THE COORDINATING MINISTRY FOR ECONOMIC AFFAIRS REPUBLIC OF INDONESIA

Main Building, Ministry of Finance, Jl. Lapangan Banteng Timur No.2-4 Jakarta 10710Tel: (021) 351-1178    Fax: (021) 351-1186    Website: http://www.ekon.go.id

Trade and Investment News1, 25 May 2009

Highlights

National Bali to build new international air terminal as arrivals grow Politics Analysts say commanding lead in polls no guarantee of re-election for presidentTerrorism Fugitive radicals still capable of creating dangerous terror groups, says ICG Law & order Immigration officials say impossible to turn back tide of illegal immigrants Government asks Singapore to extradite banker sentenced for graft Health World health officials accept Indonesian proposal for new virus-sharing system Economy Bank Indonesia says rupiah may strengthen further on signs of global recovery Business briefs Macroeconomy Government to sell additional Rp2 trillion in debt this week Bank Indonesia books $4 billion current account surplus Investment JPMorgan Chase upgrades Indonesian stocks to overweight PT Sorini to build new tapioca plant in Lampung State concerns Tourist arrivals rise marginally in first quarterSOEs New commuter rail company to invest Rp1.2 trillion in upgrading Private sector Salim Group keen to increase holding in cement maker PT Indocement Banks BCA may launch shariah bank in September Power PT Pertamina prepares heads of agreement for second-stage expansion program Oil & gas France’s Total to sign LNG deal with Japanese buyers Government to extend Medco’s Blok A gas field contract Mining Earthstone Resources to produce 3 million tons of iron ore

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 Bali to get new airport terminal by 2013: OfficialNgurah Rai International Airport in Denpasar, Bali, will get a new terminal capable of handling 7.5 million passengers per year, Antara reported.

“The new terminal will be located next to the current domestic terminal and will cover an area of 100,000 square meters,” said Heru Legowo from airport operator PT Angkasa Pura I.

Legowo said the terminal, which will cost about Rp1.2 trillion, will only serve international routes.

The new terminal is in response to the growing number of tourists visiting Bali each year, Legowo said, adding the construction is planned to commence by the start of 2010 and will take three years to complete.

Bali Governor Made Mangku Pastika said in January another airport will be constricted in Bungkulan village, Kubutambahan district, Buleleng regency, with Vice President Jusuf Kalla already approving the plan.

POLITICSSBY not a shoo-in, say analystsPollsters say President Susilo Bambang Yudhoyono will be re-elected easily on July 8, but some analysts insist that such predictions are premature, The Straits Times reported.

Yudhoyono and his running mate, former Bank of Indonesia governor Boediono, must win over 50% of the votes cast the first time or a run-off election will be required on September 8.

While approval ratings for Yudhoyono are high, Indonesian Survey Institute senior researcher Burhanuddin Mutahdi said that could change.

“The opinion of society is dynamic. Even if the electability of Yudhoyono - Boediono is high, it does not mean they cannot be defeated,” Mutahdi told the Suara Pembaruan daily. Two other pairings - former president Megawati Sukarnoputri with former general Prabowo Subianto, and Vice President Jusuf Kalla with former Armed Forces commander Wiranto - are running against Yudhoyono and Boediono

Analyst Bima Arya Sugiarto said all the candidates are still in the running. “It's still too early to say that Yudhoyono will win in one round. There is the Boediono factor,'” he said, referring to the perception of Boediono as a free-market policymaker, a view which could turn off some voters.

Some sectors in society fear that this means the government will be pro-foreign investment and have little interest in helping the ordinary citizens.

Sugiarto, who runs the Charta Politika political consultancy, said the candidates' campaign teams would have to play up their strengths.

For instance, Kalla and Wiranto could portray themselves as the most representative of Indonesian society, he said.

Kalla is from outside Java, is an entrepreneur and has the support of Islamic groups. His running mate is Javanese, a former military man and seen as advocating the protection of the domestic market.

Prabowo wealthiest in presidential poll line-up

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Former general Prabowo Subianto, who is standing for vice president, is the wealthiest candidate contesting the July election, data from the Corruption Eradication Commission (KPK) showed, owning 27 companies worldwide and about 90 thoroughbred horses, Reuters reported.

Prabowo, 57, who is teaming up with opposition leader Megawati Sukarnoputri in the election, is estimated to have personal wealth of $160 million, the KPK said in a report.

The ex-general owns plantations and mines in Indonesia, as well as businesses in Argentina and France, an official from his Gerindra Party said.

He also has about 90 horses worth $5,000 each, some at his estate in Bogor, West Java, an official from the KPK said, after verifying Prabowo's wealth report.

According to the law, presidential and vice presidential candidates are obliged to disclose their wealth as part of efforts to boost transparency.

President Susilo Bambang Yudhoyono, whose vice presidential candidate is former central bank governor Boediono, also faces a challenge from Vice President Jusuf Kalla and his running mate former general Wiranto in the July 8 election.

Sulawesi-born Kalla, whose extensive family business interests range from construction to real estate, came in second place in terms of wealth with $29 million, the data showed.

Former president Megawati was third with about $14 million, while Yudhoyono was at the bottom of the list with $920,500, according to the data.

TERRORISM Fugitives help radicalization of terror recruits, says ICGMilitant fugitives in Indonesia have the potential to turn non-violent activists into would-be bombers even as the overall threat of terrorism declines, the International Crisis Group (ICG) said.

Its report, entitled Indonesia: Radicalization of the “Palembang Group,” uses documents from the trials of 10 men from Palembang, South Sumatra, sentenced in April to heavy jail terms on terrorism charges, to show how radicalization takes place.

“The sobering revelation is how easy the transformation can be, if the right ingredients are present,” said Sidney Jones, ICG’s Asia Program senior adviser.

“In this case, the most important element in turning the group towards violence was charismatic leadership, provided by two terrorist fugitives.”

One of the men was Fajar Taslim, alias Mohammad Hasan, a member of the regional jihadi group Jemaah Islamiyah (JI), who fled Singapore in late 2001 with the recently re-arrested Mas Selamat Kastari, head of JI in Singapore.

The other was Sulthon Qolbi, who was wanted for multiple crimes committed in Maluku.

The two men separately came upon a small Islamic study circle whose biggest concern was the conversion of Muslims by Christian evangelicals in South Sumatra.

According to the report, the big leap was persuading members of the group to consider violence against the proselytizers.

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Once they were willing to kill, a broader range of targets became thinkable.

The Palembang group was inept and failed in four out of five of its planned operations, but the case holds important lessons for counter-radicalization strategies, the ICG said.

“While JI has grown progressively weaker as an institution, individual members outside the mainstream, many of them wanted by police, can still provide motivation and training to transform a non-violent group into militant extremists,” it said.

Nine of 10 members of the Palembang group were not JI, but JI members provided crucial input along the way.

The report suggested the Indonesian government pay increased attention to JI-related schools, not because of what they teach but because of their role as communication hubs and places of refuge.

The director of the JI school near Palembang was against violence and never joined the group, but visitors to the school facilitated the radicalization process.

The fear of “Christianization” – conversion of Muslims – can be a powerful local driver for radicalization in Indonesia, especially now that communal conflicts have waned, it said.

“It would be possible to conclude the Palembang men were such hapless bumblers that if this is all Indonesia has to worry about, it is in good shape,” said Jim Della-Giacoma, ICG’s Southeast Asia project director.

“But a similarly amateurish group with the same bombs and a little more luck could have a much more lethal effect,” he added.

LAW & ORDER Illegal migrant tide ‘can’t be held back’Despite a rise in the number of illegal migrants using Indonesia as a stepping-stone on their way to Australia, immigration officials say they are powerless to stem the flow, The Jakarta Globe reported.

The claim came hours after the arrest in Lampung of the latest batch of Afghan migrants — nine men and four women — all without travel documents.

Their arrests, at the Bakauheni port where ferries bound for Java depart, bring the total to 147 illegal migrants detained in the past month.

Maroloan Barimbing, a spokesman for the Directorate General of Immigration, said the number of illegal migrants entering Indonesia has increased dramatically since last year, with well over 1,000 detained since the beginning of the year.

He said the government has limited resources to provide security across the archipelago against the illegal migrants.

“We don’t have enough personnel or facilities, especially in smaller, outer islands,” Barimbing said.

He said his office would continue to work with the Maritime Security Coordination Body, the Maritime Police, the Navy and the Ministry of Transportation’s Sea and Coast Guard to patrol the country’s shores.

Besides Afghans, recent groups of illegal migrants have included Iraqis, Sri Lankans, Bangladeshis and ethnic-minority Rohingyas from Myanmar.

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He said that ad-hoc working groups set up as a result of the Bali Process on refugees and illegal migrants, co-chaired by Indonesia and Australia, were to meet later this month and expected to help identify the root causes behind the problem.

Govt. requests Singapore’s help to catch graft fugitiveThe government is seeking assistance from Singapore to extradite a key graft fugitive identified as Samadikun Hartono, who is believed to be hiding in the neighboring country, National Police chief Gen. Bambang Hendarso Danuri said Friday, The Jakarta Globe reported.

“God willing, we will discuss the issue at an upcoming meeting in the near future,” Danuri said, dispelling rumors that Hartono was already in police custody.

Rumors were circulating last week that Hartono, who was to be imprisoned in May 2003, had been arrested when the National Police hosted a meeting with Singapore Police officials on Wednesday.

Hartono fled Indonesia after being found guilty by the Supreme Court and sentenced to four years in jail and fined Rp169 billion ($16 million) for the misuse of Bank Indonesia Liquidity Assistance (BLBI) funds issued in the wake of the 1997-1998 Asian financial crisis

At the time, Hartono was chief commissioner of the now-defunct Bank Modern.

According to Danuri, last week’s meeting focused on transnational crimes and the April 1 capture of terror fugitive Slamet Mas Kastari in the Malaysian state of Johor Baru.

Muchtar Arifin, head of the government’s graft fugitive-hunting team and Deputy Attorney General, said it is believed Hartono has avoided justice by hiding in several countries, including China and Singapore.

Without an extradition treaty between Indonesia and Singapore, Arifin suggested Hartono’s return be arranged under the Mutual Legal Assistance Agreement signed by all ASEAN members, including Indonesia and Singapore.

“Singapore is a safe haven for many graft fugitives from Indonesia,” Arifin said.

Apart from Hartono, another fugitive identified as Bambang Sutrisno, a former commissioner of Bank Surya, who fled a life sentence for embezzling BLBI funds, is also believed to be living in Singapore, Arafin said.

Region Kadin head named suspect over $21M bank fraudJakarta Police have named the head of the North Aceh Chamber of Commerce and Industry (Kadin) a suspect for his alleged role in the theft of Rp220 billion ($21.3 million) from a Bank Mandiri account belonging to the North Aceh district administration, The Jakarta Globe reported.

Bahagia Dachi, head of Jakarta Police’s fiscal, monetary and reserves division, said it had been “proven” that senior Aceh Kadin member Basri Yusuf was involved in a conspiracy to embezzle funds from the Jelambar, West Jakarta branch of Bank Mandiri.

Jakarta Police spokesman Chrysnanda Dwi Laksana said other suspects Cahyono, head of the Jelambar branch of Bank Mandiri, and a woman identified as Lista, were arrested on May 14.

Police are still in pursuit of at least two more suspects, identified only by their initials, TAH and ER.

Laksana would not rule out the possibility that officials from the North Aceh district administration could also be named suspects and arrested.

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Dachi said that Yusuf met Lista, who introduced him to Cahyono, in Jakarta before lobbying the North Aceh administration to transfer Rp220 million into the Mandiri account, claiming the bank offered a more competitive interest rate.

On February 4, forged documents were used to remove the Rp220 billion, which was then distributed to several people, Laksana said.

Dachi said that after tracing the money Rp198 billion was discovered in Lista’s account but around Rp20 billion is still missing.

HEALTH Progress made on virus sharing: Health MinistryWorld health officials have accepted a proposal by Indonesia for a new system of sharing virus samples, a move that would enable all countries to access the viruses for research, an official said Friday, The Jakarta Globe reported.

The World Health Organization’s (WHO) 62nd general assembly in Geneva, Switzerland, agreed that the Standard Material Agreement (SMTA) should be concluded by January next year at the latest.

Makarim Wibisono, Indonesian delegate at the assembly, said the finalization of the plan proposed two years ago was the result of efforts by Health Minister Siti Fadillah Supari, who has been trying to change the virus sharing mechanism since 2007.

Under the SMTA, scientists from both developed and developing countries would be able to obtain virus samples for research purposes, as well as build facilities to create derivative products from the virus, including vaccines and antiviral drugs.

The SMTA would also apply the benefit-sharing system, wherein countries that have sent the specimens would be able to benefit from the virus scientifically and financially if derivative products from it are commercialized.

Supari surprised the world when she abruptly stopped sending bird flu virus samples to the WHO in 2007.

At the time, she said the WHO wanted the virus samples in order to create an effective bird flu vaccine using the Indonesian strain but offered nothing in return.

She said Indonesia was perceived by many countries as both a potential object of exploitation and a promising market for new vaccines.

The minister said that the samples were given freely, but Indonesia had to later purchase the vaccine -- developed using those samples -- at high prices.

WHO director general Margaret Chan said on Thursday the decision was a breakthrough.

“We have seen something that we have never seen before: the total commitment of countries to transparency and to timely reporting, sharing of information, sequences, viruses, diagnostic kits, laboratory equipment, and the list goes on.”

Indonesia worries over H1N1 flu vaccine production

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Indonesia has shown steely resolve in fighting the H1N1 flu virus with health checks and quarantines, but with more than 90% of flu vaccine production capacity located in the West, is less prepared than it wants to be, Reuters reported.

Despite efforts to build vaccine production facilities in Indonesia, the bulk of global production is sited in Europe and the US.

"Do you actually think that in a really serious pandemic those vaccines will be shipped here (to Asia)?" said a microbiologist in Hong Kong, who declined to be identified.

Even though the new H1N1 virus appears mild for now, Indonesia is keenly aware of its vulnerability and has recently ordered local companies to develop H1N1 vaccines.

Asia, however, lacks sophisticated medical technology, experts say, and while it takes an experienced vaccine maker in the west four to six months to prepare a vaccine, Indonesian drug maker Bio Farma said last week that it would need two years.

Lily Sulistyowati, an official with Indonesia's Ministry of Health, said that if the country failed to come up with its own vaccine, it would push the WHO to distribute stocks fairly.

"We had the experience with bird flu where we had to line up to buy Tamiflu behind other countries that didn't have any cases. Why should we line up when we have the most cases?" she said.

"We hope that won't happen again. We should be given priority if we have more cases than other countries," she said.

ECONOMY BI sees rupiah strengthening further The rupiah is expected to strengthen further on the back of a better-than-expected recovery in the global economy, a Bank Indonesia (BI) deputy governor said on Friday, Reuters reported.

“The main reason is the global condition, in which I see signs of showing an early recovery. The developments in the first quarter are better than had been previously expected,” Hartadi Sarwono told reporters.

Sarwono also said an inflation rate of 5% this year was achievable. From January to April inflation has reached a mere 0.05%.

The rupiah has strengthened about 7% so far this year against the dollar to make it the strongest performer in the region.

The news was less positive on the investment front. India’s largest stainless steel producer JSL Ltd., formerly Jindal Stainless, said it had shelved a plan for a $1.2-billion joint venture with PT Aneka Tambang (Antam) in Indonesia, according to India’s Economic Times on Friday.

Another Indian-linked company, British-based Arcelor Steel, has also canceled plans for a major project in the country.

JSL’s director for strategy and business development, Arvind Parakh, said the project has been shelved since it is no longer commercially viable.

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JSL Ltd last year entered into a joint venture with the state mining firm Antam to build a 20,000-ton ferronickel plant and 300,000-ton stainless steel slab unit in Indonesia. However prices of nickel, a vital input for producing the alloy, have dipped sharply.

"Nickel prices were hovering at $20,000-22,000 tons last year when we entered into the 55:45 JV with Antam, but now the prices have plummeted to $10,000 tons, making the project unviable," Parakh said.

However, JSL would continue to source nickel from Antam, which is currently scouting for possible buyers of JSL's stake in the joint venture, he said.

JPMorgan Chase & Co. on Monday upgraded Indonesian stocks on a recovering in the global economy and higher investor risk appetite for emerging market equities, Bloomberg reported.

Indonesia’s Jakarta Composite Index has climbed 28% and the market was upgraded from “neutral” because of the improving commodities and currency outlook, JPMorgan wrote.

On the stock market, the Jakarta Composite Index closed after a week cut short by a holiday at 1,881.71, compared to 1,750.91 a week earlier. The rupiah ended on Friday at 10,285 compared to 10,460 a week earlier.

Indonesia Growth Rate of Quarterly Gross Domestic Product by Type of Expenditure (%)

Source: Statistics Center Board

BUSINESS BRIEFSMACROECONOMYGovt. to sell 2 trillion bonds this week The government will sell Rp2 trillion of bonds on May 26 in part to fund the 2009 budget deficit, estimated at Rp139.5 trillion, the Finance Ministry said in a statement Wednesday, the Jakarta Post reported.

The bonds will be sold at Rp1 million per unit. SPN20100513 will mature on May 13, 2010; FR0036 on September 15, 2019, yielding 11.5%; and FR0047 on February 15, 2028, yielding 10%.

The bond settlement will take place on May 28, the ministry said.

Meanwhile a swap of government debt saw strong interest, with investors swapping Rp1.248 trillion ($120.5 million) of government debt maturing in 2009-2013 for bonds maturing in 2024, the Finance Ministry said on Tuesday, Reuters reported.

Investors swapped shorter-term government bonds with fixed rate bonds maturing in 2024. That compared to the Rp30 billion ($2.90 million) for a swap offer in March when demand was relatively weak when investors favored short-term bonds to reduce risk.

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BI books $4B surplus in Q1 balance of payments Bank Indonesia (BI) booked a surplus of $4 billion in balance of payments in the first quarter of 2009 following heavy deficit pressure in last year’s fourth quarter, a BI report on the development of Indonesia’s balance of payments said Tuesday, Antara reported.

BI said that the improvements took place not only in current transactions but in capital and financial transactions as well.

Current transactions in the first quarter of this year reached a surplus of $1.8 billion, up from $700 million in the fourth quarter on 2008, BI said.

"The improved current transactions were supported by an increase in surplus of non-oil and gas balance of trade, and the declining deficit in the oil and services balance of trade," the BI report said.

INVESTMENTJP Morgan upgrades Indonesian stocks Indonesian stocks were upgraded at JPMorgan Chase & Co. Monday as a recovery in the global economy and investors’ risk appetite drives further gains in emerging market equities, Bloomberg reported.

Indonesia was upgraded to “overweight” within JPMorgan’s global emerging-market portfolio, said analysts led by Adrian Mowat.

JPMorgan last month said the MSCI Emerging Markets Index will rise to 900, the highest level since September, when Lehman Brothers Holdings Inc.’s bankruptcy sparked an exodus from emerging-market assets.

The measure has rallied 25% this year to 709.38 and developing markets make up all 10 of the best performers in 2009, with Peru, Russia and China leading gains.

Indonesia’s Jakarta Composite Index has climbed 28% and the market was upgraded from “neutral” because of the improving commodities and currency outlook, JPMorgan wrote.

Gross domestic product expanded 4.4% in the three months to March 31 from a year earlier as local spending accelerated.

Sorini to build Rp100M tapioca plant in Lampung Publicly-listed PT Sorini Agro Asia Corporindo plans to build a Rp100 million tapioca flour processing plant in Lampung, company officials said, Antara reported.

"The plant will have a capacity of producing 200 tons of tapioca flour per day," Sorini Agro Asia Corporind president director Haryanto Adikoesoemo said on Monday.

The construction of the plant will start later this year and be completed in mid-2010, he said.

Sorini Agro Asia Corporindo booked a net profit of Rp142.5 billion in 2008.

The company produces tapioca sorbitol flour and derivative products known as polyols consisting of sorbitol, maltitol, dextrose monhydrate, maltose syrup, sorbital flour and maltodextrine.STATE CONCERNSForeign tourist arrivals rise 0.46% in Q1

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Foreign tourist arrivals in Indonesia in the first quarter this year only rose around 0.46% compared with the same period last year, Antara reported.

The general chairman of the Association of the Indonesian Tour and Travel Agencies (ASITA), Ben Sukma, said Friday that the rise in tourist arrivals had been small because of several factors including the global economic crisis and concern over swine flu.

Sukma said the number of foreign tourist arrivals was expected to rise after the presidential election in July.

According to the ministry of tourism and culture around 80% or 4.4 millions of around seven millions targeted to arrive in the country in 2009 would be those who had visited the country before.

SOEsRailway firm to invest $116M for revitalization Newly formed railway company PT Kereta Api Indonesia Commuter Jabodetabek (KCJ) will allocate Rp1.2 trillion ($116.4 million) by 2013 as a part of the government’s train revitalization program, The Jakarta Globe reported

“So far, we have allotted Rp600 billion from PT Kereta Api (KAI) this year,” KCJ chairman Kurniadi Atmosasmito said, adding that the funds will be used to purchase 50 used trains from Japan.

“The remaining funds will come from local banks but that will be next year,” Atmosasmito said.

Atmosasmito said at the moment approximately 400,000 passengers use the train every day, an increase from 325,000 last year. By 2013, KCJ targeted one million passengers per day.

Atmosasmito said the company would add more executive class trains while gradually eliminating non-air conditioned ones over the next year.

“With increased competition, I believe public service will improve,” he said.

KCJ is a subsidiary of the state-owned train company, KAI. It currently serves commuting routes across Greater Jakarta area, including tracks linking the city’s main stations to Serpong, Bogor, Depok, Tangerang and Bekasi.

The company was launched officially on Tuesday by Transportation Minister Jusman Syafii Djamal.

Djamal said that the establishment of KCJ could trigger private companies to enter the railway industry.

PRIVATE SECTORSalim Group looks to increase Indocement stake The Salim Group wants to increase its stake in Indonesian unit PT Indocement Tunggal Prakarsa from the majority shareholder HeidelbergCement AG, Antara reported Monday.

German cement maker HeidelbergCement may sell up to a 14% stake in the company worth around $270 million to help pay down debt.

The Salim Group CEO Anthoni Salim said the group, which already has 13.03% in Indocement, hopes Heidelberg agrees to sell more than just the small minority stake.

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A number of other investors have been reported interested in the stake such as Swiss-based world cement giant Holcim and France's rival Lafarge.

Internet providers eye $300M for Wimax A consortium of 30 small and middle internet service providers (ISPs) plan to invest $300 million if they win a bid for a Wimax broadband operating license in July, The Jakarta Post reported on Friday.

"This is our way to ensure market accessibility for local ISPs," said spokesman for the consortium, Heru Nugroho, on Wednesday.

He said the consortium leader PT Rahajasa Media Internet (RadNet), was in the process of joining the bidding being held by the Information and Communication Ministry. Should it manage to secure a license, RadNet and partnering companies would name the consortium PT Konsorsium Wimax Indonesia (KWI).

Nugroho said KWI would invest $300 million in the service for five years.

"The consortium still awaits the tender announcement before determining any plan on how to acquire the fund," he said.

Under the bidding process, there are 15 zones where Wimax services will initially be made available. The Wimax service fee will vary in each zone and there will be a cross-subsidy principle, so that zones with high Wimax fees will subsidize those with lower fees.

Around 73 telecommunications companies are participating in the tender. Tender participants were required to propose a minimum of 35% use of local products to support the new system.

BANKSHSBC completes Bank Ekonomi acquisition International bank HSBC Group said Friday it has acquired nearly 89% of the shares in Indonesia's PT Bank Ekonomi Raharja for $607.5 million cash, completing the acquisition from the Wings group, The Associated Press reported.

The acquisition nearly doubles HSBC's presence in Indonesia to 207 outlets in 26 cities. Bank Ekonomi will continue to operate as a separate entity and remain listed on the Indonesian stock exchange, HSBC said.

Through its subsidiary HSBC Asia Pacific Holdings, the company said it would make a mandatory tender offer for the remaining Bank Ekonomi shares.

Bank SBI Indonesia to help finance trade with India Bank SBI Indonesia, formerly known as Bank IndoMonex, said it expects to receive its foreign exchange transaction license from Bank Indonesia (BI) this month, enabling it to capitalize on the increasing trade and investment between Indonesia and India, The Jakarta Post reported. With the license, SBI Indonesia will be able to offer foreign exchange services, trade finance and remittance facilities, as well as depository advisory services to its customers.

"I'm optimistic we'll get it later this month. I think next month at the latest. After that we can start our foreign exchange services as an international bank," Bank SBI Indonesia director S. Sathyamurthy said Monday.

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"With a large Indian community in Indonesia and more and more Indian companies operating here, SBI will help facilitate their business activities," Sathyamurthy said.

According to the immigration office, there are around 10,000 Indian expatriates across the country.

Trade between India and Indonesia topped $10 billion last year, and is predicted to continue growing.

India is one of the largest importers of Indonesia's commodities, including palm oil, coal, and gambier, a resin used for cosmetics and some traditional medicines.

SBI acquired 76% of shares in IndoMonex in 2006 and then changed its name to Bank SBI Indonesia. The other 24% of its shares are controlled by PT. Ravindo Jaya.

BCA may launch shariah bank in September PT Bank Central Asia (BCA), is planning to launch a shariah bank in September following its acquisition of a small bank last year, its vice president director said on Tuesday, Reuters reported.

BCA's vice president director, Jahja Setiaatmadja, said all necessary procedures with Bank Indonesia (BI) were due to be completed soon to allow the launch of the bank.

"We did the fit-and-proper test last week and if BI can complete the process soon then we expect that the conversion into a shariah bank can be completed in September," he said.

"We're targetting loans to the micro-, small- and medium- enterprises segment," Setiaatmadja said when asked about the shariah bank's shariah segment, adding BCA would inject Rp100 billion as paid-up capital.

BCA, which has a market capitalization of nearly $7.9 billion, acquired Bank UIB in October last year and planned to convert the small lender into a shariah bank as part of its efforts to tap a growing Islamic banking segment.

Indonesia had five shariah banks and 26 commercial banks with shariah units as of March 2009, BI data showed.

ICBC's Indonesian unit sees robust growth in Q1 profit PT Bank ICBC Indonesia (ICBC Indonesia), the Indonesian subsidiary of Industrial and Commercial Bank of China (ICBC), the world's biggest lender by market value, doubled its pre-tax profit to $622,400 in the first quarter of this year, Shanghai Securities News reported on Friday.

In the first quarter, ICBC Indonesia saw its total assets surge 62.4% from the beginning of this year, while its outstanding loans grew 63% from the start of this year.

In 2008, the Indonesia unit's profit increased by $2.01 million, a record high among the new foreign lenders in Indonesia.

At the end of last year, ICBC Indonesia's total assets hit $140 million.

ICBC Indonesia, a commercial bank with a foreign exchange business license, at present has 12 outlets located in Jakarta, Surabaya, Bandung and other major cities in Indonesia.

POWERPertamina prepares HoA for second phase 10,000 MW program

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State-owned oil and gas company PT Pertamina is preparing to sign a head of agreement (HoA) with state power company PT PLN in the second phase of the government-sponsored 10,000 MW power plant program, The Jakarta Post reported on Friday.

“(The agreement) is still being processed; we hope to sign in June,” Pertamina’s spokesman Adiatma Sardjito said Friday in Jakarta, as quoted by tempointeraktif.com.

The agreement is yet to include the pricing for the geothermal energy or the electricity that Pertamina will supply to PT PLN, Sardjito said.

The agreement will arrange the development of 15 geothermal power plant projects.

Sardjito said Pertamina could either manage the projects totally and supply electricity to PLN or leave the generator construction projects to the state electricity company and only supply the geothermal energy needed for the plants to produce electricity.

“Whichever we are most ready to do, that is what we will opt for,” he added.

The second phase of the crash program involves a significant proportion of alternative energy sources, with geothermal energy generating 4,733 MW, hydropower 1,174 MW, and coal and gas the remaining 4,056 MW.

OIL & GASTotal to sign LNG deal with Japanese buyers A unit of France's Total plans to sign a final deal to supply liquefied natural gas (LNG) from Bontang plant to Japanese buyers next month in Bali, an energy watchdog official said on Tuesday, Reuters reported.

“We have reached an agreement with the Japanese buyers and we will sign a final deal next month,” upstream oil and gas regulatory body BP Migas chairman Raden Priyono told reporters.

The government has agreed to extend the contract with Japanese firms from 2011 for 10 years. Under the agreement, the buyers will purchase a total of three million tons per year (tpy) of LNG from 2011 to 2015 and two million tons from 2015 to 2020.

The Japanese companies involved are Osaka Gas Co, Chubu Electric Power Co, Kansai Electric Power Co, Kyushu Electric Power Co, Nippon Steel Corp and Toho Gas Co.

“The signing is between France's Total and the Japanese firms. The government will witness the event,” Priyono said.

Total is the biggest natural gas supplier to the Bontang LNG plant, in East Kalimantan, with daily output of about 2.5 billion cubic feet per day.

Another official at BP Migas said the LNG price was linked to Japan's crude cocktail price. ”The price will certainly be better than before,” said the official, who declined to be identified.

Priyono also said the government would witness the signing of a final LNG supply deal between BP and Korea Gas Corp (KOGAS) next month in Bali.

The government agreed in July last year to sell about 900,000 tpy of LNG to KOGAS between 2010 and 2012. The price will in line with the contract extension between Indonesia and Japanese buyers.

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The LNG for KOGAS will be sourced from the Tangguh project, part of supplies diverted from US firm Sempra Energy.

Sempra has a 20-year contract to lift 3.6 million tpy of LNG from the 7.6 million-tpy Tangguh project, led by BP. It has the right to divert half its volumes to customers other than its own new terminal in Mexico.

The Tangguh project is due to start delivery of LNG at the end of June, according to energy minister Purnomo Yusgiantoro.

Indonesia's LNG output is forecast to drop to 349 cargoes in 2009 from 359 cargoes a year ago.

Govt. to extend Aceh gas contract for Medco The government indicated on Wednesday that it will extend a gas exploration contract with Medco E&P for Block A in Aceh, Tempo Interaktif reported.

“The extension will definitely be given. The remaining issues are terms and conditions,” Upstream Oil and Gas Regulatory Body BP Migas head Raden Priyono said on Wednesday.

Medco has proposed to extend its contract in Aceh which will expire in 2011. Medco took over a 50% stake in the project in 2007 from ConocoPhillips.

Medco president director Budi Basuki said its partner in the project, Premier Oil Sumatra, a subsidiary of Premier Oil (UK), which controls the remaining 50% of the Block A Production Sharing Contract, has agreed to the extension. Under the current contract, the government receives 65% of gas and oil production while Medco retains 35% of production.

Medco eyes acquisition of NW Java offshore block PT Medco Energi Internasional, the country’s biggest publicly traded oil and gas company, is planning to acquire BP Indonesia’s stake in the Offshore North West Java Sea (ONWJ) block off West Java, The Jakarta Post reported.

Medco operational director Lukman Mahfoedz said on Monday the company is evaluating the acquisition of the gas block.

Mahfoedz added that Medco is eyeing the possibility of sharing ownership with other companies.

On the heels of BP Indonesia’s plan to sell 46% of its shares in ONWJ, several other energy companies are also buckling up to acquire the ONWJ block.

The ONWJ concession stretches from Cirebon in the east to the Thousand Islands, Jakarta, in the west.

The block supplies gas to fertilizer company PT Pupuk Kujang, state electricity company PT PLN and state gas company PT PGN.

Other major shareholders in ONWJ include China's CNOOC with 36.72%, Japan's Inpex with 7.25% and Itochu Oil Exploration with 2.85%.

MINING

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Earthstone to produce three million tons of iron ore PT Earthstone Resources plans to produce three million tons of iron ore this year after starting production at one of its mines on Sumatra, its chief executive said, Reuters reported.

The firm operates five iron ore mines in different parts of Sumatra and initial production will come from its Nalo Baru mine in Jambi, Pankaj Singh said.

"Production is expected to reach close to 10 million tons within two years when we start production in two other mines," Singh said.

To develop the mine, the company planned to spend $40-$45 million this year, compared to $10 million in 2008, he said.

The firm has locked in a contract with a Chinese buyer to ship 36,000 tons of iron ore from this year's production at $55 per ton, FOB Padang port in southern Sumatra, Singh said.

Iron ore from the firm would help boost iron ore production in Indonesia and may benefit local steel companies which currently depend on imports of semi-finished raw material.

"Indonesia is not known for iron ore in the global market because there are not too many players in the business," Singh said, adding the country would become an increasingly important player with the opening of more mines.

Energy and mineral ministry data shows Indonesia produced 4.6 million tons of iron ore in 2008, only a fraction of iron ore production from Australia, the world's top iron ore exporter, which is forecast to produce 367.7 million tons in 2009-2010.

Some international players planning to set up steel plants in Indonesia have approached the firm to secure possible iron ore supply deals, Singh said, without elaborating.

Churchill Mining says resource '600% larger' Coal miner Churchill Mining PLC said on Monday the resource at the East Kutai coal project in East Kalimantan was more than 600% larger than its initial estimates, Reuters reported.

The company also confirmed that it had recently obtained approvals and mining licenses for the project from the government.

The AIM-listed miner, which owns 75% of the project, said the resource at the project was now estimated at 3.18 billion tons of thermal coal, exceeding its initial estimate of 500 million tons.

Churchill Mining said it was focusing on its mine and infrastructure planning to create a bulk mining operation, with an annual production of up to 20 million tons of coal.

Koba Tin on track for target output Tin miner PT Koba Tin said on Tuesday it is on track to produce 9,017 tons of refined tin this year, up from 7,109 tons in 2008, as its mines resume operations after flooding and on plans to revive mining in old mines, Reuters reported.

"We have managed to pump water out from two mines, so mining activities have resumed as normal," said Darmansyah, a Koba Tin spokesman in Bangka Island.The firm also planned to revive mining activities in some of its old mines to increase production, Darmansyah said.

"There are some locations that we had mined in the past in which reserves are still economically viable. We plan to mine in those areas again," he said.

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Koba Tin, which is 75% owned by Malaysia Smelting Corp. Bhd, had previously said it could revise down its output target this year because of the floods.

Refined tin output from Koba Tin accounted for 18% of Malaysian Smelting's total refined tin output of 38,739 tons in 2008.

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