THE COORDINATING MINISTRY FOR ECONOMIC AFFAIRS REPUBLIC OF INDONESIA

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Trade and Investment News1, 6 April 2009Highlights

National US President Obama tells President Yudhoyono he’ll visit Indonesia this year Politics Islamist party turns on crowd but polls suggest support remains low Terrorism Philippine authorities identify Singaporean from Jemaah Islamiyah Security Deal on enhanced maritime surveillance on border with India Law & order Supreme Court starts recruitment process for new justices Health Eastern Indonesia wins Global Fund support for HIV/AIDS Economy Business welcomes G-20 agreement on steps to assist export sectors Share market wins back months-long losses Business briefs Macroeconomy Inflation down to 7.92% in March, central bank cuts benchmark rate to 7.50% Sunset policy ends, tax base widened Investment Companies return to IPOs on Indonesia Stock Exchange PT Semen Padang to build new cement factory for $366 million State concerns Japan agrees to extend $14.5 billion in financial assistance to deal with crisis Asian Development Bank to invest up to $140 million in infrastructure fund SOEs Sector profits for 2008 expected to beat targets Private sector Food giant PT Indofood records 27% sales boost in 2008 Banks Tax chief, banker nominated as senior deputy governor at central bankPower Regional banks form consortium to back 16 power projects outside Java Oil & gas BP looks to sell stake in offshore oil field Crude oil and condensates output averages 963,269 bpdMining Major coal producer PT Adaro boosts net profit 10-fold in 2008

NATIONAL1 This Trade and Investment News is a publication of the Coordinating Ministry for Economic Affairs of the Republic of Indonesia. Readers are welcomed to forward it in its original form but no reproduction is allowed without permission.

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Obama to visit Indonesia this year: SBYUS President Barack Obama is planning to visit Indonesia this year, Antara reported on Friday, quoting President Susilo Bambang Yudhoyono.

Yudhoyono said Obama — who went to primary school in Jakarta from 1967 to 1971 — had informed him of his plan when the pair sat together during a working breakfast at the G-20 meeting in London last week.

“When I told Obama that the people of Indonesia were awaiting his visit, he said he planned to do so this year,” Yudhoyono told reporters in his plane as he returned from London.

He said Obama would meet his former elementary school friends in Jakarta, and complimented the US president on how much of the Indonesian language he had remembered over the years.

“He still remembers a lot of Indonesian words such as 'apa kabar' for how are you, and 'capek' for feeling tired,” Yudhoyono said.

Obama is hugely popular in Indonesia because of his childhood connection and hopes are high he will make a visit early in his presidency.

Bali: Tourism begins to diveIn what could be the first sign of the impact of global financial crisis on Bali, the number of foreign tourists visiting the island fell 15.57% to 139,282 in February from January, Antara reported.

"Compared to February 2008, the number of tourist in February 2009 dropped 9.41%, mainly due to the global financial crisis," said Ida Komang Wisnu, the head of the Bali branch of the Central Statistics Agency (BPS).

Wisnu said the drop in tourist numbers is not a shock as many tourism analysts predicted a significant drop this year. However, it will have an immediate impact on residents whose livelihoods depend on the tourism sector.

Disappointing tourist arrivals are in contrast to 2008 when a record 2 million tourists visited Bali.

In January and February this year, the number of foreign tourist arrivals was recorded at 304,244, up 3.47% from 294,032 last year, according to the BPS.

Bali is Indonesia’s main foreign tourist destination and a general indicator of Indonesia’s tourism sector as a whole.

Jakarta planning to restrict private vehicles by mid-year The Jakarta administration is planning by the middle of 2009 to limit the number of private vehicles allowed on roads to reduce air pollution and traffic congestion, Okezone reported.

Jakarta transportation official Soetanto Soehodho said four options are currently being examined: an electronic toll system similar to Singapore’s, alternate vehicle days for odd and even numbered license plates, more 3-in-1 lanes and increased parking fees.

Soehodho said action is needed as the number of privately owned vehicles on Jakarta’s inadequate road system is rapidly increasing.

“New roads in Jakarta have increased by only 12%, compared to Tokyo with 22% and Paris with 24%,” he added.

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Jakarta Governor Fauzi Bowo said public transportation will also be increased. He said the government is also planning to build more fly-overs and will construct special lanes for motorcycles and public transportation, which he said are the main causes of traffic jams in the capital.

POLITICS Islamic pride fills national stadium, but support remains low Cadres from the Islamist Prosperous Justice Party (PKS) were out in force last week, staging the kind of mass rally in Jakarta that the other parties could only dream of, The Sydney Morning Herald reported.

More than 100,000 turned up at the Bung Karno Stadium last Monday, an impressive turnout for a workday and only eclipsed by Saturday’s rally for the Indonesian Democratic Party of Struggle (PDI-P), with an estimated 150,000 participants.

At the PKS rally, chants of ‘Allahu Akhbar’ - God is Great – mixed with songs from rock bands as party officials drove home their message of personal purity and anti-corruption.

As voters prepare to go to the polls on Thursday, the fortunes of Islamist parties are being closely watched.

Yet, polls suggest that Islam as a potent political force is on the wane in Indonesia or, at best, treading water.

According to a report from Kompas, only 8% of respondents said religion would have a significant influence on their choice in the general election and 60% said it would have no impact whatsoever.

The most authoritative surveys find that, as a grouping, Islamic parties are polling about 25%, compared with 38% in 2004, when anti-Western sentiment was at its peak in Indonesia as a consequence of the Iraq invasion.

TERRORISM Singaporean JI terrorist aiding Abu Sayyaf: PhilippinesA Singaporean terrorist aiding Abu Sayyaf militants holding two Red Cross aid workers on Jolo Island is a member of the regional Jemaah Islamiyah (JI) terrorist group, Philippine government officials said, the Philippine Daily Inquirer reported.

"We are sure the person is affiliated with JI, which has close ties to the Abu Sayyaf,” Security official Norberto Gonzales said.

Jolo government secretary Ronaldo Puno said the Singaporean is serving as an interpreter for the Abu Sayaff in its negotiations with the International Committee of the Red Cross (ICRC) and the Philippines government for three ICRC workers kidnapped in February.

The shadowy individual could be Muawiyah, an Indian-Singaporean extremist who often uses the alias Manobo, The Straits Times reported.

Richard Gordon, the head of the Philippine chapter of the ICRC, said he believes he was speaking to Muawiyah when negotiating by telephone with the kidnappers ahead of a March 31 deadline for the beheading of one hostage.

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Authorities have been tracking down the Singaporean, along with Indonesian JI members Omar Patek and Dulmatin, believed to be hiding in Mindanao in the southern Philippines along with several other wanted Indonesian JI terrorists.

"They (JI) have been going in and out of Mindanao. They're either with the Abu Sayyaf or some groups affiliated with the secessionist Moro Islamic Liberation Front (MILF),” said Gonzales.

SECURITY Maritime security cooperation enhanced with IndiaIndonesia and India agreed to intensify security in the Andaman Sea, where the two countries share a long maritime border, Antara reported.

Armed Forces (TNI) Spokesman Rear Marshal Sagom Tamboen said among ongoing threats such as terrorism and poaching, Tamil Tiger of Eelam (LTTE) rebels from Sri Lanka could flee to neighboring countries.

The two countries conduct maritime joint patrols twice yearly under a joint naval cooperation agreement.

Last week, Indonesian Foreign Minister Hassan Wirajuda pledged Indonesia would not be used as a haven for the LTTE to regroup following Sri Lanka’s recent military rout of the rebels.

Stronger focus on illegal fishing prosecution The Fisheries and Maritime Ministry and the Attorney General’s Office agreed on Tuesday to boost efforts to reduce rampant poaching in Indonesian waters.

According to Fisheries and Maritime Affairs Minister Freddy Numberi and Attorney General Hendarman Supandji, the cooperation is expected to create a more “effective” and “efficient” legal process for handling poaching cases while guaranteeing that vessels confiscated by the authorities can be utilized, The Jakarta Post reported.

Indonesia established five ad-hoc fishery courts last year to shorten the typically prolonged legal process necessary for dealing with predominantly foreign poachers.

It is estimated that Indonesia suffers an annual loss of Rp30 trillion due to poaching.

Over 750 vessels, mostly from neighboring Vietnam, Thailand, the Philippines and Malaysia, have been confiscated. Several of the vessels originated from more distant nations such as Taiwan and China.

The majority of poachers were caught pulling fish from Indonesia’s exclusive economic zone and water territories throughout the Arafura Sea, South China Sea and North Sulawesi.

Billions of rupiah for E. Kalimantan border securityEast Kalimantan Police received Rp482 billion in budget funds for 2009, with over 90% allotted for security along the Malaysian border, officials said, Tempo Interactive reported.

East Kalimantan Police Insp. Gen. Andi Masmiyat said the 2009 budget is a slight increase from last year but still less than needed to combat rampant trans-national crimes.

East Kalimantan Police spokesman Comm. Rudi Pranoto said on a case-by-case basis an average of Rp14 million is allocated for cases labeled as difficult, Rp7 million for medium cases and Rp4 million for minor cases.

LAW & ORDER

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Supreme Court to choose new judges Officials at the Supreme Court have begun the selection process for six court justices who will retire this year, Tempo Interactive reported.

Around 80 candidates are competing for the six positions, the third such selection process to take place since 2005, a member of the Judicial Commission, which is reviewing applications, said on Friday.

Mustafa Abdullah said 42 career judges have applied for the positions, while the remaining applications were from the public.

“We will narrow the field of candidates to 18 for screening by the House of Representatives,” Mustafa said, noting that only the House has the authority to select the six justices.

Since the Judicial Commission was established in 2005, two previous selections led to the appointment of 12 Supreme Court justices.

The chairman of the Judicial Commission, Busyro Muqqodas, said he believed the judiciary needed to emphasize integrity rather than qualifications in its selection of new justices.

The law governing Supreme Court appointments requires candidates who are career judges to hold a master’s degree, while those who are not judges need to have at least a master’s degree but preferably hold a doctoral degree.

HEALTH Govt. accepts health cooperation from UN, Singapore The UN’s Global Fund to Fight AIDS, Tuberculosis, and Malaria has agreed to grant Rp21.9 billion to fight AIDS in eastern Indonesia, reported Media Indonesia.

The funds will finance a five-year work plan on AIDS eradication programs in the region, said the Global Fund.

Secretary of the National AIDS Commission Nafsiah Mboi said Thursday that Rp11.7 billion of the grant will be allotted for Papua and West Papua.

According to Mboi, the funding will be granted in two stages involving the national and regional AIDS commissions, local health agencies and the Indonesian Family Planning Association.

Since its creation in 2002, the Global Fund has become the dominant source of money for worldwide programs against the three scourges that kill more than six million people a year, mostly in poor and developing countries. Meanwhile, Singapore’s Alexandra Health said it will partner with the Health Ministry to provide training to healthcare professionals in Indonesia and increase preparedness to fight infectious diseases in the region, The Straits Times reported.

The Temasek Foundation will reportedly channel a total of $2.44 million towards the program, of which $1.47 million will be used for training healthcare professionals.

The remaining $970,000 will equip the National Training Center in Batam for implementing the program, which begins this month for a three-year period.

The program aims to build a pool of healthcare trainers in Indonesia. A competency-based training module will equip trainees with skills and knowledge to work in the health sector.

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“One of the most significant aspects of this joint effort is equipping Indonesian healthcare professionals with the know-how to fight infectious diseases in the region, including Bird Flu,” said Liak Teng Lit, chief executive officer of Alexandra Health.

ECONOMY G-20 credit pledge aimed at reviving tradeThe G-20 summit's promise to Asia of money to help credit-starved exporters and a bigger voice in global finance should help the region revive growth, business leaders and economists said Friday, The Associated Press reported.

In Southeast Asia's biggest economy, Indonesia, where industries from textiles to auto parts have been hit by a lack of credit, the money should play a role in restoring normal production, said Sofyan Wanandi, head of the Indonesian Employers Association (Apindo).

"This should really help," he said. "The most important contribution will be tackling problems within the banking system, so it works normally again."

Before leaving for home, President Susilo Bambang Yudhoyono told reporters “our interests right now are to restore confidence and economic growth at the global level.”

“That can only be reached with a high degree of financial system transparency, a stimulus package and monetary policies as counter-cyclical measures to help revive global demand and to make the economy run again,” The Jakarta Post reported him as saying.

The London summit on the financial crisis ended Thursday with a promise of $250 billion from major governments to pump up global trade credit.

Many of the region's export-dependent economies have tipped into recession not only because demand from the West has crumbled amid the global slump but also because financing for trade has become scarce.

While Bank Indonesia (BI) said the economy was seen as having expanded by 4.6% in the first quarter, export figures remained strongly down on the same period last year. BI cut its 2009 growth forecast to 3-4% last month, from a previous forecast of 4%.

Inflation was down to 7.92% in March, prompting Bank Indonesia to cut its benchmark rate by a quarter point to 7.50%, with promises that more cuts could be expected as inflation continued to fall on low fuel prices.

The AP said there was also optimism that Asian economies would be helped by the summit's promise to triple the resources of the International Monetary Fund to $750 billion and to create a $250 billion IMF fund to help members' foreign reserves.

China, the world's third biggest economy, should benefit as the measures restore demand in export markets, said Standard Chartered economist Stephen Green.

Beijing also succeeded in its campaign for more influence in managing the global economy, winning a pledge at the summit to give developing countries a bigger role in the IMF and other finance bodies.

Asian leaders have been reluctant to deal with the IMF since the 1997 financial crisis, when reforms recommended by its experts prompted a public backlash.

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Dr. Yudhoyono said it would require more efforts by developed countries to help strengthen the multilateral financial institutions to help developing and poor countries recover from the crisis, as the cause of the problems stemmed primarily from developed countries.

"It's unfair for underdeveloped and developing countries to be held responsible for the mistakes they didn't make, without help from the international community," Dr. Yudhoyono said.

Australian Treasurer Wayne Swan was upbeat on the result, calling it “very significant reform for the globe.”

Indicators:

  January February February 09/February 08

Cumulative 2009

Total exports $7.15 billion $7.08 billion -33% $14.23 billionNon-oil & gas exports $6.21 billion $6.06 billion -25.83% $12.27 billion   February

(y-o-y)February (m-o-m)

March (y-o-y)

March (m-o-m)

Inflation 8.60% 0.21% 7.92% 0.22%  Full year 2006 Full year

2007Full year 2008 First quarter 2009

GDP growth 5.5% 6.3% 6.1% 4.6%*Tourist arrivals January February Growth/loss

(m-o-m)Growth/loss

(y-o-y)473,200 421,555 -10.91% -9.03%

Source: Central Statistics Agency* Bank Indonesia estimate

BUSINESS BRIEFSMACROECONOMYBI cuts rate again to 7.5% Bank Indonesia (BI) cut its policy interest rate by 25 basis points to 7.5% from 7.75%, as expected, and said it sees room for further cuts in a bid to spur consumption-driven growth amid slowing inflation and a slump in exports, Reuters reported.

"Regarding the BI rate, we see room for lowering it because we see that inflationary pressures are still in line with our expectations and may still continue to ease," BI deputy governor Hartadi Sarwono said.

BI has cut its key interest rate since December to 7.5%, to bolster the country’s growth that is now forecast at 3-4% for 2009.

Indonesia's inflation eased to a one-year low of 7.92% in March from 8.6% in the previous month.

Sunset policy ends with higher taxpayer base The government on Tuesday ended its sunset policy, which waives penalties and administrative fees for individuals and corporations that have registered for a tax number, The Jakarta Globe reported.

The government policy appears to have scored well, fattening the state coffers by Rp5.56 trillion ($483 million) in additional tax revenue last year.

Tax Director General Darmin Nasution said his office estimated that at least 35% of about 12.7 million registered taxpayers would have submitted their tax returns by the closing date.

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In the first three quarters of 2008, an average of 118,663 people applied for tax registration numbers each month. Although figures on the total number of new registered taxpayers are not yet available, the government has estimated that up to 1.5 million new registration numbers will be issued by the time the sunset policy officially ends.

February exports down 33% year-on-year February exports plunged a third from a year ago, while inflation eased to a one-year low of 7.92% in March, said the the Central Bureau Statistics (BPS), Reuters reported.

On an annual basis, BPS said the consumer price index (CPI) rose 7.92% in March from a year earlier, below February's inflation rate of 8.60%.

BPS said exports dropped 33% to $7.08 billion in February from a year earlier, amid slowing global demand for commodities such as palm oil and rubber.

BPS added that imports dropped 41% in February compared with a year earlier, reflecting sagging domestic demand as well as high cost of imports due to a weaker rupiah.

Foreign reserves up to $54.8B in March Foreign reserves increased again to $54.8 billion during the period ending March as foreign loans and export revenues — particularly from oil and gas — increased coverage to 5.9 months of imports and foreign loan payments, Bank Indonesia’ (BI) Governor, Boediono, said, The Jakarta Globe reported.

Before this, reserves had slumped from highs of $60.56 last July, a drop attributed to the central bank’s defense of the rupiah, which lost about 30% of its value against the dollar over the past six months.

Reserves have fallen in most countries because of de-leveraging and the return of foreign funds to the countries of their origin, Boediono said.

“In times like these, it doesn’t matter if it’s hot or cold money. If the money goes in and out of the capital market, it’s okay. The most important thing is that the money is coming in,” Boediono said, responding to economists’ concerns that the incoming funds are “hot money” which can flow out just as quickly

Indonesia’s first-quarter balance of payments surpassed BI’s forecast, recording a surplus of $3.5 billion. Commodities have shown positive results and prices have risen although manufactured exports have fallen.

INVESTMENTCompanies start to raise funds through IPO A number of companies have now become brave enough to enter the local bourse and raise funds through an initial public offering (IPO) as the capital market is becoming more stable, The Jakarta Post reported.

Cellular company PT Trikomsel Oke started offering 450 million of shares to the public at a price of Rp225 a share on Thursday, while financing firm for used cars PT Batavia Prosperindo Finance said it would offer 450 million of its new shares at prices ranging from Rp100 to Rp120 a share in the hopes of raising at least Rp45 billion in proceeds.

Trikomsel and Batavia are expected to officially list their names in the bourse by mid April and May, respectively.

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Both companies shared optimism about their moves, saying that the market would absorb the shares on offer on the back of improving market sentiment.

The Indonesia Stock Market (IDX) authority has targeted up to 15 companies to offer their shares to the public through IPOs this year, a drop from 18 in 2008.

The previously gloomy outlook of the capital market had initially made the authority less optimistic about meeting the IPO target.

But IDX president director Erry Firmansyah said that out of 15 possible companies that might launch an IPO, 11 were already in the pipeline.

PT Sumber Alfaria Trijaya, which operates the Alfamart minimarkets, was the first company to go public this year, selling a 10% stake through an IPO in January.

Semen Padang to build new factory West Sumatra-based cement maker PT Semen Padang said it plans to build a new factory with a capacity of 2.5 million tons a year with an investment of Rp3.3 trillion ($366 million), Asia Pulse reported.

The new production unit will increase the annual production capacity of the company from 5.8 million tons at present to Rp8.3 million tons when it is completed in 2011.

Last year the subsidiary of state-owned PT Semen Gresik produced 5.4 million tons of cement from its four existing units.

Its president Endang Irzal said the company is also preparing the construction of a coal-fired power plant to guarantee supply of power to the factory

The power plant will be part of a package of 10 coal-fired power plants to be built by the Semen Gresik Group, Irzal said.

STATE CONCERNSJapan to extend $14.5B in financial aid to Indonesia Japan has agreed to extend $14.5 billion in financial assistance to Indonesia to help deal with the impact of the global financial crisis, Antara reported.

Japan made the commitment at a meeting between President Susilo Bambang Yudhoyono and Japanese Prime Minister Taro Aso on Wednesday.

Finance Minister Sri Mulyani Indrawati told a press conference $12 billion of the assistance would be extended in the form of a bilateral swap facility in the framework of the Chiang Mai Initiative, $1.5 billion in the form of Samurai bonds, $500 million in regular loans for 2009, and $500 million in financing facilities.

Indrawati said the trade financing would be done by the Japan Bank of International Cooperation in partnership with Bank Ekspor Indonesia, adding that Japan would also extend another $2.4 billion to finance various projects.

One of the new initiatives taken by Japan to help reduce the impact of the global financial crisis was adding $25 billion to its budget for Overseas Development Assistance for all Asian countries for the 2009-2010 fiscal year.

"The funds are the Japanese commitment to the world in the framework of G20 to curb the negative impact of the crisis particularly on developing countries in Asia," she said.

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During the meeting President Yudhoyono and Prime Minister Aso also discussed Japan`s wish to maintain its cooperation in the energy field with Indonesia.

Earlier, Indonesia secured 71.3 billion yen ($728 million) in loans, with around $488 million for the Jakarta mass rapid transportation (MRT) project, The Jakarta Post reported on Wednesday.

According to the Finance Ministry, the Japan International Cooperation Agency (JICA) has committed to financing 85% of the MRT project under special economic partnership terms while 15% will be funded by Indonesian central and regional government budgets.

The first Indonesia MRT project is expected to have a maximum capacity of 300,000 passengers per day, with an average travel time of five minutes and 30 seconds. There will be 17 trains, each having six cars.

The rest of the loan package is aimed at flood mitigation in selected cities, preventing sedimentation in the Wonogiri multipurpose dam, developing the Bandung Institute of Technology and to provide engineering services for the Java-Sumatra interconnection power transmission line project.

ADB to invest up to $140M in infrastructure fund The Asian Development Bank (ADB) will invest up to $140 million in the Indonesian Infrastructure Financing Facility to support urgent infrastructure development in Indonesia, the lender said Wednesday, Dow Jones reported.

The ADB said in a statement that it will pay up to $40 million for a 20% equity stake in IIFF, and will give a 25-year loan of up to $100 million to government-owned infrastructure holding company PT Sarana Multi Infrastruktur, which will re-lend the money to IIFF as subordinated debt. The loan will have a grace period of five years.

The IIFF is a government-backed fund created in 2007 to support private investment in infrastructure projects by providing financial assistance in the form of guarantees, equity or long-dated debt instruments. It aims to increase private investment in Indonesia's infrastructure by six or seven times.

IIFF is expected to finance $5.5 billion of projects in its first five years of operations, the statement said.

“There is a huge gap between needed infrastructure investments and the available financing. That has significantly constrained the expansion of crucial infrastructure in Indonesia,' said Arjun Thapan of the ADB's Southeast Asia department, Agence France-Presse reported.

“The fund will finance commercially viable infrastructure projects by offering long-term financing and by providing the intellectual capital needed to catalyze public-private partnerships,” said Philip Erquiaga of the bank's private sector operations department.

“By limiting its exposure to 20% of the cost of any project, (the fund) is expected to finance up to $5.5 billion of projects in its first five years of operations,” Erquiaga added.

Indonesian firms can buy China goods in yuan: Official Indonesian companies will for the first time be able to buy goods from China using the yuan, Bank Indonesia (BI) deputy governor Hartadi Sarwono said, Bloomberg reported.

“Importers do not need to use dollars and they can directly pay their import bill with renminbi,” Sarwono said in a reply to e-mailed questions. “This will reduce pressure in the dollar market and help stabilize the foreign exchange rate. We are now in the process of finalizing the regulations.”

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China and Indonesia agreed on a 100 billion yuan ($15 billion) currency swap last month to ease foreign-exchange shortages. Indonesia buys an enormous range of goods including electronics, heavy equipment and toys from China, its No. 1 source of imports.

“The swap doesn’t increase the foreign currency reserves since renminbi is not convertible,” Sarwono said.

Hotel occupancy up despite fewer foreign visitors The occupancy rate of hotels in Indonesia rose 10-15% year-on-year in the first quarter of 2009 despite a decline in the number of foreign visitors, Asia Pulse reported.

Chairwoman of the hotel and restaurant association Yanti Sukamdani attributed the increase to pre-election campaigns.

January-March is low season when hotel occupancy rates normally average 40%, Sukamdani was quoted as saying by Investor Daily.

Earlier, the Central Bureau of Statistic said the number of foreign tourists visiting the country dropped 9.43% to 421,555 in February from 465,400 in February last year.

SOEs2008 profits from SOEs may be above targetState enterprises may have booked a consolidated profit of more than Rp79 trillion (around $6.95 billion) in 2008, thanks to better-than-expected results from some companies, The Jakarta Post reported.

The State Ministry for State Enterprises estimates that profits in 2008 have reached over Rp79 trillion.

“After seeing the performance of some of the companies, we should book at least Rp1 trillion more,” secretary to the State Minister for State Enterprises Said Didu said on Friday.

The official figure of last year’s consolidated profit for all SOEs is yet to be announced, pending an ongoing consolidated auditing process.

He said that the main factor behind the increased figure was that the financial reports of selected state enterprises, showed better actual results than last year’s estimates.

“The estimations of each company were set out in the fourth quarter of last year taking account of the effects of the global financial crisis,” he said.

He pointed to the profit results of state oil and gas company PT Pertamina as an example. “Pertamina was initially expected to record Rp25 trillion in profits, while their unaudited report shows about Rp30 trillion in (actual) profits last year,” he said.

BNI extends $25.6M loan to PT PAL PT Bank Negara Indonesia (BNI) has agreed to extend $25.6 million in loans to state-owned ship builder PT PAL Indonesia to build four tankers, Antara reported.

The loan agreement was signed on Wednesday by BNI president director Gatot Suwondo and PAL president director Harsusanto before State Enterprises Minister Sofyan Djalil at the latter`s office.

Harsusanto said the loan would be used to finance four vessels to be built to meet orders from abroad.

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Three vessels ordered by Italy consist of two chemical tankers weighing 6,200 DWT each and one double-skin bulk carrier. Another vessel ordered by Turkey is a Star 50 type weighing 50,000 DWT.

"The ships will be completed and handed over in stages at the end of December 2009 and in June 2010," he said, adding that the loan was additional financing given by BNI after an earlier $58 million in loans from the bank.

Harsusanto said PT PAL had also received an order to build 14 vessels of various sizes and types. "Its financing is expected to come from a consortium of Bank Mandiri, Bank Ekspor Indonesia and Asset Management Company," he said.

Negotiations with the consortium are continuing, he said.

PT PAL corporate director, Krishna R Suparto, said the additional financing had been studied thoroughly. "PT PAL is worth financing because it has orders, human resources and advanced technology," he said.

He said the funds were given based upon commercial agreements with the interest determined by business-to-business principles," he said.

He said PT PAL had also involved technical consultant National Ship Design and Engineering Center from the Technology Institute of Sepuluh November to assist on planning for the financing.

PRIVATE SECTORIndofood reports 27% increase in sales Food giant PT Indofood Sukses Makmur reported a 27% increase in sales to Rp27.86 trillion ($3 billion) last year from Rp21.94 trillion in the previous year, Antara reported.

Indofood operating profit surged 46.8% to Rp2.89 trillion with net profit rising to Rp980.36 billion from Rp661.21 billion.

Increases were recorded by almost all strategic business units, notably in the agribusiness sector, said CEO Anthony Salim.

Salim said the corporation recorded significant progress such as the expansion of plantations, citing the recent acquisition of PT London Sumatra, which has large oil palm plantations in Sumatra.

BANKSSBY picks tax senior official, banker for BI senior post President Susilo Bambang Yudhoyono has proposed Darmin Nasution and Gunarni Soeworo as his choice of candidates to replace Bank Indonesia Senior Deputy Governor Miranda Goeltom, a legislator said on Wednesday, The Jakarta Globe reported.

With a doctorate from the Sorbonne in Paris, the former lecturer in economics at the University of Indonesia previously served as the head of the Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK).

He chaired a high-powered committee set up to clean up the fallout after the notorious Bank Indonesia’s Liquidity Assistance (BLBI) scandal about a decade ago.

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Gunarni Soeworo, a Padjadjaran University graduate, is a former chairman of the Indonesian Bankers Association (Perbanas) and a former president director of Bank Niaga. She served on the supervisory board of the Indonesian Banking Restructuring Agency (IBRA) which oversaw the disposal of assets surrendered to the state in the wake of the Asian financial crisis.

Top banks report significant growth in 2008 The country’s three largest banks, PT Bank Mandiri, PT Bank Central Asia (BCA) and PT Bank Negara Indonesia (BNI), all posted more than 20% net profit growth in 2008, despite the pinch of the global crisis taking hold in the fourth quarter, The Jakarta Globe reported.

State-owned Bank Mandiri’s loans grew 26% in 2008 to Rp174.5 trillion ($15.18 billion). Private lender BCA, managed 36.9% growth to Rp112.8 trillion, while state-owned BNI posted a 26.3% gain to Rp111.99 trillion.

“The Indonesian banks are in a much better situation compared to US or European banks, as our NPL (non-performing loan) situations, capital adequacy ratios and profits are still relatively solid and were growing as of last year,” Agus Martowardojo, president director at Bank Mandiri, said on Monday.

Bank Mandiri reported that profit rose 22.3% last year to Rp5.31 trillion from Rp4.34 trillion in 2007.

This year, however, bankers have started to anticipate slower lending growth and increases in bad loans as the global economy slumps further.

“Due to the economic uncertainty, we expect our credit portfolio quality will decline in 2009, although it will still be under control,” D.E. Setijoso, president director of BCA, said on Monday. “However, BCA has increased its credit provision in 2008.”

BCA increased the funds it had put aside for NPL exposure to Rp1.74 trillion in 2008, compared with Rp210 billion in 2007. The bank booked 29% growth in net profit last year to Rp5.8 trillion, up from Rp4.5 trillion.

Gatot Suwondo, president director of BNI, said the bank had increased its NPL provision from 71.9% of total NPLs in 2007 to 101% in 2008. This year, BNI plans to raise its NPL provision to about 115%.

“With the provision, we will try to hold our NPL ratio this year to no more than 6%,” Suwondo said.

Bank Mandiri increased its NPL provision to 127.1% at the end of 2008, up from 109% in the previous year.

Beside increasing provisions, Suwondo also stressed the importance of having banks raise their core capital to deal with the likely bumpy conditions ahead.

“Currently, our tier 1 capital is 9.8% and we plan to increase it to above 10%,” he said.

“A BNI rights issue will not be possible in the current conditions; most likely we will ask the government,” as the bank’s majority shareholder, “to decrease our dividend payout ratio from above 50% to below 50%.”

Separately, Martowardojo said he hoped the government would reduce its dividend payout ratio to 25%.

Tier 1 capital is the core measure of a bank’s financial strength from a regulatory standpoint. It comprises capital types considered to be the most reliable and liquid.

Meanwhile, mid-size PT Bank Panin said Monday its 2008 net profit fell 16% on year to Rp798.01 billion as a slightly higher net interest income was offset by an increase in operating costs, , Dow Jones reported.

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Net interest income was up 8% to Rp2.57 trillion from Rp2.38 trillion a year earlier.

Operating costs such as administrative and salary expenses rose 30% to Rp1.81 trillion from Rp1.41 trillion a year earlier.

19 more banks join BI linkage program As many as 19 more commercial banks on Wednesday signed an agreement with Bank Indonesia (BI) to take part in a linkage program between the banks and the country’s many small businesses, The Jakarta Globe reported.

The program has helped boost lending by commercial banks to small businesses over the past few years, BI’s director for research and banking regulation Halim Alamsyah said Wednesday.

Alamsyah noted that overall loans to small-and-medium enterprises (SMEs) and cooperatives rose to Rp6.4 trillion in February from Rp6 trillion at the end of 2008, from only Rp2.8 trillion at end 2005. The increase was a direct result of the scheme, he claimed.

“The program helps commercial banks to reach the micro industries and support these important financial institutions,” said Achmad Baiquni, director for SMEs at Bank Negara Indonesia (BNI).

The number of commercial banks taking part in the program has now reached 40.

Between July 2008 and February 2009, Rp1.5 trillion in loans was extended to SMEs and cooperatives, including shariah-based cooperatives.

Alamsyah said he expected total outstanding loans extended to SMEs and cooperatives to rise to Rp10 trillion by the end of this year, compared to the total value of outstanding bank loans in Indonesia last year, which stood at Rp1,300 trillion.

Launched by the central bank in 2002, the linkage program connects commercial banks with the country’s privately owned rural banks in order to make credit available to small and micro businesses as well as community cooperatives. The program has so far extended loans to more than 500 rural banks and cooperatives across the country.

BRI 2008 net profit up 23% PT Bank Rakyat Indonesia (BRI) said Tuesday its 2008 net profit rose 23% on year to Rp5.96 trillion due to an increase in net interest income and fees, Dow Jones reported.

The nation's second-largest lender by assets said net interest income for the January-to-December period rose 18% on year to Rp19.65 trillion from Rp16.69 trillion a year earlier.

The bank, 56.79% owned by the government, attributed the increase in net interest income to strong lending growth.

BRI's total outstanding loans rose 42% during the year to Rp161.06 trillion at the end of December, said Abdul Salam, the bank's chief financial officer. Fee-based income rose 21% to Rp1.77 trillion.

Salam said he expects loan growth for 2009 to slow to up to 22% due to challenging economic conditions.

To help cope with the situation, "we will propose to the bank's shareholders to put aside less than 60% of 2008 net profit for the dividend payment," he added.

BRI is also considering issuing up to Rp1 trillion in subordinated debt later this year to help strengthen its working capital.

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Assets at end-December stood at Rp246.08 trillion, compared with Rp203.73 trillion a year earlier.

POWERRegional bank consortium to finance 16 power projects A consortium of regional administration banks (BPD) led by Jakarta's PT Bank DKI will provide Rp5 trillion ($454 million) to finance the construction of 16 steam-powered power plants outside Java, Asia Pulse reported.

PT Bank DKI president Winny Erwindia said the consortium would group 22 BPDs, with Bank DKI as the lead arranger and Bank Papua, Bank Jatim and Bank Kaltim as co-arrangers.

Bank DKI alone would contribute up to Rp1 trillion to the credit, she said.

The fund was expected to be available this month, pending an endorsement by the finance minister that guarantees the projects.

The guarantee by the government would benefit the banks, with less risk to be faced and in lending to the maximum limit, she was quoted as saying by Investor Daily.

OIL & GASBP expected to announce plan to sell BP W. Java Oil giant BP is expected to announce plan to sell its subsidiary BP West Java Ltd, which has a 46% stake in the project of Offshore North West Java (ONWJ), Asia Pulse reported.

The announcement by BP is expected after the Upstream Oil and Gas Regulator (BP Migas) agrees to allow potential buyers to access its data room.

BP ONWJ is one of the largest operators of offshore oil fields in Indonesia with its working area expanding in the Java Sea from Cirebon to the Thousand islands.

The data room holds data of the oil and gas fields of BP West Java including reserves needed by the potential buyers, said Nico Kanter, country head of BP Indonesia.

The BP Migas agreement will mark the start of process of sales, Kanter said, adding interesting investors may make their offer based on the data.

A final deal is expected to be signed by the end of this year, he was quoted as saying by Investor Daily.

Jan-Feb average crude, condensate output at 963,269 bpdIndonesia's output of crude oil and condensates averaged 963,269 barrels per day (bpd) over the January-February period, the Energy and Mineral Resources Ministry said in a statement on its Web site Wednesday, Dow Jones reported.

In February, the production of crude and condensate averaged 966,845 bpd, 6,807 bpd higher than January's average production of 960,038 bpd, as several oil contractors increased production.

Between January 1 and March 16, the production of crude and condensates averaged 960,374 bpd, the statement said.

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It also said Pertamina EP, a unit of state oil and gas firm PT Pertamina, increased crude and condensate production by 694 bpd in February to 117,628 bpd.

PetroChina International Jabung Ltd. increased February output by 4,168 bpd to 19,068 barrels/day as its Betara plant came back online after maintenance, the statement said.

With this level of production, the 960,000 bpd crude and condensate production target set in the 2009 state budget should be achieved, it added.

Medco to cut 2009 capex 31% on low crude prices Publicly traded oil and gas company Medco Energi Internasional will cut capital expenditure in 2009 by 31% to $200 million from $288 million last year, a senior official said late Tuesday, Platts reported.

"We estimate costs will be lower this year due to the decrease in global oil prices," company finance director Cyril Nurhadi said.

Medco may delay some of its seven key projects totaling $1.7 billion, project director Lukman Mahfoedz added.

"We had planned to carry out an enhanced oil project at Rimau block this year, but with current oil prices, the project is no longer economically viable. We will go ahead with the project once the oil price recovers, maybe at $70 per barrel," Mahfoedz said.

The Rimau block, currently producing at 25,000 bpd, is expected to hit 64,000 bpd after the ramp-up is completed, he added.

Medco is in talks with several financiers for loans to ensure at least some of its seven key projects proceed as planned, Mahfoedz said.

Meanwhile, the company’s net profit in 2008 was posted at $280.2 million the highest it had recorded since 1980, Antara reported.

Nurhadi said the company’s sales in 2008 stood at $1.3 billion, the highest figure ever in its history, or an increase of 19.3% from $1.1 billion in 2007.

He said the increase in the company’s sales was triggered by the rise of the world crude oil price to $100.6 per barrel and gas to $4.2 per million British thermal units (MMBTU).

The other factor contributing to the rise was increases in the price of methanol, diesel oils and electricity sales.

Nurhadi said the sale of the company's interest in its subsidiary PT Apexindo Pratama Duta and 25% of Tuban Block shares earned it a one-time profit of $260.5 million.

According to Nurhadi, the company`s production costs in 2008 increased 12.9% to $776.3 million from $687.7 million a year earlier.

Ujung Pangkah block initial LPG output begins Ujung Pangkah oil and gas block, operated by Hess Corp.'s Indonesian unit, began initial output of 3,000 barrels of oil equivalent a day of liquefied petroleum gas (LPG) late last week, oil and gas upstream regulator BP Migas said Friday, Dow Jones reported.

LPG production at the block, located offshore northern East Java, will be increased in stages and will reach 6,000 barrels of oil equivalent a day by end-2010, BP Migas said in a statement on its web site.

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It said all LPG produced at Ujung Pangkah will be sold to state oil and gas company PT Pertamina to be used in the government's program to switch household energy supplies to LPG from kerosene.

Hess owns 75% of Ujung Pangkah via unit Hess (Indonesia - Pangkah) Ltd., with Kuwait Petroleum Corp. unit Kuwait Foreign Petroleum Exploration Company (Kufpec) owning the remaining 25%.

Hess Corp. data showed that combined production of LPG, crude oil and condensate from Ujung Pangkah reached 12,000 barrels of oil equivalent a day by end 2008.

MININGAdaro’s 2008 net profit up ten-fold Indonesia's second-largest coal producer PT Adaro Energy on Tuesday reported a ten-fold increase in net profit in 2008 to Rp887.2 billion ($77 million), Reuters reported.

Adaro said revenue rose 56% to Rp18.09 trillion in 2008, from Rp11.6 trillion a year ago.

The coal miner previously said its sales volume, including third-party coal trading, rose 9% to 41.1 million tons in 2008, while production volume increased 7% to 38.5 million tons last year.

Adaro had said it expected production would rise to between 42-45 million tons this year and has set aside as much as $100 million to acquire a coal barge and trans-shipment company to improve its supply chain.

The firm said last month that 2009 revenue was projected to reach $2 billion, on the back of sales secured in long-term contracts.

Bumi Q4 net profit more than doubles Top coal producer PT Bumi Resources said on Wednesday fourth-quarter 2008 net profit after minority interests rose 119% to $155.2 million from a year ago, Reuters reported.

For the full year, Bumi reported a better-than-expected 18% fall in net profit to $645.4 million, from $789.0 million in 2007.

Bumi, which has a market capitalization of $1.35 billion, benefitted from soaring commodity prices in the first half of 2008.

It said full-year revenue rose 49.1% to $3.378 billion, from $2.265 billion a year ago.

The coal miner reiterated its earlier view that sales and production volumes may increase 10% this year, from 53 million tons last year.

PT Timah posts Rp1.3T in 2008 net profit State-owned tin mining company PT Timah reported its net profit reached Rp1.34 trillion in 2008, 25% lower from Rp1.78 trillion in 2007, Antara reported.

The lower net profit was due to a decline in the company’s sales performance following a drop in the global tin price, according to a company press statement.

The company’s revenue in 2008 reached Rp9.053 trillion, 6% higher than 2007 revenue of Rp8.542 trillion.

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The company`s gross profit in 2008 reached Rp2.71 trillion or 14% lower than that of 2007 of Rp3.17 trillion. This was due to higher refined tin cost of goods sold of 61%, while cost of goods sold by consolidated subsidiaries increased by 25% compared to that of the previous year.

Indika Energy 2008 net profit Rp1.08T Coal miner PT Indika Energy said Monday its 2008 net profit more than quadrupled due to gains from an investment in an affiliated company, Dow Jones reported.

Net profit rose to Rp1.08 trillion from Rp264.97 billion a year earlier. Revenue, however, fell 1.2% to Rp2.31 trillion from Rp2.34 trillion a year earlier.

The company said it booked Rp1.025 trillion from an investment in an affiliated company, up significantly from Rp388.60 billion a year earlier.

Indika didn't comment on its 2008 earnings.

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