THE COORDINATING MINISTRY FOR ECONOMIC AFFAIRS REPUBLIC OF INDONESIA

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Trade and Investment News1, 28 April 2008

Highlights

Politics Indonesia calls for action by UN on high food prices The Philippines says Indonesia troops could assist in peacekeeping in MindanaoRegions Security boosted on borders to stop smuggling of rice Economy ArcelorMittal proposes $8 billion package focused on iron ore Business chamber supports fuel price rise Business briefs Macroeconomy Statistics agency says inflation likely steady in AprilInvestment New cellular operator Natrindo plans $1 billion investment this year T.Rad to make radiators in IndonesiaState concerns Agriculture minister rules out rice exports this year Palm oil export tax to be lowered to 15%SOEs Four holding companies to be formed next month, minister says Rajawali Group looks at exit from PT Semen Gresik investmentPrivate sector PT Indofood plans Rp1.5 trillion bond issue Telkomsel subscribers rise by 32% on year in first quarter Banks Kuwait’s International Leasing to buy a bank in Aceh and invest in infrastructure Bank Internasional Indonesia reports a 72% jump in first quarter net profit Power Power utility PLN lets contracts for two power plants PLN signs loan agreements with Bank of ChinaOil & gas Business backs fuel price rise, infrastructure spending 2008 LNG exports likely to rise 6.3%Mining PT Antam and PT Krakatau to build $60 million iron ore processing plant Indian cement producer in talks on PT Berau Coal share

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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POLITICS Call for UN action on high food pricesIndonesia said Wednesday that the UN should adopt measures against rising prices for food commodities to prevent a full-scale crisis worldwide, Deutsche Presse-Agentur reported.

Jakarta's UN Ambassador Marty Natalegawa said there had been piecemeal reaction to world food prices but no concerted short-term and long-term plans to deal with the issue. 

"We need a holistic approach involving the UN, and we as governments have to come up with solutions," Natalegawa said.

He said he has suggested a high-level summit on the food issue to UN Secretary General Ban Ki-moon and received an assurance that the matter will be brought up to UN members.

Natalegawa said there was difficulty in scheduling such a meeting in the already heavy UN General Assembly agenda. He suggested holding a food summit following the scheduled meeting of the 192-nation General Assembly in early September on the Millennium Development Goals, one of which deals with reduction of poverty and hunger.

If a food summit cannot be held at UN headquarters in New York, Jakarta would step in to organize and host an event because of the urgency of the issue, Natalegawa said.

"There is now an excess of attention on the issue, but there should be a clear road map to deal with it," he said.

Foreign Affairs Minister Hasan Wirayuda earlier said Indonesia was ‘likely’ to host a world summit on the issue if the UN took no action.

The foreign minister was in New York for a meeting with the UN Secretary General.

Wirayuda said Indonesia was ready to host such a summit even if it had to be held before September. He said he had discussed with the UN chief a suggestion from President Susilo Bambang Yudhoyono that the world body should hold a summit during the UN General Assembly in September.

"According to President Yudhoyono, it is urgent that the UN overcome the skyrocketing prices of food and energy because they were causing a negative impact on developing countries. As everybody can observe, demonstrations to protest the food and energy crisis are happening in many countries, including in Indonesia," he said.

"The UN chief will discuss the matter with related institutions within the world body and then coordinate with the World Bank," the minister added.

Manila says TNI could help in Mindanao The Philippines has suggested that predominantly Muslim Indonesia would be an ideal replacement for Malaysia to lead international monitoring of the Muslim separatist group, the Moro Islamic Liberation Front.

Manila, through its chief negotiator Rodolfo Garcia on Friday said that Indonesia would be able to find common ground with Mindanao with respect to religion and culture.

"Logically, it helps if the [monitoring team's] head comes from a country that is predominantly Muslim, because they will be able to understand the practice, religion and culture in Mindanao better," he said in a report from The Manila Standard..

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Malaysia has announced that it would begin withdrawing its peacekeepers from Mindanao in the south of the country next month, as prospects for a final peace agreement remain dim.

Britain seeks closer military ties The Indonesian and British militaries will soon formulate an agreement in the framework of a strategic partnership both countries agreed in March 2006, the Indonesian Armed Forces (TNI) commander said Thursday, Antara reported. "We agreed to increase and expand fields of cooperation that have been established between the Indonesian and the British armed forces," TNI commander Gen. Djoko Santoso said at a joint press conference with British Armed Forces Commander Marshal Jock Stirrup after a meeting with Defense Minister Juwono Sudarsono. 

Santoso said that the strategic partnership included maritime defense and security cooperation.

Stirrup said relations between the two countries had been running well and would be further expanded in the future. He said cooperation was important for the two countries to face global security challenges.

He said the Asia Pacific region was a strategic area which played an important role in global security stability.

On weaponry, Stirrup said that he understood Indonesia's military need for sufficient reliable armaments to equip its defense system. "We are happy that we can exchange experience on equipment and armaments such as reconnaissance weapons," he said.

VP says House must accept KPK search The House of Representatives must allow the Corruption Eradication Commission (KPK) to search its premises, Vice President Jusuf Kalla said in Makassar on Friday, overturning objections to a search by House Speaker Agung Laksono and other members, Kompas reported.

“The KPK is an independent institution formed by law. There is nothing in this country that is above the law,” said Kalla, adding that the KPK had already searched the Supreme Court and Bank Indonesia and could search the presidential offices if it wanted to.

The KPK provoked a storm at the House when it tried to search the office of Al Amin Nur Nasution, a United Development Party politician accused of taking a bribe to change the status of forest land on Bintan island.

Laksono initially said the KPK could not search his office, especially since the House was in recess. He questioned the KPK’s search authorization. “The question is, does the KPK have the authority to conduct a search?”

By Friday Laksono had climbed down and merely called on the anti-corruption agency to act in a polite manner.

KPK head Antasari Azhar called for calm, asking the media not to try to start a war between the agency and the House.

New manhunt for terror fugitive Police said Friday that a massive manhunt is underway for terror fugitive Noordin Moh Top following the arrest of an alleged accomplice, Yasir Abdul Bar, in the Central Java town of Purworejo, Xinhua reported.

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"We are currently searching for other suspects but we cannot tell you the names," Central Java police chief FX Sunarno was quoted as saying by the national Antara news agency.

Yasir, 30, is believed to be a close aide of Malaysian-born Top, who is blamed for a series of major bombings in Indonesia.

He was arrested by the elite anti-terror squad on Tuesday without resistance, Sunarno said.

Separately in Jakarta, National Police spokesman Abubakar Nataprawira said Top remained a priority target in the country 's fight against terrorism.

"Hopefully we can capture him alive because that would be useful in helping us uncover other (terror) networks," he said.

Meanwhile the Supreme Court is to decide the execution site for convicted 2002 Bali bombers Iman Samudra, Ali Gufron and Amrozi, a police official said Wednesday.

“We are still waiting for the Supreme Court to deliver the letter naming the execution site,” said Central Java Police chief, Ir. Gen. FX Sunarno, adding that there are two possible locations, Bali or Central Java.

The execution will be performed either under the authority of Central Java or Bali Police, said Sunarno, adding the execution date will also be decided by the Supreme Court.

Diplomatic notes for China, Vietnam and TaiwanThe Foreign Ministry has sent diplomatic notes to China, Vietnam and Taiwan following the arrest of 17 foreign vessels and 151 crew members on April 11 in Natuna waters, an official said on Thursday.

“We are sending the letters to the countries to conduct verification and arrange deportation of the crew members,” said the Consular Affairs Director at the Foreign Ministry, Indra Kesuma Oesman.

Oesman said that the deportation of the detainees will occur within at least two months from now to prevent more problems.

The crew members have been interrogated by the Pontianak Immigration Office, while the ships are still anchored at the Jeruju Port, said Pontianak Naval Base Commander Lt. Col. Taufik Harun.

REGIONSBorders tightened to prevent rice smugglingWith global rice prices at record highs, Indonesia is scaling up border patrols and taking other measures to deter rice smuggling to other countries, Trade Minister Mari Pangestu said in an interview with The Wall Street Journal on Friday.

The trade ministry fears smuggling to beat strict controls on exports and is cooperating with the police and navy to control the Indonesia’s porous borders. “We have to be more vigilant about the possibility of smuggling," Pangestu said.

President Susilo Bambang Yudhoyono said during a visit to Central Kalimantan on Thursday that the government would remain vigilant to stamp out rice smuggling. "Don't let our rice flow to other countries," he urged farmers.

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In the past, Indonesia hasn't needed to regulate exports of rice because the domestic price was higher than global rice prices, due to import tariffs and subsidies for farmers but as global prices have spiked, Indonesia's rice price has fallen below the global average.

To reduce incentives to smuggle rice, the government is also trying to close the price gap. Earlier last week, Indonesia raised the price it pays farmers for unhusked rice by 10% and for finished rice by 7.5%.

The state food agency, which buys about 10% of the annual harvest, was finding it hard to procure rice because traders were offering higher prices, Pangestu said.

Bird flu pandemic readiness testedIndonesia began a major bird flu simulation Friday that was to end on Sunday to test the county’s preparedness for a potentially catastrophic pandemic.

According to a report from The Associated Press, about 1,000 government, health and law enforcement officials were at the three-day event in Bali to consider how to contain a possible widespread outbreak of the often-lethal disease.

The drill began with the isolation of a village where a field hospital was set up to treat people with flu-like symptoms. At the closing on Sunday, officials will try to prevent "infected" travelers from leaving the international airport and spreading the virus to other countries.

"This is the only exercise in the world (of its kind) that has ever taken place," said Subhash Salunke, the World Health Organization's top official in Indonesia. "This will certainly help prepare Indonesia in the event of a pandemic."

It will be an example to other countries struggling to contain outbreaks of the disease, he said.

Jakarta, W. Java push ahead on ‘mega-city’ plansThe Jakarta administration said last week it is pushing ahead on a number of strategic plans to generate income and solve some of the city’s long-standing problems.

One of the ventures the Jakarta administration is pinning high hopes on is a proposed ‘mega-city’, The Jakarta Post reported.

Jakarta Governor Fauzi Bowo, after a meeting with newly-elected West Java governor Ahmad Heryawan, said he was confident of a joint venture with the West Java administration to realize the mega-city concept for Greater Jakarta.

"The newly elected West Java governor is someone who understands Jakarta's problems. I believe together we can find common ground to solve these problems," Bowo said Monday.

Ahmad Heryawan, former deputy speaker of the Jakarta council from 2004 - 2009, was declared the winner of the West Java gubernatorial election on Tuesday.

The ‘mega city’ development concept would see Jakarta, several regencies in West Java (including Bogor, Depok, Bekasi and Cianjur) and Banten's Tangerang regency incorporated into a single area, to be called "Jabodetabekjur".

The concept was proposed by former Jakarta Governor Sutiyoso in 2006, as a solution to resolve long-standing problems in the capital region, including floods, waste management, transportation and urbanization.

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Govt. to restrict shopping mall hours to save energyThe government plans to reduce the operating hours of malls and supermarkets in the country to save energy, Development Planning Minister Paskah Suzetta said on Thursday, Xinhua reported.

The minister said soaring prices of oil and electricity had led the government to provide more subsidies for the energy consumed by the shopping centers.

"We are discussing the proposed regulation and it will be issued in the near future," said Suzetta. He did not elaborate on how many hours the cut would be.

Suzetta said that the opening hours of the malls and shopping centers in Indonesia from morning to evening was not effective, adding that malls and supermarkets in developed countries, such as in Japan, only opened from 10:00 AM to 6 PM.

ECONOMYIron ore plan to boost investment The world’s largest steelmaker, ArcelorMittal, is planning to invest around $8 billion – some reports said $10 billion – to build a new steel plant, take a stake in state-owned PT Krakatau Steel and prospect for iron ore, nickel and manganese.

ArcelorMittal has made a formal offer in a letter to President Susilo Bambang Yudhoyono, according to officials of the Indonesian Chamber of Commerce (Kadin), which has been involved in the negotiations.

Kadin was also involved in a meeting with Finance Minister Sri Mulyani Indrawati to discuss ways of trimming the government’s ballooning fuel subsidy bill, with chamber officials saying they would support an immediate 10% rise in the price of fuel as long as public transport was not affected.

The government said it was pushing ahead for a ‘smart card’ system to limit sales of subsidized fuel, but Kadin officials said they doubted the system was be effective, and could instead create chaos at petrol pumps and create social costs.

While Minister for Mines and Energy Purnomo Yusgiantoro said Thursday that the government so far has no plan to increase retail petroleum product prices, Vice President Jusuf Kalla said fuel prices could be raised to relieve pressure on government finances.

His comment suggested the government was about to dump its earlier insistence on keeping fuel prices down until at least next year.

The government nearly tripled its planned fuel subsidy spending to Rp126.6 trillion ($13.79 billion) in a revision to the 2008 state budget. Meanwhile the electricity subsidy jumped to Rp60.3 trillion in the revised budget from Rp29.8 trillion, mostly because of higher costs of oil.

Kadin deputy for investment Chris Kanter said money now being spent on subsidies would be better directed to infrastructure development, Xinhua reported on Friday.

"It is better to allocate the funds to infrastructure or sectors which can make the economy grow," he told reporters at the office of Coordinating Ministry for Economy.

The chamber predicted that the subsidies on the oil sector could pass Rp200 trillion ($21.98

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billion) should the global oil price reach $120 per barrel, Kanter said.

"The prediction is that the oil price keeps rising, the state budget can’t hold on it. The government must adjust oil prices in accordance with the people’s spending power," said Kanter, but Coordinating Minister for Economy Boediono said there was no plan to raise oil prices.

There was good news on the power front, with state utility PLN stating Friday it had awarded contracts to build two coal-fired power plants worth about $890 million to two Chinese groups, Agence France Presse reported.

The two plants will add a total of 570 MW to the Java-Bali grid, with one plant completed in around two years and the second in nearly three years time.

BUSINESS BRIEFS MACROECONOMY On-month inflation steady in April: BPSOn-month inflation rate in April won't exceed 0.95%, a top official of the government's statistics agency said Wednesday, Dow Jones reported.

"There is no price fluctuation in April, so I assume that inflation won't exceed the 0.95% that we had in March," agency Chairman Rusman Heriawan said.

Heriawan, however, said that on-year inflation this month could exceed the 8.17% recorded in March. He didn't elaborate on his projections.

INVESTMENT Natrindo to spend $1B in '08PT Natrindo Telepon Seluler is preparing to spend $1 billion on network expansion and marketing in 2008, on projections that the country's 90 million-user cellular market will double over the next three years, Dow Jones reported Wednesday.

"We intend to take part in that doubling (of the market)," CEO Erik Aas said, adding that the company wants to increase the number of its base stations to 3,700 by the end of the year from the current 1,500.

"We believe that, by the end of 2009, (we will have) nationwide coverage," Aas said. If this target is achieved, it will be a fast rise for the company, which began offering cellular services only this February.

The campaign started Thursday with the launch of a marketing campaign for Natrindo's GSM-based cellular services under the Axis brand in the greater Jakarta area.

Natrindo, previously controlled by the Lippo Group, has been taken over by new investors.

Saudi Telecommunications Co. bought a 51% stake in September last year while Malaysia's Maxis Communications Bhd. picked up 44% in 2005. The remaining shares are held by a local investor.

Lippo Group plots $1.1B burial park Lippo Group plans to invest more than $1.1 billion to develop a 500-hectare memorial park, the Financial Times reported Thursday.

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With a boating lake, swimming pool, hiking trails, family center and Italian restaurant, the park might appear more country club than burial ground.

Suziany Japardy, marketing director for San Diego Hills Memorial Park, said plots sold so quickly in the first “gardens” in the cemetery in Karawang, 50 km east of Jakarta, since launch last year that the whole site is to be developed.

“It will probably cost Rp10,000 billion ($1.1 billion) and take 10 years but we are confident it will succeed,” she said after unveiling the second, 25-hectare phase, the Garden of Prosperity and Joy.

More than 90% of the plots in the Garden of Creation and the Heavenly Garden, each 8 hectares with space for about 3,000 plots per hectare, have been snapped up at prices ranging from Rp1.7 million per square meter to Rp27 million per square meter for “the pick of the pick at the top of a hill”.

More than 200 people have been buried at the site but the vast majority of customers are buying what is described as “pre-need”. Once bought, the plots are fully transferable and can be sold on the open market.

Bank Indonesia, the central bank, has bought the most plots, Japardy said, with Pertamina, the state oil company, and Aneka Tambang, a state-owned mining company, also bulk buyers.

Inti Kapuas to buy more oil palm plantations PT Inti Kapuas Arowana said it has set aside $120 million for acquisition of more oil palm plantations, Asia Pulse reported Tuesday.

Earlier Inti Kapuas signed an agreement for the acquisition of palm plantations - PT Dendymarker Indahlestari and PT Anam Koto - at a price of $80 million from Malaysia's Bousted Estates Agency.

Corporate secretary Veronica Dini Krissanti said part of the fund will also be used to expand land bank for future expansion of oil palm plantations.

The shareholders approved plans by the company to increase its authorized capital from Rp384 billion ($41.85 million) to Rp1.2 trillion.

Krissanti said the company wants to change its core business to palm oil trading and oil palm plantation, therefore, the name of the company will be changed with PT Inti Agri Resources.

T.Rad to make radiators in Indonesia Japan's T.Rad Co. will set up a radiator factory in Indonesia, bringing it online next summer to produce 600,000 units a year, Nikkei Business Daily reported Wednesday.

The firm has been making radiators at its Thai plant and then shipping them to Indonesia, but transport costs have become prohibitive and switching to local production will also enable it to better respond to Indonesia's surging motorcycle and automobile output.

T.Rad will invest an estimated 1 billion yen ($9.58 million) to buy a factory in Bekasi from a local manufacturer and start installing production facilities next January.

The plant will first produce motorcycle radiators, then start shipping radiators for

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automobiles.

T.Rad will also form an Indonesian unit and take a 50% stake. Its Thai production subsidiary will own 40% of the new unit, with the rest of the capital to be solicited from Japanese trading companies.

STATE CONCERNS No rice exports this year: ministerAgriculture Minister Anton Apriyantono said Indonesia would not export rice this year although the country had an estimated rice production surplus of two million tons, Asia Pulse reported Wednesday.

"For the time being, the government will not export rice although this year we have a rice production surplus of about two million tons," the minister said.

"Exports can be carried out if rice production at home increases by at least 5% per year," the minister said.

He said the government should not be careless in exporting the staple and regulate it well.

Domestic need for rice stood at 2.7 million tons per month so exports should not be done without proper regulation.

The government has predicted rice production this year would reach 33 million tons, well above the domestic need of 31.68 million tons, meaning there would be a surplus of about 1.30 million tons that could be exported.

Indonesia meanwhile raised domestic farmgate rice prices in a bid to support local farmers who are facing rising production costs and to track global price increases, a senior government official said Tuesday, Dow Jones reported.

The farmgate price for rice has been raised to Rp2,200-Rp4,300 a kilogram from Rp2,000-Rp4,000/kg, said Bayu Krisnamurthi, deputy of the coordinating economic minister.

The farmgate price for unmilled rice has been raised to Rp2,200/kg from Rp2,000/kg, dry milled rice to Rp2,840/kg from Rp2,600/kg and polished rice to Rp4,300/kg from Rp4,000/kg.

The farmgate price is the price Bulog, the national agency which procures commodities, pays to local farmers.

The higher prices will help offset higher production costs faced by farmers and encourage them to continue growing rice, said Krisnamurthi.

Krisnamurthi said the higher rice prices won't contribute to inflation, as the 7.5%-10% price increases are comparable with the domestic inflation rate. Consumer prices rose 8.17% on year in March.

Krisnamurthi added Indonesia will continue to prioritize its local rice industry and won't import rice until national stocks fall below 1 million metric tons.

National rice stocks currently stand at 1.4 million tons. Bulog chief Mustafa Abubakar said the stocks should last for the next 4-5 months.

Palm oil export tax lowered

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The government has reduced export taxes for palm oil products in May to bring them in line with international prices, the trade ministry said on Friday, Reuters reported.

The export tax for crude palm oil in May will be cut to 15% from 20% in April.

The base export price for crude palm oil will be cut to $1,082 a ton from $1,196 in April, while the export price for RBD palm olein, used as cooking oil, will be down to $1,229 a ton compared to $1,303 in April. The base price and export tax will be valid from May 1 to the end of the month.

The base export price is used to calculate export tax paid by exporters.

Crude palm oil makes up 45% of the country's palm oil exports. Higher priced palm oil by-products such as RBD palm olein make up the rest.

The government meanwhile introduced mandatory checks on vessels carrying crude palm oil and its derivatives from April 24 in a bid to curb smuggling of the commodities, Detik.com quoted Ardiansyah Parman, director-general for domestic trade, as saying Tuesday.

Cargo records will be cross-checked to ensure the volume and type of palm oil being shipped from one domestic port tallies with that unloaded at the next port of berth, Dow Jones reported.

The move comes after the government found some palm oil that was only allowed to be sold locally being smuggled overseas, said Parman.

Refiners may buy 1.9M tons raw sugar in 2008 Sugar refiners in the country may buy 19% more raw sugar this year as demand increases, the industry group said, Bloomberg reported Tuesday.

Refiners may buy 1.9 million metric tons of raw sugar to make 1.8 million tons of refined sugar this year, more than 1.6 million tons bought last year for 1.44 million tons, Yamin Rachman, executive director of the Indonesian Refined Sugar Association, said.

The Agriculture Ministry said April 17 that white sugar output, processed from canes harvested by the country's growers, may rise to 2.7 million tons in 2008 from 2.4 million tons last year.

Output from farms is used for domestic household consumption, estimated at 2.7 million tons annually. Industrial users must import refined sugar or buy from local processors of raw sugar purchased overseas.

"Consumption by all types of users may increase to 4.85 million tons this year,'' Rachman said. Food makers may directly import 350,000 tons of refined sugar this year, he said.

Indonesia is Asia's biggest importer of sugar.

Cotton plantations to double in 2009 The agriculture ministry said cotton plantations in the country are expected to double in 2009 from 20,000 hectares this year, Asia Pulse reported Thursday.

Farmers will be encouraged to grow cotton with free high quality seeds to be provided by the government, Plantation Director General Achmad Mangga Barani said.

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Barani said the government will also set a more attractive purchasing price of cotton from farmers and provided subsidized fertilizer.

Annual imports fluctuated between 454,000 and 760,000 tons or 99.5% of the total requirement of the country's textile industry.

He said cotton seeds are already available including through imports from China.

He said three companies already agreed to finance development of cotton plantations in cooperation with farmers.

SOEsGovt. to establish state holding cos next month The government will establish four holding companies for state companies in the construction, pharmaceutical, mining and plantation sectors next month, Asia Pulse reported Thursday.

In principle, the finance ministry has agreed to the plan although a meeting is still needed to discuss matters still pending, Minister for State Enterprises Sofyan Djalil said

The establishment of holding companies will be a step toward the establishment of a super holding for all state companies, he said, adding that a holding company for state banks is not part of the move.

Director of Institute for Development of Economic and Finance M. Ikhsan Modjo said the holding company plan will create synergy for companies with similar core business.

Meanwhile the government hopes to cut the total losses of state companies this year by as much as 92%, thanks to strong progress in certain companies, the State Ministry for State Enterprises said, The Jakarta Post reported Monday.

"Up to 28 state companies are still suffering losses, as our 2007 prognosis shows, amounting to Rp2.94 trillion (around $323 million)," said Said Didu, secretary to the State Minister for State Enterprises.

"In 2008, the government plans to reduce the number of unprofitable state companies to 11, and the total losses to only Rp0.23 trillion," he said.

According to Didu, state electricity company PT PLN has always been one of the main contributors to the total deficit suffered by state firms. For 2007, the loss was estimated at Rp 1.5 trillion.

The 11 companies expected to remain in the red until the end of this year include PT Merpati Nusantara Airlines and PT Kereta Api Indonesia (KAI).

Rajawali considers selling stake in Semen GresikThe Rajawali Group is considering selling its 24.9% stake in PT Semen Gresik, hoping to earn a handsome profit after two years of investment in the country's largest cement maker, Asia Pulse reported Wednesday.

Rajawali has selected a number of foreign investment banks to become its financial advisors in the divestment plan, an industrial source told the newspaper Bisnis Indonesia.

Rajawali, which paid $336.7 million to former shareholder Cemex Asia Holding for the stake

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in July 2006, expects a strongly improved price given the surge in the prices of cement, the source said.

Based on the market share prices, Rajawali, through its subsidiary Blue Valley Holdings Pte Ltd, would chalk up a profit of Rp3.2 trillion ($355 million) from the sale, the paper said quoting the source.

Semen Gresik posts 38% rise in net profit The net profit of state-owned cement maker PT Semen Gresik shot up 38% to Rp455.29 billion from Rp329.92 billion in the same period last year.

The country's largest cement producer recorded Rp2.52 trillion in income in the three-month period, up 20% year-on-year, on larger sales and price hike, the newspaper Bisnis Indonesia reported Friday said.

The paper quoted company sources as attributing the increase in its sales to the growing property sector and brisk development of infrastructure projects necessitating a larger supply of cement.

Market analyst Stanley Tjiandra from Trimegah Securities predicted the net profit of Semen Gresik will rise to Rp1.9 trillion from Rp1.78 trillion last year.

PRIVATE SECTOR Indofood plans Rp1.5T bond issue PT Indofood Sukses Makmur, the world's largest maker of instant noodles, said Monday it plans to raise Rp1.5 trillion ($163 million) by selling five-year bonds by June, Reuters reported.

Indofood, which is controlled by the Salim family through Hong Kong-listed First Pacific Co Ltd, said that most of the proceeds from the rupiah-denominated bonds would be used to repay debt which matures in June.

"We will use around 82%, or about Rp1.23 trillion, to repay our bonds issued in 2003 which will mature on June 10. The rest will be used for working capital," the company said in a statement.

Indofood, which has a market capitalization of $2.4 billion, has appointed DBS Vickers Securities, Danareksa Sekuritas, ING Securities Indonesia, Kim Eng Securities, and Mandiri Sekuritas as underwriters and managers for the bond issue.

Telkomsel 1Q subscribers up 32% on yearPT Telkomsel's subscriber base grew 32% on year in the first quarter due to product innovation and cheaper tariffs, its president said, Dow Jones reported Wednesday.

"Our subscribers for the first three months of this year increased to 51.3 million from 38.9 million in the same period last year," said Telkomsel President Kiskenda Suriahardja.

He expects that Telkomsel, the nation's largest cellular operator by subscribers, will get 8 million new subscribers this year.

Telkomsel is 65% owned by PT Telekomunikasi Indonesia (Telkom) and 35% by Singapore Telecommunications, or SingTel.

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About 38% of the nation's 230 million people own cell phones and there's room for more growth, analysts have said.

Tunas to allocate 40% of net profit to dividendsAutomotive dealer PT Tunas Ridean Tbk plans to allocate 40% of its 2007 net profit to pay dividends, Asia Pulse reported Wednesday.

"The total amount of the dividends to be distributed reaches around Rp189 billion ($20.8 million) or Rp55 per share," director Miranti H. Andiyana said.

She said the company planned to open new Toyota showrooms in the second half of 2008 and next year at a total cost of Rp15 billion.

Astra Agro says Q1 net profit treblesIndonesia's largest listed plantation firm, PT Astra Agro Lestari, reported on Friday a trebling in first-quarter net profit, boosted by high crude palm oil prices, Reuters reported.

The company said its net profit climbed to Rp827.05 billion ($89.65 million) in the January-March period from Rp268.85 billion a year ago, as its revenue more than doubled to Rp2.27 trillion.

Astra Agro , controlled by PT Astra International, accounted for about 5% of Indonesia's total crude palm oil production estimated at between 17-17.2 million tons last year.

"The rise in Astra Agro Lestari's revenue was partly due to higher CPO prices and higher CPO sales volume," Widya Wiryawan, the firm's president director said in a statement.

CPO sales rose to 240,643 tons in the January-March period, up 25% from 192,844 tons a year earlier.

Meanwhile the company said it will seek shareholder approval to accept $60 million from PT Adaro Indonesia in exchange for mining rights, Bloomberg reported Wednesday.

A meeting would be held on May 22, Astra Agro said in a statement published in Investor Daily Indonesia today.

Astra Agro has been in talks with coal miner Adaro since 1991 over 7,163 hectares of land its units own in Tabalong regency in South Kalimantan that overlap Adaro's mining rights.

The transaction "will not significantly affect the company's operations," Astra Agro said.

Astra Agro had 394,067 hectares of land as of December 31, of which 182,470 hectares were planted, the company said in its 2007 financial statement.

Fadjar Widijanta, head of Adaro's administration and external relations, said the company had agreed to pay around $60 million to use the land.

Foreign insurance firms eye expansion Five insurance companies from France, Singapore, the United Kingdom, Italy and Malaysia are seeking local partners to tap the increasingly lucrative Indonesian life insurance industry, an insurance association says, The Jakarta Post reported Thursday.

Chairwoman of the Indonesian Life Insurance Association (AAJI) Evelina Pietruschka said in a statement the companies had approached the association for information on qualified companies for potential partners. She refused to name the foreign companies.

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The association has forecast a 30% growth in revenue from premiums for 40 major insurance firms in Indonesia this year, to around Rp58 trillion ($6.3 billion).

Last year, the industry experienced unprecedented growth of 67% from Rp26.5 trillion in 2006 to Rp44.4 trillion, according to the AAJI.

The 40 insurance companies' combined assets were worth Rp101.2 trillion as of 2007, a 52% increase from the previous year.

BANKSKuwait's Intl Leasing to buy Aceh bank Kuwait's International Leasing & Investment Co said it has completed talks about buying a government bank in the province of Aceh and developing $5 billion of infrastructure projects, Reuters reported on April 20.

International Leasing, a firm that invests in line with Islamic law, will in the next two weeks sign an initial agreement buying 80% of the Aceh state bank, it said in a statement on Thursday on the Kuwait bourse website. It did not identify the bank.

International Leasing is part of a Kuwaiti group that includes logistics provider Agility investing about $10 billion in infrastructure projects in the Philippines.

BII Q1 net profit up 72% on loan growth The country's sixth largest bank by assets, PT Bank Internasional Indonesia (BII), said Thursday its first quarter to March net profit rose 72% to Rp198 billion ($21.5 million) from a year ago, aided by loan expansion, Thomson Financial reported.

The bank said its outstanding loans at end-March grew 29% from a year ago to Rp34.2 trillion.

BII said its net interest income grew 15% from a year earlier to Rp715 billion.

BII president Henry Ho said the increase in net interest income was a reflection of the improvement in the bank's funding mix with lower-cost funding sources, in the form of demand and savings accounts, now contributing 47% of total third-party funds raised compared to 41% a year ago.

Meanwhile PT Bank Danamon, the country's fifth-largest lender, on Tuesday reported a 17% rise in first-quarter net profit as outstanding loans increased 30%, Reuters reported.

The bank, controlled by a consortium which includes Singapore state investor Temasek Holdings and Deutsche Bank AG, said it would stick to its full-year target for loan growth of 22% given the difficult conditions in world financial markets.

"Despite the global and domestic economic challenges, we are confident that we will be able to achieve our growth targets for this year of up to 22%," Sebastian Paredes, Danamon's president director, told a news conference.

Danamon said net profit in the January-March period rose to Rp563 billion ($61.24 million), from a revised first-quarter 2007 net income of Rp482 billion.

BNI to issue $300M shariah bond Publicly listed bank PT Bank Negara Indonesia (BNI) said it plans to issue shariah bonds

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valued at $300 million to improve its foreign exchange liquidity, Asia Pulse reported Tuesday.

The bond to be issued in the second half of the year will be an alternative if plans to seek a bilateral loan fail, president of the state-owned bank Gatot Soewondo said.

Gatot said the fund will be needed to refinance maturing bonds and to strengthen its lending capacity in foreign exchange.

BNI has a foreign exchange-denominated bond valued at $100 million maturing soon.

POWERPLN awards power contracts worth $890 million The state electricity company said Friday it had awarded contracts to build two coal-fired power plants worth about $890 million to two groups, Agence France Presse reported.

PT PLN president Fahmi Mochtar said Chinese Sinohydro Corporation was awarded a contract to build the Nagan Raya power plant in Aceh province.

The other contractor, a consortium consisting of China National Machinery Corp., China National Electric Equipment Corp. and local company PT Penta Adi Samudra, was awarded a contract to build the Tanjung Awar-Awar plant in East Java province, Mochtar said.

He said the Nagan Raya plant will have two generators with a capacity of 110 MW each and will be completed within 24 to 26 months.

The Tanjung Awar-Awar plant will also have two generators each with the capacity to produce 350 MW and will be completed in 33 months.

The two projects are part of PLN's fast-track program to build new coal-fired power capacity of 10,000 MW. So far, PLN has awarded contracts for nine projects under the program.

Mochtar said PLN is still offering one more big project in Java and 15 smaller projects outside Java.

PLN, Bank of China to sign loan agreementPT PLN and Bank of China will sign a loan agreement valued at $592.2 million to finance a coal-fired power plant project of the state electricity company, Antara reported Tuesday.

The agreement will be signed in Beijing on April 28, said Yogo Pratomo, chairman of the team for the acceleration of implementation of PLN's crash program.

Bank of China will provide foreign exchange financing for the Indramayu coal fired power plant project, Pratomo said.

PLTU Indramayu is part of the crash program to build coal-fired power plants with a total capacity of 10,000 MW to be completed before 2010.

Earlier PLN signed a similar agreement with China Exim Bank, which will provide a total loan of $615.1 million for PLTU Suralaya in Banten and PLTU Paiton in East Java.

PGN to sell more gas to state power firm State-owned gas firm, PT PGN said Tuesday it will supply additional natural gas to the state

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power company, Reuters reported.

PGN already has a contract with state electricity firm PT PLN to supply 50 million cubic feet per day of gas for two years from July.

"PGN will sign a contract with PLN to supply an additional 150 million cubic feet per day for five years, also from July this year," PGN's president director Sutikno said.

"PLN has agreed to pay $5.6 per million British thermal units," he said.

Sutikno said the gas supply from PGN will save PLN around 2 million kilolitre (12.5 million barrels) of diesel oil per year.

PGN will supply the gas from gas fields operated by US oil major ConocoPhillips and state oil and gas firm Pertamina in South Sumatra.

OIL & GASBusiness backs 10% fuel price rise A committee of the Indonesian Chamber of Industry and Commerce (Kadin) has said the government should not hesitate to raise fuel prices by 10% while maintaining the current level of subsidies for public transport, Kompas reported.

Bambang Soesatyo, head of the chamber’s committee on fiscal and monetary policy, said Friday after a meeting with Finance Minister Sri Indrawati Mulyani that Kadin did not believe that the smart card system planned by the government for low-income consumers would be effective.

“We recommend that the government should not have doubts about adopting policies related to the price of oil, including to raise the price of fuel by a maximum of 10%,” he told reporters after the meeting.

Indrawati had called the meeting to gauge the opinion of business on what actions should be taken to deal with the increasing price of oil on the international market.

The meeting at the finance ministry followed earlier indications that the government was considering raising prices of subsidized fuel to cut the ballooning subsidy bill.

On Monday, Reuters quoted an unidentified mines and energy ministry as saying that a fuel price rise was an option if global prices go beyond the $95 a barrel budget assumption for 2008.

"If oil prices go higher and the subsidy passes the ceiling, then the government has to find a way to keep agreed subsidy level in place," the official said.

Earlier, Vice President Jusuf Kalla said fuel prices could be raised to relieve pressure on government finances.

The government nearly tripled its planned fuel subsidy spending to Rp126.6 trillion ($13.79 billion) in a revision to the 2008 state budget. The electricity subsidy jumped to Rp60.3 trillion in the revised budget from Rp29.8 trillion.

2008 LNG exports likely to rise 6.3%Liquefied natural gas exports will likely increase 6.3% to 22.1 million metric tons this year

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from 20.8 million tons last year, said an official with state-owned oil and gas company PT Pertamina, Dow Jones reported Thursday.

Pertamina's vice Ppresident Iin Airifin Takhyan said that a higher LNG export volume is expected this year due to rising gas output from Total SA's Mahakam gas block in East Kalimantan.

Output from the block is delivered to the Bontang LNG plants, which are operated by Pertamina.

Takhyan said of the total 22.1 million tons expected this year, 19.6 million tons will likely come from the Bontang plants and the remaining 2.5 million tons from the Arun processing facility in Aceh.

Indonesia has been struggling in recent years to meet its commitment to ship LNG to offshore buyers due to declining gas output.

Bioethanol target set at 3.8 million kilolitersIndonesia must produce at least 3.77 million kiloliters of bioethanol as an alternative to fossil fuel amid surging global oil prices, an official said Thursday, Xinhua reported.

"Spending on fuel subsidies will exceed Rp120 trillion (about $13 billion) and the burden will grow even heavier unless we develop bioethanol quickly," said Al Hilal Hamdi, chairman of the Biofuel Development Team.

Instead of waiting for oil prices to turn back to below $100 per barrel, which is very unlikely to happen, the country must find alternatives to fossil fuel to save heavy spending on oil, he was quoted as saying by Detik.com.

The government has announced ambitious program to produce biofuel from jatropha, cassava, sugarcane and other crops.

The Agriculture Ministry is working to prepare 5 million hectares of land to plant crops for biofuel development.

The country last year produced 139,600 kiloliters of biofuel, with exports accounting for some 80%.

Husky sells 50% Madura stake to CNOOCChina's CNOOC has agreed to pay $125 million for a 50% stake in the Madura Strait Block, from Husky Energy Inc., Asia Pulse/Antara reported Tuesday.

Husky decided to sell 50% of its shares in the gas block to strengthen its capital and recruit personnel with experience in offshore operation, an official said.

Deputy chief of the Upstream Oil and Gas Regulatory agency (BP Migas) Abdul Mu'in said Husky hopes that the involvement of CNOOC will help cope with difficulties in offshore operation.

President and CEO of Husky John C.S. Lau said in a statement the share sale is to speed up development of the natural gas reserve.

CNOOC through its subsidiary CNOOC Southeast Asia operates offshore Southeast Sumatra Block and also has stakes in Wiriager and Blora Blocks.

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MINING Antam, Krakatau to build $60M iron ore processing plant PT Aneka Tambang (Antam) will build a $60 million ore processing plant in Kalimantan in November along with fellow state-owned company PT Krakatau Steel, Dow Jones reported Tuesday.

The companies said in a joint release the plant, which is expected to be completed by 2010, will have an initial processing capacity of 315,000 metric tons per year.

Antam will own a 34% stake in the venture, and Krakatau Steel the remaining 64%.

The companies said they could further expand the facility's capacity to 1 million tons in the future but didn't give a specific timetable for the expansion, only stating it would need an additional $600 million in investment.

Antam also plans to start building a chemical grade alumina plant in Kalimantan this year, its president director said, Reuters reported Tuesday.

The plant is part of the company's plans to reduce its dependence on nickel and step up its bauxite and gold business.

Last year, Antam teamed up with three international partners, including Japan's Showa Denko KK and Marubeni Corporation, to conduct a feasibility study for the plant which will process bauxite into alumina.

"Our target is to start construction later this year," Dedi Aditya Sumanagara said, adding that the plant is expected to have annual capacity to produce 300,000 tons of alumina.

Binani may buy Berau mine for over $100MIndia's Binani group is in advanced negotiations with one of Indonesia’s largest coal producers, PT Berau Coal, to acquire a coal mine to feed its growing cement operations in India, India's Economic Times reported Tuesday.

The size of the proposed acquisition is estimated to be more than $100 million, according to sources close to the negotiations.

PT Berau, a three way joint venture between PT Armadian Tritunggal, Netherlands-based Dan Rognar Holding and Japan’s Sojitz, has coal mining operations in the Lati, Binungan and Sambarata areas of East Kalimantan with an annual coal production of about 40 million tons.

Binani’s move is part of a trend by Indian companies to buy natural resources overseas to ease costs and also ensure availability. Increased coal supply is needed as the Binani group plans to double their Indian cement operations to 12 mt by 2012.

Bumi to up output to 100M tons a yearThe country's largest coal producer PT Bumi Resources said it will increase its annual production capacity to 100 million tons in 2010 from an estimated 62 million tons this year, Asia Pulse/Antara reported Tuesday (22/4/08).

Senior vice president Dileep Srivastava said the plan is to meet growing demand in the world market for coal.

Bumi, which has two large coal producing subsidiaries - PT Kaltim Prima Coal (KPC) and PT

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Arutmin Indonesia in Kalimantan - has a 10% share of the world coal market at present, Srivastava said.

KPC has a reserve of 940 million tons of coal in East Kalimantan and Arutmin has a reserve 462 million tons in South Kalimantan.

Srivastava said Bumi, which is owned by the Bakrie Group will increase its coal reserve to 6.7 billion tons in 2010.

Indika to sell 22% of shares in IPOThe third largest coal producer in the country, PT Indika Energi, plans to float 22% of its shares in an initial public offering (IPO) scheduled for June, Antara reported Wednesday.

Around 70% of the shares are set aside for foreign investors and the rest for domestic investors, a company official said.

Citigroup and Deutsche Bank are the coordinators for the share sales to foreign buyers and they started surveying the market in Singapore and Hong Kong last week.

The source told the newspaper Investor Daily, Indika hopes to earn more than $400 million from the IPO saying demand is strong from foreign investors, with growing demand for coal, especially from China and India.

Indika, which owns major coal producing subsidiary Kideco Jaya Agung, also has a stake in an oil and gas business and related service sectors.

Freeport-McMoRan profit more than doublesFreeport-McMoRan Copper & Gold Inc said Wednesday first-quarter profit more than doubled, topping Wall Street estimates, as the miner benefited from higher metals prices, Reuters reported.

The company lowered slightly its estimate for copper sales this year, and raised its estimate for gold sales.

Freeport said first-quarter earnings were $1.1 billion, or $2.64 per share, up from $476 million, or $2.02 per share, a year earlier.

The company, which operates mines in the United States, Indonesia, Peru and Chile, said revenue rose to $5.7 billion from $2.2 billion.

Freeport said consolidated sales from mines for the full year are expected to be 4.2 billion pounds of copper, 1.4 million ounces of gold and 75 million pounds of molybdenum.

In January, the company had forecast 2008 copper sales of 4.3 billion pounds and gold sales of 1.3 million ounces. It had also said output at the vast Grasberg mine in Indonesia was expected to rebound in the second half of the year.

Newmont Mining 1Q net soars with gold prices Newmont Mining Corp.'s first-quarter net income more than quintupled as the company benefited from soaring gold prices and managed to reduce costs, Dow Jones reported Thursday.

Newmont, the world's second-largest gold miner, said net income rose to $370 million, or 81 cents a share, from $68 million, or 15 cents a share, a year earlier. Revenue rose 59% to $1.94 billion.

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Newmont's gold sales rose 49%, while costs fell 2% and copper sales more than doubled.

Inco to start Bahodopi nickel exploitation in 2010 PT International Nickel Indonesia (Inco) said it will start exploitation of nickel reserve in Bahodopi in the regency of Morowali, Central Sulawesi in 2010, Asia Pulse reported Thursday.

Rajeshnagara, a spokesman of the subsidiary of Canada based Inco Ltd, said currently the company is carrying out explorations and studies in the area to determine the size of the reserve.

The result of the study will determine the method of exploitation to be used, Rajeshnagara said.

Inco already has large nickel mines and smelters in operation in the neighboring province of South Sulawesi.

Kalimantan Gold signs options on five coal concessions Kalimantan Gold Corporation (KGC) said Tuesday it has signed an option agreement to acquire a 75% stake in five coal concessions, Dow Jones reported.

KGC said it will have exclusivity for a six month period in which to conduct its due diligence on the companies that hold the Mining Rights (KP) and carry out a minimum of 3,000 meters of drilling on the KP areas to assess the potential for coal reserves.

KGC will work in close association with PT GMT Indonesia, a geological consulting group which manages a number of coal exploration projects in East Kalimantan.

If KGC elects to exercise its option then the shares of each of the KP companies will be transferred to a new nominee company with the vendors retaining 25% of the shares in the new company.

KGC will allocate 5% of its 75% interest to GMT as an incentive payment.

Upon a decision to mine, the KP companies shall pay a cash bonus to the vendors based on the amount of coal reserves in each KP at the rate of $0.25 Pt, with a minimum bonus of $3 million and maximum of $25 million.

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