Trillions Spent to Fight Poverty: Govt.
The Indonesian government is taking new measures to alleviate poverty and unemployment in the country, says a senior minister.
Coordinating Minister for the Economy Boediono said Tuesday (1/5/07) that besides improving the investment climate, the government has introduced several crash programs to push annual economic growth to around 7%, similar to pre-economic crisis levels.
"The government has allocated trillions of rupiah to empower communities in all sub-districts and villages, and small and medium enterprises, to create more jobs in the informal sector. We have also accelerated the workers overseas program to send more migrant workers overseas," The Jakarta Post quoted him as saying while addressing the Inter-Parliamentary Union conference in Bali.
"To make these crash programs a success, the government has also carried out training programs for entrepreneurs and workers to improve their skills and allow them to gain added value."
Explaining revision of the tax law and the enactment of a new investment law, Boediono said the government wanted to attract more investors to help generate new jobs.
The government, working in close partnership with private and state companies, allocated Rp51 trillion this year to empower communities and help finance SMEs to generate more jobs.
The government also hopes to send at least one million semi-skilled workers annually overseas, and is targeting around $5 million in remittances.

ECONOMY
Inflation Falls, Hopes for Rate Cut
Inflation fell back in April by 0.16% on a month-by-month basis, bringing the annualized figure to 6.29%, down from 6.52% in March.
The fall increased speculation that Bank Indonesia (BI) will again trim its benchmark rate at its monthly meeting on Tuesday (8/5/07), with most observers predicting a quarter point cut to take the rate to 8.75%.
Vice President Jusuf Kalla was one who was pushing for a rate cut, repeating earlier comments that lower rates would be good for business.
Expectations of a cut helped buoy enthusiasm on the Jakarta Stock Exchange, with the exchange’s composite index hitting yet another new record at the close on Friday at 2,033.368 off an intra-day high of 2,042.537.

Last month, BI kept its key rate unchanged at 9.0%, in a move that surprised the market, with BI Governor Burhanuddin Abdullah stating that he was watching longer-term inflationary pressures both within and beyond Indonesia.
And while analysts say commodity prices may soon start to fall, there was no immediate sign of that happening, with good prices helping Indonesia maintain a strong trade surplus at $3.74 billion in March from $3.66 billion a month earlier. 
Exports rose 10% to $9.19 billion from $8.32 billion in February, while imports rose 17% to $5.44 billion from $4.66 billion in February. 
The rupiah rose to a four-month high on Friday (4/5/07), extending gains against the US dollar, closing the week at 9,010 per dollar, its highest level since January 9, according to Reuters, and while economists said the currency could gain another 2% by year end, the central bank was buying dollars to keep the rupiah stable.
Coordinating Minister for the Economy Boediono, discussing the country’s growth prospects, said investments totaling Rp1,180 trillion were needed next year to achieve the growth target of 6.7% to 7%, with 88% of that having to come from the private sector.
For this year, the government expects total investment to reach Rp958 trillion to achieve the economic growth target of 6.3%, he said.
There were encouraging signs that South Korea was keen on entering the infrastructure and energy sectors in a big way, and the local unit of India’s Essar said it was planning to build a steel mill in addition to earlier plans for a pellet factory in Kalimantan.
Yamaha Motor Co. also plans to raise motorcycle production capacity in Indonesia, its biggest market, by 20% as it aims to surpass Honda Motor Co. in the country, Bloomberg reported.

Yoshiteru Takahashi, president director of PT Yamaha Motor Kencana Indonesia, said the company plans to raise its annual capacity by 400,000 units to 2.2 million next year.
The government said it was moving to restructure five major state-owned enterprises, including giants PT Telkom and PT Pertamina. Minister for State-owned Industries Sugiharto also noted that financial performance at the SOEs was improving, reminding poor performers that they faced liquidation.

Indicators:
 

BUSINESS BRIEFS
MACROECONOMY
Timing Right for New Rate Cut - VP
The central bank should cut its key interest rate following lower inflation last month, Vice President Jusuf Kalla said on Friday (4/5/07), according to Reuters.
Central bank governor Burhanuddin Abdullah said on Wednesday there is still room to adjust the rate on lower inflation in April.  "The possibility of achieving the inflation target is getting bigger.  It seems there is still room for an adjustment of the BI rate.  Perhaps at the end of the year it could be 8.5%," Abdullah said.
Consumer prices fell in April from March and on-year inflation was lower than expected last month, Dow Jones Newswires reported.
The Central Statistics Bureau (BPS) on Tuesday (1/5/07) released data showing that the consumer price index fell 0.16% in April from a month earlier, a turnaround from a 0.24% rise in March.  From a year earlier, the CPI rose 6.29% in April, slowing from a 6.52% on-year increase in March.
A 5.16% fall in the price of rice was the main component that pushed the overall CPI lower in April, bureau chairman Rusman Heriawan said.  "The rice price factor contributed 0.37% to the deflation figure," Heriawan said.
Analysts had expected rice imports to boost domestic supply of the grain and ease upward pressure on inflation after flooding earlier this year pushed the staple's price higher.  "There is enough food supply, enough staple food and so prices have fallen, just like the year before," Roy Bahren, economist for Bank Niaga, told Reuters.
BPS also reported a stronger-than-expected trade surplus in March as global commodity prices remained high.
Indonesia's trade surplus rose to $3.74 billion in March from $3.66 billion a month earlier.  The numbers showed that commodity exports such as crude palm oil and natural rubber are still competitive, analysts said.
Exports rose 10% to $9.19 billion from $8.32 billion in February, while imports rose 17% to $5.44 billion from $4.66 billion in February.  Non-oil and non-gas exports rose to $7.641 billion from $6.86 billion a month earlier.
Crude oil exports rose to $686.7 million in March from $628.4 million the previous month.  Exports of petroleum products edged down to $191.3 million from $205 million.  Natural gas rose to $668.5 million from $628 million.
Non-oil and non-gas imports gained marginally to $3.584 billion in March from $3.580 billion in February.
Crude oil imports rose sharply to $668.6 million, compared with $382.7 million a month earlier, while imports of petroleum products increased to $827.6 million from $695.4 million a month before.

Rupiah at 4-Month High
The rupiah rose to a four-month high on Friday (4/5/07), extending gains against the US dollar, closing the week at 9,010 per dollar, its highest level since January 9, according to Reuters.
Dealers said last week's yen weakness was encouraging investors to sell the low-yielding Japanese currency in favor of higher-yielding ones, such as the rupiah, Indian rupee and the South Korean won.
Talks of a further cut in Indonesian interest rates have also boosted foreign demand for local bonds and given the rupiah rally momentum, analysts said.
Meanwhile, Citigroup Inc said the rupiah may decline another 2.2% by the end of the year as the central bank buys dollars, Bloomberg News reported on Thursday.
The currency may close the year at 9,250 per dollar as BI adds to its purchases of more than $3 billion in 2006, said Anton Gunawan, country economist at Citigroup Inc.  Foreign exchange reserves climbed to $49.2 billion on April 27 from $42.6 billion at the end of last year, a sign the central bank is seeking to weaken the rupiah to bolster exporters' overseas earnings.
“It looks like the central bank is very reluctant to let the rupiah strengthen much,” Gunawan said.  “They're limiting it within a narrow trading range.”
 “We want the rupiah to be stable at its current level,” BI Governor Burhanuddin Abdullah said.  “Small volatility is okay.  Big volatility in the rupiah is not good for business.”

Rp1.44t Bond Swap to Reduce Costs
Indonesia bought back Rp1.44 trillion ($158.6 million) of local-currency bonds maturing from 2008 to 2012 and sold the same amount of longer-term notes to lower its interest costs, the Finance Department said.
The government sold 10.25% bonds due in July 2022 at a price of 100.55 and a yield of 10.174%, the department said in a statement issued on Tuesday (1/5/07), according to Bloomberg News.  Investors submitted bids of Rp4.78 trillion for the debt on offer.
Tuesday's swap was the fifth this year.  The government last swapped debt on April 3 when it repurchased Rp2.63 trillion of short-term notes and sold the same amount of securities due in September 2025.
The government has been buying back higher-yielding debt to reduce its interest payments and lower its refinancing risk for more than two years.

International Reserves Rise to $49.15b
International reserves rose to $49.15 billion at the end of April from $47.22 billion at the end of March, central bank data showed on Tuesday (1/5/07), according to Reuters.
Bank Indonesia (BI) said on its website base money fell to Rp270.27 trillion ($29.75 billion) at the end of April from Rp272.24 trillion at the end of March.
Net claims on government declined to Rp195.87 trillion in April from Rp200.46 trillion the month before.

BI Awards Rp56.86t of 1-Month SBIs
Bank Indonesia (BI) said it has awarded Rp56.86 trillion worth of one-month BI Certificates (SBIs) at a fixed interest rate of 9%, XFN-Asia reported on Wednesday (2/5/07).  The auction absorbed all bids.

INVESTMENT
Rp1,180t Needed to Meet Growth Target
Indonesia requires an investment of Rp1,180 trillion next year to achieve the economic growth target of 6.7% to 7%, Coordinating Minister for the Economy Boediono said.
Of the investment needs, Rp141 trillion will come from both central and regional governments and the remaining Rp1,039 trillion, or 88%, from the private sector, he said, according to an XFN-Asia report on Thursday (3/5/07).
For this year, the government expects total investment to reach Rp958 trillion to achieve the economic growth target of 6.3%, he said.
About 13% of the investment needed this year will come from the government and the rest from the private sector, he said.

Strategic Alliance with S. Korea
South Korea has demonstrated its commitment to an Indonesian-Korean strategic alliance, says Trade Minister Mari Pangestu.
"They are not looking for incentives or special treatment.  All they are looking for is clarity, information and certainty," Pangestu said Tuesday (1/5/07) after concluding the first joint meeting between delegations from the two countries.
Pangestu said the strategic alliance differs from other bilateral cooperative ventures as it envisages concrete action, projects and programs without spending too much time debating policies, frameworks and other peripheral issues.
Korean Commerce, Industry and Energy Minister Kim Young Joo said that among the concrete actions that would be taken will be the signing of five memorandums of understanding (MoUs) between firms from the two countries.
The MoUs cover a project worth $1 billion for the construction of a railway and a port for the transportation and shipment of coal in East Kalimantan by two consortiums from the two countries; a joint investment for the production of infusions involving PT Indentrust Pharmatech and Partners Investment; a joint study on oil and gas exploration involving PT Pertamina, KNOC and SK Corp; cooperation for the development of a coal mine involving PT Tambang Batu Bara Bukit Asam and the Korea Resources Corp; and a direct coal liquefaction project involving PT Nuansa Cipta Coal Investment, Posco E&C and Kenertec Co.
Among the other topics discussed during the joint meeting were further collaboration with a view to identifying the locations for power, gas, and coal exploration and mining projects, establishing the Korean Investment and Trade (Kotra) Business Support Center, identifying priority infrastructure sectors, establishing the ICT Human Resources Center in Jakarta and paving the way for cooperation in building submarines and engines for armored vehicles.
"Other concrete actions concern the forestry field, where 500,000 hectares of land have been allocated for Korean investments in forestry plantation," Pangestu was quoted as saying by The Jakarta Post.  "On top of the 500,000 hectares, another 150,000 hectares of land will be available, with an estimated investment potential of $116 million."
She said that the Koreans are primarily interested in the infrastructure and energy sectors. 
Meanwhile, South Korea's Saman Corp said it will build a $1 billion dry port terminal with a railway track in Indonesia.  Company representative in Indonesia Kim Hyo Tae said the dry port, to serve as a container terminal, will be built in the Jababeka industrial estate in Bekasi tand will be linked to Jakarta's Tanjung Priok port with a railway, which will also be built by Saman Corp, Antara reported.

India's Essar Plans Java Steel Plant
PT Essar Indonesia, a member of India's Essar Group, plans to build a steel plant in West Java with production capacity of 2 million tons of billet per year, a senior industry ministry official said on Friday (4/5/07), Reuters reported.

This would be in addition to Essar's planned pellet factory in Central Kalimantan, said Ansari Bukhari, Director General of Metal and Machinery at the industry ministry.

"They are going to build an integrated steel factory which processes iron ore into pellet for steel manufacturing. They may set it up in Cilegon in Java," he told reporters.

Last November, Essar said it will invest $500 million to set up a factory in Central Kalimantan with capacity to convert 7 million tons of iron ore into 2 million tons of pellet.

Essar Indonesia is an affiliate company of Essar Steel Ltd. The company began commercial operations in 1997 and is one of the biggest producers of cold rolled steel in Indonesia.

Bhakti Investama Eyes Two More Airlines
Investment company PT Bhakti Investama, which acquired 50% of Adam Air last month, is eyeing two more domestic airlines -- Sriwijaya Air and Mandala Airlines.
Bhakti has in the past month sought to discuss possible acquisition of the two airlines in formal meetings, a company source told the Investor Daily.
The company wants to acquire at least 51% of Sriwijaya Air and hopes to take control of Mandala Airlines through conversion of a Cardig International debt, which owns 51% of Mandala.  Cardig's debt to Bhakti could be converted into shares.
Bhakti, through its subsidiary PT Global Transport Service, acquired 50% of PT Adam SkyConnection, the operator of Adam Air, on March 11.
Bhakti president Harry Djaja said the investment company wants to focus on the aviation business but refused to comment on its acquisition plans.  The company has also indicated interest in acquiring Batavia Air but negotiations between the two companies broke down.

Govt. Bonds Trade on SSX
Investors can now buy and sell government bonds on the Surabaya Stock Exchange (SSX), which previously only traded corporate bonds, The Jakarta Post reported.
Finance Minister Sri Mulyani Indrawati said that by allowing the exchange to trade government bonds, transactions would be more transparent, which would, in turn, give rise to fairer prices.
"As trading on the bourse is more transparent, investors will obtain fairer prices when buying and selling," Indrawati said Tuesday (1/5/07) at a ceremony marking the launch of government bond trading on the SSX.
Government bonds have so far been traded outside the bourse through a number of designated banks and securities firms.  Such over-the-counter trading is conducted bilaterally based on bargaining. 
As of April 27, the total value of tradable treasury bonds in circulation amounted to Rp422 trillion ($46.8 billion) and $7 billion, while the amount sold on the secondary market stood at Rp123 trillion, an increase from Rp112 trillion in January.

Daihatsu to Expand Production
Toyota Motor Corp's unit Daihatsu Motor Co plans to invest Rp1.2 trillion ($132.1 million) in Indonesia to boost its annual capacity to 150,000 units, Bisnis Indonesia reported on Tuesday (1/5/07).
The expansion is part of a plan to double capacity at PT Astra Daihatsu Motor, the carmaker's local distributor, to 270,000 vehicles a year by 2010.
The paper quoted Astra Daihatsu president director Hideku Nomura as saying the capacity increase is necessary to meet rising domestic demand and potential exports.  He said the expansion would take place in October.
Daihatsu has a production capacity of 114,000 cars a year, or about 9,600 units a month, but has had to increase shifts and working hours to boost monthly output to 13,000 units to meet demand.
Daihatsu has introduced a number of fuel-efficient models in Indonesia such as the Xenia mini-van and Terios small-SUV, which have won drivers since a big fuel price hike in October 2005.
Last year, the company increased its market share in country to 10.4% from 9.1% in 2005.

Hitachi Construction to Expand Bekasi Factory
PT Hitachi Construction Machinery Indonesia (HCMI) has set aside $45 million to increase production capacity at its heavy equipment factory in Bekasi, Antara reported.

HCMI Director A. Solichin said $25 million will be used to build a new production line for excavators with a weight capacity of 250 to 800 tons, increasing its production capacity to 30 units from 15 units a month.

The new production line is to be completed by the end of this year and will operational early next year, Solichin said.

The company will also expand its production capacity for excavators weighing 10 ton and 20 tons to 170 units from 150 units a month at present with an investment of $15 million.

Three Foreign Firms Build Rubber Factories
Three foreign companies have completed construction of rubber processing factories in the country, Antara reported.

Itochu from Japan built its factory in Jambi, Mardex Bhd from Malaysia in South Sumatra and Trans Corp. from Thailand in South Sumatra, executive director of the Association of Rubber Companies (Gapkindo) Suharto Honggokusumo said.

The factories were built to meet growing demand for rubber especially on the domestic market, he said.

Demand for natural rubber in the country totaled 355,000 tons last year exceeding the target of 250,000 tons, he said, adding this year, demand is forecast to rise further by 10%.

Meanwhile, PT Astra Agro Lestari plans to expand its rubber plantations by 100,000 hectares with an investment of Rp1 trillion ($111 million).

STATE CONCERNS
Govt. Likely to Import More Rice
Indonesia may hold another tender in the next few months to import more rice as production seems set to decline due to unfavorable weather conditions, The Jakarta Post reported.
State Logistics Agency director Mustafa Abu Bakar said Wednesday (2/5/07) that the government would decide in June whether or not to import more rice.
Bulog estimates that domestic rice production will amount to only 1.5 million tons this year, much lower than the 2 million tons targeted by the government.
"This is due to a delay in the onset of the harvest from January to March," Abu Bakar told reporters following a meeting chaired by Coordinating Minister for the Economy Boediono.
He said the delay in the harvest was due to the prolonged dry season and subsequent torrential monsoon rains that inundated vast areas of productive farmland.
The government has signed agreements with Thailand and Vietnam for the supply of 1.5 million tons of rice, 25% of which was shipped to Indonesia between January and March.
The government has been trying to increase national rice production by providing some 5,000 tons of free seeds to farmers.  It has also procured another 3,000 tons of seeds for the planting of new rice land this year as part of the rice production expansion program.
In anticipation of the expected drought, a number of regions in East Java are investigating ways of increasing water storage to ensure adequate supplies for the next planting season, he added.

Hike in Foreign Tourists Arrivals
Foreign tourist arrivals in Indonesia increased 14.21% in the first quarter of 2007 compared to the same period last year, according to data released by the Central Bureau of Statistics on Tuesday (1/5/07).
Most tourists were drawn to Bali, which enjoyed a 44.67% increase year-on-year to 363,686, the figures showed, according to Agence France-Presse.
The tourism industry will cheer the hike after experiencing a downturn in business in recent years amid security concerns on the island.
Nationally, 1 million tourists visited in the first quarter. In March, 361,760 tourists arrived throughout Indonesia, an increase of 12.25% from February.  Devastating floods hit the capital Jakarta in February, which could have adversely affected the month's tourist arrivals.

SOEs
Telkom’s Q1 Net Drops on Margin Squeeze
State telecommunications firm PT Telkom posted a 12% drop in first-quarter net profit as higher costs offset rising subscriber numbers, Reuters reported on Monday (30/4/07).
Telkom posted January-March net profit of Rp3.04 trillion ($335 million), versus Rp3.46 trillion a year ago.  Operating revenue climbed 22.8% to Rp14.5 trillion, helped by a strong performance from its mobile phone business.
Telkom blamed the quarterly net profit dip on implementation of a new interconnection tariff, which knocked its earnings before interest, tax, depreciation and amortization (EBITDA) margin down to 60% from 67% a year earlier.  "This new tariff scheme has resulted in an increase in revenue and, at the same time, an increase in expenses which has impacted the EBITDA margin percentage," it said in a statement.
Net profit fell despite a 44.3% increase in subscriber numbers, to 38.9 million, at mobile arm PT Telkomsel.
Telkom, valued at almost $24 billion, has not reported full-year 2006 financial results and will release details of its first-quarter results together with audited 2006 numbers.  Company commissioner Anggito Abimanyu has said unaudited 2006 net profit should be about Rp10.9 trillion.
Meanwhile, Telkomsel reported on Tuesday (1/5/07) an 8% rise in first-quarter net profit driven by a rise in subscriber numbers.
"Despite the intensifying competition, Telkomsel has sustained strong customer base growth in the first quarter of 2007," the firm said in a statement.
Telkomsel's customer base grew 44% from a year ago, with its network capacity increasing to 41.9 million connections from 28.9 million.  But average revenue per user (ARPU) fell 10% from a year ago, it said, as the firm penetrated more low-income groups.
Telkomsel's revenue climbed 26% to Rp8.2 trillion but a sharp increase in operating expenses cut its EBITDA margin to 69% from 73%.
Telkomsel is also planning to issue Rp2 trillion ($211 million) in bonds in the third quarter of the year to help finance its capital expenditures for 2007, Dow Jones Newswires reported.
Telkom president director Rinaldi Firmansyah said Thursday (3/5/07) that Telkomsel is also seeking bank loans to help finance a $1.5 billion plan to develop its cellular business.
He did not say how much the company would borrow through bank loans but did say Telkomsel will also use its internal cash to cover the capital expenditures.
Telkomsel expects to have up to 56 million cell phone subscribers this year, up from 36 million subscribers by the end of 2006.

Semen Gresik’s Q1 Net Profit Up 14.8%
State-owned cement company PT Semen Gresik posted an increase of 14.8% in first-quarter net profit to Rp329.9 billion compared to the same period last year, owing to its success in using coal instead of expensive oil as fuel, Antara reported on Thursday (3/5/07).
The country's largest cement maker recorded sales at Rp2.2 trillion from the sales of 3.93 million tons of cement, including exports.
The country's second largest producer, Indocement recorded a decline of 31.6% in net profit to Rp112.5 billion while Holcim Indonesia posted a loss of Rp14.48 billion from a net profit of Rp219.91 billion.
The decline in net profit was attributed to foreign exchange losses and rising production costs with the surge in fuel oil prices.

PRIVATE SECTOR
Gudang Garam Q1 Net Profit Jumps
The country’s largest tobacco company, PT Gudang Garam, reported on Monday (30/4/07) a 58% jump in first-quarter net profit on the back of lower costs and operating expenses.
The company, controlled by the Wonowidjojo family, saw its net profit soar to Rp404.3 billion ($44.55 million) in the three months ended March 31 from Rp255.8 billion a year ago, Reuters reported.
Sales climbed only 5.7% to Rp6.48 trillion while operating profit jumped 24.6% to Rp703.1 billion.
Subsiding inflation, which hit around six-year highs in late 2005 after the government hiked domestic fuel prices, is helping the country's consumer sector, including tobacco firms, this year.
Cigarette production in Indonesia rose 64.45% year-on-year in February, after a rise of 31.4% expansion in January.  Production only grew 5% last year.
Indonesia's $8 billion tobacco industry supports about 7 million people and accounts for about 10% of the country's tax revenue.
Gudang Garam has been facing strong competition from number two PT Handaya Mandala Sampoerna, and briefly lost its top spot in December and January, industry data showed.  Philip Morris International, the tobacco arm of Altria Group, controls nearly 100% of Sampoerna.

Toyota to Restructure Production in Asia
Toyota Motor Corp plans to start shipping cars to Southeast Asia from Taiwan by June and increase Indonesian exports to Africa and the Middle East as part of efforts to improve output in Asia, The Nikkei reported, without citing its sources.
In Indonesia, Toyota will boost exports of such models as the Avanza minivan as part of plans to raise exports by 130% annually to about 40,000 vehicles in 2007, targeting mostly Africa, the Middle East as well as Central and South America. 
Toyota's vehicle sales in Indonesia rose 26% in April to 12,117 units from a year ago, head of sales at PT Toyota Astra Motor, Jodjana Jody, said Thursday (3/5/07), according to Reuters.
Toyota's sales in the first quarter of 2007 dropped by 11.6%, partly due to floods that hit Jakarta and some other areas disrupting sales, while overall industry sales in the first three month rose by 6.42% from a year ago.

Personal Computer Sales Jump in 1Q
Sales of personal computers in the first quarter jumped 23% over the same period last year, reaching a total of 360,500 units, Antara reported.

The increase was sharper in notebook sales, which shot up 60%, market analysts said.

"Strong demand for notebooks and server X-86 drove the market growth," Erica Gadjuki, a researcher from Gartner Inc said.

Hewlett-Packard still led other vendors followed by Acer, Dell, Lenovo and Zyrex. The five brands dominated 40% of the computer market in Indonesia.



POWER
President Launches C. Sulawesi Projects
President Susilo Bambang Yudhoyono officially launched the steam-powered electricity generating station in Mpanau sub-district, North Palu, the Palu Bay bridge and the Hanga-Hanga hydro-power station in Banggai regency during his visit to Central Sulawesi on Thursday (3/5/07).
The construction of the Palu steam-powered station began in December 2004. The first stage of construction, called Unit I and built with a capacity of 15.5 MW, was completed in February 2006, while Unit II will be completed in July this year.
The power station is being built by Shandong Machinery I & E Group Corporation and PT Adhi Karya Indonesia at a cost of Rp275 billion. The coal-powered station is run by PT Pusaja Jaya Palu Power, a wholly-owned private corporation.
During the official launching ceremony, Dr. Yudhoyono told state-owned power company PLN that it needed to produce an additional 10,000 MW of power capacity over the next four years.
The country's total power output at the moment is around 25,000 MW, which is not enough to meet the rapidly growing industrial and household demand.
According to Dr. Yudhoyono, power generation should be spread evenly across the country and not only focused in certain cities or islands, although he added that power generation was not simple and that it needed more time. "I appeal for all the people of Indonesia to be patient," said Yudhoyono.
He also urged the public to conserve energy while waiting for the completion of the power projects.

Hess Starts Gas Supply for E. Java Plant
US oil and gas producer Hess Corp. has started supplying gas from its Pangkah field to a power plant in East Java, at an initial rate of 20 million cubic feet per day, a company official said on Thursday (3/5/07).

In 2004, Hess signed a deal to supply state power firm, PT Perusahaan Listrik Negara (PLN), with 100 million cubic feet per day of natural gas from the field for 20 years, worth around
$2.19 billion.
"We have got a first well drilled...we are drilling initially four gas wells to produce 100 million cubic feet per day. That will be happening over the next couple of months," Reuters quoted Colin Munro, Hess Indonesia president and general manager, as saying.

Hess is supplying the gas from its offshore Pangkah gas block in East Java via a 39 km pipeline. The contract is part of PLN's plans to slash oil use in its generators because of high global oil prices.

PLN, which has a monopoly over electricity supply, will need 8 million kilolitres (kl) of oil products this year, down from an estimated 9.2 million kl in 2006 as it tries to cut back on oil use.

The figure is still higher than a forecast last year for 2007 demand of 7.4 million kl.

Malaysia's Zelan Bidding for 2nd Project
Malaysia's Zelan Holdings is bidding for another $571 million power plant project in Indonesia, a report said Sunday (29/5/07).
In February, a Zelan-led consortium won a $606 million project to build a coal-fired power plant in Rembang in Java.
Zelan chief executive Albert Chang was quoted by The Edge daily as saying that the company has tied up with China's Dongfong Electric Corp. to bid for a second 600 MW power project at Tanjung Jati, also in Java.
The Rembang and Tanjung Jati projects are part of the Indonesian government's program to build more plants that has attracted bids from established Korean, Chinese and Japanese consortiums, the report said.
Chang was quoted by The Star as saying that Zelan viewed Indonesia as an exciting market, with at least 10 new plants with a combined capacity of 7,000 MW to be built in Java this year. Five of the projects, including the one in Rembang, have been awarded, he said.
Indonesia is also planning another 25 new power projects outside Java this year, with total capacity of about 10,000 MW, he said in the report.

OIL & GAS
LNG Export Shortfall Seen Ending in 2010
A shortfall of liquefied natural gas (LNG) exports from the Bontang complex will end in 2010 when a sales contract expires, an official at the energy ministry said on Friday (4/5/07).

Indonesia has failed to meet all of its long-term contractual commitments for a number of years due to depletion of its gas fields and higher domestic demand, tightening the LNG market and driving up prices.

"One export contract from Bontang will expire in 2009, that will give a positive supply and demand gas balance in East Kalimantan in 2010," the official, who declined to be identified, told Reuters. "It is expected to end the export shortfall from Bontang," the official added.

He did not identify the contract, but Indonesia has said it will not extend 1.5 million tons of annual LNG contracts to Taiwan's Chinese Petroleum Corp. (CPC) beyond 2009.

Mines and Energy Minister Purnomo Yusgiantoro on Friday said East Kalimantan natural gas supply would be at 3.2 billion cubic feet per day (cfd) in 2010, while contracted demand would be 3.1 billion cfd.

In 2007, gas supply is forecast at 3.2 billion cfd in the area, against contracted demand of 3.7 billion cfd. Most of the gas is supplied to the Bontang plant for LNG and a small portion to a local fertilizer firm.
"However, Indonesia will still experience LNG export shortfalls in 2007, 2008 and 2009. Indonesia will negotiate with the buyers whether the shortfall can be dropped," Purnomo told reporters.

"If it cannot be dropped then Indonesia should find LNG supply from other countries such as Oman for resale to the traditional buyer," he said, without elaborating.

Foreign, Local Firms to Bid on Coalbed Methane Fields
Eight foreign and local companies will take part in the country's first-ever exploration and production tender for coalbed methane (CBM) gas in August this year, The Jakarta Post reported on Monday (30/4/07).
The Energy and Mineral Resources Ministry's director for the upstream oil and gas industry, Priyono, said the companies would include Australia's third largest oil and gas producer, Santos, US-based Vico, Indonesian state oil and gas company Pertamina and Medco Energi Internasional, the country's biggest publicly traded oil company, and gas distributor Perusahaan Gas Negara (PGN).
The tender will be conducted on a direct offer basis, with companies having carried out a feasibility study to be given priority, he said.
CBM fields to be tendered are located in South Sumatra and in Barito, South Kalimantan. They are estimated to have deposits of 183 trillion cubic feet and 101.60 trillion cubic feet of gas, respectively. These two areas are believed to hold the largest CBM deposits in the country.
"Pertamina will sign with us in May, as they started the project earlier, while other investors will have to wait four more months to finish their studies," Priyono said.
Pertamina and its partner Ephindo have been conducting a joint study on a CBM block in South Sumatra and Jambi since the end of 2006.
Energy and Mineral Resources Minister Purnomo Yusgiantoro has called on oil and gas companies to begin investing in the coalbed methane sector.
Indonesia has the largest CBM deposits in the world after China, with estimated total reserves of 453 trillion cubic feet, or the equivalent of about 81.5 billion barrels of oil.
If it was able to tap these reserves, Indonesia could meet its gas export commitments while at the same time filling rising domestic demand.
The government recently said it was reviewing its liquefied natural gas export policy amid an increase in gas demand at home. The government hopes to attract up to $2.5 billion in investment to develop 90 CBM wells expected to produce up to 100 million cubic feet of gas per day by 2014.

Pertamina, S. Korean Firms Sign Exploration Deal
State oil firm Pertamina and two South Korean firms have signed a preliminary deal to jointly explore oil and gas blocks, the president of Pertamina said on Tuesday (1/5/07). The South Korean firms are state-run Korean National Oil Corp. and SK Corp.
South Korea is keen to get access to global energy resources to power its energy hungry economy, while Indonesia needs investment and technology to open up new fields.
"We will conduct join exploration with those firms in Indonesia. We plan to bid for new exploration areas," Reuters quoted Pertamina's president director Ari Soemarno as saying. "We will also offer them possible exploration in Pertamina's own areas," he said.
Soemarno said the firm had a combined 141,000 sq km of exploration area where foreign firms could cooperate. "The areas owned by Pertamina are promising but we need funds and technology to develop them," he said.
KNOC is involved in exploration in the Wokam block offshore Papua but its exploration contract will expire this year. "KNOC wants the Indonesian government to consider extending the contract for that block," said Doo-Yul Hwang, KNOC's president and chairman.
Luluk Sumiarso, Director General of Oil and Gas at the energy ministry, said he would evaluate the Wokam block development to decide whether to extend the contract. "If there were no mistakes during the previous exploration contract, then we will consider (an extension)," Sumiarso said.
Initial estimates indicate the Wokam block has 671 million barrels of oil reserves, oil watchdog BP Migas has said. If reserve estimates prove accurate, the block would top the Cepu oil and gas project in East and Central Java, which is estimated to have recoverable reserves of up to 600 million barrels.

Free Gas Stoves for Millions of Poor
Indonesia will distribute gas stoves to more than four million poor households this year in an attempt to soften the blow of a planned cut in the kerosene subsidy, a report said Friday (4/5/07).
The government has announced it will cut the subsidy, costing Rp40 trillion ($4.4 billion) annually, in 2008 to reduce its enormous fuel subsidy bill amid recent record global oil prices, the report said.
The resulting price jump is expected to impact on millions of impoverished people who use kerosene for cooking, and could trigger protests.
State oil and gas company Pertamina has commissioned the production of 4.5 million small stoves, each with a filled bottle of gas, to be rolled out to households in stages this year, Antara said. "In the initial step, we will distribute 380,000 units to households in Jakarta and surrounding areas on May 8," Pertamina president director Ari Sumarno said.
Another one million households in Central and East Java will receive, later this month, the same package. At $6 each, the packages are expected to cost the government $27 million.
A government study late last year found 39.05 million people out of a population of 220 million live below the poverty line. Many of those use wood as fuel for cooking.

Sinar Mas, Fulcrum to Build Biofuel Plant
The Sinar Mas Group has signed a deal with U.S. energy firm, Fulcrum Power Services, to build a biodiesel plant with an initial capacity of 400,000 tons a year, a company official said on Friday (4/5/07).

The plant will be built in Dumai on Sumatra and should start producing fuel next April, Danny Jozal, the alternative energy chairman at Sinar Mas, told Reuters by telephone.

The plant is expected to cost $60 million and capacity may be raised to 1 million tons from an initial 400,000 tons, he added.

The official said one of the diversified group's units, PT Bio Energi Mas, signed the joint venture on Thursday with Houston, Texas-based Fulcrum. "Sinar Mas has a 50% share in the joint venture company. It will process palm oil, olein, and stearin to biodiesel," Jozal said, adding it may also process jatropha, a shrub with oil-bearing fruits.

In late March, the company said that it would build a second plant in Malaysia's Lumut. But Jozal said it was still evaluating the plan.

Sinar Mas Group has joined several Indonesian companies that have announced plans to build biofuel plants, mostly palm-oil based biodiesel, including PT Asian AGri and PT Bakrie Sumatra Plantations , to tap global interest in biofuels.

In January, the group's palm oil unit, PT Smart, signed an agreement with Chinese oil major, CNOOC, and Hong Kong Energy Ltd. for a $5.5 billion investment to produce biofuel in Indonesia.

Korea Gas Eyes Tangguh’s 3rd LNG Train
Korea Gas Corp is considering investing in the third train of Indonesia's Tangguh construction to secure supplies of LNG from the project, a Kogas official told Platts Commodity News Monday (30/4/07).
Tangguh, in Papua, is due to produce 7.6 million tons of liquefied natural gas a year from two plants, or trains, with output expected from the fourth quarter of 2008.
"We want to participate in the new LNG project at Tangguh. We will import as much LNG as Indonesia can export," said the Kogas official who was participating in a bilateral meeting on the energy sector between the two countries in Jakarta. He declined to put a figure on the investment.
Kogas currently imports 5.3 million mt/year of LNG from Indonesia. The BP-led Tangguh project is setting up two liquefaction trains to produce at least 7.6 million mt/year of LNG starting in late 2008. It is based on 14.4 Tcf of proven gas reserves in three neighboring production sharing contracts.

CAPC to Build $40M Facility
The country's largest petrochemical company PT Chandra Asri Petrochemical Center (CAPC) will build another naphtha cracking unit this year with an investment of $40 million, Asia Pulse reported on Monday (30/4/07).
The additional facility is expected to increase its installed production capacity for polyethylene from 520,000 tons to 590,000 tons a year. Naphtha is used as a basic material for polyethylene, a feedstock for benzene.
CAPC secretary Suhat Miyarso said the new facility and the recent acquisition of PT Styrene Monomer, the country's only producer of ethyl benzene and styrene monomer, would make CAPC a greater integrated petrochemical company.




MINING
Govt. Approves 2 More Tin Export Permits
Indonesia has approved export licenses for two more tin smelters, taking the number of smelters allowed to export the metal to 12, a senior trade ministry official on Friday (4/5/07).
"We approved two more tin export permits on Wednesday. One of them is for PT Prima Timah Utama," Aang Kanaan Adikusumah, director of mining exports at the Trade Ministry told Reuters.

PT Prima Timah Utama is the largest independent smelter on the island of Bangka, with capacity of 1,400 tons per month, said a source in the Indonesian tin market.

Metals traders have been closely watching Indonesia, the world's second largest producer, after a government crackdown on illegal mining last October which shut dozens of small independent smelters on Bangka.

Tin prices at the London Metal Exchange have fallen around $1,000 from the contract high of $15,100 per ton they hit on April 18, as the market has expected supply to increase as more licenses are granted.

Indonesia has applied stringent rules for tin exports, including producing refined tin with a minimum purity of 99.85% and providing proof of royalty payment.

PT Timah Q1 Tin Profit Jumps 26 Times
Tin major PT Timah posted net profit of Rp314.3 billion for the first quarter ended March 31, 2007, 26 times higher than that of the same period in 2006 of Rp11.6 billion, the company said in its latest quarterly report on Wednesday (2/5/07).
According to Platts Commodity News, Timah attributed the higher net profit to higher production and sales volume, higher price of tin received, and lower increased cost of goods sold compared to the increased revenues.
Average tin price received by the company during the first quarter of 2007 was $12,635/mt, or 66% higher than the average price received in the same period of 2006 of $7,629/mt.
Meanwhile, the exchange rate of the US dollar to rupiah received by the company was 2% lower at Rp9,134 per US dollar compared to Rp9,329 per dollar year-on-year.
Sales volume of refined tin during the first quarter of 2007 amounted to 14,554 mt, 51% higher than 9,614 mt a year ago. Higher sales volume of refined tin during the first quarter of 2007 at 14,350 mt was in line with higher production of refined tin. Q1 2006 output was 9,688 mt.
Total production of tin-in-concentrate during the first quarter of 2007 jumped 136% to 22,329 mt from 9,455 mt in the first quarter of 2006. Higher production was mainly due to availability of procured tin-in-concentrate which amounted to 20,230 mt, or 201% higher compared 6,717 mt in Q1 2006.
Meanwhile, tin-in-concentrate production from dredges operation was 23% lower to 2,099 mt from 2,738 mt in the same period last year. Higher production of tin-in-concentrate compared to production of refined tin resulted in significant increase in tin-in-concentrate inventories at the end of the first quarter this year. Stocks totaled 19,567 mt at the end of Q1 2007, up from 3,796 mt year on year.
Sales revenues totaled Rp1,859.9 billion in Q1 2007, up 130% from Rp809.8 billion in Q1 2006.

United Tractors Acquires Coal Mining Firm
Publicly-listed heavy-duty equipment company PT United Tractors (UNTR) through its subsidiary PT Pamapersada Nusantara (Pama) has acquired 99% of Dynamics Acres Sdn Bhd (DASB)'s stake in coal mining firm PT Dasa Eka Jasatama (DEJ) at the maximum price of $19.50 million, a spokesman said.

"Part of the transaction's value, namely $14.40 million, will be paid in advance in the form of a bank guarantee which DASB can cash subject to conditions stipulated in a shares sale
agreement," UNTR vice president director Djoko Pranoto told the Surabaya Stock Exchange on Friday (4/5/07).

He said the transaction was subject to terms and conditions contained in a Shares Sales Agreement (SSA) signed by the concerned parties last April 30 and to become effective after
all conditions precedent set in the SSA had been fulfilled.

If the conditions in the SSA could be met within nine months Pama would obtain the DEJ stake and own all DEJ shares indirectly. "As part of the agreement, Pama will help repay DEJ's
obligations to third parties totaling $11 million," Pranoto said.

He said the signing of the SSA was part of Pama's comprehensive plan to settle DEJ's claim and previous acquisitions of mining concessions and a coal marketing firm.

Straits Asia Secures Coal Mining Rights
Singaporean-listed Straits Asia Resources Ltd said on Friday (4/5/07) it has secured additional mining rights over a large coal tenement in Central Kalimantan.

The site is adjacent to BHP's Maruwai Coal Project, which hosts a world-class deposit of high quality coking coal and is currently being brought into production, it said.

Straits Asia Resources chief executive David Toms said the acquisition of a new mining concession in Indonesia is in line with the group' strategy of widening its operating base beyond
the Sebuku Coal Operation.
"The new project area is potentially very exciting as it forms part of a region that looks set to underpin the next wave of coal supply growth from Indonesia," Toms told XFN-Asia.

Inco Q1 Net Profit Jumps Fivefold
PT International Nickel Indonesia (Inco), a unit of CVRD Inco Ltd, said its first quarter to March net profit jumped more than fivefold year-on-year to $227.78 million, aided by higher nickel prices.

"Inco's excellent results in the first quarter reflected attractive market conditions, strong operating performance and effective management strategies to address much lower-than-average rainfall from September 2006 to February 2007," Inco president and CEO Arif Siregar told XFN-Asia on Friday (4/5/07).
Inco said its realized nickel price during the quarter averaged at $29,149 a ton compared to $11,136 the year before, while its nickel output reached 17,980 tons in the quarter compared to 17,361 tons in the previous year.

As a result of the higher nickel prices, sales jumped to $446.72 million in the quarter from $181.90 million the previous year, and the operating profit rose to $307.15 million from $63.85 million previously.

Siregar also said management believes the company will be able to achieve the upper end of its production target for this year of 70,307-74,843 tons.

Banpu to Launch IPO for Indonesian Unit
Thailand's largest coal miner, Banpu PCL, said Wednesday (2/5/07) it would launch an initial public offering (IPO) for its Indonesian subsidiary in a bid to expand its operations.
Banpu expects to generate up to $300 million by listing PT Indo Tambangraya Megah on the Jakarta Stock Exchange in the second half of this year, the company said in a statement.
Sales from Banpu's Indonesian unit alone account for some 90% of the Thai company's total revenue and the IPO is part of Banpu's efforts to boost coal mining business in Indonesia, it said.
Banpu owns a 95% stake in PT Indo Tambangraya Megah, which runs five coal mines in Indonesia.

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