THE COORDINATING MINISTRY FOR ECONOMIC AFFAIRS REPUBLIC OF INDONESIA

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Trade and Investment News1, 2 February 2009

Highlights

National A survey finds that the majority of mosque leaders in Jakarta are moderates Papua looks to Aceh and Nias agency for aid in development Politics Sultan Hamengkubuwono popular with Indonesian Democratic Party of Struggle Terrorism Judges dismiss move to scrap terrorism trials Government ready to try Hambali if returned from Guantanamo Security Police to establish national fingerprint data base Law & order Life demanded for former central bank deputy governor Democratic Party legislator jailed for corruption Health Non-medical sectors warned to prepare for possible pandemic Economy Optimism over prospects of first Shariah retail bond Finance minister concerned over slowdown in exports Business briefs Macroeconomy Finance minister predicts lower inflation for January $6.3 billion stimulus package to provide tax breaks for business Investment Investment board says commitments to suffer amid global concern State concerns Public works ministry sets ball rolling on infrastructure work Government commits Rp20 trillion for small business credits SOEs Toll road operator PT Jasa Marga sees 12% boost in 2009 revenue Private sector Holcim reviews cement plant expansion plan Banks Central bank to set criteria for derivatives Power State utility PT PLN looks for $2.5 billion for expansion program Oil & gas Government to introduce subsidies for biofuel industry Mining PT Aneka Tambang to triple capital expenditure

1 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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NATIONAL Survey: Most mosques in Jakarta 'moderate leaning'A recent survey conducted by the Syarif Hidayatullah State Islamic University's (UIN) Institute for the Study of Religion and Culture revealed the majority of mosque leaders in Jakarta are 'moderate leaning’, The Jakarta Post reported.

The survey also shows that 26% agree that war is the main form of jihad while 20% support the formalization of Shariah law.

"In general, most of the mosques in Jakarta are moderate in their perceptions and ideas and this is reflected in the respondents' view on five key issues," UIN researcher Ridwan al-Makassary said.

The five survey themes were civic pluralism, gender equity, jihad, the formalization of shariah law and Indonesia's political system.

"Eighty-eight percent of respondents agreed that women could hold public offices, however, 56.4% were against the idea of a female president," he said.

The poll, conducted at 250 of Jakarta's 2831 mosques, chosen at random, also found that 83.6% of survey participants agreed that terrorism was against the teachings of Islam, with 78.4% advocating capital punishment for convicted terrorists.

"While 88% of respondents believed that Muslims should respect people of other faiths, most of those surveyed were against a non-Muslim holding the presidential office," al-Makassary said.

With a margin of error of between 5% and 6%, the survey also revealed that 60% of respondents believed the government had a role in regulating the dress code of Muslims.

Meanwhile, about a hundred protestors from a hard-line Muslim group rallied outside the US embassy in Jakarta on Friday, some criticizing US President Barack Obama over suspected US missile strikes in Pakistan, Reuters reported.

"Obama has promised maintaining a mutual respect with the Muslim world but the position that the US shows when it attacks Pakistan and Afghanistan means it has not changed," said Heru Binawan, head of the Jakarta branch of Hizbut Tahrir Indonesia (HTI).

The suspected US missiles were fired into Pakistan last week, killing at least 14 people. It was the first strike since Obama took office.

Papua officials look to BRR for development helpAuthorities in Papua hope to learn how to develop the vast province with help from the Aceh-Nias Reconstruction and Rehabilitation Agency (BRR), which has earned praise for its transparent management and procurement system, The Jakarta Globe reported.

Kuntoro Mangkusubroto, BRR chairman, said Papua Governor Barnabas Suebu had expressed interest in learning about the methods the BRR used to rebuild Aceh after the provincial capital, Banda Aceh, and the province's western coastline were devastated by the Indian Ocean tsunami in December 2004.

"We are ready to help Papua and other disaster-prone parts of Indonesia," Mangkusubroto told a panel discussion hosted by the Jakarta Foreign Correspondents Club.

Agus Sumule, an adviser to the Papua governor who is in charge of regional development, said in a telephone interview from Jayapura that the province was particularly interested in learning how to build and manage infrastructure.

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"We'd like to finish projects on time, with no corruption in the process," Sumule said.

Papua is one of the country's most corrupt provinces, according to Indonesian Corruption Watch.

Eight officials from Papua will work out of BRR's office in Aceh for two weeks to learn about how to manage development projects.

BRR also plans to share computer software it used to plan projects and ensure fiscal accountability. The agency uses online database software that has allowed the public to track its progress with reconstruction efforts in detail.

POLITICS Sultan in talks to become Mega’s running mate Yogyakarta’s Sultan Hamengkubuwono X, a Javanese king, is a leading candidate to be former President Megawati Sukarnoputri's running mate as she bids to regain the position she lost in 2004, Bloomberg reported.

The Sultan was supported by 33 branches of Megawati's Indonesian Democratic Party for Struggle, while Prabowo Subianto, former chief of the army special forces, was endorsed by 28, said Pramono Anung, secretary general of the party. Indonesia will vote in July in the second direct presidential elections since independence in 1945.

President Yudhoyono's "popularity is very high," said Fauzi Ichsan, chief economist at Standard Chartered Plc in Jakarta. "The vice presidential candidate could tilt the balance because the contest is likely to be between Yudhoyono and Megawati."

According to a survey conducted in September, 32% of the 1,239 respondents would vote for 59-year-old Yudhoyono, while 24% preferred Sukarnoputri. The survey was conducted by Lembaga Survei Indonesia. About 86% of the respondents who knew about the Sultan said they liked him.

TERRORISM Trial of JI suspects to proceed: JudgeA court ruled Thursday that it will proceed with the trial of 10 suspected members of the Jemaah Islamiyah (JI) regional militant group charged with terrorism offences, reported Agence France-Presse.

Judge Haswandi said the trial, which opened earlier this month only to be suspended within minutes over objections from the defense, would go ahead.

"We rejected all the defendants' lawyers' objections and decided to continue the hearing," the judge told the South Jakarta District Court.

Defense lawyers had argued that the men, including Mohammad Hasan bin Saynudin, 35, a Singaporean who received al Qaeda training and met Osama bin Laden in Afghanistan, should not have been charged under anti-terror laws.

But Haswandi said there was sufficient evidence of the group's intentions and links to JI, blamed for deadly attacks across Southeast Asia including the 2002 Bali bombings, to justify the terrorism charges.

The suspects were arrested in Palembang, South Sumatra in late June and early July last year and allegedly have links to some of the region's most wanted terrorists.

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At the time of their arrests, police said they found 20 improvised bombs and a safe house in Palembang.

The cell is accused of planning to bomb a backpacker cafe in the tourist town of Bukittinggi, West Sumatra, and kill two Christian priests in Jakarta in August 2006.

They also allegedly attacked Christian priest Yosua Winardi with a hammer in the same year and murdered Christian teacher Dago Simamora in June 2007.

They are also accused of planning attacks against gold shop owners in South Sumatra.

The trial will resume next Thursday.

Govt. prepares to try alleged Bali bombing mastermind Police are making preparations for the trial of the alleged mastermind of the 2002 Bali bombing, Hambali, should he be returned to the country after the closure of America's Guantanamo Bay detention center, The Age reported.

The Indonesian embassy in Washington has spoken with US officials about the potential deportation of the high-level terror suspect but has been told the closure of the prison camp will take time.

Police spokesman Abubakar Nataprawira said that if Hambali was returned to Indonesia, the police, Foreign Affairs Department and State Intelligence Agency (BIN) would organize his transfer and any court action.

Repeated requests for access to Hambali have been denied but Indonesian officials are hopeful that Guantanamo Bay's closure and the change of government in the US will bring a change.

"We cannot predict how long it will take as it is a legal process," Foreign Affairs spokesman Teuku Faizasyah said.

Hambali, often referred to as the Osama bin Laden of Southeast Asia, was arrested in Thailand by the CIA and Thai police in 2003 and transferred to Guantanamo Bay on suspicion of involvement in a number of terrorist attacks across the region.

SECURITY Police to establish national fingerprint database The National Police is to create an integrated fingerprinting system for all Indonesian residents in an effort to enhance crime-fighting efforts, reported Kompas.

The fingerprint system will be managed by the National Police’s Indonesia Automatic Fingerprints Identification System (INAFIS), officials said.

INAFIS chief Sr. Comm. Bekti Suhartono said the system will be used in all citizen data including ID cards, criminal records and land ownership records.

“Therefore, people will no longer be able to hold two ID cards if their fingerprints are already registered in the system,” Suhartono said.

He added that in the event of natural disasters victims could be immediately identified if their fingerprints had already been registered.

Police said the system will be implemented beginning this year in all 31 regional police headquarters across the country.

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LAW AND ORDERProsecutors want life for former bank official Prosecutors Friday requested life in prison for a relative of President Susilo Bambang Yudhoyono who is accused of embezzling millions of dollars from the country's central bank, Reuters reported.

Former Bank Indonesia (BI) deputy governor Aulia Pohan is accused of using Rp100 billion ($8.8 million) in bank funds to bribe lawmakers and to hire lawyers to defend other bank executives facing corruption charges.

Prosecutors demanded the maximum life sentence for Pohan and three other deputy BI governors in the first hearing of the case at the powerful anti-corruption court. Pohan’s daughter is married to a son of the president.

The four men are accused of using Rp31.5 billion of the embezzled money to bribe lawmakers.

The remaining Rp68.5 billion was used to hire lawyers to defend other bank officials accused of being complicit in the embezzlement of billions of dollars that went missing during the 1997-98 Asian financial crisis.

Court jails Democratic Party legislatorIn a shocking indictment of the level of corruption plaguing the House of Representatives (DPR), Sarjan Taher, a lawmaker from President Susilo Bambang Yudhoyono's Democratic Party, was given a four-and-a-half-year jail sentence and fined Rp200 million for his role in a 2007 corruption scandal, The Jakarta Globe reported.

The case also revealed that the 23 lawmakers on House Commission IV, which oversees forestry, allegedly accepted bribes.

Delivering the verdict, Andi Bachtiar, one of the judges on the five-member panel, said it had been proven that Taher met with South Sumatra Governor Syahrial Oesman, his provincial secretary Sofyan Rebuin and businessman Chandra Antonio Tan to discuss the plan to build the Tanjung Api-Api seaport in the Pantai Air Telang protected forest.

"Sofyan Rebuin and Chandra Antonio Tan then gave the defendant Rp2.5 billion in 2006 and another Rp2.5 billion in 2007."

The House collectively passed the forest conversion decree in 2007, the court ruled.

"The defendant has abused his position as a lawmaker and marred the image of the House of Representatives, which is supposed to defend the people's aspirations and provide a role model for society," presiding Judge Gusrizal told the court.

Papuan court clears rights defender of all chargesAmnesty International said it welcomed the decision on Friday by the Jayapura District Court to clear human rights lawyer Iwanggin Sabar Olif alias Sabar of all charges brought against him over inciting a violent action, or sedition.

Amnesty said the ruling sends a positive signal to the Papuan human rights defenders community.

Olif was charged under Article 160 of Indonesia's Criminal Code (KUHP) for inciting "in public to commit a punishable act, a violent action against the public authority or any other disobedience".

Amnesty International said it will continue to urge the Indonesian government to ensure that Article 160 is no longer used to undermine the right to freedom of expression.

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HEALTH Non-medical sectors told to be prepared for bird flu pandemicPreparations for a possible bird flu pandemic must involve sectors outside the health field, for sound cooperation to help mitigate the pandemic's impacts, a top official warned, The Jakarta Post reported.

"All sectors have to possess plans on pandemic preparedness, including the private sector and community groups," said Bayu Krisnamurthi, executive director of the National Commission on Bird Flu Preparedness.

"There is no single country in the world fully ready to face the global pandemic, including Indonesia."

Krisnamurthi, who is also deputy for fisheries, maritime affairs and agriculture to the coordinating minister for the economy, was speaking at a regional workshop for Bali and East and West Nusa Tenggara provinces.

Similar workshops will be held in nine other cities involving 14 provinces in Java, Papua and Sumatra. The workshop on simulated responses to a bird flu pandemic was supported by the national commission and UNICEF.

ECONOMY Optimism over first Shariah bond prospects Indonesia launched its first Islamic bond, or sukuk, on Friday, with sales agents stating that the issue could realize as much as Rp5 trillion ($440 million), The Jakarta Globe reported.

Returns are expected to be competitive with interest rates on bank deposits, and in an environment where bank rates are beginning to fall, the sukuk is likely to be seen as an attractive investment, said Rosinu, president director of PT Trimegah Securities.

Interest is forbidden in Islamic finance, but the government has set coupon rates for the retail sukuk at 12%, higher than premium-grade bank deposit rates of about 10%. The coupons provide returns from tangible assets such as rental fees from property holdings or other commercial transactions.

"Investors can expect gains if they want to sell the debt papers in the secondary market, because when interest rates fall, the value of the bonds will increase," Rosinu said.

Edwin Syahruzad, a director at PT Danareksa Sekuritas, said sukuk may appeal to Indonesian investors, who have Rp1,400 trillion held in deposits at commercial banks, according to the central bank's data in November. Deposits sitting in shariah-compliant accounts make up about Rp34 trillion of this figure.

The SR-001 sukuk went on sale with a maturity in three years effective from February 25, Agence France-Presse reported.

Finance Minister Sri Mulyani Indrawati said the government would use the income to finance its budget deficit, predicted at 2.5% of GDP.

"The launch of the retail sukuk is an effort by the government to ensure the funding for the state budget, and to diversify state obligation instruments," she said.

The government is also to open talks with global investors beginning this week aiming to raise as much as $4 billion in debt on the international market, Bloomberg reported.

Rather than float a series of bonds, the government may sell the debt in a mix of syndicated transactions and private placements, officials said.

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Rahmat Waluyanto, Director General of State Debt Management at the Finance Ministry, said the government hoped to respond quickly as positive market conditions emerged.

With inflation and trade figures out this week, Finance Minister Indrawati cast a pall over hopes the economy could ride out the global economic storm when she said that a slowdown in exports was ‘alarming’.

Export value dropped significantly for most of January from the same month last year, she said.

This was an early sign of a decline in domestic production, she told the House of Representatives in a meeting on Tuesday.

The contribution of exports to economic growth could fall from 13.7% in 2008 to 5.9% at present, she added.

BUSINESS BRIEFSMACROECONOMYForecast on-month CPI fall in January: Minister Indonesia will likely experience another month of deflation in January following the government's move to cut subsidized gasoline prices earlier this month, Finance Minister Sri Mulyani Indrawati said Thursday, Dow Jones reported.

Indrawati expects on-year inflation this year to be between 5% and 6%. The on-year inflation rate last December was 11.06%.

The Consumer Price Index dropped 0.04% in December, which emboldened the central bank to cut its benchmark rate by 50 basis points earlier this month.

With inflation easing, there is room for Bank Indonesia (BI) to cut interest rates further, BI Deputy Governor Budi Mulya said Friday. "The timing of the rate cuts will be decided later," Mulya told reporters.

BI usually decides on rates during monthly meetings, the next of which is due Wednesday.

Govt. proposes $6.3B stimulus package The government has proposed an economic stimulus package worth Rp71.3 trillion ($6.32 billion) in a bid to sustain growth in the country, the finance minister said on Tuesday, Reuters reported.

"The fiscal stimulus is aimed at sustaining consumer spending, strengthening businesses and developing labor-intensive infrastructure projects," Finance Minister Sri Mulyani Indrawati said in a statement.

Indrawati proposed the package to the House of Representatives on Tuesday.

She said the stimuli would include Rp3.5 trillion in government-borne sales taxes and government-borne import duty (PBMDTP), subsidies for the exploration of gas and oil, Rp2.5 trillion BMDTP in subsidy for raw materials and capital goods, Rp6.5 trillion in employee income taxes (PPh) and Rp800 billion for geothermal income taxes.

The House last year passed a new tax law which cuts corporate income tax to 28% in 2009 and 25% in 2010 from 30% in 2008.

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There would also be subsidies of Rp2.8 trillion in the form of cuts in diesel oil prices, Rp1.4 trillion in the form of discounts during electricity peak load hours, Rp10 trillion for additional infrastructure expenditures and Rp600 billion for extension of the people`s empowerment program, Antara reported

According to the ministry, Indonesia's Rp71.3 trillion stimulus package accounts for 1.4% of Gross Domestic Product (GDP).

No further extension for Sunset Policy: Minister The government would not again extend the government’s tax amnesty for administrative violators, dubbed as the Sunset Policy, despite another request from businesses, Finance Minister Sri Mulyani Indrawati said Thursday, The Jakarta Post reported.

The Sunset Policy was supposed to end on December 31 but the government decided to extend it until February 28.

Speaking before House of Representatives’ commission XI for financial affairs, Indrawati said the two-month postponement was expected to provide time for people to honestly improve their tax records.

Indrawati said Indonesia’s tax revenues had been dominated by tax from corporations, not individuals, which had prompted the Finance Ministry to extend the Sunset Policy.

“In developed countries, individual income tax is bigger than corporate income tax. In Indonesia last year, corporate income tax accounted for 77.11% of non-oil and gas tax revenues, while individual income tax was only 22.89%,” she said.

“Also, the extension will enable the tax office to have a strong and wider tax base to (help) detect tax evasion,” she added.

The Sunset Policy is a program by which registered taxpayers are given the chance to settle their previously unreported obligations. Taxpayers who submit accurate reports will not be scrutinized and will be freed from paying tax penalties on previous liabilities.

In January this year, the tax office received additional revenue from tax returns worth Rp1.43 trillion.

“This shows that the Sunset Policy is a success as tax revenues rise. It means the policy extension is useful because taxpayers agree to honestly fix their previous tax reports,” Director General of Taxation Darmin Nasution said.

“We are being helped (by the public) because there are additional revenues. As taxpayers fix their tax reports, we have a new basis for tax revenues in the future,” he added.

Govt. to meet investors for $4B debt sale The government will meet investors in Asia, Europe and the US from next week to drum up interest in its plans to raise as much as $4 billion in debt this year, Bloomberg reported on Thursday.

The government may sell the debt in a mix of syndicated transactions and private placements, it said in an e-mail to investors.

The size of any sales will depend on market conditions, Rahmat Waluyanto, the Director General of State Debt Management at the Finance Ministry, said separately.

Standard & Poor’s (S&P) assigned a BB- rating, three levels below investment grade to the debt, which can be sold at any time in the “medium term,” Agost Benard, associate director at S&P, said on Thursday.

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“We will have to make use of the market momentum in a precise manner so that the borrowing cost will be cheap for us,” Waluyanto told reporters Wednesday. “The terms of the medium-term notes will really depend on demand. When there is a good market opportunity, we will quickly respond.”

INVESTMENT2009 foreign investment expected to decline: BKPM Foreign investment is expected to decline this year due to tight liquidity and fierce international competition amid the economic slump, a report from the Investment Coordinating Board (BKPM) said, The Jakarta Globe reported.

Accounting for over 80% of total investment last year, foreign direct investment increased by 43.8% from a year earlier to $14.87 billion, supported by strong investment in the transportation, warehousing and communications sectors, which jointly accounted for $8.53 billion.

By contrast, domestic investment fell 41.6% to Rp 20.36 trillion from a year earlier.

BKPM's figures exclude investment in the oil and gas, banking and insurance sectors.

Last year, the country recorded total direct investment — both domestic and foreign — of Rp 154 trillion ($17.13 billion), 20% higher than in 2007, BKPM said in the report released last week.

Govt. to set limit for large food estates The government this year will set limits on the amount of land that can be controlled by large investors for food crop plantations, an official said on Wednesday, Antara reported.

The policy is to prevent domination by large plantation companies and protect small farmers, said Bayu Krisnamurti, a deputy at the office of the coordinating economics minister.

A food estate is not allowed to exceed 10,000 hectares in western Indonesia and 50,000 hectares in eastern Indonesia, Krisnamurti said.

The draft regulation is being finalized by the agriculture ministry and the office of the coordinating economics minister, he said.

Large-scale food estates are expected to use large empty land such as in Merauke, Papua, Agriculture Minister Anton Apriyantono said.

STATE CONCERNSMinistry signs $100M in infrastructure contracts The Public Works Ministry signed on Thursday 214 package contracts worth Rp1.02 trillion (about $100 million) for bridge and road construction across 13 provinces, Xinhua reported.

"Most of the projects are for existing road improvements and the others are new road construction. We are attempting to accelerate the bidding process considering a growing numbers of damaged roads during the rainy season," the Sindo Daily on Friday quoted Public Works Minister Djoko Kirmanto as saying.

The budget allocated for bridge and road constructions was lifted in 2009 to Rp17 trillion ($1.7 billion) from Rp16.8 trillion ($1.68 billion) in 2008. The budget was still not sufficient to cover the total cost of 35,000 km of roads and 17,000 bridges, said Kirmanto.

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Govt. sets aside Rp20T for smallholder credit scheme The government has set aside Rp20 trillion for the smallholders` credit (KUR) scheme in 2009, Minister for Cooperatives and Small and Medium Enterprises (UMKM), Suryadharma Ali said, Antara reported.

"The Rp20 trillion KUR funds this year increase from Rp14.5 trillion in 2008, though last year only Rp12.5 trillion were absorbed with Rp2 trillion of the funds unspent," Ali said on Thursday.

He said that the increase in the KUR funds was intended to empower micro, small and medium businesses with bigger amounts of funds.

President Susilo Bambang Yudhoyono launched the KUR program with a credit guarantee facility in November 5, 2007 and it was expected to continue until its targets were achieved, Ali said.

Govt. looks to boost domestic cocoa processing The government may impose a tax on exports of cocoa to boost investment in domestic processing, Director General of Plantations at Agriculture Ministry Achmad Manggabarani said on Wednesday, Bloomberg reported.

Indonesia produced 480,000 metric tons of cocoa in the year ended September 30, behind Ivory Coast and Ghana, according to the International Cocoa Organization. The Southeast Asian country’s grindings of beans was estimated at 150,000 tons in the period.

Indonesia plans to spend Rp8 trillion ($704 million) in three years through 2011 to boost output, as part of its efforts to become the second-biggest cocoa producer.

The money will be spent on replacing trees struck by diseases, and on aged trees with more resistant, higher-yielding varieties, Manggabarani said in an interview on Tuesday.

“We will be the second producer only trailing Ivory Coast by 2013,” Manggabarani said.

Subsidized cooking oil launched The government launched Minyak Kita, its own brand of subsidized packaged cooking oil, on Wednesday to stabilize the price of the commodity, The Jakarta Post reported.

"This packed oil is expected to stabilize cooking oil prices on the domestic market, improve hygiene and boost the domestic packaging industry to serve the public at large, not only those shopping in the modern retail stores,” Trade Minister Mari Pangestu said during the official launch of the program.

Pangestu said the cheap cooking oil would be sold for Rp6,000 a liter as compared to the existing market price of between Rp8,000 and Rp9,000.

The government has allocated Rp800 billion to subsidize Minyak Kita through the abolition of the added value tax.

Pangestu said that Minyak Kita was targeted specifically at the 18.2 million poor families in the country.

Minyak Kita is produced by the country’s 24 cooking oil manufacturers as part of their corporate social responsibility programs.

SOEs

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Jasa Marga sees 2009 revenue up 12% Indonesia's top toll road operator, PT Jasa Marga, expects revenue to increase nearly 12% this year, thanks mainly to higher car volumes and tariffs, its president director said, Reuters reported.

Jasa Marga expects revenue to reach Rp3.69 trillion ($326.2 million), compared to an estimated revenue of Rp3.3 trillion in 2008. Analysts polled by Reuters Estimates expected the firm to book Rp3.68 trillion this year.

"The relatively new toll roads have the potential for higher traffic volume. Other factors include higher tariffs on most of the toll roads which we operate," president director Frans Sunito said Thursday.

Jasa Marga, which raised tariffs around 12% on two toll roads last year, expected to raise other toll road tariffs this year. It estimated transaction volumes increased by 2.5% to 880.4 million in 2008 compared to a year ago.

The firm also said it had allocated capital expenditure of Rp4.7 trillion which will be largely used for constructing new toll roads and increasing capacity of existing roads.

Five toll roads are currently in the construction phase, one of which is due to be finished in the second quarter, while the remaining sections are expected to come into operation in 2010 and 2011.

Semen Gresik expects 2009 net profit above 10% Cement maker PT Semen Gresik is maintaining its target for net profit to grow by more than 10% in 2009 due to a slight increase in sales and lower cost of operations despite weakening demand as a result of the global economic crisis, the company's top executive said Tuesday, Dow Jones reported.

"We will strive to maintain our bottom line for 2009 to grow by at least double digit," Semen Gresik president director Dwi Soetjipto said in an interview.

He said the company will launch some cost reduction programs and efficiency measures and maintain healthy revenue which he expects to grow by at least 5% in 2009. He didn't offer details for the cost reduction programs but said lower fuel prices could help reduce the company's cost of operations.

Semen Gresik also plans to make new investment to maintain steady growth over the coming years

For 2008, Soetjipto believes that the company's net profit would beat analysts' estimates which average Rp2.1 trillion ($185 million), compared with the Rp1.77 trillion Semen Gresik earned in 2007.

Last year, Gresik cement sales rose4.2% on year to 17.66 million tons, faster than the country's cement sales which grew 2.5% to 43.02 million tons. Semen Gresik had a 41% domestic market share in 2008.

Wika plans entry to asphalt, mining businesses State-owned construction company PT Wijaya Karya (Wika) said it plans to expand by entering the asphalt business this year and by buying a mining contracting firm, The Jakarta Globe reported.

"We plan to acquire a mining contractor because right now there are no state-owned mining contractor companies," Bintang Perbowo, Wika's president director, said on Tuesday.

"Private companies, most of them foreign, dominate the mining contractor business. They are involved in this business because its prospects are good."

He said the company would use between Rp 30 billion ($2.67 million) and Rp40 billion from its 2009 capital expenditure budget of Rp250 billion to finance the acquisition, but did not disclose which contractor Wika planned to acquire.

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Slamet Maryono, Wika's operating director, said the company was also planning to become an asphalt producer this year.

"We will cooperate with Jakarta administration-owned construction company PT Pembangunan Sarana Jaya to set up an asphalt extraction plant with our deposits of bitumen located in Buton, Southeast Sulawesi," he said, adding that the company's has an annual extraction capacity of 200,000 tons.

He added the company may also invite local mining company PT Timah to invest in the asphalt plant, which is expected to cost at least Rp40 billion.

Ganda Kesuma, Wika's finance director, said that of the firm's 2009 capital expenditure budget, some 30% was drawn from internal funds or equity, with the rest coming from bank loans.

He said the company was also buying a stake in road contractor PT Marga Nujyasumo Agung, (MNA) which is involved in building the Rp3.22 trillion Surabaya-Mojokerto toll road project in East Java scheduled to begin in 2011.

Wika had said it expects a net profit of Rp175 billion in 2009, up 21.5% from an estimated Rp144 billion last year, largely due to expected government contracts for infrastructure work.

PRIVATE SECTORHolcim reviewing new cement plant plan PT Holcim Indonesia is reviewing its plan to build a cement plant in East Java this year due to the current global credit crunch, an official said Thursday, Dow Jones reported.

"Many companies are reviewing their investment plans, we are also doing it," said Rusli Setiyawan, a spokesman for Indonesia's third-largest cement producer by output.

Holcim had planned to spend around $500 million to build the cement plant in East Java, with daily output of 4,000 metric tons, Setiyawan said.

He said that the company's existing plants are still running close to total peak capacity of 7.9 million tons per year.

Holcim Indonesia is a unit of Switzerland-based Holcim Group.

Many analysts have predicted that growth in demand in Indonesia will ease this year from an estimated 10%-12% in 2008 due to the impact of the global economic crisis.

Bakrie mulls IPOs for subsidiaries to repay debts Investment holding company PT Bakrie & Brothers is planning to sell units via initial public offerings (IPOs) to repay debts, director Ari S. Hudaya said on Tuesday, The Jakarta Post reported.

The company will take the measures should its plan to sell Rp4.26 trillion ($384 million) worth of convertible bonds to Northstar Pacific Partners fail to get approval from shareholders and regulators, according to Hudaya.

Bakrie & Brothers is due to have a meeting of shareholders to get the go-ahead in April or May.

“The Capital Market and Financial Institution Supervisory Agency (Bapepam-LK) and the shareholders must approve the issue. There’s a possibility we won’t get the go-ahead. If this happens, the restructuring will take more time,” he said.

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“We have prepared several options (to settle the debts), including from dividend flow (of Bakrie subsidiaries), an expectation of higher prices on our stocks and IPOs for our non-publicly listed companies.”

While refusing to name the companies ready for the IPOs, Ari merely hinted that the units would include those in the infrastructure and construction sectors.

Bakrie & Brothers non-publicly listed units include among others PT Bakrie Pipe Industry, PT South East Asia Pipe Industries, PT Seamless Pipe Indonesia Jaya, PT Bakrie Construction, PT Bakrie Corrugated Metal Industry, PT Bakrie Building Industries and PT Bakrie Tosanjaya.

BANKSBI to set criteria for buyers of derivative products Bank Indonesia (BI) will set criteria for buyers of derivative products sold by banks, central bank deputy governor Muliaman D Hadad said on Friday, Antara reported.

"Derivative and structured products are only for sophisticated customers who understand the products. We will issue a reference for its implementation later," he said.

He said banks are now required to periodically report offshore products and structured products that they sell.

BI itself, Hadad said, had already banned trading of derivative products that were speculative in nature since they could disrupt the rupiah exchange rate.

Unlike before when banks only needed to report their products after they were effectively traded for seven effective days. They now had to get approval first before they could sell the products.

BI deputy governor Budi Mulia said 15 banks in the country had been involved in speculative hedging transactions worth between $3.5 billion and $4 billion.

The transactions were still below non-speculative total hedging derivative transactions that reached $60 to $70 billion, Mulia said He explained the speculative hedging transactions were made to gain enhanced returns but derivative transactions of speculative nature were banned under BI Regulation No. 10/37 issued in December.

The BI regulation also contained clauses on the settlement of speculative transactions that had already been made. Such transactions had to be settled before they matured by converting them into credits or by restructuring them, he said.

Mulia said it was hoped the settlement of the recently discovered speculative transactions would not create pressure on the rupiah.

BI expects moderate growth in Shariah bank assets Bank Indonesia (BI) expects moderate asset growth in the country’s shariah banks of up to Rp70 trillion this year, up around 40% from last year when the figure was recorded at around Rp50 trillion, Antara reported.

"BI has three scenarios: a pessimistic scenario when assets grow to only Rp57 trillion, a moderate scenario when assets grow to Rp70 trillion and an optimistic scenario when assets grow to Rp127 trillion," BI deputy governor Siti Fadjrijah said on Wednesday.

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She said with the moderate growth target total assets of shariah banks would grow around 3%.

Although economic growth would slow down, new shariah banks were expected to form this year, she said, including Bank Persyarikatan of Bank Bukopin.

She said the presence of new players in the industry would make shariah banks more competitive and to grow strongly.

POWERPLN seeks $2.5B loan for power projects State power company PT PLN is seeking a further $2.5 billion in loans to build power projects, its chief said on Friday, Reuters reported.

"The projects will cost around $8 billion in total," president director Fahmi Mochtar told reporters, referring to the 10,000 MW coal-fired projects. "We have signed $5.5 billion in loan deals and we are now seeking (the remaining) $2.5 billion."

PLN signed a $380 million syndicated loan deal on Friday to finance a combined 1,320 MW of power projects in various parts of the country. The lenders included state-controlled Bank BNI and Bank BRI.

A significant amount of the total of $5.5 billion in funding has come from Chinese lenders, PLN said.

Some of the 10,000 MW coal-power projects are expected to come on stream in March this year and the whole project is due to be concluded in 2011.

"We are seeking to obtain loans from local banks as well as from international banks, including from China," Mochtar said.

Govt. to offer power producers 63% increase The government will increase the price paid to independent power producers (IPP) for electricity by up to 63% to encourage more investment in the sector, Jacobus Purwono, a senior official at the Energy and Mineral Resources Ministry, said on Tuesday, The Jakarta Globe reported.

The government wants to see an additional 30,056 MW of generating capacity coming on stream, including 10,000 MW under the first stage of state power company PT PLN's fast-track capacity expansion program.

As part of the second stage of the fast-track program, which starts this year and envisages the provision of an additional 11,144 MW, the government hopes that IPPs will provide the bulk of the capacity, selling the power they produce to PLN based on the new prices, which will be capped at between 5.8 and 8 cents a kilowatt-hour, depending on the size of the power plant and how the electricity is produced.

Purwono said that the new prices would also be paid to other IPPs, besides those participating in the second stage of the 10,000-MW program.

"The prices will be set out in a ministerial decree to be published at the end of this month," he said.

Mitsubishi Heavy to build power plant in Jakarta Japan's Mitsubishi Heavy Industries has won a contract to build a new combined cycle 750 MW gas-fired generation unit at the Tanjung Priok power plant, North Jakarta, a company official said Tuesday, Platts reported.

The unit is scheduled to come online in November 2011.

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The company won the contract to build the gas-fired combined cycle power plant for state power company PT PLN as part of PLN expansion plans at the plant to meet growing local demand, the official said.

The latest project came with a financing arrangement by Official Development Assistance of Japan, the official said, declining to elaborate.

OIL & GASGovt. plans to subsidize biofuel in 2009: Official The government is planning to pay a subsidy to biofuel producers starting this year to encourage them to remain in the business and promote widespread use of the alternative energy source, Reuters reported on Friday.

"We will only pay the subsidy if biofuel prices are higher than crude oil-based fuels," Evita Legowo, Director General of Oil and Gas at the Energy and Mineral Resources Ministry said on Friday.

Under the plan, if prices of biofuel products are higher than crude oil-based fuels, the government will pay subsidy of Rp1,000 (8 cents) per liter on average.

"At the moment, palm-based biodiesel is more expensive than crude oil-based diesel, but prices of bioethanol are not," Legowo said.

Bioethanol is made using both cassava and cane molasses. Palm biofuel and bioethanol compete with cheap domestic petrol diesel in Indonesia.

Palm-based biodiesel prices were around Rp5,800 per liter on Friday, or about Rp1,500 higher than diesel, said Paulus Tjakrawan, secretary general of the Indonesian Biofuel Producers Association.

State oil and gas company PT Pertamina, which sells subsidized fuel products, is estimated to blend 194,444 kl of bioethanol and 580,025 kl of palm-based biodiesel in 2009, a government document showed. 

Based on such an estimate, the government may have to allocate Rp774.5 billion in biofuel subsidies this year.

MININGAntam to triple capex in 2009, banks on recovery State miner PT Aneka Tambang plans Rp3 trillion ($265 million) this year in capital expenditure, up three-fold on 2008, to position itself for an eventual recovery in commodity prices, its chief executive said on Thursday, Reuters reported.

"We think that it is the best time to start our profitable investment, which may be sold when prices of commodities recover, hopefully within the next two to three years," Alwin Syah Loebis told reporters.

Antam said more than 80% of the spending, which will be funded from internal cash, will be used to further develop its plants, including improvements to its ferronickel smelter III in Pomala in Southeast Sulawesi.

The firm's unaudited financial report showed actual capital expenditures last year were Rp758 billion.

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Antam expected ferronickel output, its biggest contributor of revenue, to fall by 30% this year as prices for commodities and demand ease in the face of the global economic dowturn.

"We assume the average nickel price this year will range from $11,000-12,000 per ton, from an average of $18,000 a ton last year," said Loebis.

Antam, 65%-owned by the Indonesian government, is involved in the exploration and production of nickel ore, smelting of ferronickel, production and refining of gold, silver, bauxite and iron sands.

BHP Billiton invests $100M in C. Kalimantan coal mine BHP Billiton subsidiary PT Lahei Coal is investing $100 million in coal mining in the Haju Block, Murung Raya regency, Central Kalimantan, the company's president director, Indra Diannanjaya, said on Thursday, Antara reported.

"The funds for the investment came from internal financial sources and are to be used to construct a number of infrastructure facilities. We are still in a physical construction phase, not in production," Diannanjaya said.

The construction of the infrastructure facilities will be carried out by PT Leighton Contractor Indonesia and PT Inacia Utama.

The infrastructure projects include the construction of roads as a transportation access facility, a port, a housing complex, an office complex and load-unloading facilities on the bank of the Barito River.

He said that the construction, which would be carried out on a 56-hectare of plot of land, would employ hundreds of workers and begin next month.

BHP Billiton, one of the world's largest mining firms, expects to commence production activities later this year.

Timah earmarks Rp700B capex plan for 2009 State tin miner PT Timah plans to spend Rp700 billion in 2009 to expand its tin chemical plant as well as buying more dredges for off shore mining, Reuters reported.

Timah president director Wachid Usman said the company has delayed some projects this year as demand for tin used in food packaging and soldering of electronic components has fallen.

"We continue some investment plans this year. But we have to delay others," he said.

In 2008, Timah earmarked spending of Rp1.4 trillion. For 2009, it plans to allocate spending to increase the capacity of its tin chemical plant which currently has a production capacity of 10,000 tons a year and had initial investment of Rp240 billion.

Timah said that it plans to boost output of higher value tin based products to offset falling prices. In 2008, Timah produced 49,029 tons of refined tin, down by 16% from 58,325 tons in 2007 due to slow demand and competition for raw material with independent smelters. Sales of refined tin fell by 20% to 46,438 tons in 2008 from 57,897 tons in 2007.

Timah posted revenue of Rp 9.05 trillion in 2008, up by 6% from Rp 8.54 trillion in 2007. It also booked net profit of Rp1.41 trillion, down by 21% from Rp1.78 trillion in 2007.

Banpu to invest $160M in coal units in 2009 Banpu PCL, Thailand's top coal miner, said it planned to invest $160 million this year, mostly to develop existing mines in Indonesia, and might issue bonds to benefit from falling interest rates, Reuters reported."The budget this year should be about the same (as) last year's $150-160 million," he said.

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About $110 million will be spent developing mines and another $50 million used for other projects including a power plant, chief executive Chanin Vongkusolkit told reporters on Tuesday.

Banpu, also the fourth-largest operator in Indonesia with five coal mines, may sell bonds to refinance debt to take advantage of lower interest rates, Vongkusolkit said.

Last month, Chanin said Banpu was reviewing its 2009 business plan in line with changing economic conditions.

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