THE COORDINATING MINISTRY FOR ECONOMIC AFFAIRS REPUBLIC OF INDONESIA

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Trade and Investment News1, 10 November 2008Highlights

National Analysts warn of possible protectionist policies from US president-elect Politics Winner announced in East Kalimantan poll run-offTerrorism Terrorists executed by firing squad Security Police round up more than 1,000 hoodlums in major cities Law & order Team to be sent to Australia for extradition of two Bank Indonesia Liquidity Scheme felons Economy Government to lower subsidized fuel prices, introduce monthly price changes Consumer confidence rises, according to two surveys Business briefs Macroeconomy Statistics agency says 2008 will be above 6.0% Bank Indonesia says inflation target within reach Investment President Yudhoyono calls for investment self-reliance State concerns Regions urged to move faster on project realization Foreign tourist arrivals top 4.7 million in first nine months SOEs PT Telkom drops growth target on lower tariffs, stiff competition PT Garuda Indonesia positive on profit outlook Private sector Intense interest in participation in PT Bumi Resources share sale CPO output to be trimmed by replanting program Banks CIMB Niaga completes merger with Bank Lippo Power East Java enacts by-law to support geothermal project Oil & gas New fuel pricing policy to involve House of Representatives PT Medco Energi buys back shares valued at Rp100 billion Mining Government sets level of domestic coal requirements Contract signed for $1.1 billion iron sand project at Yogyakarta NATIONALAnalysts caution over Obama optimism 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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Indonesia foresees better relations with the US under president-elect Barack Obama but some analysts said the optimism should be tempered by the realities of the current state of the US economy, Channel News Asia reported.

Many Indonesians – like others around the world – rejoiced when Obama won the US presidential election on November 4. The charismatic Democrat leader had spent four years in a primary school in Jakarta when he was living with his Indonesian stepfather.

As the euphoria dies down, experts in Indonesia said it is time to reassess high expectations of the Obama presidency.

HS Dillion, a senior economist, said: "He will have a place for Indonesia in his heart, but we can't expect a radical change in American policy. Their domestic interests are paramount."

International relations expert Dewi Fortuna Anwar said: "But having said that, don't forget who was the strong supporter of multilateralism – Bill Clinton.

"Who was the strong supporter of APEC? Bill Clinton, who in fact opened up trade liberalization in the region? It was Bill Clinton – a Democrat president."

POLITICSIshak wins E. Kalimantan election: KPUDAn East Kalimantan Regional Election Commission (KPUD) plenary session on Friday officially declared Awang Faroek Ishak and Farid Wadjdy as the winners in the province’s run-off gubernatorial election by 57.94% of total votes, Detikcom reported.

The session was held under tight security by at least 400 personnel from the East Kalimantan Mobile Brigade Police and Samarinda Police.

The pair managed to garner 740,742 votes while rivals Achmad Amins and Hadi Mulyadi won 537,680 votes.

Earlier, the KPUD faced legal challenges, threatening to derail the run-off election process. Election proceedings were halted once due to a lawsuit lodged by Ishak with the Samarinda District Court. The lawsuit was later retracted.

The KPUD also issued a ban on exit polls in a bid to suppress possible friction among the public, however, the Indonesia Survey Circle (LSI) went ahead and announced Ishak and Wadjdy as the likely winners before the KPUD had officially tallied all the votes.

The KPUD registered 2,301,410 voters cast ballots during the election at 6,617 polling booths across 13 regencies and municipalities.

TERRORISM Bali bombers meet firing squadThree terrorists sentenced to death for the Bali bombings which killed 202 people were executed by firing squad shortly after midnight on Sunday morning, after five years of legal challenges.

"At around 00:15 am (1715 GMT Saturday) the three convicted men on death row, Amrozi, Mukhlas and Imam Samudra, were executed by firing squad," said attorney general's office spokesman Jasman Panjaitan.

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Amrozi, 47, his brother Mukhlas, 48, and ringleader Imam Samudra, 38, were killed with shots to the heart in an orange grove near their prison on Nusakambangan island off southern Java, TV One television reported.

The alleged mastermind of the Bali bombings and subsequent attacks, Malaysian extremist Noordin Mohammad Top, is still at large.

SECURITYPolice in crackdown on thugsThe National Police announced Thursday that within four days a total of 1,024 people had been arrested for alleged hoodlum activity, The Jakarta Post reported.

Head of crime detectives unit Susno Duaji told reporters that the arrests were part of a newly launched program, which aimed to tackle rising street crimes, particularly in six provinces: North Sumatra, Jakarta, Central Java, Yogyakarta and East Java.

The operation is projected to run through early December.

"We have released 845 of them because of lack of proof and keep 172 in detention for further investigation," Susno said while adding that police officers had also confiscated four firearms, 10 sharp weapons and drugs.

Of all the five regions, Jakarta saw the most arrests, Susno said, without giving more details.

International drug syndicate expanding: PoliceA West African drug syndicate operating in Indonesia and Southeast Asia that employs local women as couriers is gaining momentum, the National Police has warned, reported The Jakarta Post.

Brig. Gen. Harry Montolalu, head of narcotics and organized crime at the National Police, said Friday the members of the drug ring, who conduct their operations behind the front of a garment business, some times marry Indonesian women and later employ them as drug couriers.

"Seventeen Indonesian women were arrested recently in several countries for drug smuggling. In Brazil, one Indonesian woman was caught smuggling 10 kg of cocaine, another with 2 kg of heroin in Malaysia, and there were similar cases in China, Ecuador and Pakistan," Montolalu said.

The National Police, provincial police forces in Jakarta, West Java, North Sumatra and Bali, and the National Narcotics Agency (BNN) are currently conducting a joint operation code named Paniki to crack down on foreign drug dealers, with a particular emphasis on the West African syndicate.

"The West African syndicate, which specializes in heroin, tops our list of illicit drug circulators," he said.

In October alone, 489 foreigners were nabbed in the police operation, including 19 for drug-related crimes.

Police confiscated heroin, hashish, marijuana ecstasy and methamphetamine worth Rp3.20 billion ($320,000) from the foreigners.

Meanwhile, prosecutors at the Tangerang District Court have sought the death sentence for three foreigners convicted of smuggling cocaine into Indonesia through Soekarno-Hatta International Airport in February.

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Prosecutors said in a hearing Thursday the defendants, a Thai woman, Thitirat Charoensuk, 24, and two British men, Michael Anthony Guevara, 34, and John Patrick Patton, 52, were found guilty of smuggling the drugs.

Prosecutors allege that Guevara and Patton were the owners of the cocaine, and had asked the Thai woman to take the drugs to Indonesia.

LAW & ORDERAGO to send team to Australia for BLBI fugitivesThe Attorney General’s Office (AGO) will send a team to Australia to extradite two Indonesian fugitives, Andrian Kiki Iriawan and Edi Putranto, wanted in connection with the Bank Indonesia Liquidity Assistance (BLBI) case, Antara reported.

"We will send a team to Australia next week to make final preparations before Iriawan is extradited," Junior Attorney General Muchtar Arifin said Friday.

He said that the implementation of the extradition would depend on assistance from the Australian government, which had promised to help bring back the BLBI corrupters.

Australia’s readiness to assist the Indonesian government was reached during a meeting between Australian Ambassador to Indonesia Bill Farmer and Attorney General Hendarman Supandji on October 27.

AGO spokesman Jasman Pandjaitan said that the meeting discussed Australian assistance to extradite Iriawan who is wanted by Indonesian authorities for his involvement in a BLBI case which caused a state loss of Rp1.5 trillion.

Iriawan, a former director of Bank Surya, and deputy director Bambang Sutrisno were sentenced to life imprisonment by the Central Jakarta District Court in 2002. The two were tried in absentia.

Iriawan fled to Australia while Bambang Sutrisno escaped to Singapore.

ECONOMY Govt. acts on fuel subsidies The government has announced it will decrease subsidized fuel prices by Rp500 but will review prices for fuel on a monthly basis, suggesting a move to limit the use of subsidies in favor of market-linked pricing.

The price of subsidized fuel will be cut from Rp6,000 per liter to Rp5,500 per liter effective on December 1, Antara reported.

The government will then adjust the premium gasoline price each month in line with movements in world crude prices. Finance Minister Sri Mulyani Indrawati said the price would be discussed each month with the House of Representatives.

The cut in prices will reduce the cost of business and relieve pressure on consumers, both positive outcomes as the global economy starts to impact economic activity. Moreover, it allows the government to reduce the role of subsidies, although it is likely to have to cushion major movements in prices.

Both Bank Indonesia and the Danareksa Research Institute noted that consumer confidence rose in October. An international survey conducted by AC Nielsen showed that Indonesia along with India has Asia’s highest levels of consumer confidence in the face of the global economic slump.

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The survey ranked consumer confidence on a scale of one to 200. India scored 114 and Indonesia 110, compared with an average of 84.

India’s Tata steel announced it was still interested in a $1 billion investment in a stainless steel plant in Kalimantan, and there were promising signs of major investments in the mining sector.

A $1.3 billion bid by Northstar Pacific for 35% of coal miner PT Bumi Resources relieved some of the pressure on the Bakrie Group, and at the end of the week Philippines major San Miguel said it was keen on taking a major position in the company.

The Northstar consortium holding the Bumi shares included state-owned coal miner PT Tambang Batubara Bukit Asam.

Rating agency Standard & Poor's (S&P) maintained its outlook on Indonesia' debt rating as stable, thanks partly to a declining level of debt and improvements in monetary policy management.

"Bank Indonesia sees this as positive news in particular amid the ongoing turmoil in the global financial system, which has caused international rating agencies to downgrade ratings of both corporations and sovereigns," central bank governor Boediono said in a statement, according to The Jakarta Post.

Indicators:

  August September September 08/September 07

Cumulative 2008

Total exports $12.55 billion $12.23 billion 28.53% $107.65 billionNon-oil & gas exports $9.68 billion $9.08 billion 31.72%  September

(y-oy)September

(m-o-m)October(y-o-y)

October (m-o-m)

Inflation 11.85% 0.51% 11.77% 0.45%  Full year 2006 Full year

2007 First half 2008 Third quarter 2008GDP growth 5.5% 6.3% 6.4%

6.3%Tourist arrivals September October Growth/loss

(m-o-m) Growth/loss (y-o-y)

567,400 501,000 -16.43%7.99%

Source: Central Statistics Agency

BUSINESS BRIEFS MACROECONOMY2008 growth likely above 6%: BPS Indonesia will still likely record better than 6% economic growth this year, thanks to solid growth in the first three quarters, a government official said Monday, Dow Jones reported.

Central Bureau of Statistics (BPS) head Rusman Heriawan said growth in the first three quarters was not affected by the global financial crisis, while in the fourth quarter it would start to slow growth.

Indonesia's economy has grown at an average of about 6% on a quarterly basis since the end of 2006 and the government was aiming for full-year growth of 6.4% this year, hoping to reduce poverty and unemployment, Bloomberg reported.

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The central bank is not optimistic that robust growth can be maintained. BI deputy governor Hartadi Sarwono said Wednesday that it will be tough to grow above 6% next year given global economic conditions.

On trade, BPS also reported that Indonesia's trade surplus jumped to $1.02 billion in September, from $640 million in August, as imports fell at a faster rate than exports.

Excluding imports to free-trade areas, where imported commodities are processed into export goods, Indonesia had a surplus of $2.82 billion, compared with a surplus of $2.45 billion in August and $2.59 billion in September 2007, BPS said.

Total imports fell 5.5% to $11.21 billion from a month earlier, as the sharp fall in oil prices globally reduced Indonesia's fuel import bill by 12% from a month earlier, BPS said.

Falling oil prices, on the other hand, dragged down the value of oil and gas exports by 17% from a month earlier.

A 29% increase in crude palm oil exports mitigated the impact of the lower oil and gas exports. Overall exports fell by only 2.2% to $12.23 billion in September from a month earlier.

Heriawan said Indonesia's non-oil and non-gas exports to the US rose to $1.23 billion in September, from $1.09 billion in August, despite the worsening global financial crisis.

Heriawan said such exports to the US seemed to be spared by the crisis, as most of the September export contracts were signed two or three months earlier.

BPS also predicted that Indonesia would achieve self-sufficiency in rice in 2008 for the second year after a long period of having to import the staple.

Heriawan said the prediction is based on the estimate that local rice production this year would increase by 3.12 million tons of unhusked rice (GKG) or about 5.56% above production in 2007.

The increase would raise national rice production to 60.28 million tons of GKG, he added.

Indonesia’s rice production was recorded at 57.15 million tons of GKG last year and only 54.45 million tons in 2006. The official attributed the achievement to an expansion of more than 195,000 hectares of cultivated land and increased yield of rice by 170 kg per hectare.

The manufacturing sector posted 1.6% growth in the third quarter from a year earlier, slowing down from 3.3% and 5.85% in the second and first quarters, respectively.

October consumer confidence highest in 2008 Indonesia's consumer confidence strengthened to its highest level this year, a central bank survey showed on Friday, amid expectations of an easing in inflation due to lower food and fuel price pressure, Reuters reported. A Bank Indonesia (BI) survey of 4,600 households in 18 cities across Indonesia showed the consumer confidence index rose to 94.8 in October, from 93.5 in September. This was the highest level since December 2007 when it reached 99.1.

A separate survey of 1,700 households across six provinces, which was conducted by the state-run Danareksa Research Institute, also showed improving sentiment with the index rising to 80.3 in October from 79.1 in September.

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A reading below 100 means the consumers are pessimistic. The last time the index was above 100 was in November 2007, the central bank said on its website.

Antara reported that a survey conducted by research company Nielsen showed that Indonesia along with India has Asia’s highest levels of consumer confidence in the face of the global economic slump.

The survey ranked consumer confidence on a scale of one to 200. India scored 114 and Indonesia 110, compared with an average of 84.

BI says 2008 inflation target within reachIndonesia should be able to achieve its year-end inflation target of 11.5-12.5%, Bank Indonesia (BI)governor Boediono said on Friday, after a decline in October's annual inflation and helped by cuts in subsidized gasoline prices, Reuters reported.

"Inflation is under control. I am very optimistic that we can achieve our inflation target," Boediono told reporters.

Indonesia's annual inflation eased in October to 11.77% from a two-year high of 12.14% as food price pressures eased on the back of a fall in global commodity prices.

BI expects inflation to fall to 6.5-7.5% next year due to lower food and fuel prices.

Indonesia’s consumer price index (CPI) rose 11.77% in October from a year earlier, slightly below the 11.8% increase forecast by analysts in a Reuters' poll and below September's inflation rate of 12.14%, which was a two-year high.

Month-on-month inflation was 0.45% in October, against a market forecast of 0.4% and a reported figure of 0.97% in the previous month. The monthly figure, however, is not seasonally adjusted.

BI keeps key rate steady at 9.5% Bank Indonesia (BI) kept its key rate unchanged at 9.5% on Thursday, after six increases since May, aiming to stem an exodus of foreign investors that pushed the rupiah to its biggest drop in a decade, Bloomberg reported.

“The chances of a global economic slowdown are getting real,'' the central bank said in Thursday's statement. “Bank Indonesia thinks it is important to maintain an accurate monetary policy so that it can achieve a balance between economic growth and efforts to maintain monetary stability.

BI expects economic growth to slow to 5.9% in the fourth quarter after an estimated 6.3% expansion in the three months ended September 30.

State revenue excise, duty close to targetAs of October 31, the government had realized 93.32% or Rp42.67 trillion of its 2008 target of Rp45.72 trillion, a senior official said on Thursday, Antara reported.

Customs and Excise Director General Anwar Supriyadi said the realization of state revenue from import duties was recorded at Rp18.74 trillion or about 118.43% of the targeted Rp15.82 trillion.

The realization of export tax revenue had reached Rp13.56 trillion or about 129.59% of the targeted Rp11.16 trillion.

"So, the realization of all the targets has been recorded at Rp74.97 trillion or 103.13%," Supriyadi said.

Supriyadi said his office has raised its revenue targets for 2009, but said the export tax revenue target will be hard to meet.

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"The export tax on crude palm oil (CPO), for example, was previously set at a high level but now it has been cut to zero," he said.

The increase in the cigarette excise target in 2009 was expected to reduce cigarette production from 247 billion pieces to 240 billion pieces a year.

The 2009 state budget set the state revenue target at Rp49.49 trillion with the following breakdown: Rp48.24 trillion from cigarette excise, Rp479.00 billion from alcoholic ethyl and Rp775.6 billion from alcoholic drinks.

The target of revenue from import duties was set at Rp19.16 trillion and from export taxes at Rp9.34 trillion.

In the revised 2008 state budget, revenue from excise is projected at Rp45.72 trillion, from import duties at Rp15.82 trillion and from export taxes at Rp11.16 trillion.

According to Supriyadi, the target of revenue from excise and duties in 2009 increased Rp3 trillion to Rp49.49 trillion from Rp45.72 trillion in 2008.

INVESTMENTPresident urges economic self-reliance President Susilo Bambang Yudhoyono said Tuesday that Indonesia should gradually become economically self-reliant, so that the country would not be easily affected by another global crisis, Antara reported.

"Our sources of investment and domestic funds should be strong so that we don't need to rely on foreign loans," Yudhoyono said, adding that the nation also should develop its comparative advantages.

He said that Indonesia should focus on the survival and the future of the next generation through economic equality so as to have sustainable economic growth, and strengthen the domestic economy by encouraging economic autonomy at the regional level.

The proportion of foreign funds in Indonesia's development budget has continued to drop. At one time, foreign funding accounted for 70% of the development budget but the figure is now only 20%, said Yudhoyono.

Tata Steel may invest $1B in S. Kalimantan Indian steel giant Tata Steel Ltd looks set to go ahead with a plan to build an upstream steel plant in South Kalimantan with investment estimated to reach $1 billion, an official said, Antara reported.

Tata continues to study possible investment in a factory with an annual production capacity of one million tons of upstream steel materials, Metal, Textile Machine and Multifarious Industries Director General Ansari Bukhari said.

Bukhari said Tata leaders are scheduled to meet the South Kalimantan governor and district leaders as well as holders of iron ore mining licenses.

Japanese SMEs explore Indonesian investment Japanese small and medium businessmen, grouped in the Association of Japanese Small and Medium Businesses International Human Resources Development, are exploring possibilities for investment in Indonesia, Antara reported.

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Manpower and Transmigration Minister Erman Soeparno said the Japanese businessmen also wished to cooperate with the ministry in recruiting Indonesian graduates of an apprentice program in Japan due to its high standards of competence and ethics of employment. The association’s managing director Minoru Ishida hoped the ministry could facilitate and support the investment plan.

A total of 34,364 Indonesians have taken part in the Indonesia-Japan apprenticeship cooperation program since 1993.

STATE CONCERNSRegions urged to start project tenders by year-end The government on Monday urged local administrations to start the tender processes for procurement for projects allocated in 2009 regional budgets by the end of this year to help bolster national economic growth in the face of the global financial crisis, The Jakarta Post reported.

"The government's spending is needed to keep growth at above the 6% level," said State Minister of National Development Planning Paskah Suzetta during a meeting with leaders from provinces, including governors, spokespersons of local councils and regional treasurers.

"Although the budget will be effective from January (next year), we can prepare all tender requirements from now on," he added.

Director General of Financial Balance at the Finance Ministry, Mardiasmo, also reminded local authorities to complete all the requirements needed to get their annual budget from the central government.

Foreign tourist arrivals recorded at 4.57 million: BPS The Central Bureau of Statistics (BPS) said the number of foreign tourist arrivals in the January-September 2008 period reached 4.57 million, Antara reported.

BPS head Rusman Heriawan said on Tuesday the number of foreign tourists arriving from January-September was 12.19% more than the number of foreign tourist arrivals in the same period a year earlier, which stood at 4.07 million people.

He said that the number of foreign tourists arriving through 11 main arrival gates in September 2008 reached 410,800 or an increase by 7.27% compared with the same period in 2007 which stood at 382,900 people.

The BPS head said that the occupancy rate of star-rated hotels in 14 main destination regions in August was recorded at 55.19%, or an increase by 0.62 points compared with that in July 2008.

The occupancy rate of star-rated hotels in Bali increased 1.81 average points to 69.94% from 68.13% in July 2008.

The length of stay of foreign tourists in star-rated hotels in 14 main tourist destination regions was recorded at an average of 2.06 days in August 2008.

Cotton imports rise 101.3% Imports of cotton surged 101.3% year-on-year to $1.5 billion in the first nine months of this year, Antara reported.

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Executive director of the Indonesian Textile Association (API) Ernovian G Ismy said the increase in textile imports indicates that Indonesia's textile industry continues to grow.

The Central Bureau of Statistics said that in September cotton imports fell 3.5% to $123.8 million.

Indonesia imports cotton from around 50 countries, but mainly from the United States, Bisnis Indonesia said.

SOEsTelkom lowers growth target State-owned telecommunication company PT Telkom has lowered its growth target from 11% to 3-4% this year following its decision to cut tariffs amid stiff market competition, Antara reported.

With the new target, Telkom is expected to reach Rp61.81 trillion ($6.5 billion) this year, up from Rp59.44 trillion last year, its finance director Sudiro Asno said.

In the first nine months of this year Telkom chalked up a 2.18% increase in income to Rp44.6 trillion but its net profit shrank 9.16% to Rp8.92 trillion on the tariff cut. It would be difficult to chalk up two digit growth especially as market saturation has reached 62% and is expected to rise to 65% by the end of this year, Asno said.

In the first nine months of this year, Telkom spent Rp14.8 trillion or 60% of its capital expenditure target of $2.5 billion for this year.

Telkom plans to increase the number of its base transceiver systems by 2,500 units to 27,558 units by the end of 2008.

The number of cellular phone operators has continued to rise in Indonesia, now reaching 12, the most of any country in the world.

Garuda remains optimistic over profits despite crisis Garuda Indonesia, the nation's flagship airline, remains optimistic that it can improve on last year's profits in spite of the recent sharp devaluation of the rupiah against the US dollar, The Jakarta Post reported.

"We are still positive about our operating profit despite the depreciation of the rupiah. Thus far, we have recorded a substantial income," Garuda's president director, Emirsyah Satar, said.

According to Pujobroto, Garuda's vice president and corporate secretary, during the first eight months of this year Garuda gained net profit of Rp272 billion ($27.2 million), an increase on the Rp259 billion made in 2007.

Pujobroto said the company had also benefited from the decline in fuel prices, which allowed it to lower the fuel surcharge paid by passengers.

PRIVATE SECTORBidding for Bumi heightens PT Bumi Resources, the coal mining unit controlled by the troubled Bakrie Group, returned to the market on Thursday following a deal with investment banker Northstar Pacific and by week end a range of suitors was bidding for a part in the deal. Shares in the company had been suspended for a month.

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Northstar agreed to pay $1.3 billion for 35% of the company, helping the Bakrie Group meet a $1.2 billion debt repayment that matures in April.

PT Tambang Batubara Bukit Asam and at least two other state-run mining companies reportedly will join the Northstar-led group to acquire the stake in Bumi Resources.

The Philippines' largest food and beverages company, San Miguel Corp., has also said it may make a competing offer to purchase a 35% stake in Bumi to diversify its business.

San Miguel told the Philippine stock exchange that it wanted to buy at least 51% of the coal miner.

Bakrie & Brothers said on October 31 it plans to seek shareholder approval for the stake sale to Northstar on December 2, Bloomberg reported.

"TPG is accommodating the government's interest by teaming up with Bukit Asam," said Norico Gaman, head of research at PT BNI Securities, which manages about $155 million in assets.

"They are also hoping that Bukit Asam will make it easier for them to obtain new contracts in Indonesia."

2009 CPO output to be cut by replanting Indonesia and Malaysia will work together to reduce record high palm oil stocks in a bid to shore up prices of the country's main agricultural product, senior government officials said Thursday, Dow Jones reported.

Indonesia will replant 50,000 hectares of oil palm plantations next year, taking advantage of a period of high palm oil stocks to rejuvenate plantations more than 25 years old.

The replanting will reduce the production of crude palm oil by 75,000-100,000 metric tons compared with this year's production, Ahmad Manggabarani, Director General for Plantations at the Agriculture Ministry said.

Indonesia will likely produce around 19 million tons of CPO this year, he added.

To ensure greater cooperation between the two countries and provide greater clarity as regards the CPO market environment, Indonesia will also start sharing data on the country's palm oil output and stock levels with Malaysia each month.

Industry players say Indonesia has the opportunity to take advantage of the market situation to support use of biofuels. Indonesia's mandatory use of a 1%-2.5% biodiesel blend will begin January 1

"Those percentages (for Indonesia) are the minimum levels for blending. Pertamina has already started selling a 5% biodiesel blend and is expected to increase this to 10% gradually," said Agriculture Minister Anton Apriyantono.

Apriyantono met Malaysia's Plantation Industries and Commodities Minister Thursday to discuss those plans and other measures to be undertaken by both countries in preventing further falls in CPO prices.

Indofood debt up 16% after acquisition The debt of publicly traded food giant PT Indofood Sukses Makmur increased by 16% to Rp24.72 trillion ($2.6 billion) after wholly acquiring Drayton Pte. Ltd, Asia Pulse reported

The management of Indofood said the debt of the world's largest instant noodle producer had increased from Rp21.31 trillion before the acquisition of Drayton.

By acquiring Drayton, Indofood took over a debt of $100.5 million owed by Drayton, Indofood vice president Fransiscus Welirang was quoted as saying by Bisnis Indonesia.

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Drayton is a Singaporean company controlling 68.57% of PT Indolakto, a dairy company operating in Indonesia.

Vehicle sales up 74% in October: Astra Vehicle sales in October soared 74% to 54,500 from a year ago, largely due to slow sales in the previous year, Toyota Astra Motor said on Thursday. On a monthly basis, the figure represented a slight fall on the 55,230 units sold in September, Reuters reported.

The company, jointly owned by Toyota Motor Corp and PT Astra International, said it sold 18,262 of its brand vehicles last month.

Vehicle sales this year are set to break a historic high set in 2005, thanks to a fall in interest rates early this year and strong commodities prices.

However, rising inflation, which prompted the central bank to hike interest rates, and a liquidity squeeze in the domestic financial system, might hurt automotive sales next year.

Excelcom 9-month profit rises four-foldThird-largest mobile phone operator PT Excelcomindo Pratama reported a more than four-fold rise in its nine-month net profit, powered by growth in subscribers and phone usage, Reuters reported.

The company, 83.79% controlled by Telecom Malaysia, said the number of its subscribers nearly doubled to 25.1 million over the period from a year ago.

Excelcom's net profit for the January-September period was Rp890.99 billion ($82.11 million), compared to Rp208.44 billion a year ago, while its revenue climbed 60% to Rp9.18 trillion.

Hasnul Suhaimi, Excelcom's president director, said in a statement Friday that lower tariffs had attracted more customers and increased phone usage. The mobile phone operator said it achieved a more than 10-fold increase in total outgoing minutes.

Excelcomindo Pratama also reported on Friday that had received a $140 million syndicated loan from four overseas banks to help meet its capital expenditure needs.

"We are very pleased to have the support of the four mandated lead arrangers in such volatile times, and believe that they will be great partners as we continue to expand our operations," Suhaimi said. The company added that its subscribers jumped 124% to 22.9 million in the first half of 2008 from a year ago.

Citra Marga to build $195M toll road in Philippines Citra Marga Nusaphala Persada (CMNP), a publicly listed toll road operator, plans to build a toll road in the Philippines with a total investment of $195 million, The Jakarta Post reported.

Director of operations Hudaya Arryanto said the project would start early next year and was scheduled to be completed in 2010.

The project, known as Metro Manila Skyway, is the company's second project in the Philippines. CMNP will also build a toll road connecting Bicutan to Alabang with a total length of 6.8 km.

The first one involves the construction of a 13.5-km toll road connecting Buendia and Bicutan regions. The company has a 21% stake in the two projects.

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"We are in talks with a number of local banks in the Philippines to provide loans for the project," Arryanto said, without naming the banks.

Aside from the projects in the Philippines, the company also has projects in Malaysia.

On the domestic front, the company's ongoing projects include the Cawang-Tanjung Priok toll road (north-south link), a section of the Tanjung Priok Port-Jembatan Tiga (harbor road) and Surabaya Eastern Ring Road.

It plans to start the construction of a Depok-Antasari turnpike on Jakarta’s southern rim with a total length of 22.8 km by the end of this year.

CMNP is now 58.3% owned by the public and state toll road operator and builder PT Jasa Marga owns about 17.8% of the company.

Mandala Air sticks with order for 30 Airbus aircraft Mandala Airlines has said it will not postpone a plan to procure 30 Airbus A320 and A319 aircraft at a price of $1.8 billion, despite the global financial crisis, Asia in Focus reported.

Mandala chief executive Warwick Brady said delivery of the aircraft will begin in 2010 to serve domestic and international routes.

Brady said the 30 planes are part of a purchasing package of 300 Airbus aircraft by Indigo Partners to strengthen its fleets serving flights in Europe, the United States and Asia.

Indigo Partners is a 49% shareholder of Mandala, with Cardig International Aviation as a 51% owner.

BANKSCIMB Niaga completes Lippo merger Malaysia's Commerce International Merchant Bankers (CIMB) Sdn Bhd has completed the merger of its subsidiary Bank CIMG Niaga with Lippo Bank after acquiring 51% of the latter's stake from Santubang Investments BV, The Jakarta Post reported.

CIMB Group now holds a controlling share ownership of 77.75% of Bank CIMB Niaga, CIMB Bank president director Arwin Rasyid said.

He said that the CIMB Group settled the merger process last Tuesday and completed the merger last Saturday.

According to CIMB Niaga head of corporate communications Dina Sutadi, the merger will result in a bank with Rp100 trillion ($1 billion) of assets, serving customers through 650 branch offices run by almost 11,000 employees in 120 Indonesian cities.

After the merger, Lippo Bank shares will no longer be listed on the Indonesia Stock Exchange.

The merged bank is owned indirectly by Malaysia-based Khazanah Nasional Berhad, which, according to Rasyid, also owns most shares of the CIMG Group.

CIMB Niaga Bank is now Indonesia's sixth largest bank by assets.

POWER

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E. Java House endorses geothermal draft bylaw The East Java Regional House of Representatives on Monday endorsed a draft bylaw on a geothermal development project in Ngebel at the border of Ponorogo and Madiun regencies to help ease the power crisis in Java and Bali, The Jakarta Post reported.

All factions at the Regional House gave their support for the geothermal project on condition that the exploration prove it will positively impact the local population financially and meet safety and ecological guidelines.

The joint Democratic-Justice faction insisted on referring to Chapter 33 of the amended Constitution on natural resources, which states that the provincial government must rigidly regulate the exploration to ensure economic benefits for local populations.

Spokesman for the joint faction Daisy Margaret said her faction would closely monitor proceedings because the bylaw stipulates that the governor has most authority in overseeing the exploration.

Margaret said investors are required to carry out a CSR program to empower local people and generate jobs for local workers once exploration begins.

OIL & GASMonthly adjustments for fuel prices The government will make adjustments to premium gasoline price each month following its policy on Thursday to lower the price of fuel from Rp6,000 per liter to Rp5,500 per liter effective on December 1, Antara reported.

Minister for Energy and Mineral Resources Purnomo Yusgiantoro said the price adjustment would be made each month in line with developments of world crude prices.

He said that the reduction by Rp500 per liter was arrived at after taking into account the tax cut of subsidized premium gasoline.

With the price reduction, he said, the government has to provide a Rp750 billion subsidy in December 2008 with a sale projection of 1.5 million kiloliters.

Separately, Finance Minister Sri Mulyani said price changes of fuel oil would be consulted with the House of Representatives each month in order to maintain market confidence in the ability of the state budget the deal with the subsidy program.

Indrawati said that fuel oil subsidy for 2009 would be calculated based on the Indonesian Crude Price (ICP) price at $80 per barrel.

"At present range of crude price in the world market at $65 per barrel, the government has enough ability to manage the 2009 state budget," she said.

Indrawati said the government will not alter diesel and kerosene prices.

The government raised fuel prices by an average of nearly 30% in May in order to reduce its ballooning subsidy bill but with the recent drop in the global oil price, the government has been under increasing pressure to reduce fuel prices.

Medco buys back Rp110.7B in shares

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PT Medco Energi Internasional (Medco) has bought back 45.75 million shares worth Rp110.7 billion, including transaction costs, Medco finance director Cyril Noerhadi said on Tuesday, Antara reported.

"The buy-back of the shares was carried out between October 13 and 31," Noerhadi said.

He said a general shareholders meeting had agreed that the maximum volume of shares that should be bought back was equal to 10% of the paid-up capital.

Noerhadi said the maximum funds for the buy-back deal reached $100 million. With the purchase of 45.75 million shares, the remaining amount of funds was $88.87 million.

On Monday, Medco said it may postpone its plans to construct six energy projects worth $3 billion (Rp30 trillion) due to the global economic recession.

The company's chief commissioner, Hilmi Panigoro, said banks should provide 70% of the funds needed for the projects, while the remaining 30% would be taken from the company's internally generated funds.

"Because of the crisis, banks have tightened their liquidity. Thus, we will possibly reschedule the big projects," Panigoro said, as quoted by Antara.

Panigoro said Medco would keep working on the Senoro Liquefied Natural Gas plan being financed by the Japan Bank for International Cooperation.

MININGGovt. sets domestic coal market obligation The government has set the domestic market obligation (DMO) for coal in 2009 between 40 and 50 million tons, an Energy and Mineral Resources Ministry official said on Tuesday, Antara reported.

The Director General of Mineral, Coal and Geothermal Resources, Bambang Setiawan, said the figure will be included in a ministerial regulation to be issued soon.

“With the DMO it is expected domestic demand for coal will be met,” Setiawan said.

The amount of 40 to 50 million tons is what consumers have asked for, including state power company PT PLN, which requested 36 million tons.

Demand for coal will increase significantly in 2010 when several new 10,000-MW power plants come online, he said.

The regulation for the benchmark price of coal, Setiawan said, would also be issued along with the DMO regulation.

The benchmark coal price is set based on the combination of the Indonesia Coal Index, Barlow Jonker, Global Coal Index and Platts. "The benchmark price will be in effect every month," he said.

Govt. signs contract for $1.1B iron sand project The government signed a $1.1 billion contract for an iron sand and pig iron mining project on Tuesday, the first mining contract to be awarded in a decade due to confusion over the mining law, Reuters reported.

Energy and Mineral Resources Minister Purnomo Yusgiantoro said PT Jogja Magasa Iron, an Indonesian firm in which Australian miner Indo Mines Ltd has a 70% share, would start mining iron sand and set up Indonesia's first pig iron smelter in Yogyakarta.

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"It has been difficult to attract fresh direct investment. This is the first company to have a working contract in Java and the first for iron sand mining," said Yusgiantoro.

Jogja Magasa Iron will begin exploration of iron sands in 2011 and expects commercial production of pig iron to start in 2012, Lutfy Heyder, the firm's commissioner, said.

The company expects to produce one million tons of pig iron in the first year.

Heyder said the pig iron would be sold to the domestic market, adding that the firm has signed a memorandum of understanding to supply 100,000 tons of pig iron a year to state firm PT Krakatau Steel, Indonesia's biggest steel producer.

The $1.1 billion investment includes a 350-MW power plant and a port facility.

The project will require four to five million tons of coal a year for processing iron sand and for the power plant, Heyder said.

Bayan signs $300m coal deal with Petrosea PT Bayan Resources, Indonesia’s eighth largest coal producer, has signed a $300 million mining contract with construction firm PT Petrosea, The Jakarta Post reported.

PT. Gunungbayan Pratamacoal (GBP), a subsidiary of Bayan, signed a five-year contract with Petrosea for overburden removal, Bayan director Jenny Quantero said.

Petrosea has been operating at GBP since November 1999 under two contracts, the last of which is due to expire at the end of December.

The new deal, which will commence on January 1, sets overburden production targets of 36 million bank cubic meters (BCM) per annum.

"We believe that our strong relationship and support from Petrosea will positively contribute to our activities and secure future production from one of our main mines," Bayan's president director Eddie Chin said.

Thai utility sets up coal mining JV in Indonesia State-owned Electricity Generating Authority of Thailand (EGAT) on Friday said its unit is entering into a coal mining joint venture in Indonesia, Dow Jones reported.

EGAT's overseas investment arm EGAT International Ltd. has signed a memorandum of understanding with Inter Mining & Energy Co., a Thai company, and Indonesia's PT Beringin Coal Prakasa to jointly invest in the coal mining business, EGAT Governor Sombat Sarntijaree said in a statement.

In late October, EGAT's board gave the green light for the power agency to bid for a coal mining exploration license in Indonesia, in a move to secure fuel supply for future expansion.

PT Timah Q3 net profit up 18% PT Timah booked a net profit of Rp1,491 billion or Rp296 per share in the third quarter of 2008, up 18% from Rp1,264 billion in the same period a year earlier, Antara reported.

This was attributed to higher average tin prices, according to a press statement on Tuesday on the company’s unaudited consolidated financial statement for the period ended September 30.

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The tin price at the London Metal Exchange (LME) increased from $16,055 per ton at the beginning of the year to $17,175 per ton at the end of September 2008, averaging $20,306.04 per ton, up from $13,933.74 per ton in the same period last year, the release said. In May, the tin price hit a record $25,500 a ton.

Sales volume of refined tin up to the third quarter of 2008 reached 34,045 metric tons, 28% lower than 47,270 metric tons at the end of the third quarter in 2007.

The current slump in prices will probably curb investment and delay new projects, Peter Kettle, research manager of Tin Research Institute (ITRI) Ltd., a producer-funded group, said last week and Director General of Coal and Mineral Resources Bambang Setiawan said on Monday that the government may reduce production if the tin price extends its decline.

“Output will be less than 90,000 tons this year," Setiawan said. “If the price keeps tumbling we'll talk with local governments and producers on their output quotas and we'll have to tighten them."

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