THE COORDINATING MINISTRY FOR ECONOMIC AFFAIRS REPUBLIC OF INDONESIA

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Trade and Investment News1, 1 September 2008Highlights

National No indication of major job losses as a result of fuel price rises, minister says Politics Poll suggests close race between leading candidates in next year’s presidential pollSecurity No revision of strategic plans, says defense minister Death-row Bali bombers in isolation, families visit Law & order Government seizes Suharto family funds from fictive national car project Trial of key suspect hailed as advance in Munir murder caseEconomy Investments point to strong long-term economic growth Business briefs Macroeconomy President calls for new start to Doha Round trade talks First Islamic bond short of target but analysts say prospects sound Investment India’s Nalco looks to 2010 start for $3 billion smelter plan General Motors chooses Indonesia as regional production base State concerns Pakistan, Indonesia closer to trade agreement Range of industries relieved of environmental impact requirement SOEs Flag carrier Garuda looks to IPO in 2009 Vice president orders revitalization of seven fertilizer plants Private sector Indonesia to produce 1 million vehicles by 2011, minister says Noodle maker Indofood more than doubles first half profitBanks Market regulator won’t change rules for Maybank acquisition Middle East investor to inject $400 million into shariah bank Power Indonesia Power, Widya Karya win geothermal projects China Huadian Engineering wins tender for Batam power plant Oil & gas Pertamina and Medco agree on $16 billion gas deal from Central Sulawesi field Mining Chamber of Commerce and Industry calls for export tax on unprocessed minerals

NATIONAL1 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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No mass lay-offs: Minister Manpower and Transmigration Minister Erman Suparno said on Friday that concerns about the possibility of mass worker lay-offs as a result of May’s fuel price hikes are unfounded, Antara reported.

"There will be no mass lay-offs because the problem is being managed properly," the minister said.

He said that in the first semester of 2008 there had been 11,500 lay-offs while in 2007 the number of laid-off workers reached 25,000.

“This is a result of the conducive and harmonious labor and industrial relation programs where the government encourages negotiations between workers and employers so that companies do not have to carry out mass lay-offs," the minister said.

Suparno said that most of the 11,500 job losses in the first semester of 2008 were due to mismanagement, not bankruptcy.

POLITICSPoll: Yudhoyono, Megawati seen in tight racePresident Susilo Bambang Yudhoyono and his political rival, former president Megawati Sukarnoputri, are likely to be locked in a tight election race next year, a new poll showed on Thursday, Reuters reported.

The survey, by Jakarta-based Taylor Nelson Sofres, showed 28% of respondents would vote for Megawati while 27% favored Yudhoyono.

Dr. Yudhoyono came to power with the promising to tackle corruption, spur economic growth and create jobs.

Indonesia is due to hold a general election for parliamentarians on April 9 followed later by a presidential election in June.

Dr. Yudhoyono has not said if he plans to run for next election but is widely expected to do so, while Megawati will be the nominee of her Indonesian Democratic Party of Struggle (PDI-P).

Two legislators to be recalled Two members of the House of Representatives -- Max Moein and Saleh Djasit -- will be immediately recalled following a court verdict and the recommendations of a House disciplinary council, Antara reported.

Secretary General of the Indonesian Democratic Party of Struggle (PDI-P) Pramono Anung said PDI-P is committed to upholding the decision issued by the House disciplinary council.

Moein was reported by his secretary Desi Firdianti to the House disciplinary council to have violated the House’s code of ethics.

Anung said PDI-P held a meeting on Tuesday and decided to recall the legislator. Moein will be replaced by another PDI-P cadre. The House disciplinary council had previously recommended the dismissal of Moein.

Moein was accused of repeatedly harassing his secretary sexually from 2005 to 2006. The legislator has denied the allegations.

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Meanwhile, Golkar said it will immediately recall Saleh Djasit, the former Riau governor who is currently member of the House’s Commission VII, following a court declaring him guilty of graft during his term as governor and handing down a five-year jail term.

SECURITYNo revision of strategic plans: Defense Minister The Defense Ministry will not revise strategic plans for the 2004 - 2009 period following a decline in the budget allocation for 2009 to only Rp35 trillion, Antara reported.

"It will not be revised because the important thing is how to use the existing budget efficiently and optimally for the development of our defense forces," Defense Minister Juwono Sudarsono said Monday.

He said he understands the government is more focused on improving people’s lives and economic development in order to eradicate poverty.

The defense ministry and Armed Forces (TNI), he added, were not disappointed with the decline in the defense budget considering that the two institutions are already accustomed to conditions in which everything is at minimum levels.

Prison isolates Bali bombers, families visit The three convicted Bali bombers have been isolated from other inmates at Batu penitentiary on Nusakambangan prison island, Cilacap, as a security measure before their execution, The Jakarta Post reported.

Bambang Winahyo, the head of the Legal Affairs and Human Rights Ministry's Central Java office, said the convicted Bali bombers -- Amrozi, Imam Samudra and Ali Ghufron – are currently being held in isolation.

"We're keeping them there until the execution. But we don't know when," Winahyo said.

The families of the convicted men visited them at Nusakembangan on Saturday, Kompas reported. Interviewed after the visit, family members said the felons did not discuss their imminent execution, while one of their lawyers, Achmad Michdan, said he had been instructed to take any legal steps possible on their behalf.

Police have increased security in Cilacap regency, Central Java, in preparation for the executions even though they are not likely to take place for over a month.

Attorney General Hendarman Supandji said no exact date has been set for the execution of 2002 Bali bombing death-row convicts, Antara reported.

Speaking to reporters on Thursday, Supandji said the date for the Bali bombers’ execution would be decided after the Ramadhan fasting month which starts on Monday.

"I received the dossiers on the execution on Wednesday but it cannot be carried out in the fasting month. Let’s wait until after Ramadhan," he said, adding that it would certainly be carried out before the end of this year.

Malaysia, W. Kalimantan Police to cooperate on terrorism West Kalimantan Police are to cooperate with the Malaysian Police in hunting terrorism suspects, the regional police chief said on Tuesday, Antara reported.

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“This cooperation is very significant given the vast area we have to cover. The border is very long and prone to illegal practices including terrorism,” West Kalimantan Police chief Brig. Gen. Raden Nata Kesuma told the press after a meeting with the Malaysian Royal Police in Pontianak, West Kalimantan.

According to Kesuma, terrorism was highlighted in the meeting over fears that Singaporean Jemaah Islamiya terrorist fugitive Mas Selamat Kastari might enter Indonesia through the region.

Joint land and sea patrols will be intensified, Kesuma said, adding that the two police forces will also focus on handling cyber crimes.

As many as 30 cases so far have been jointly handled by the two forces, with 27 cases in Indonesia and three in Malaysia.

Sarawak Police deputy commissioner Dato’ Muhammad Bin Salleh said the cooperation between the two police forces began in 2005 and will end in 2010.

“Under this cooperation, we meet in Malaysia and West Kalimantan every July and August to exchange information to curb transnational crimes,” Salleh said.

LAW & ORDERGovt. seizes funds from Suharto family firmThe government has seized Rp1.225 trillion million from a firm linked to former president Suharto's family, a sign the authorities are taking a harder stance against the family, Reuters reported Friday.

Finance minister Sri Mulyani Indrawati, a key reformer in Yudhoyono's government, said Bank Mandiri had been ordered to transfer Rp1.225 trillion belonging to Timor Putra Nasional, the controversial car company owned by Suharto's youngest son, to a government account to "secure state money".

Timor defaulted on its loans to state banks after the 1997-98 financial crises. The firm was set up by Hutomo Mandala Putra, also known as Tommy Suharto, to build Indonesia's national car, and attracted widespread criticism as it simply sold a rebadged version of South Korean-made cars.

The Indonesian Bank Restructuring Agency (IBRA) sold Timor to Vista Bella Pratama, a small company, in 2003 for about Rp500 billion. The Corruption Eradication Commission (KPK) said recently that Vista Bella was affiliated with Timor. Tommy Suharto has denied any link with Vista Bella.

In May, prosecutors acting on behalf of the finance ministry said they were seeking Rp4 trillion in damages from Tommy Suharto and his companies, which include PT Humpuss.

Suharto's youngest son filed a counter-suit against the finance minister earlier this month, asking the court for Rp200 billion in damages for defamation and for a public apology in the national media.

Key suspect’s trial may reveal more on Munir murderThe current trial of former intelligence high official Muchdi Purwopranjono may be another stepping stone on the road to justice in relation to the sensational 2004 murder of human rights activist Munir Said Thalib, Inter Press Service reported Thursday.

"This is the first-ever case in Indonesia's political history where a high-ranked former military general, former deputy head of the intelligence agency, was brought to trial," said Usman Hamid, the executive director of the Commission for Missing Persons and Victims of Violence (Kontras).

Purwopranjono — the deputy head of state intelligence agency (BIN) at the time of Munir's death and previously a chief of the Army Special Forces (Kopassus) — is currently on trial on charges of

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premeditating the murder of Indonesia's foremost human rights defender. He is also accused of orchestrating Munir's death.

The activist died on a Garuda Indonesia airlines flight from Singapore to Amsterdam in September 2004 after being poisoned with arsenic during a stopover.

Prosecutors are arguing that Purwopranjono's motivation for his alleged involvement in Munir's death was revenge. They say that Munir was responsible for Purwopranjono's dismissal as head of Kopassus after the human rights defender had exposed the latter's involvement in the disappearances of several activists in the late 1990s.

Lawyers for Purwopranjono say he views the court proceedings as an opportunity to prove his innocence. He faces a possible death penalty if found guilty.

W. Java: Suspects arrested for illegal sweeping Several people were arrested by Bekasi Police on Friday for committing illegal sweeping on cafes and bars that sell liquor in Karang Harum village, Kedungwaringin district, Bekasi, West Java.

According to police, hundreds of people stormed a number of cafes and forced the owners to hand over their liquor. The sweeping was intercepted by officers patrolling the area.

Bekasi Police crime and investigation unit chief Adj. Com. Susatyo Purnomo said the perpetrators will face a maximum of 10 years imprisonment if found guilty of looting.

In Jakarta, police said they will impose sanctions against any individuals or organizations that conduct illegal sweeping during the fasting month of Ramadhan.

Paramilitary leader’s trial begins over Monas attackThe trial of the leader of the militant organization KLI, Munarman, began on Friday. He is facing seven years in prison if found guilty of involvement in a violent protest at the National Monument in Jakarta in June, Detikcom reported.

Munarman is charged with violating four articles of the criminal code: involvement in an ambush, causing damage, oppressive acts and provocation.

Munarman’s lawyer, M. Assegaf, lodged a postponement appeal on Munarman’s detention, saying Munarman’s wife is soon expected to give birth.

A panel of judges at the Central Jakarta District Court decided to combine Munarman’s trial and the trial of another militant organization (FPI) leader Habib Rizieq Shihab.

“Several witnesses in Munarman’s case are also scheduled to testify in Shihab’s trial,” presiding judge Panusunan Harahap said on Friday.

Munarman’s trial is scheduled to continue on September 4. Jakarta Police deployed around 200 personnel and water cannon to guard the trial which was also attended by 70 FPI members.

ECONOMY Investments point to industrial growthThe decision of Indian aluminum producer Nalco to go ahead with a $3 billion smelter in South Sumatra suggests the province possesses the potential to develop into a new industrial hub.

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While Antara reported that feasibility studies are continuing, the plan presumes a plentiful supply of power, a major component in the manufacture of aluminum.

Plans for coal-mouth power stations in the province are likely to be critical to the plan and further development of the region.

Nalco also notes that the promising long-term prospects of the economy in Indonesia are its major motive for choosing the country as a production center.

General Motors’ decision to restart its idle production facilities in the country are also another plus for the development of a modern industrial base.

Indonesia may well have benefited from Thailand’s current political woes in the decision by GM.

The other major investment news came from PT Nusantara Smelting Corp., which said it will build a copper smelter in Bontang in East Kalimantan with an investment of $850 million.

The plan assumes that the new mining law, still stuck in the House of Representatives, will insist on in-country processing, while the Chamber of Industry and Commerce (Kadin) is also pushing for a 10% export tax on unprocessed minerals to push greater processing within Indonesia.

The Middle East’s Islamic Corporation for the Private Sector (ICD) meanwhile agreed to inject $400 million, 80% of paid-up capital, into the new PT BNI Syariah.

While Bank BNI itself has decided to play the role of minor partner in the enterprise, the Middle Eastern investment along with interest in the agribusiness sector suggests Indonesia is now firmly on the radar for investors from the region.

There was a slightly disappointing reception to the government’s first Islamic bond, with investors taking up slightly less than the Rp5 trillion of bonds on offer, but demand was high at over Rp8 trillion, with the government preferring not to meet interest rate demands.

Analysts welcomed the move and said that despite the shortfall in sales the prospects were good for further issues. The government is planning a $1 billion Islamic bond in November at the latest.

On the stock market, shares moved higher in the last days of the week to close at 2,165.94, up from 2120.49 at the end of trading a week earlier. The rupiah was trading stable at 9,150 to the US dollar.

BUSINESS BRIEFS MACROECONOMY President calls for revival of global trade talks Indonesia has called on Brazil, China and India to help revive the stalled Doha Round of trade talks at a meeting in September, a spokesman for President Susilo Bambang Yudhoyono said on Monday, Agence France-Presse reported.

Dr. Yudhoyono has contacted President Lula da Silva of Brazil, Chinese President Hu Jintao and Indian Prime Minister Manmohan Singh to underline his concern at the failure of the ministerial-level World Trade Organization talks in July.

"The president expressed his concern at the latest developments in the Doha Round," spokesman Dino Patti Djalal said, adding that he had asked the leaders to push for discussions to begin again, possibly as early as September.

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"The president is very concerned about this issue because if discussions fail, the effects on the world economy and developing nations, for Indonesia, will be bad," Djalal said.

It was not clear what form of meeting Dr. Yudhoyono was proposing or where.

The Geneva ministerial meeting ran aground after India and the US failed to agree over a special safeguard mechanism that would allow nations to impose a special tariff on agricultural goods if imports surge or prices fall.

Washington rejected Indian proposals that developing nations should be allowed to boost duties by an additional 25% on farm products if imports surged by 15%. Washington insisted extra duties should be allowed only if imports rose by 40%.

Brazil has also been pushing to revive the talks and India has said it would like to return to the negotiating table if the United States signals that the impasse can be overcome.

Islamic bond off target but prospect sound Indonesia's first Islamic bond sale fell slightly short of targets due to economic headwinds. The government aimed to sell Rp5 trillion worth of sovereign Islamic bonds, or sukuk, on Tuesday, counting on heightened appeal for Islamic investment instruments but sales reached only Rp4.7 trillion ($513 million) of seven-year and 10-year bonds.

Concerns about hefty debt supply and inflation worries dampened demand and prompted investors to seek higher yields than Jakarta was ready to accept, Reuters reported.

"Even though this is just the first one but demand is quite healthy," said Willing Bolung, head of fixed income market at ANZ Bank in Jakarta.

Bids totaled Rp8.1 trillion and yields -- at 11.80% for the seven-year bond and 11.95% for the 10-year paper --- were largely in line with yields on the secondary market for conventional bonds.

Domestic investors bought almost 90% of the bonds, many of them conventional banks and insurance firms, signaling strong growth potential for Islamic finance in the country, analysts said.

The finance ministry has said it aims to use Rp18 trillion worth of property as the underlying assets for the Islamic bonds.

The government also plans to sell a dollar-denominated sukuk in November in its effort to broaden its financing options. The government will start a road-show for the paper in the fourth week of October.

Govt. still relying on state bonds The government will still rely on the issuance of state bonds to offset a deficit in the 2009 state budget, Finance Minister Sri Mulyani Indrawati said, Antara reported.

"The available sources of deficit-financing funds particularly from the domestic banking industry, program loans, privatization of state firms and others have become increasingly limited over time," she said.

Judging by the conditions, deficit-financing funds would constantly be needed from the issuance of state bonds, she said, adding that in issuing the state bonds, the government had given priority to the domestic market by taking into account the lowest cost burden at the most controllable risk.

On the budget deficit forecast of 1.9% of the GDP in the 2009 state budget, Indrawati said it was still normal and appropriate for the country’s current fiscal condition and capacity.

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The figure was within a range of 1.5% to 2.0% agreed upon by the House Budgetary Committee and the government, she said.

INVESTMENT Nalco may commence smelting aluminium by 2010 India's state-run National Aluminum Company (Nalco) is progressing well with plans to build a $3 billion aluminum smelter in South Sumatra, targeting to start operation by 2010, an official said, Antara reported.

Industry Ministry metal industries director I Gusti Putu Suryawirawan said Nalco had performed a number of studies for the project since April, including a feasibility study and an engineering study.

"Nalco said it needed one year to finish its studies," he said on the weekend.

"With estimations of six months and one year for equipment deliveries and construction respectively, Nalco's smelter is expected to start operation by the end of 2010." 

At its peak, Putu said, the smelter could produce up to 500,000 tons of aluminum ingots per year.

In its first phase, he said, Nalco would need more than one million tons of alumina per annum as raw material which it would import directly from India.

Domestic demand for aluminum products is high, thanks in part to encouraging growth in the Indonesian property industry, said Indonesian Aluminum Association chairman Abu Bakar.

GM to make Indonesia ASEAN production base General Motors Corp. will make Indonesia the production base for multi-purpose vehicles (MPV) in this region, an official of the industry ministry said, Asia Pulse reported.

The largest car maker in the US would put back into operation its factory - which has been idle in Pondok Ungu, Bekasi, West Java - featuring a capacity of 20,000 units a year, transport director Syarif Hidayat said.

GM plans to produce three models of MPV - Chevrolet Aveo, Chevrolet Captiva and Chevrolet Estate, Hidayat said.

He said GM might need to invest up to $200 million to put the factory back into operation.

STATE CONCERNS Pakistan and Indonesia negotiating trade agreement: Official Indonesia and Pakistan are actively engaged in negotiations to sign a trade agreement which would help in raising the volume of bilateral trade to the $1 billion-mark, Ibnu Prispermana, the charge d'affairs at the Indonesian Embassy in Pakistan said, Pakistan Daily reported. He said the governments of both countries are committed to raise the bilateral trade volume up to $1 billion. A Comprehensive Economic Partnership (CEP) agreement has already been signed and now the negotiations are underway to sign a trade agreement, which will be a significant landmark.

There is still lot of potential that could be explored and exploited in the industrial sector, technical know-how, banking and marine and air services, he said, as well as good prospects to enhance trade relations.

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25 activities exempt from environment test New hospitals will no longer have to obtain an environmental impact analysis (Amdal) to open up shop, as the government has exempted this pursuit -- and 24 others -- from the list of activities requiring the document, The Jakarta Post reported.

Under the previous policy, it took businesses at least one year to obtain an Amdal to build a hospital.

The State Ministry of the Environment said the Amdal requirement had been exempted from 25 activities in 14 business sectors since last year.

"They (these activities) no longer need an Amdal to obtain licenses," Hermien Rosita, deputy for environmental management at the ministry, said.

"We have excluded them from the list because we can predict potential environmental impacts of their operations, and technologies are ready to resolve them."

She said dangerous infections or domestic waste from the hospital, for example, could be addressed by using incinerator facilities.

Among the activities scrapped on the new list of exemptions include hospitals, cement firms, train stations and undersea cable installations.

Previously, 85 businesses in 14 sectors were obliged to secure Amdal documents in order to obtain operating permits.

"The Amdal document is now a must only for 60 activities. But this is still too many compared with only four activities in the United States. We will continue to cut the list every five years," Rosita said.

She said her office was currently revitalizing the Amdal to help protect the environment, while also considering ways to enforce the law more effectively.

"We propose legal sanctions, such as up to 10 years' imprisonment for developers who violate Amdal requirements," Hermien said.

The ministry had previously been the only state institution authorized to award Amdal documents for business activities across the archipelago.

But since the move to decentralization in 2001, local administrations have been responsible for Amdal licenses in their areas.

SOEsGovt. approves IPO for Garuda in 2009 The government has given the green light to Garuda Indonesia's plan to conduct an initial public offering (IPO) of its shares next year, a company official said, Antara reported.

"The IPO will be included in the company's 2009 business plan and corporate budget," Garuda operations director Ari Sapari said.

Garuda was in the middle of preparations for the IPO, he said following a meeting between State Enterprises Minister Sofyan Djalil and Garuda's boards of directors and commissioners.

"The IPO is part of the company`s efforts to get funds to refinance its activities," Sapari said.

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Djalil had earlier said Garuda was one of the state firms the government was planning to privatize next year.  The IPO was part of a program to restructure Garuda, the minister said.

Last year, Garuda posted a net profit of Rp258 billion after suffering losses for three consecutive years. It suffered a loss of Rp811.3 billion in 2004 but the figure fell to Rp688.4 billion in 2005 and to Rp197 billion in 2006.

The national flag carrier needs at least $400 million to have a positive financial status. However, the government is reportedly able to inject only $100 million into the company.

VP decides to revitalize seven fertilizer plants Vice President Jusuf Kalla has decided to revitalize seven fertilizer plants which are no longer efficiently operating and at the same time boost their production, a minister said, quoted by Antara.

"The vice president has decided to revitalize seven fertilizer plants soon," State Enterprises Minister Sofyan Djalil said after a meeting on the issue.

The meeting also decided to increase the production capacity of other fertilizer plants, the minister said.

"The vice president wants the production capacity of the fertilizer plants raised up to 60% to 15 million tons, considering demand for urea-based fertilizers until 2015 will reach 15 million tons," he said.

The revitalization of the seven fertilizer plants would cost $700 million which was expected to come from bank loans, he said.

PRIVATE SECTORIndonesia to produce 1M cars by 2011: MinisterThe government projects national car production in 2011 will reach one million units, Industry Minister Fahmi Idris said, according to Antara news agency.  "In the road map on the automotive industry, the government has set a target of one million cars by 2011," Idris said in a written address at a function marking the production of the one millionth automatic transmission unit by PT Honda Precision Parts Manufacturing (HPPM) on Friday.  Idris said of the overall production figure, 30% was for export.   During the first seven months of 2008, Indonesia exported some 60,000 cars, and the figure for the whole year was expected to reach over 100,000 units. "We are optimistic the car export target of 80,000 units this year will be surpassed," he said.   To support the automotive industry in the country, the government had developed a number of infrastructure facilities such as power plants, seaports, roads, the minister said. The government had also provided tax facilities to boost national industrial growth, he said.

Toyota Motor Corp (TMC) plans to expand its export markets for the Kijang Innova MPV, Antara reported.

"We are studying an expansion of our Innova BPV export market. These MPVs have a high market potential," chief of engineering product planning of the Toyota Commercial Vehicle Development Centre Kaoru Hosokawa said in Jakarta on Monday.

TMC currently has production bases in India and Italy. In Indonesia the Innova is produced for local and export markets.

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TMC needs to maintain a minimum export volume of 300-500 units per month to reach an economical scale and to maintain markets. "I think the next market will be Brazil," Hosokawa said.

TMC currently exports Indonesian-built Innovas to several countries in Latin America, including Argentine and Venezuela. Last year Innova exports from Indonesia reached 7,900 units. Meanwhile vehicle sales are expected to touch record 575,000-600,000 units this year despite higher inflation pushed by a hike in fuel prices, automotive distributor Toyota Astra Motor said.   "Sales volumes of vehicles in Indonesia in 2008 are estimated to rise quite drastically to 575,000-600,000 units ... The previous record of car sales was 533,900 units in 2005," Joko Trisanyoto, marketing director at Toyota Astra Motor, told Reuters.  Sales in the January-July period reached 353,501 units, he said.  Last year, domestic car sales reached 434,449 units, recovering from a slump in 2006 when sales dropped to 318,904 units after the government more than doubled the fuel price in 2005.

Indofood H1 profit more than doubles PT Indofood Sukses Makmur, the world's largest instant noodle maker, reported its first-half net profit more than doubled from a year ago, boosted by its plantation business, Reuters reported.

The company, controlled by the Salim family through Hong Kong-listed First Pacific Ltd, said January-June net profit was Rp827.45 billion, compared with Rp367.18 billion a year ago.

Indofood CEO Anthony Salim said although rising commodity prices had helped the company in the first half, rising inflation in Indonesia dampened the performance of its food and instant noodle businesses.

"The high inflationary environment resulting from high commodity and prices in the first half of 2008 has affected the consumer purchasing power especially in the lower end segment," Salim said.

Sales revenue in the first six months of 2008 jumped 53.8% to Rp18.92 trillion ($2.07 billion).

The company, which took control last year of one of the top plantation firms in the country, PT London Sumatra, benefited from rising palm oil prices in the first six months of 2008.

Indofood controls two of the world's largest flour millers through its unit, Bogasari Flour Mills, with the unit recording a 42.3% growth in total sales while its agribusiness division, which includes plantations, saw a 137.4% jump in sales. Its traditional food business, which includes instant noodles, saw a 30.3% rise in total sales revenue.

Indosat to boost investment by 16% Publicly listed PT Indosat, the nation's second-largest telecommunications provider, will spend more capital this year than its original estimate in a bid to attract more subscribers by increasing its network coverage, The Jakarta Post reported. The Indosat president director said after a shareholders meeting Thursday the company would spend $1.4 billion this year, 16% higher than the previously targeted $1.2 billion.  

"By optimizing capacity and coverage, the company aims to get 12 million new subscribers this year," Swandi Sjam said. 

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At the end of last year, the company's subscriber base stood at 24.4 million after $1.2 billion in capital expenditure had been spent on expansion in 2007. 

To gain more subscribers this year, the company will build 3,000 base transceiver stations (BTS), mostly outside Java. As of June 30, 1,304 units had been built. At the end of last year, the company had 12,064 BTS in operation. The company will also add 14 mobile centers by the end of this year.  

Indosat reported a 24.9% rise in first-half net profit, Reuters reported, with a 14.9% rise in revenue.

Indosat, around 40% owned by Qatar Telecom, said in a statement that net profit for the January-June period was Rp1.06 trillion ($115.8 million) compared to a revised figure of Rp845.1 billion for the previous year.

Indosat also announced the appointment of two executives from Qatar Telecommunications (QTel) to its board.

The change in Indosat's board of commissioners came after Qtel bought the entire stake held by Singapore Technologies Telemedia in Indosat in June, gaining a 40.8% stake in the mobile phone operator.

Indosat said in a statement on Monday that it had appointed Qtel's chairman, Sheikh Abdullah Al Thani, as chief commissioner and Qtel's chief executive officer, Nasser Marafih, as a commissioner.

Bakrie Telecom H1 profit jumps 59.5%Publicly-listed telecommunications operator PT Bakrie Telecom (BTEL) said its net profit in the first half of 2008 jumped 59.5% to Rp62.4 billion from a year earlier, fueled by an increase in the number of customers, Antara reported.

"The number of BTEL customers in the first semester of 2008 rose almost one-and-a-half fold or 141.9% compared to the same period last year," BTEL finance director Jastiro Abi said.

The number of BTEL customers rose to 5.4 million in the first half of 2008 from 2.2 million in the same period last year.

Compared to the month ended December 31, 2007, the number of customers in the first half of 2008 rose 42.2%.

Net income in the first half of 2008 grew 90.2% to Rp930 billion from Rp493.2 billion in the same period last year, he said.

BANKS BII takeover in Malaysia's handsThe fate of a $2.7 billion takeover of Bank Internasional Indonesia by Malayan Banking Bhd (Maybank) is in Malaysia's hands and the capital markets watchdog will not make exceptions to existing rules, Indonesia's regulator said, Reuters reported.  Malaysia's top lender, Maybank, has agreed to buy a 55% stake in BII from Singapore's Temasek Holdings and South Korea's Kookmin, but the Malaysian central bank has blocked the plan citing concerns over potential losses.  When Bank Negara Malaysia revoked its approval of the transaction in July, the central bank said new Indonesian takeover rules, which require Maybank to ensure BII has a public float of 20% within two years, could lead to material losses for Maybank.

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 "From now I will say that the ball is in Malaysia's hand. So they are the ones who have to decide whether this deal can go on or not. Our stance remains the same," Fuad Rahmany, the chairman of Indonesia's capital market watchdog (Bapepam), said.  "There are things that they (Maybank) have to take care of, but that's their business with Bank Negara Malaysia, so I the ball is in Bank Negara Malaysia's hand," he added.   Maybank chief executive Abdul Wahid Omar said on Monday that the lender was hoping to resolve its stalled plan to gain control of BII by September although Maybank was not planning to renegotiate the price of the deal, nor submit a new proposal to the central bank.

Shariah bank receives $400M capital injection The Islamic Corporation for the Private Sector (ICD) has agreed to inject capital of $400 million into shariah bank PT BNI Syariah, Asia Pulse reported.

With the capital injection, the Middle East investor would control the Islamic bank, a wholly-owned shariah subsidiary of Bank Negara Indonesia (BNI), the newspaper Investor Daily said.

"We are prepared to become the minority shareholder," said Gatot M Suwondo, the president of BNI, a state-owned bank.

Gatot said BNI Syariah would have around $500 million in capital, making it the country's largest shariah bank if a final deal was signed, with ICD disbursing the loan funds.

Bank Permata's H1 profit up 40%Bank Permata said Thursday its net profit in the first half of 2008 rose 40% to Rp277.5 billion from Rp198.2 billion in the same period last year, Antara reported. Net profit before tax in the first semester of 2008 meanwhile reached Rp401.5 billion, up Rp112.6 billion from the same period last year when the figure was Rp288.8 billion, the bank said in a press statement.

The amount of credits channeled in the first half of 2008 grew 26% to Rp31.2 trillion from Rp24.8 trillion in the same period last year, it said.

The high credit growth resulted from the bank's prudent management of credit risks, causing its non-performing loan ratio to fall to 1.2% in the first half of 2008 from 2.5% in the same period last year, Bank Permata president director Stewart D. Hall said.

POWERIndonesia Power, WIKA, win geothermal auctions PT Indonesia Power (IP) and PT Wijaya Karya (WIKA) have secured three geothermal power plant projects in West Java with a total capacity of 285 MW, The Jakarta Post reported.

Director of geothermal utilization at the Energy and Mineral Resources Ministry Sugiharto Harsoprayitno said Monday that IP would exploit geothermal reserves in Cisolok Sukarame and Tangkuban Perahu concessions, which have capacities of 45 and 220 MW respectively. WIKA won the bidding for the Tampomas concession, which has a capacity 20 MW.

"The two companies won tenders for the lowest geothermal electricity price they offered to state power firm PT PLN. They are the first companies to win geothermal tenders held by the regional government," Sugiharto said.

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WIKA and IP, which is a unit of state power utility company PT PLN, are now waiting for the regents of the concessions' respective areas to issue permits to manage the geothermal resources for 35 years, including a five-year exploration period.

Sugiharto refused to cite the exact investment for the plants, although he said a 55 MW geothermal plant would need about $3 million per MW to construct.

China Huadian wins tender for Batam power plant China Huadian Engineering Corp. (CHEC) has been declared the winner of a tender to build a steam powered electric generating plant in Batam, Asia Pulse and Antara reported.

CHEC, which pledged to finish construction of the 110-MW power plant in 2011, defeated compatriot bidder China Machinery Export Corp.

CHEC will cooperate with local contractor PT TJK Power in the construction of the power plant in Tanjung Kasam, the newspaper Bisnis Indonesia said.

Earlier the government awarded the project to Dongfang Electric, also from China, and the project was to be completed in 2009, but Dongfang quit for a number of factors including an increase in steel prices.

OIL & GASPertamina, Medco agree on $16B gas deal PT Pertamina E&P, a subsidiary of state-owned oil company Pertamina, has signed a $16 billion natural gas sale-purchase agreement with Medco International for a period of 15 years, according to a report on Friday.  The first of two heads of agreement (HOA) documents covers a sale-purchase agreement between PT Pertamina E&P and PT Donggi Senoro LNG for a 15-year period with a volume of 85 million standard cubic feet per day (mmscfd) to be supplied from the Matindok gas field, according to Antara.  Head of the Oil and Gas Regulating Body (BP Migas), R Priyono, said that the second HOA covers a joint operating body agreement among Pertamina E&P of Tomori Central Sulawesi, Medco and PT Donggi Senoro LNG.   This sale purchase agreement covers a term of 15 years with a volume of 250 million mmscfd per day. Priyono said the total volume of natural gas covered by the agreement reached 1.7 trillion cubic feet (tcf) in the 15 year period.  "The total value of the agreement reached $16 billion, whose price formula is based on the international oil price of $100 a barrel," he said.  Director for operational affairs of Medco International Lukman Machfoed said the sale purchase formula referred to the Japan cocktail crude (JCC) price. If the JCC was $100 per barrel, the gas would be priced at about $9.75 per million British thermal unit (mmbtu).   "If the JCC is $120 per barrel, the natural gas price could reach $12.15 per mmbtu," Machfoed said.Geologists find 20 new potential oil basins At least 20 new oil and gas basins have been found in Indonesia, mostly in the eastern part of the country, Asia Pulse reported.

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The new basins bring the number of potential oil and gas basins to 87, the Association of Indonesian geologists (IAGI) said.

IAGI secretary Ridwan Djamaluddin said the government and oil and gas companies may use the new map of oil and gas basins for reference in explorations.

Benyamin Sapiie, the coordinator of Basin Tectonic Indonesia, said so far the country had fully developed only 17 basins to produce oil or gas, adding 33 other basins are still under exploration.

Serica Energy completes Kambuna sale Serica Energy Plc has completed the sale of a 15% interest in the Glagah-Kambuna Technical Assistance Contract offshore Sumatra to a subsidiary of Salamander Energy Plc, London's CNW reported.

Serica received $52.7 million and its interest in the Kambuna TAC is now 50%, with Salamander holding the remaining 50%.

The companies have agreed a handover protocol under which Serica's Kambuna TAC operating responsibilities will be assumed by Salamander, a process which is expected to be substantially complete by 1 January 2009.

Serica CEO Paul Ellis said Serica will also begin to benefit from production revenues from its 50% interest in the Kambuna field next year.

MININGKadin calls on govt. to tax mineral exports The Indonesian Chamber of Commerce and Industry (Kadin) has called on the government to impose an export tax on mineral exports in an effort to encourage the growth of domestic processing industries and to prevent the flow of mineral raw materials out of the country, Antara reported.

"We hope that the government will impose an export tax in order to create barriers for businesses willing to export raw materials only," Herman Afif Kusumo, chairman of the Permanent Committee for Mineral Resources Affairs of Kadin said.

He said that the ideal export tax rate for mineral exports was 10%. Besides, the obligation of the companies concerned to pay 3% royalties should also be maintained.

The government should encourage the growth of mineral processing industries such as nickel ores, iron ores and bauxites.

"It would be better if the export taxes are imposed immediately because there is proof that China's need for Indonesia's mining goods is almost unlimited. It should not happen that we are forced later on to import raw materials," he said.

The government revenues from the imposition of an export tax should also be channeled to regional administrations in order to help their environment rehabilitation programs and infrastructure development, Kusumo said.

Metal firm to set up $850M copper smelter A metal firm plans to set up a copper smelter next year with an annual production capacity of 200,000 tons of copper cathode, a company official said, quoted by Reuters.

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PT Nusantara Smelting Corp will build the smelter in Bontang in East Kalimantan with an investment of $850 million, said Juangga Mangasi, director of the locally owned firm.

The smelter will secure raw material from copper producers, such as the Indonesian unit of US mining group Freeport-McMoRan Copper & Gold, PT Freeport Indonesia, and the local unit of Newmont Mining Corp, which operates the Batu Hijau copper mine in Sumbawa island.

"The rest of the copper concentrate will be imported," Mangasi said.

Development of the smelter will start in the first half of 2009 and is expected to start operating in the second half of 2011, he said.

The smelter will be the second copper smelter in Indonesia after PT Smelting's smelter in Gresik, East Java. PT Smelting is 60.5% owned by Japan's Mitsubishi Materials Corp.

The new smelter project aims to be in place before a new mining law that will require mining products to be processed at home before they are exported, Mangasi said.

"We need to have proper infrastructure when the law is in place. Otherwise the domestic market will be flooded," he said.

The mining law, which has been in the works for several years and is being held up by a parliamentary committee, will require miners to turn raw ore into metal by setting up smelters or team up with a smelting firm.

The government said late last year it expected investment in geothermal and mining products to reach $1.55 billion in 2008, compared with $1.35 billion last year.

Antam to boost nickel sales as prices weakenState-owned miner PT Aneka Tambang on Friday revised its nickel sales target up by nearly 6% for this year from an earlier target to boost revenue as nickel prices soften, Reuters reported.    The company now plans to sell 18,000 tons of ferro-nickel this year, up 5.88% from an initial target of 17,000 tons, Antam president director Alwin Syah Loebis said in a statement.  "We plan to increase ferro-nickel sales in anticipation of lower nickel prices," Loebis said. Nickel prices at the London Metal Exchange have fallen about 22% so far this year on easing demand from stainless steel producers.  The company sold 17,723 tons of ferro-nickel in 2007.   Antam said sales of ferro-nickel in the first half of 2008 rose 18% to 8,570 tons from 7,268 tons in the same period last year.  Despite higher sales volume, the firm's revenue in the first six months of this year fell 7% to Rp5.570 trillion ($609.4 million) compared to a year ago.  Antam's gold sales volume rose 248% to 3,912 kg in the first half of this year compared to the same period a year ago. Revenue from gold sales increased by 219% to Rp1.072 trillion in the first half compared to Rp336 billion in the first half of 2007.

Timah H1 net profit up 42.3% Indonesia's biggest tin producer PT Timah said its net profit for the six months to June rose 42.3% from a

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year ago aided by higher sales and cost efficiencies, Thomson Financial reported.

The state-run miner booked a net profit of Rp1.11 trillion ($121.22 million) in the first half of the year, against Rp780.85 billion a year ago.

Sales increased to Rp4.20 trillion from Rp4.08 trillion a year ago.

It said that as a result of cost efficiencies, its gross profit rose to Rp1.93 trillion in the period from Rp1.48 trillion a year ago.

Operating profit also rose to Rp1.67 trillion from Rp1.27 trillion.

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