million from $653.7 million.

 Its output of nickel in matte fell to 37.8 million pounds in the third quarter from 43.3 million pounds a year earlier due to a fire in one of its furnaces in late May.

 "However, the financial impact of lower production was more than offset by higher prices received for our nickel in matte," president and chief executive officer, Arif Siregar said in a press release, according to Dow Jones Newswires.

 The furnace was back in operation middle of August, thus Inco expects its output to be in the range of 158 million and 159 million pounds for the whole 2006, from a record 168 million pounds in 2005, and slightly below the 2004 output of 159.1 million pounds.

 The company said it is still negotiating an insurance claim for the fire, including about $5 million of claims for physical damages, and a business interruption claim that would result in the recovery of a portion of lost profits, it said.

 Inco Indonesia also said it has decided to delay the completion of a hydroelectric dam to the first quarter of 2010 from the first quarter of 2009 as it is still finalizing amendments to a forestry permit related to the project.

 The delay and higher major commodity prices will likely raise the cost of the project from the previous estimate of between $275 million and $280 million, it said.

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