THE COORDINATING MINISTRY FOR ECONOMIC AFFAIRS
REPUBLIC OF INDONESIA
Main Building, Ministry of Finance, Jl. Lapangan Banteng Timur No.2-4 Jakarta 10710
Tel: (021) 351-1178 Fax: (021) 351-1186 Website: http://www.ekon.go.id
Trade and Investment News, 21 July 2008
Highlights
Politics
· The Supreme Court denied a request by the three convicted terrorists
· President Yudhoyono assured general election would not become a security concern
Regions
· New radars are planned to be installed in Indonesia’s eastern provinces
· Indonesian scientists and doctors are reporting progress in the fight against bird flu
Economy
· Foreign participation in local markets increased two fold from May to June
· Bank Indonesia chief said the economy has rebounded from May’s fuel price hike
Business briefs
Macroeconomy
· Foreigners bought a netRp17 trillion of high-yielding central bank SBIs
· Foreign investment in state bonds rose to a new peak
SOEs
· The House may approve a plan to privatize some state firms next month
· PT Telkom cancelled a bond sale after receiving $437 million loan promise
Private Sector
· PT Global Mediacom received $225 million loan to fund expansion
· The government is optimistic that car exports will exceed 80,000 units this year
Banks
· The government established holding company for state banks
Power
· Vice President Jusuf Kalla expressed optimism for no rotating blackouts in 2009
· West Java proposes five new geothermal sites as power plants
Oil & Gas
· PT Elnusa will get a $95 million syndicated loan to fund expansion
· Construction of the Tangguh liquefied natural gas plant in Papua is 93% complete
Mining
· PT Berau Coal may sell a 30% stake in an IPO
· Aneka Tambang and Zhongjin Lingnan Nonfemet abandoned a bid for Herald Resources
POLITICS
Supreme Court gives go-ahead for Bali bombers' execution
The Supreme Court has given the green light for the execution of the three bombers after rejecting their last appeal, Agence France-Presse reported on Thursday.
"The Supreme Court only acknowledges (the bombers') first appeal, which they've already rejected. The ball is now in the hands of the (Bali) prosecutor's office to carry out the sentence, the appeals process is over," Denpasar District Court head Nyoman Gede Wirya said.
The court has sent a letter to the Bali prosecutor's office confirming that the rejection of the bombers' latest and third petition meant the appeals process was exhausted, Wirya said.
Attorney General Hendarman Supandji was quoted by Antara as saying the bombers had already refused to seek clemency from the president, clearing the way for them to face the firing squad.
"According to the law, the punishment can already be carried out," Supandji said.
Bali chief prosecutor Dewa Putu Alit Adnyana said he had not yet received the letter but had already appointed a team to oversee the executions, which will be held outside Bali.
The three members of the Jemaah Islamiyah regional terror network -- Amrozi, Imam Samudra and Ali Ghufron -- were convicted in 2003 and are being held in Nusakambangan prison, Central Java.
The men remain defiantly unrepentant over their lead roles as plotters of the 2002 attack which killed 202 people, mostly foreign tourists at bars and nightspots on Bali.
General election not a source of public worry: President
President Susilo Bambang Yudhoyono said he hoped the upcoming general election would not become a source of public worry and therefore the polls must be carried out in the best way possible, Antara reported Friday
"Competition during a general election is something normal but it should not lead to people slandering each other, much less lead to violence. Only then will the polls become free of worry," Yudhoyono said Thursday at a meeting with North Sumatra’s governor, district heads, mayors and other local chiefs.
He also said in the run up to the 2009 polls, government officials affiliated to political parties must give priority to their governmental tasks and maintain public order.
Yudhoyono said the reform movement had spawned a relatively large number of political parties but this fact posed no problem.
The 2009 election will be held on April 9, in which 34 political parties have been declared eligible to participate.
Three death row convicts executed
Indonesia has executed three people convicted for murder, including a mother and a son, an official said on Saturday, the latest in a string of recent executions in the country, Reuters reported.
Jakarta has defended the death penalty as a necessary deterrent. Three militants on death row for the 2002 Bali bombings are likely to be executed soon after the Supreme Court rejected their final appeal, but no date has been announced.
The 59-year-old mother, Sumiarsih, and her 43-year-old son, Sugeng, faced a firing squad in Surabaya, East Java around midnight, Abdul Hakim Ritonga, deputy attorney general for general crimes, said.
Both were sentenced to death for murdering five members of a family 20 years ago over a money dispute.
Separately, an Indonesian shaman, Tubagus Yusuf Maulana, was executed on Friday night in Banten, Ritonga said.
Maulana, who claimed to have the power to double money, was convicted for murdering eight people in a series of ritual slayings.
REGIONS
New defense radars planned for eastern regions
Defense Minister Juwono Sudarsono said last week the government will have four more radars to cover the eastern provinces as part of the 2010-2014 Strategic Plan program, reported BBC Asia and Pacific.
"Previously, we procured four new radars under the 2005-2009 strategic plan program," Minister Juwono said in a hearing with the House of Representatives Commission-I and defense force chief, Gen Djoko Santoso, here on Monday.
The four new radars procured through the 2005-2009 export credit program will be placed in Saumlaki, Yamdena, Merauke and Timika in Papua, the minister said.
The government in stages will pursue self-reliant production of radar facilities optimally by involving domestic industries such as PT Len Industri Electronics (PT LEN) and aircraft manufacturing company PT Dirgantara Indonesia (PT DI).
However, both PT LEN and PT DI do not have military radar technology, and the transfer of technology process is still very limited. Therefore, the radar facility self-reliant process still has a long way to go, he said.
Despite the shortcomings, the government is committed to protecting outermost regions, he stated.
The Defense Ministry in cooperation with related ministries and institutions will comprehensively boost development programs in the outer most regions, he said.
Indonesia makes progress in fight against bird flu
Indonesian scientists and doctors have made progress in the battle against bird flu that they have been waging under a joint project with Singapore, said Dr. Balaji Sadasivan, Senior Minister at Singapore’s State for Foreign Affairs, The Straits Times reported.
“The scientists and doctors are very conscientious in their work and in getting data that is very useful and very important to the world,” he said.
Balaji was speaking to Singapore reporters during a visit to the Tangerang, Banten, to inspect a joint bird-flu research center.
Balaji, who is on a two-day official visit to Indonesia, went to the Pasar Gerendeng wet market to observe how chickens, ducks and other fowl are sold.
He also visited unlicensed slaughterhouses where about 2,500 poultry are butchered daily, and a holding center where live chickens and ducks are held before heading for slaughter.
The doctor said the wet market would have to be restructured to ensure better hygiene, and that the slaughterhouses would have to be moved elsewhere as they were too close to population centers and the hospital.
Already, the authorities have imposed restrictions on the movement of poultry from other regions by requiring health certificates for chickens and ducks transported to Tangerang.
Kopassus boss appointed as new Aceh military commander
Indonesian Army Chief of Staff Gen Agustadi Sasongko Purnomo officially installed Maj.Gen Soenarko as the Commander of Iskandar Muda Military Area in Banda Aceh on Wednesday, Detikcom reported.
Maj. Gen. Soenarko, previously commander of the Armed Forces (TNI) Special Forces Command (Kopassus), replaces Maj-Gen Supiadin, who has been appointed as the assistant for operations to the TNI commander.
Purnomo said that the security situation in the province was good and that the armed conflict with the Free Aceh Movement (GAM) was over, adding that the informal economy had returned to life and was contributing to the province's economy which held a significant position in the region.
Purnomo noted that stability in Aceh had to be maintained while criminal activity and the attempts to disturb the peace process in Aceh had to be stopped. Purnomo called for the new Iskandar Muda Military Area commander to continue to work closely with the Aceh Police and local government to ensure that stability continued.
He also called on the people of Aceh to participate directly in maintaining peace and prosperity in their province by reporting illegal activities to the security forces.
ECONOMY
Foreign investor confidence grows stronger amid spiking inflation
Data released by Bank Indonesia shows that foreign participation in local financial markets through Bank Indonesia Certificate (SBI) in June increased more than two times to Rp33.6 trillion from Rp16.6 trillion in May.
Deutsche Bank in a report says that the number shows “improved confidence in the macro outlook” despite the concern on high inflation.
Analysts believe that Bank Indonesia’s decision to renew its key interest rate by 25 basis points to 8.75% early this month would help lessen the impact of inflation. Indonesian inflation hit 11.03% in June or the highest in almost two years. However, analysts also say that should the Central Bank decide to increase its rate, it must be done carefully as to not shock businesses.
Foreign investors also showing increased confidence through state bonds. As reported by The Ministry of Finance, foreign investment in state bonds rose from Rp89 trillion ($9.67 billion) in May to a new peak at Rp96 trillion at present or 18.45% of the total amount of state bonds. According to Debt Management Director General Rahmat Waluyanto, this figure is the highest in the past year.
The government also earned Rp6.45 trillion in auction of state bonds on Tuesday in which foreign investors accounted for 60% of the total bidding of Rp11.79 trillion. Waluyanto said the auction was supported by positive sentiment with strengthening rupiah and controlled public expectation. He noted domination by foreign investors in bonds offered by the government began after the US subprime mortgage crisis.
Bank Indonesia Governor Boediono said the economy has rebounded from the impact of a hike in subsidized fuel prices despite rising interest rates and high inflation.
"I have reported to the president that our economy has begun improving. At the beginning the effect of the fuel price rise gave our economy a slight fever, but we have overcome this," said Boediono.
He said after a meeting with President Susilo Bambang Yudhoyono that foreign exchange reserves were at a healthy $59.6 billion and inflation had "become normal again" following a jump from the fuel hike.
Consumer prices likely peaked last month and would start easing by the end of the year.
Boediono has said he expects inflation to range between 11.5 and 12.5% by year's end, before easing off to between 6.5 and 7.5% by the end of 2009. Inflation was running at 11.03% in June. The Finance Ministry said the economy would likely grow 6.19% in 2008.
The financial sector, however, is not reflecting the global economic slowdown. Credits provided by financing companies reached Rp118.36 trillion ($12.6 billion) in May or an increase of 22.75% from a year before, Asia Pulse reported.
Consumer financing accounted for 63.29% with leasing financing for 33.74%, the newspaper Investor Daily said quoting data from Bank Indonesia.
Based on the data, credits in consumer financing totalled Rp74.92 trillion or an increase of 21.39% in a year, and leasing credit grew 25.49% to Rp31.82 trillion.
Seeing the figures, the prospects are still encouraging for leasing business with higher annual growth rate, chairman of the Association of Financing Firms Wiwie Kurnia said.
Kurnia noted that business in consumer financing has expanded mainly in the automotive sector with strong growth recorded in the sales of cars and motorcycles with most owners using credit to purchase their cars or motorcycles.
Fallout from the power shortage affecting most of the country remains a cause for concern. Several foreign companies, including a Japanese consortium, have expressed their concern directly to President Yudhoyono saying if the power shortage is not corrected soon they may move their operations from Indonesia. Analysts say the power crisis may threaten close to $1 billion in future contracts.
The government recently passed regulations forcing Industries to work at least two weekends per month in order to lessen burden on the power supply during the week. The greater Jakarta area where a large number of industries are located is currently in the middle of several weeks or rotating blackouts.
MACRO ECONOMY
Foreign holdings of SBIs double
Foreigners bought a netRp17 trillion ($1.86 billion) of high-yielding central bank debt (SBIs) in June, central bank data showed, reflecting growing confidence in the country's economic outlook, Reuters reported.
The higher foreign holding of SBIs, seen as a key indicator of hot money flows, came at a time of a wider spread between US interest rates and domestic rates following recent hikes of the Bank Indonesia (BI) rate.
The data showed foreign holdings of the central bank's one-month, three-month and six-month debt paper more than doubled in June to Rp33.6 trillion from Rp16.6 trillion at the end of May.
"We reckon that the surge in foreign holdings may reflect improved confidence in the macro outlook ... although inflation remains a concern, the central bank expects this would decline in 2009," Deutsche Bank said in a report.
"We estimate an inflation of around 8%. As such, BI's interest rate policy may be more a function of rupiah stability, which largely also depends on outflow and inflows into government papers, more than inflation per se."
The central bank raised its key interest rate early this month by 25 basis points to 8.75%, its highest level since June last year, to contain double-digit inflation.