The rupiah nosedived against the US dollar in the Jakarta interbank spot market, dropping below the level of Rp11,350 per US dollar as market players were worried over national economic growth.

The Indonesian currency traded at Rp11,363/11,377 per US dollar, down 53 points from Rp11,310/11,330 at the market`s close a day earlier.

Market players were pessimistic and worried that the Indonesian economic growth would continue to slow down, Edwin Sinaga, a money market analyst, said here on Friday.

The local currency was under pressure because investors preferred to keep the greenback, which they believed safer than the rupiah, he said.

He believed that Bank Indonesia (BI) would try to maintain the rupiah movement at between Rp11,200 and Rp11,300 per US dollar.

If the local currency continued to tumble to Rp11,500 per US dollar, it might approach the level of Rp12,000 per US dollar, he said.

The rupiah was under pressure also because of the report on the bad performance of the Indonesian exports in January 2009, which was only half of that in January 2008, he said.

However, he disagreed comparing the country`s exports in January 2009 with that of January 2008, when the national economic growth was better.

The rupiah tumbled against the US dollar in the Jakarta interbank spot market on Friday morning on indications the global economic crisis was worsening.

The Indonesian currency traded at Rp11,350/11.375 per US dollar, down 40 points from Rp11,310/11,330 at the market`s close a day earlier.

The domestic money market during the week had tended to remain negative towards the local currency as the national economy was being impacted by the slowdown in global economic growth, Edwin Sinaga, a money market observer, said here on Friday.

The sluggish growth of the national economy was reflected in a significant decrease in Indonesia`s exports in January 2009.

"We are worried that the rupiah may weaken further because the market`s sentiment is still negative," he said.

However, he considered the position of the Indonesian currency at Rp11,350 as not yet worrying as it was still well below the level of Rp12,000 per US dollar.

Therefore, Bank Indonesia (BI) was expected only to monitor and supervise foreign banks` foreign currency dealings, he said.

He predicted the central bank would not intervene in the money market (release US dollars) except if the rupiah was approaching the level of Rp12,000 per US dollar.

Publicly listed bank PT Bank CIMB Niaga (JSX:BNGA), the product of a merger in November between PT Bank Niaga and PT Bank Lippo, reported a sharp fall in net profit in the first 11 months of that year.

In separate financial reports, the net profit of Bank Lippo plunged 74 per cent to Rp140.51 billion (US$12.78 million) and meanwhile, the net profit of Bank Niaga fell 13 per cent to Rp593.71 billion. Combined, the net profits of the two banks fell 40 per cent from Rp1.23 trillion to Rp734.22 billion.

Bank CIMB Niaga director Catherine Hadiman said an increase in personnel burden, in the form of merger compensation for employers, was the main factor causing the decline in profit

Shareholders of PT Telekomunikasi Seluler (Telkomsel), the nation’s largest cellular operator, introduced Thursday Sarwoto Atmosutarno as the company’s new president director replacing Kiskenda Suriahardja.

Sarwoto moves on from his post as executive general manager of the infrastructure division for Telkomsel’s parent state-run PT Telkom, the nation’s largest telecom firm. Telkomsel is 65 percent owned by publicly listed Telkom, while the remaining 35 percent is owned by Singapore Telecom Mobile Pte Ltd.

“My priority will be to improve the quality of our voice and broadband products by expanding network and bandwidth. This is to keep up with the current stiff competition,” Sarwoto told The Jakarta Post Thursday after the inauguration.

“I will also take advantage of the market community of both Telkom and Telkomsel customers, and leverage synergy between the companies to boost efficiency.”

The replacement of Telkomsel’s chief was made without going through the regular shareholder’s meeting, amid the company’s losing price war against rivals that sent its profits plunging by 7 percent during the first nine months of last year to Rp 9.7 trillion (US$858 million) from Rp 9.08 trillion in the same period of 2007 despite a 36 percent jump in subscribers to 60.5 million, or a 46 percent market share.

Telkomsel is the operator of Kartu Halo, Simpati and Kartu As. This year, Kartu Halo’s call rate fell 30 percent, Simpati’s by 47 percent and Kartu AS’s by 25 percent.

“We are going to see the price war more wisely. That’s why we’re going to focus on improving our service (rather) than getting drowned with our rivals in cutting the call rates,” said Sarwoto, who is a Telkom career official dealing mostly with satellite technology.

Indonesia is home to 11 GSM and CDMA-based cellular phone operators, backed by international giants including Qatar Telecom, Telekom Malaysia, Saudi Telecom, and Hutchison Telecommunications International.

Telkomsel’s former president director Kiskenda, who was on the post since 2005, said in November last year that the company had been more supportive of the public by providing cheaper call rates than to the shareholders by slapping on higher rates to earn more profits.

“This is the consequence (of the cheap rate), which eventually (has) trimmed our profit,” said Kiskenda in his defense over Telkomsel’s slumped first nine months profits.

Indonesia's economic indicators have been unimpressive with the depreciation of the rupiah by more than 14 percent since the third quarter 2008.

The Jakarta Composite Index in October fell to 1,355 points whilst inflation soared to around 11 percent by end of December.

The excellent performance of Indonesia's exports has buoyed Indonesia's economic growth to remain steady at 6.2 percent from a year earlier, well within the government's target.

With the deepening global financial crisis it is anticipated most property sectors will be impacted despite the government's actions to prevent this.

In Jakarta, absorption in the condominium market was relatively stable. In Q4 2008 around 1,900 units were transacted and a total of 9,600 units were transacted throughout 2008.

The strong take up was contributed mainly from newly launched projects with prices between Rp 200 - Rp 500 million per unit, within CBD locations, with good access to major public transportation, and investment motivated buyers.

The high mortgage rate and tighter competition created negative sales in some projects located in the West, CBD and South Jakarta.

A slight decline in the rental apartment occupancy rate to 69.7 percent was also recorded in the previous quarter.

Service apartments is the only sub sector that actually reached higher occupancy levels compared to the same quarter in 2007.

The Jakarta office market showed strong performance to date with stable office occupancy rates recorded at 86.4 percent last quarter.

High annual demand during 2008 was contributed by the absorption of major tenants in newly completed buildings.

Retail development is expected to slow and careful planning considerations will be critical to success in this sector.

Industrial market investors have adopted a wait and see stance however, some foreign investors and local investor are still active in seeking small industrial land and standard factory buildings (SFBs).

The condominium market performance is predicted to slow in 2009.

Property developers and buyers will carefully consider their investment decisions due to high interest rates and tighter loan approvals.

The sales rate of existing condominiums will remain stable at around 95 percent, and average pre-sales rate of proposed new supply has reached almost 70 percent.

Developers will start to offer flexible payment terms, such as longer installment/balloon payment terms, resizing their units, and offering special packages such as rental guarantees.

It is believed that a more flexible foreign property ownership regulation will be a good stimulator to push the condominium market.

Office future supply by end of 2010 will dominate the Kuningan and Thamrin areas and South Jakarta.

Occupancy levels in 2009 and 2010 are predicted to hover at 84.0 percent - 86.0 percent, due to the high new supply to be completed with lower current pre-commitment level achieved.

Office leasing activity is expected from relocations for rental efficiency, subleasing activities, space downsizing and surrendering of leased spaces. Further pressure in gross rental will be a challenge for landlords, although the effect of high inflation rates during 2008 has created higher operational costs.

The retail sector will face tighter competition with more pressure on rental and occupancy rates, and nine new projects opening in 2009.

Jabodetabek projected annual net supply for 2009 and 2010 will be 316,000 sm and 132.000 sm, respectively and about 117,000 sm is scheduled for opening in the next quarter.

Occupancy rate of Jakarta retail centers is predicted to remain stable at around 77 percent over the next two years.

Limited new supply in the Debotabek area until 2010 will slightly increase the overall occupancy rate to 75 percent.

Pressure on rental rates is expected to continue due to the lower economic growth projections, lower consumer spending and high competition. Further decreases in fuel prices will help reduce pressure on operational costs.

In the industrial sector, Bekasi is the favored area for industrial estates due to it's accessibility to the harbor. As foreign investors prolong purchasing decisions until signs of recovery in the global economy, the industrial estate market is expected to slow.

The writer is an associate director at Procon Indonesia and can be reached at utami.prastiana@procon.co.id

The government is proposing a subsidy for biofuel in an attempt to promote the use and distribution of this form of renewable energy.

Energy Mineral Resources Minister Purnomo Yusgiantoro submitted this plan in a hearing on Thursday with the House of Representative commission VII, which oversees energy and mineral resources.

Under the plan, the government will give the subsidy to state owned oil and gas company PT Pertamina as the sole distributor of the fuel.

Pertamina will get a subsidy of Rp 1,000 (8.9 US cents) for each liter of biofuel distributed, he said.

Declining crude oil prices in global markets has made the development of biofuel less commercially attractive, given the high costs involved in producing biofuel.

Pertamina for example, has had to dig deep into its own pocket to keep the price artificially low in the local market, with the company having publicly said it was considering scaling back its biofuel production. As such this would definitely put the country’s renewable energy development plan in danger.

Purnomo said that a subsidy was therefore needed as an incentive for Pertamina to keep its biofuel distribution business going.

“The subsidy will be given on condition there will be a higher price for biofuel feedstocks,” he said.

The subsidy is aimed at helping Pertamina cover high production costs for biofuel so that it could still sell its biofuel products at commercially reasonable prices.

Pertamina could for instance sell biosolar, which is a combination of 2.5 percent biodiesel and 97.5 percent conventional diesel, at Rp 4,500 a liter, at the same price as 100 percent diesel.

Similar pricing would apply to bioethanol with Pertamex.

Pertamina had planned to scrap its biofuel business, as its biofuel products had caused the company to suffer Rp 16.9 billion (US$1.8 million) in losses last year due to the high prices of the two raw materials, namely ethanol and crude palm oil.

Under the subsidy proposal, the government is expected to spend an additional Rp 744.4 billion, topping up the previously agreed subsidy allocation of Rp 57.6 trillion already stated in the 2009 state budget.

The subsidy is expected to keep the government’s energy policy on track, which is designed to help gradually reduce the dependency on increasingly imported fossil fuels.

The government targets that by 2025, biofuel consumption must contribute at least 5 percent of the national energy portfolio, from less than 1 percent currently.

Aside from providing a subsidy for Pertamina, the government has required fuel retailers to ensure that biodiesel accounts for at least 1 percent of their national fuel sales.

While for bioethanol, the quota is set at 3 percent.

Thursday’s meeting at the House also approved the amount of fuels to be subsidized this year.

The amount of subsidized fuels will increase to 38.9 million kiloliters this year from a previous estimate of 36 million kiloliters as the lower price of fuels encourages higher consumption.

The new fuel subsidy costs are down 0.13 percent on 2008.

A prospective president nominated by the Indonesian Movement Party (Gerindra), Probowo Sibianto, said the government was believed to be on array in applying the economic system of Indonesia.

The economic system of Indonesia would be deemed to be in the right tract if it was in line with the chapter 33, point one, of the 1945 constitution which described that the economy was formulated on the basis of family principles, Prabowo who is also chairman of the Garindra Party`s Advisory Board said here on Thursday.

"I dare stress that our economic system applied for the past tens years is on array and needs reforming," he said in commenting the today`s economic system of Indonesia.

According to him, if the present economic system was to be maintained, in the next 50 or 100 years the people of Indonesia would remain poor.

He further said that the economic system worked out by the founders of this nation should not be abolished and it had to be applied instead, if all people were desiring to enhance the economy of the people.

"I have a high confidence on it, because I have data and the results of researches conducted by some high learning constitutions in foreign countries," Prabowo said.

However, Prabowo reiterated that he refused the privatization of state enterprises by the government as it had violated the law. The strategic state assets should be maintained and could not be sold.