Highlights
Politics
·         South Korea and Indonesia agree to nurture a ‘strategic partnership’
·         Sukhoi jet fighters ready in 2008
Regions
·         Campaigning ends peacefully before regional elections in Aceh
·         A gas operator agrees to pay full compensation for mudflow victims
Economy
·         Central bank drops benchmark rate to 9.75%
·         Investment approvals up, though realizations slow
Business briefs
Macroeconomy
·         Higher growth predicted for next year
·         Investors swap government debt for longer-term bonds
Investment
·         Tax cuts to start January 1 for range of industries
State concerns
·         Rubber producers urged to rein in exports
·         Japan to cut marine product duties as part of agreement
SOEs
·         State pension fund Jamsostek to invest in workers’ housing
·         PT Krakatau Steel wins export finance facility from S. Korea
Private sector
·         Textile exports set to rise 10% next year to $10 billion
·         Vehicle sales start to move forward on lower interest rates
Banks
·         New lending rises 9% in first 10 months
Power
·         International Atomic Energy Agency backs nuclear plans
·         Chinese companies sign up for two new power plants
Oil & gas
·         Pertamina plans cooperation with S. Korea on refinery expansion
Mining
·         Coal deposits total 19 billion tons

POLITICS
Closer Links with South Korea
South Korea and Indonesia, agreeing to nurture a "strategic partnership," have vowed to establish closer energy and economic links.

A series of agreements were signed on Monday (4/12/06) in Jakarta by President Susilo Bambang Yudhoyono and South Korean President Roh Moo Hyun. Roh said he hopes South Korea will be able to play a role in Indonesian nuclear-energy development, and that a recent bilateral agreement on peaceful use of such energy will be a cornerstone for cooperation.
According to a declaration signed by the two presidents, Seoul and Jakarta will launch a feasibility study on cooperation in developing a nuclear-power plant in Indonesia. Jakarta has set a deadline of 2010 for the start of construction on the country's first nuclear plant.

Indonesian Minister of Energy and Mineral Resources Purnomo Yusgiantoro said recently he expects the plant to begin operation by 2017 and hopes nuclear power will contribute 4,000 MW to the country's electricity grid by 2025.

Monday’s joint declaration said Korea Electric Power Corp. is interested in investing in a plant in Bojonegara, Central Java. Roh said in a speech that while the two nations have a trade balance that is "lopsided" in Indonesia's favor, South Korea will seek to increase its exports rather than restrict imports.

Indonesia ran a $4.2 billion trade surplus with South Korea in 2005. Total trade between the two countries was up 47% to $9.9 billion that year, according to data from the Indonesian Chamber of Commerce.
Roh's comments reflect solid growth in Indonesian exports, which Yudhoyono has said will likely reach $100 billion this year, up from $85.7 billion in 2005. Roh said South Korea also sees opportunities to supply equipment to Indonesia's armed forces, and to invest in infrastructure projects.
Indonesia and South Korea will seek to begin consultations on "a renewal or increase of the contract amount" of a bilateral currency-swap deal of up to $1 billion that will expire at the end of 2006, the declaration said.
The currency-swap arrangement is in line with the Chiang Mai Initiative, set up following the 1997-98 Asian financial crisis to help cash-strapped countries defend their currencies in times of crisis, and forged by the Association of Southeast Asian Nations, Japan, China and South Korea.

Sukhois Ready in 2008
The Indonesian Armed Forces (TNI) says that it hopes to have a fully-operational squadron of 10 Sukhoi twin-engine jet fighters by 2008, with Russia pledging $1 billion in credit for the purchase of the planes and other military hardware.
"We have four Sukhoi jet fighters now and we hope that with the new agreement, we can have a full squadron in two years, Defense Ministry secretary general Syafrie Syamsuddin told Antara.

Indonesia plans to buy six more jet fighters from Russia through the credit facility that Syamsuddin signed in Moscow on November 30.  The deal was finalized shortly after President Susilo Bambang Yudhoyono met with Russian Prime Minister Vladimir Putin to sign several agreements, the most important of which was on military cooperation.

Indonesia also plans to buy 10 MI-17 U-5 troop-carrying helicopters and five combat choppers through the loan scheme. It will also purchase two submarines, 20 amphibious tanks and anti-aircraft missiles for its navy.
Syamsuddin said Indonesia would need $1.3 billion for arms procurement between 2006 and 2010. "We will try to get the remainder from the Finance Ministry with the National Development Planning Board's recommendation," he said.
 

REGIONS
Peaceful End to Aceh Campaign Period
The campaign period for the Aceh elections ended on Thursday with 158 cases of administrative and criminal violations but no serious violence occurred during the process, surprising political analysts and more than 100 international observers in the province since late last month.
From the 158 cases, 109 administrative cases have been handed over to the Independent Election Commission (KIP) while 19 criminal cases have been forwarded to the police. The other 23 cases cannot be followed up due to lack of evidence, Aceh Election Monitoring Committee’s chief of communications, Bukhari AY told Antara on Thursday (7/12/06).
 
The criminal cases include assault and two hour-long kidnappings of campaigners, vandalizing of campaign materials, a heated spat at an open discussion between candidates and other crimes, said Bukhari.
Despite the number of violations, the run-up to the December 11 polling day, from voter registration to campaigns, has been largely free from conflict. “During the campaign, we did not see followers of different political options clash,”  said Paul Rowland, senior resident director for the Washington-based National Democratic Institute.
Marcus Mietzner, political analyst and long-term Indonesia watcher at Australian National University, attributed the violence-free campaign to the success of the peace process.
In a related development, the Washington-based International Foundation for Election System (IFES) issued its latest survey on Monday showing 70% of Aceh’s 2,632,935 voters are very likely to vote, up from the organization's findings of 56% in late September.
According to the survey, 68% of Acehnese believe the elections will be completely or mostly fair and honest, up from 60% in September. Only 6% did not think it will be fair and honest, while the rest had no opinion.
On Saturday, President Susilo Bambang Yudhoyono reminded candidates and the voters that the first-ever regional elections on December 11 should not spoil peace in the province.
"I hope the elections in Aceh can be carried out fairly, orderly and democratically without disturbing the peaceful situation which is now being felt and enjoyed by the local people," Antara quoted the president as telling Acehnese worshipers at the Istiqlal mosque in Jakarta.
"Whoever elected governor, deputy governor and the district heads in Aceh should realize that the authority and leadership entrusted to them is a test and a trial in their bid to carry out Herculean tasks set before them," Dr. Yudhoyono said.
Lapindo to Pay Mudflow Settlement Demand
The management of PT Lapindo Brantas on Monday (4/12/06) agreed to pay compensation for the victims of the mudflow disaster at the site of its operations in Sidoarjo, East Java, fully meeting the demands of the victims, reported Antara.
According to the settlement each land owner who was affected by the mudflow will receive Rp1 million ($92) per square meter of land and an additional Rp1.5 million per square meter for any building on the land.
The company will also pay Rp120,000 per square meter for destroyed rice fields. Lapindo representatives said the price was based on the victims’ demands and by considering the economic, social and psychological impact caused by the disaster, which is why the compensation far exceeds the normal market value of the land.
The company also agreed to assign an independent team to document, distribute and verify the compensation process so it will be finished before two-year house lease contracts given by the company to the victims who lost their homes expire, said EMP’s vice president Yusuf Martag. “This is based on our social awareness and moral responsibility,” he added.
Indonesia Hopes to Control Haze in 2 Years
Indonesia hopes to see a major improvement in the annual haze problem and control it within the next two years after introducing tough new methods to tackle the problem such as seizing land hit by suspicious fires and raising the water level in peat areas to reduce the chance of blazes, Environment Minister Rachmat Witoelar told a lunch hosted by the Jakarta Foreign Correspondents' Club on Monday (4/12/06).
"The strategy is not for dousing the fires but to prevent them from happening," he said.  
Witoelar said police would seize any land which was burned and would prevent plantation owners from illegally expanding their lands by holding them responsible for any fire on their property, whether they started it or not, which may lead to the government confiscating the land.
The minister remarked that the "policy has yielded results" since it was introduced in August, pointing to Riau province where "the hotspots have been reduced very drastically" even before the start of the rainy season.
Deep-seated peat fires could not be tackled by aerial spraying so the ministry was planning to dam irrigation channels and ditches to raise the water level in affected areas so the peat would not burn so readily. "We expect to have a decrease of 30-40% of happenings there, which I think will cut down on the total size of the burnings we've experienced in previous years," he said.
Despite the new measures, the minister said he would need another two years to tackle a problem which dates back 30 years. The government has said around 90% of this year's fires have been extinguished, but Witoelar said previously he feared they could flare again should dry El Nino conditions intensify.
Bandung Announces Plans for Int’l Airport
West Java has announced plans to build an international airport in Kertajati, Majalengka regency, some 100 km east of the provincial capital Bandung.
The announcement was made Friday (8/12/06) by Governor Danny Setiawan at the provincial council building. He said the Rp25.4 trillion airport had been discussed since early this year with President Susilo Bambang Yudhoyono.
In addition to providing a boost for exports, the governor said the new airport would help ease traffic at Soekarno-Hatta International Airport.  "Soekarno-Hatta cannot be expanded any further due to space limitations. I want some of the activity in overloaded Jakarta to be pulled to the east to help stimulate investment here," Setiawan was quoted as saying by The Jakarta Post.
Foreign investors from China, England, Germany, Japan, Malaysia and Singapore have expressed interest in the planned 1,800-hectare airport, which would have a 3,500-meter runway.
Setiawan said the West Java administration had received the principal permit for the airport's construction from the Transportation Ministry. West Java is currently served only by Husein Sastranegara airport, but it can no longer be expanded due to its location in central Bandung. 
The head of the Development and Management Cooperation Body for the planned airport, Iwan Dermawan Hanafi, said work on the project was planned in stages. He also said support facilities and the area surrounding the airport would be developed simultaneously. Development will include residential, recreational, business and industrial areas.
"Our target is to have the airport operational in 2010," Iwan said. After the first phase of the airport's construction is completed, an additional 9.8-hectare passenger terminal will be built in 2020, as well as a 2.6-hectare cargo terminal, he adds.
ECONOMY
Benchmark Rate Drops to 9.75%
A long-standing goal of both the government and Bank Indonesia for the year was achieved on Thursday (7/12/06) with the decision by the central bank to drop its benchmark interest rate to 9.75%.
The board of governors of the central bank said in a statement that while lower inflation had been a major factor in the decision to lower the rate, the governors had also taken into consideration the need to “maintain positive perceptions among economic actors, support improvement in the business climate and ensure stability on the financial market.”
The bank also noted improved domestic macroeconomic conditions, “reflected in a hefty balance of payments surplus, steady decline in inflation, stable yields on rupiah instruments and minimum external risks.”
Lower rates were already boosting consumer spending. Toyota said on Tuesday its vehicle sales in Indonesia jumped 11.8% last month from a year ago, signaling a recovery in the sector, which had been badly hit by high interest rates and fuel prices.
The Investment Coordinating Board (BKPM) said approvals of foreign investment applications were up by 18% over the same period to $13.88 billion compared to a year ago, while domestic investment approvals nearly tripled to Rp157.5 trillion.
However realizations were down, partly because of higher costs associated with last year’s sharp rise in fuel prices, said the head of BKPM, Muhammad Lutfi in a hearing with a House of Representatives commission.
"The investment commitments have actually begun to rise again in 2006," Lutfi said.  "And with the recent improvements in our macroeconomic situation, we expect investment to continue growing in 2007."
Lutfi said separately that 5% tax breaks would be given for six years to investors in the flavor industry, textiles and garments, pulp and paper, chemicals, rubber and rubber products, porcelain goods, iron and steel, metal, machinery, land transportation, electric motors, ships and ship repair.
Russia’s Alfa Group said it plans to invest up to $2 billion in Indonesia's telecommunications sector as well as other sectors, while Egyptian cement producer and construction firm Orascom Construction Industries (OCI) said it wants to sink $370 million into a 1 million ton cement plant in East Java,
Ernovian Ismy, executive secretary of the Indonesian Textile Association (API), meanwhile said textile exports could jump 10% to $10 billion next year on rising global demand.

BUSINESS BRIEFS
MACROECONOMY
BI Caps 2006 Interest Rate at 9.75%
Indonesia is likely to see higher growth next year on better macroeconomic indicators, with the central bank wrapping up 2006 with a final rate cut in line with the recent slowdown in inflation.
At its monthly policy meeting on Thursday (7/12/06), Bank Indonesia's (BI) Board of Governors trimmed its key interest rate by half a percentage point to 9.75%, the fifth cut of this size since August, following two quarter-point shaves in May and July, The Jakarta Post reported.
This sees both inflation and interest rates back at single-digit levels, which is expected to help boost the country's $266 billion economy on the back of higher consumer spending and investment ahead.
Inflation in the year to the end of November continued to slow to 5.27%, the Central Bureau of Statistics (BPS) recently reported, after soaring in the first months of the year following the fuel price hikes at the end of 2005.
As a result of high inflation and interest rates, growth in the country's consumption-driven economy slumped to only 4.7% during 2006's first quarter, before rebounding to 5.08% and 5.52% in the second and third quarters, respectively.
While growth may miss its 5.8% target for this year, analysts say, ending up at around last year's level of 5.6%, the government expects it to accelerate to 6.3% in 2007.
The central bank hopes that Thursday's rate cut will spur more growth and help improve the country's business climate while at the same time maintaining stability in the financial markets.
"BI's recent rate-cut policy has so far received a positive response from both the financial markets and the real sector," its Board of Governors said in a statement announcing the latest rate cut.  "Consumer confidence and optimism among producers is up, and is being translated into higher production and spending.  Businesses will also be able to seek cheaper financing from outside the banking sector."
Lower rates should help the prospects of publicly listed companies, but could also cut into the yields of rupiah- based assets, affecting investor interest.
For 2007, the central bank is maintaining its inflation forecast at 6%, plus or minus 1%, and the BI rate at 8.5%.
Meanwhile, BI Deputy Governor Hartadi Sarwono said Friday (8/12/06) the central bank expects a slower pace of cuts next year.
"Currently we still can cut it by 50 basis points because there's enough room...  Going forward there are some potential risks and the cautionary approach would be shown by a more gradual and slower pace of cuts," Sarwono was quoted as saying by Reuters.
When asked if the cut would be less than 50 basis points each time, Sarwono said, "Yes, we still have room for a 25 basis points cut each time.  But we have to cautiously monitor it each month".
Finance Minister Sri Mulyani Indrawati said she still sees room for further rate cuts in the future, but such a move will hinge on inflation.
The central bank said inflation may well drop to less than 6% this year, but warned it could also move up to 7% again next year on possible inflationary pressures ahead.
Strong Demand for Last 2006 Bond Swap
Investors swapped Rp6.19 trillion ($678.5 million) of Indonesian government bonds maturing between 2007 and 2011 with 19-year debt through an auction on Tuesday (5/12/06), a senior Finance Department official said.
The government has in recent months stepped up its debt exchange programs, as it seeks to smooth its debt maturity profile.
The government received incoming bids worth Rp9.745 trillion bids to swap the short-term rupiah bonds into long-term paper FR0040.  The 19-year bond was priced to yield 10.995% at the auction.
"Investors' confidence in Indonesia's economic fundamentals in the long term is still very high," Rahmat Waluyanto, the Finance Department's director general in charge of debt management, said, according to Reuters.  "Their interest in long-term government bonds remains high and it will continue to remain high in the future."
Waluyanto also said the auction was the last debt swap for this year and the government plans to resume monthly bond auctions in January.  He also added that the government may issue more retail bonds and the country's first treasury bills next year.
Tuesday's debt swap brought the total amount of rupiah bonds swapped by the government to Rp31 trillion so far this year.
Indonesian bonds had made strong gains earlier this year.  One attraction of Indonesian bonds for foreign investors is that they offer among Asia's highest yields.
Forex Reserves Rise to $41.5b
Indonesia's foreign exchange reserves rose to $41.5 billion at the end of November, up from $39.9 billion a month earlier, Bank Indonesia (BI) said Thursday (7/12/06).
BI spokesman Budi Mulia said the central bank is confident the reserves will rise to $43 billion by the end of the year.
 
The central bank also said it expects the current account surplus to narrow to $6.2 billion in 2007 from the $9.6 billion expected this year, mostly due to rising imports, Dow Jones Newswires reported.
It said that imports will likely rise to $79.5 billion, from $71 billion projected this year.  Exports are expected to grow to $109 billion from $103 billion.
BI further said that the current rupiah level is "conducive" for exports and imports, but did not elaborate.  The rupiah was trading at Rp9,100 on Thursday.
BI added that it is always standing by in the market to reduce volatility in the currency market.
The statement confirmed speculation in the market that the central bank has been buying and selling dollars recently via state banks to smoothen currency fluctuations.
INVESTMENT
Govt. to Give Investors Tax Incentive
From January 1, 2007, Indonesia will give investors in certain industries a tax allowance to attract investment to the country, Investment Coordinating Board (BKPM) chairman, Muhammad Lutfi, said Monday (4/12/06).
A total of 30% of each investor's realized investment will be deducted from their tax bill, Lutfi said in a speech to a South Korea-Indonesia business gathering.
The deduction will be spread over six years, amounting to 5% per annum, he said, according to Dow Jones Newswires.
Companies eligible for the deduction are those investing in the flavor industry, textiles and garments, pulp and paper, chemicals, rubber and rubber products, porcelain goods, iron and steel, metal, machinery, land transportation, electric motors, ships and ship repair.
During the occasion, Lutfi also promoted the special economic areas of Batam and Bintan that provide special tax regulations for export-oriented industries.  "Imports of raw materials and capital goods to the areas will be given tariff concession while exports are exempted from export duty," he was quoted as saying by Antara.
Lutfi said Indonesia is seeking to develop manufacturing industries to create added value and employment.  "We can no longer promote the sale of raw materials or half-finished products," he said.
He noted that early next year, his office, in cooperation with the departments of industry and trade, the National Agency for the Assessment and Application of Technology, and the National Development Planning Board, would map out top industries for promotion to foreign investors.
One of the industries to be promoted is the petrochemical industry and its derivative industries.  "With oil and gas production reaching 1.6 million barrels a day, we need to have a good petrochemical industry.  Now, we only have one aromatic chemistry industry and one complete petrochemical industry," he said, adding that most of the raw materials of the country's petrochemical industry are reprocessed in Singapore.
Surabaya Bourse Shareholders Approve Merger
Indonesia's second stock exchange, the Surabaya Stock Exchange (SSX), has received shareholder approval to proceed with a merger with the Jakarta Stock Exchange, its president director said on Friday (8/12/06).
The SSX management had set up a team to meet with its counterpart from the Jakarta bourse to discuss the merger process, Bastian Purnama told Reuters in a telephone interview.   "We hope the merger process can be completed within the next six months. In principle, the sooner the better," Purnama said.
The tie-up is aimed at improving the operating efficiency of the two bourses and giving Indonesians more flexibility in investing in the equities market.
"The shareholders of Jakarta Stock Exchange had given their approval for the merger in May 2006, but we were waiting for a response from the Surabaya exchange," Erry Firmansyah, president director of the Jakarta Stock Exchange, told Reuters.  "But since their shareholders had given their approval, early next week we will have a meeting for the merger preparation."
When asked if the bourse would have an initial public offering after the merger, Purnama said, "We still need more time as the current law on stock exchanges does not allow us to go public."
"We need a new stock exchange law.  At this time, it cannot be done. We are waiting for the new law that will be discussed in parliament," he added.
The Jakarta bourse is the largest exchange in the country with a market capitalization of about $135 billion. The Surabaya bourse is the country's main bond exchange
Russian Group Looks at $2b for Telecom Sector
Russian industrial and financial holding Alfa Group plans to invest up to $2 billion in Indonesia's telecommunications sector as well as other sectors, Alfa Bank said in a statement Monday (4/12/06), citing its president Pyotr Aven.
Aven met with Indonesian President Susilo Bambang Yudhoyono, who was recently on a visit to Russia.  Yudhoyono welcomed Alfa Group's intention to invest in Indonesia, saying that the holding would have the support of the Indonesian government, Alfa Bank said, according to Prime-TASS, Russia’s leading business news agency.
Alfa Group has been seeking to expand its telecommunications business into Southeast Asia.  The company recently established a representative office in Vietnam.
Altimo, the telecommunications arm of Alfa Group, controls a 32.9% voting stake in Russia's second largest mobile operator VimpelCom and a 29% stake in US-registered telecommunications operator Golden Telecom. 
It also indirectly owns about 44% in Ukraine's largest mobile operator Kyivstar, a 25.1% stake in Russia's third largest mobile operator MegaFon, and a 13.22% stake in Turkey's largest mobile operator Turkcell.
Aquatico Ready to Invest $15m in Water
Singapore-based Aquatico Pte Ltd said on Tuesday (5/12/06) it will invest $15 million in Thames Pam Jaya (TPJ) if the Jakarta administration approves its plan to buy 100% of shares owned by Thames Waters in TPJ.
"We will use the $15 million in fresh fund to build water processing installations to produce drinkable water and new pipelines," Rosan P Roeslani, president director of PT Recapital Advisor, which owns Aquatico, was quoted as saying by Antara.
He said Aquatico is waiting for the agreement from the Jakarta governor to buy the shares.
Aquatico is the winner of a limited tender for Thames' 100% stake in TPJ.  Thames sold its stake following the decision of its headquarters in London to focus on Europe and America.
Egypt's Orascom Plans $370m Cement Plant
Egyptian cement producer and construction firm, Orascom Construction Industries (OCI), plans to invest $370 million in building a cement plant with a capacity of 1 million tons next year in Purwodadi, East Java, National Investment Coordinating Board (BKPM) chairman, Muhammad Lutfi, said.
“The company is currently assessing the availability of raw materials needed, such as limestone, for the cement plant.  I expect the construction of the plant to begin early next year,” he said, according to an XFN-Asia report on Monday (4/12/06).
Cement consumption in the country is expected to pick up next year as the government plans to start some infrastructure projects to boost economic growth.
Indonesia's cement sales in January to October declined by 3.4% to 25.9 million tons from the year-ago period, as the industry was partly hit by a sharp increase in fuel prices last year, dampening consumer spending, Reuters reported.
Some industry experts expect output to be unchanged or slightly lower this year, compared with last year's 31.51 million tons.
Turkey's Sabanci Buys Tire Yarn Firm
Turkey's Sabanci Holding has agreed to buy a controlling stake in Indonesian tire yarn firm, PT Branta Mulia, as part of its expansion into east Asia, it said on Tuesday (5/12/06).
Sabanci, a major tire maker, said it bought the 54.2% stake via its industrial yarn and cord subsidiary, Kordsa Global, Reuters reported.  It gave no price for the deal, but said in a statement the Indonesian company's turnover is $170 million and it is Asia's leading nylon yarn and tire cord firm.  The purchase would boost Kordsa Global's turnover to about $1 billion.
The Sabanci unit, which has already invested in China, will take over three factories with the deal -- two in Indonesia and one in Thailand.  Kordsa produces nylon and polyester yarn and tire-cord fabric.
STATE CONCERNS
Rubber Producers Asked to Cut Exports
Indonesia will urge other Southeast Asian rubber producers to slash exports by at least 10% next year to help push up prices, the trade association said on Wednesday (6/12/06).
Indonesia's tire-grade SIR20 rubber has fallen about 12% this year to about $1.6 a kg, mainly due to ample supplies and fund selling in Tokyo futures.
The Indonesian Rubber Association (Gapkindo) said it had asked members not to sell rubber below $1.5 per kg and urged other producers in Southeast Asia to limit exports.  "We will urge rubber associations in Malaysia and Thailand, as well as those in Vietnam and Cambodia to cut exports so that we can maintain prices at profitable levels," Gapkindo chairman, Daud Husni Bastari, told Reuters.
"We will ask them to start cutting exports by at least 10% next year," said Bastari, without giving further details.
Indonesia's rubber output in 2007 is expected to fall to 1.9 million to 2.1 million tons from an estimated 2.2 million this year, as heavy rains in North Sumatra at the beginning of the year are expected to hurt the tapping process.  Indonesia produced 2.27 million tons of rubber in 2005.
"I don't think it will work.  I think it will be hard to ask buyers to pay a minimum of $1.5 per kg if the actual market price is below that level," said a dealer in Jakarta.  "Besides that, what if shippers really need the money? I think they will sell at any price possible."
The ASEAN Rubber Business Council has said main producers Thailand, Indonesia and Malaysia, which account for 70% of global production, will churn out 6.6 million tons of rubber this year, compared with 6.3 million in 2005.
Fish Exports to Enjoy Privilege in Japan
Japan has vowed to exempt duty on 51 aquatic products from Indonesia within the next three to five years after the signing of the Economic Partnership Agreement, Bisnis Indonesia reported on Tuesday (5/12/06).
The products include mackerel, shrimp, lobster, catfish and tuna, the daily said.
Zero duty on shrimp will greatly benefit Indonesia, which last year became the second largest shrimp supplier to Japan, with export reaching 45,574 tons or 19.9% of Japan's total shrimp import.
Shrimp, now liable to duty from 4.8% to 7.3% in Japan, accounts for 90% of Indonesia's fishery exports to Japan.
"Japan is the second largest destination of our shrimp export after the United States... the agreement is of huge importance for Indonesia," said Anang Noegroho, a senior official at the Fishery and Maritime Department.
SOEs
Jamsostek May Fund Housing
The government and state-owned labor insurance firm, PT Jamsostek, have agreed to revise the 2005 regulation on the company's investments to allow it to develop more low-cost housing for workers in industrial zones and urban areas.
Manpower and Transmigration Minister Erman Suparno said the review of the regulation is necessary and in line with the government's commitment to focus on improving the welfare of workers.
"Under the current regulation and the poor remuneration system, it is almost impossible for low-paid workers and their families to possess simple and cheap houses.  With the review, Jamsostek will be encouraged to invest a bigger part of its assets to finance the construction of infrastructure, including affordable houses and flats," he was quoted as saying by The Jakarta Post on Tuesday (5/12/06).
Jamsostek president director, Iwan Pontjowinoto, hailed the government's initiative to review the government regulation.  "Jamsostek will seek cooperation with local administrations and housing developers to carry out the cheap housing program." 
Suparno and Pontjowinoto said that if Jamsostek changes from a limited company into a non-profit institution, it would no longer be obliged to pay annual dividends to the government and would be able to allocate a greater part of its profits to providing social facilities and building affordable housing.  Jamsostek currently channels 35% of its annual profits in dividends to the government, its main shareholder.
Jamsostek reported a 73% increase year-on-year in net profit to Rp738 billion ($82 million) in the first nine months of the year, Antara reported on Tuesday.
Pontjowinoto attributed the increase in net profit to a 106% rise in net income to Rp4.5 trillion in the January to September period.  He said its operating cost also rose to Rp580 billion from Rp433 billion.
Investment director, Iskandar Rangkuti, said the company's investment has reached Rp45 trillion, exceeding its target of Rp40 trillion set by the end of 2006.
He said 47% of the investment is in deposits, 36% in bonds, 12% in shares and 3% in mutual funds.
Krakatau to Get $500m Export Financing from Korea
State-owned steel maker, PT Krakatau Steel, and the Korea Export Insurance Corp (KEIC) on Monday (4/12/06) signed a memorandum of understanding (MoU), under which the latter will provide a long-term export finance facility worth $500 million.
The MoU was signed by KEIC director, Kim Song Woong, and Krakatau Steel director, Danulhay, and witnessed by visiting Korean Industry Minister Chung Sye Kyun and Indonesian Trade Minister Mari Pangestu, XFN-Asia reported.
KEIC's Jakarta chief representative, Kim Eun Sung, said the export financing scheme is part of efforts to boost trade between the two countries.  He declined to provide more details.
PRIVATE SECTOR
Textile Exports Seen Up in 2007 - Industry
Indonesia's textile exports are expected to rise to $10 billion next year from a projected $9 billion this year as world demand is expected to keep rising, a senior trade body official said on Thursday (7/12/06).
The textile industry is one of the biggest contributors to Indonesia's foreign exchange reserves.  It contributed $8.6 billion in 2005 to Indonesia's total exports, which is equivalent to about 3% of gross domestic product in 2005.
"Textile exports for January to September 2006 reached $7.2 billion, up from $6.5 billion in the same period last year," executive secretary of the Indonesian Textile Association, Ernovian Ismy, was quoted as saying by Reuters.
"I think it should be possible to achieve the $9 billion target at the end of this year...  We are projecting $10 billion next year as world demand for textiles and clothing is expected to keep rising as the population grows."
Indonesia ranks number 11 globally among textile exporters with a 1.6% market share and number 9 in clothing with a 1.7% market share in 2005, data from the association showed.
Toyota Vehicle Sales Up 11.8% in November
Toyota said on Tuesday (5/12/06) its vehicle sales in Indonesia jumped 11.8% last month from a year ago, signaling a recovery in the sector, which had been badly hit by high interest rates and fuel prices.
Jodjana Jody, head of sales at PT Toyota Astra Motor, the local distributor of the world's second largest automaker, told Reuters the company sold 12,648 units in November and estimated total domestic sales were 26.3% higher at 33,000 units.
"Sales have been very good, the entire market is seen reaching 33,000 units... For December, I think it could be around 30,000 units," Jody said.  "If we observe the recent development, interest rates have declined recently, so we are very optimistic that the industry will head towards a positive direction."
Sales volume in the first 10 month of the year has declined by about 46% to 254,396 units and the full-year figure is expected to be 330,000 to 350,000 units, far below the historic high of 533,910 units achieved last year.
Meanwhile, sales by Indonesia's top three motorcycle makers jumped just more than 50% last month, hitting a record monthly volume and providing more evidence of a rebound in the sector, a source at an automotive company said on Tuesday.
Motorbike sales at Honda Motor Co Ltd, Suzuki Motor and Yamaha Motor jumped to 517,368 units, topping the previous historic monthly sales record for the total industry made in August 2005, of 504,787 units, the source, who declined to be identified, said by telephone.
The top three, which account for between 98% and 99% of total sales in Indonesia, sold 344,620 units in November last year.  The country's $6 billion motorcycle market is seen as a barometer of consumer spending, which sagged in the wake of oil price rises last year and an accompanying surge in inflation.
Sales at Honda, the market leader, jumped 55.6% to 293,389 units, while sales at Yamaha rose 63.4% to 156,679 units.  Suzuki's sales rose 11.8% to 67,300 units, said the source.
Honda's market share among the top three firms rose to 56.7% in November from 54.7% a year ago.
Astra Agro Eyes Plantation Buys
Indonesia's largest listed plantation firm, PT Astra Agro Lestari, is looking to buy small plantation firms at home and in Malaysia, a top company official said on Thursday (7/12/06).
"That will be our strategy for growth.  Our top priority will also be to develop new plantations in Kalimantan and Sulawesi," Gunawan Lubis, the firm’s area director for palm plantations, told Reuters on the sidelines of a palm oil conference in Bali.
Astra Agro has said it plans to increase capital spending in 2007 to Rp700 billion ($76.92 million) to expand its oil palm plantations by 15,000 to 17,000 hectares and to build new mills, with construction expected to begin early next year.
The company will spend between Rp500 billion and Rp600 billion this year.
The plantation unit of the country's leading auto retailer, PT Astra International, currently manages 201,412 hectares of oil palm plantation.
BANKS
New Bank Loans +9% On Year
New lending by Indonesian commercial banks rose 9% on year during the first 10 months of the year to Rp66 trillion, although this was still short of the targeted 13%-15% credit growth for the year, Bank Indonesia (BI) said Thursday (7/12/06).
The central bank said total outstanding bank loans reached Rp791.6 trillion as of October 31, reported Dow Jones Newswires.
The data showed BI's rate cuts since May and recent policies to boost lending have not spurred banks to increase loans more aggressively.
The central bank has said 20% growth in loans is needed annually to support a 6% annual growth in the economy.
BTN Eyes IPO, Bonds in 2007 to Boost Loans
Bank Tabungan Negara (BTN), which specializes in home lending, expects to offer 30% of its shares in an initial public offering (IPO) next year to support its lending growth, its president director said on Tuesday (5/12/06).
The state bank might opt for a bond issuance to raise Rp1 trillion ($109.3 million) should the IPO plan not come through, Kodradi said, according to Reuters.  He however did not elaborate how much money the bank expects to raise from the IPO.
He said the company is aiming to increase outstanding loans to Rp22.2 trillion in 2007 from Rp18.2 trillion this year, and net profit to Rp367.8 billion from an estimated Rp312 billion this year.
POWER
IAEA Voices Support for Nuclear Power Program
The International Atomic Energy Agency (IAEA) on Friday (8/12/06) expressed support for Indonesia's plan to construct nuclear power plants on Java and Madura islands, despite strong protests from environmental organizations.
"We are currently supporting Indonesia's preparations and plans on its nuclear power plant construction.  The need to ensure adequate and reliable energy supply is directly relevant to development," IAEA director general, Mohamed ElBaradei, said in a discussion with government officials, energy experts, students and activists.
"With its decision to involve in a nuclear power program, Indonesia is taking a step to expand its energy mix and energy availability.  We stand ready to assist you," he was quoted as saying by Kyodo News.
According to ElBaradei, public perception is an important aspect of the future of nuclear power.  "The public perception has a strong influence for a country's energy basis.  Nuclear power has absolute safety guarantees, (but) what is important is that the risks and benefits (must be) clearly understood," he said.
"All elements of the nuclear society -- scientists, operators and civil regulators -- should make every effort to provide accurate and easily understood information to improve public understanding on the risks and benefits of nuclear energy," he added.
The common perception of nuclear power, he said, will "improve understanding and confidence on the nuclear facilities" which will lead to public acceptance of the country's nuclear power program.
Indonesia's plans to build nuclear power plants have raised strong opposition from environmental organizations such as Greenpeace. They warn that building a nuclear power plant on Java is doomed because of poor enforcement of safety standards and susceptibility to earthquakes.
S Korea May Help Develop Nuclear Plants
An agreement on nuclear energy cooperation between South Korea and Indonesia, seen by Dow Jones Newswires Thursday (7/12/06), includes details on the possible transfer of nuclear material, equipment and technology between the two countries.
A series of agreements, including a nuclear cooperation, were signed Monday (4/12/06) in Jakarta by visiting South Korean President Roh Moo Hyun and Indonesian President Susilo Bambang Yudhoyono.
The agreement said the two countries will exchange scientific and technological information, data and related personnel.  "Uranium transferred pursuant to this agreement shall not be enriched to 20% or more... unless otherwise agreed by the parties," it said.  The agreement bans the use of the nuclear material for the development of nuclear weapons and nuclear explosive devices, or military purposes. 
However, it does not have a timetable on when the cooperation will begin.
Indonesian Mines and Energy Minister Purnomo Yusgiantoro said recently he expects the planned power plant to begin operation by 2017 and hopes that nuclear power will contribute a total of 4,000 megawatts to the national electricity grid by 2025.
Meanwhile, the government will hold a tender in 2008 to select suitable suppliers of nuclear technology and contractors to construct the Rp15 trillion ($1.66 billion) plant in Muria, Central Java, a senior official said Wednesday (6/12/06).
"A special body responsible for conducting the tender will be set up next year, with a presidential decree to serve as the legal basis expected to be issued later this month," Ferhat Aziz, legal and public relations head at the National Nuclear Energy Agency (Batan), was quoted as saying by The Jakarta Post.
To be called the Nuclear Power Implementation Agency, Aziz said the new agency would be responsible for preparing the tender and selecting reliable suppliers of safe technology suppliers for the project, which will be able to generate 1,000 megawatts (MW) of electricity.
It will be made up of officials from Batan, state power firm PT PLN, the Office of the State Minister for Research and Technology, and the Nuclear Energy Regulatory Agency (Bapeten).
"We're eyeing companies from the US, South Korea, France and Japan, as their technologies meet the standards set by the International Atomic Energy Agency," he said, although he was quick to add that the tender, by its nature, would be open to all potential suppliers.
The winner, however, would have to team up with a local company for the development of the plant.  "We estimate that the shareout will be 25% for the local-based firm and 75% for the foreign company," Aziz said.
Chinese Firms Win Power Contracts
Two Chinese firms, China National Technical Import and Export Corp. and Harbin Power, have won contracts to build power plants in Java, an official of state electricity firm said on Friday, Reuters reported.
National Technical won the bid to build a 600-MW coal-fired power plant in West Java and Harbin Power got the contract to build a coal-fired power plant in East Java.
"We will send a letter of intent this month and we expect to sign the contracts in January," Chairuddin Matondang, chief of bidding of state utility PLN, told reporters.
Indonesia is keen to encourage more foreign investment to support its economy and to funnel much needed cash to develop its power sector, while China is keen to increase its economic clout and influence in the region.
OIL AND GAS
Pertamina Eyes $1b Refinery Expansion with SK
State oil and gas company, PT Pertamina, plans to cooperate with South Korea's SK Corp in a $1 billion expansion of its Dumai refinery, Pertamina president director, Ari Soemarno, said on Monday (4/12/06).
Under the plan, the capacity of the refinery in Sumatra island would be raised to 170,000 barrels per day (bpd) from 120,000 bpd at present.  "We will start a study on it next year and it could take two to three years to build," Soemarno said, according to Reuters.
Pertamina recently said it has signed an agreement with Japan's Mitsui & Co to build a new gasoline cracking unit, costing about $1 billion at its Cilacap refinery.
Another Pertamina official had said the new unit in Cilacap would have a capacity of between 40,000 bpd and 50,000 bpd and that the company is planning to start building it by 2008 at the latest and expects it to begin operations in 2010.
Santos Urged to Develop Jeruk Field
Indonesia wants Australian oil and gas producer, Santos Ltd, to keep developing its Jeruk field offshore East Java despite lower reserves forecasts, an official at the country's energy watchdog said on Friday (8/12/06).
Santos said in a statement last month that the latest tests at the Jeruk-3 appraisal well showed that recoverable oil resources for the offshore field were most likely less than 50 million barrels -- significantly smaller than its previous forecast of 170 million barrels.
Santos said plans for additional appraisal drilling had been put on hold pending further technical and commercial reviews.
"Certainly, we want Jeruk field to be developed, because Indonesia needs additional oil production," Achmad Luthfi, deputy chief of watchdog BP Migas, told Reuters by telephone.
"We are waiting for more information from Santos, on exactly what reserves Jeruk has.  However, as long as the field will benefit the government, we want Santos to develop it," he added.  "I do believe that there will still be benefit from the Jeruk development."
Indonesia's crude oil output rose 0.9% to 862,000 barrels per day (bpd) in November from October, helped by some wells resuming output after maintenance.
Crude production was 854,000 bpd in October.
The country's condensate output fell slightly to 124,200 bpd in November from 125,700 bpd in October.
Malaysia's Genting Plans to Develop Oil Block
Malaysian conglomerate, Genting Bhd, plans to develop an Indonesian oil block after it found oil in two exploration wells in the block, its chief executive officer said on Tuesday (5/12/06).
Last month, Genting said tests showed one of the two wells in the North West Natuna block flowed oil at a rate of 525 barrels per day (bpd) while another had a flow rate of 1,210 bpd.  Both wells are operated by Genting's unit, Genting Oil & Gas Ltd.
"We will submit our development plan to BP Migas.  If everything is approved, we think we should be in production within 18 to 24 months," TS Ong was quoted as saying by Reuters after meeting Mines and Energy Minister Purnomo Yusgiantoro.  "Now, we are in a situation where we have to analyze our data."
Mines and Energy Department official, Priono, said the government expects Genting to submit the development plan as soon as possible.
MINING
19b Tons of Coal Deposits - Official
Indonesia has at least 19 billion tons of coal deposits that may replace oil and gas as a source of energy in the future, a Mines and Energy Department official said on Monday (4/12/06).
"Only a small part of the coal deposits has so far been used as the country's coal production reaches 150 million tons per year," director general for mineral, coal and geothermal energy, Simon F Sembiring said after opening the International Energy Conference and the 6th Coal Tech Conference.
Coal production would be raised in stages, he said, according to Antara.
By 2005, coal production was projected to reach 200 million to 300 million tons per year to meet domestic demand, he said, adding that nearly 60% of the country's coal deposits are good to generate electrical power.
India’s PTC Talking to Mines for Coal Supply
PTC (India) Ltd is in talks with mine owners in Indonesia to import coal on a long-term basis for private power projects in India, a senior company official said Thursday (7/12/06).
PTC will arrange for coal supplies on a "tolling basis" in return for electricity from these power projects, said the official, according to Dow Jones Newswires.  "We are in talks with four to five strong entities (from Indonesia)."
PTC initially plans to secure 1.5 million metric tons of imported coal for two power projects in Krishnapatnam in the southern state of Andhra Pradesh.  If the deals go through, supplies are likely to start in 2010-11, around the time when the private power projects start operations.
PTC is negotiating for a five-year contract for coal supplies, he said.
Coal supplies may go up to 5 million tons later on, as more projects are brought in to the tolling arrangement.