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.

State-run mining company PT Aneka Tambang (Antam) is intensifying efforts to jack up its gold output by securing more gold mines.

As a slump in global nickel prices has cost the publicly listed mining company dearly, it is seeking to gain control of Martabe gold mine in North Sumatra from its partner Australian-based Oxiana Limited.

Antam president director Alwin Syah Loebis said on Thursday Antam was seeking more than a 50 percent stake in the project, which has a resource base of 6 million ounces of gold and 60 million ounces of silver in a 2,563 square-kilometer area.

Martabe is owned by PT Agincourt Resources, in which Oxiana holds a majority interest.

“Under earlier arrangements, we have secured a 10 percent stake in the project, however we want to increase it,” Alwin said.

Under a memorandum of understanding signed in April last year, Antam had purchased a 10 percent stake in the Martabe project for US$66.5 million, and had an option to acquire a further 10 percent for another US$66.5 million.

The new price, however, is subject to an adjustment based on fluctuations in the gold and silver prices.

“We want to take a majority in the project should the price be attractive and suitable with our budget,” Alwin said, refusing to give figures.

He said Antam had logged the offer to Oxiana, but had no reply yet.

With the acquisition, Antam is expected to be able to reduce its dependency on the nickel business, which accounted for 73 percent of revenue during the first nine months of last year, while the remaining 23 percent was contributed by gold and 4 percent by bauxite and iron ore.

Antam’s revenue slumped by 8 percent to Rp 7.57 trillion ($670 million) in the first nine months of last year as against Rp 8.27 trillion in the same period of 2007 due to the plunge in nickel prices affected by the global economic slowdown.

The company signed on Thursday a memorandum of understanding with the Central Kalimantan administration to develop untapped mineral resources in the province, including high-grade coal, iron ore and bauxite.

Alwin said Antam had budgeted Rp 140 billion this year for exploration, and Rp 3.04 trillion for capital expenditure, up by 301 percent from Rp 758 billion in 2008.

The company expects to produce 12,000 tons of ferronickel this year, down from 17,000 tons in 2008 on declining demand and prices.

Due to difficulties in securing mining concessions, Antam only forecast bauxite and gold output to reach 1 million tons and 2.9 million tons, respectively. The figure is similar to last year’s.

Regional development banks (BPD) are to boost their contributions to stimulating the economy in the regions, to provide alternative liquidity sources amidst the global financial crisis.

“BPDs have so far been acting as a cashier to regional government. With huge regional government funds placed in BPDs, the banks should have moved more actively to support regional development,” Finance Ministry director general of financial balance Mardiasmo said in a seminar Thursday.

He said BPDs should allocate more funds to the real sector, such as infrastructure building and also micro-lending, generating growth, instead of simply placing their funds in the financial sector.

As of December 2008, BPD funds placed in central bank certificates (SBI) reached Rp 24 trillion (US$2.11 billion), and in bonds were Rp 9.3 trillion.

Last year, the ministry transferred Rp 290 trillion, or 33 percent of the state budget, to regional governments, with 94.8 percent of these funds going through BPDs.

This year, the figure has been raised to Rp 320 trillion.

Such a huge amount can be used to spur growth in the regions while many commercial banks are facing a liquidity squeeze.ank Indonesia (BI) deputy governor Siti Ch. Fadjriah said that if BPDs and regional governments could harmonize their objectives then regional economies would grow even faster.

To support BPDs, Mardiasmo said, regional governments, as the banks’ stakeholders, should inject capital and provide financing to the BPDs.

Pay TV operators are confident they can increase their subscribers by between 65 to 70 percent this year to push total users to over 1 million, regardless of the global financial crisis, an industry player say.

The optimism comes from the fact that only about 7 percent of the potential market has been penetrated, according to pay TV subscriber operator Indovision corporate secretary Arya Mahendra Sinulingga.

“The potential market for the industry is around 10 million users, while only 700,000 of them have subscribed to pay TV. It shows that there is still a lot of market share to fight for,” Arya said.

With the prospect of increasing the number of subscribers by 65 percent, there would be at least 1.1 million subscribers that could be registered by the end of 2009.

With an average fees of Rp 140,000 (US$14) per subscribers per month, the total revenue projected is around Rp 1.87 trillion.

However, the projected number of official subscribers is still smaller than those subscribing to “illegal operators.”

According to Arya, illegal operators usually subscribe to one of the pay TV industry official operator services and then re-distribute the broadcast content for cheaper fees using illegal connection wires and analog signals.

“Based on our investigations, there are around one million subscribers to illegal operators,
and they are clearly visible with their cable connections on their roof-tops,”

“There are government regulations for these violations, but in practice, the authorities have yet to make enough efforts to punish the illegal operators,” he added.

Sinulinga said that another challenge the industry would face during the coming year would be the unclear anti-monopoly broadcasting regulations.

The industry saw similar growth in subscribers from 2007 to 2008, growing from 450,000 subscribers to 700,000 in one year.

This growth was the largest in the Asian pay TV industry scene, according to the Cable and Satellite Broadcasting Association of Asia (CASBAA).

Six major companies — Indovision, First Media, IM2, Aura, Telkom Vision and Oke Vision — are participating in the country’s pay TV industry, with Indovision having the largest market share of around 480,000 subscribers (68 percent).

Publicly listed Bank Negara Indonesia (BNI), the nation’s third biggest banks by assets, plans to issue bonds worth between US$200 million and US$300 million in a bid to boost liquidity and lending.

“The exact pricing and timing of issuance of the sub debts will be determined by the condition of the market,” Bien Subiantoro, director of treasury of the bank, said on Thursday.

“We might even issue the bonds this first semester, if the market is good,” he added.

He said the state bank wanted to issue the sub debts overseas, and this was feasible because of the high spread on interest rates.

“For a period of five years, the LIBOR interest rate spread is very high,” he said.

LIBOR is a daily rate based on the interest rates used in the borrowing of unsecured funds from banks in the London wholesale money market.

Plus 600 to 700 basis points added on to LIBOR, would make an interest rate of around 8 to 9 percent, according to Bien.

“We may issue the sub debts (overseas) if the interest rate is below 5 percent,” he added.

In addition to the bond issue, BNI is also looking at the possibility of securing bilateral loans to increase its liquidity.

“We are negotiating with more than five foreign banks to discuss the possibility,” he said, without naming the banks or amount of loans.

With liquidity getting tighter, following the global trend, banks here are forced to be more selec-
tive in making new loans, while existing loans are under increased threat of turning bad. Many firms may have to struggle to pay up on their loans as weakening demand cuts earnings.

The central bank has forecast the banking sector will book around 18 to 20 percent growth in lending this year, far slower growth than the 30 percent booked last year.

BNI president director Gatot M. Suwondo has said that lending this year would likely grow by around 17 percent, down from an estimated 28 percent last year, on the country’s slower economic growth.

Indonesia’s economy may grow this year by between 4.5 and 5.5 percent, compared to an estimated 6.2 percent in 2007.

Gatot said also that lenders are likely to use loans equally both for working capital, and to expand trade financing .

The bank recorded Rp 110 trillion in outstanding credits by the end of last year. Last year, the US fourth largest bank, Wachovia Bank, agreed to provide a US$100 million loan to BNI.

The Indonesian government has proposed a stimulus package amounting to 71.3 trillion rupiah (6.27 billion US dollars) as a buffer against the global economic slump, a minister said Wednesday.

Finance Minister Sri Mulyani Indrawati, who proposed the package to parliament Tuesday, said the plan offered a mix of government spending, tax breaks and incentives to boost economic output and create jobs.

"The stimulus is all about reducing fees that have been imposed, easing the burden of doing business and providing additional budget expenditure," Indrawati was quoted by AFP as saying.

The parliament has yet to approve the stimulus package.

Indonesia's government has pared back its 2009 growth forecasts to between 4.5 and 5.5 percent from an earlier 6.2 percent due to declining commodity exports and lower foreign investment.

The government also raised its projected budget deficit to 2.5 percent of gross domestic product from an earlier one percent, with declining revenue leaving a bigger hole in state coffers.

Businesses have warned the government against giving firms in labor-intensive sectors a waive in employees’ taxes they normally bear, with details of the plan still sketchy.

The government has laid out an economic stimulus package of Rp 71.3 trillion (US$6.3 billion) which includes an allocation of Rp 6.5 trillion to be used to compensate for employees’ income taxes usually paid by businesses, in an attempt to cut costs and allow companies to avoid layoffs.

The tax office and Finance Minister Sri Mulyani Indrawati have said calculations are still being made to determine eligible business sectors, but have hinted it will be intended for labor-intensive sectors and other sectors hit the hardest by the global economic downturn.

However, the Indonesian Chamber of Commerce and Industry (Kadin) says such a stimulus for labor-intensive industries will not reach its target, because companies in those sectors generally employ low-wage workers whose salaries are below the taxable income threshold (PTKP).

“It will be wasted; most workers in labor-intensive industries receive a salary below the PTKP, so they're not even taxed,” Kadin vice chairman Chris Kanter said Wednesday.

In Indonesia, unlike many other countries, most companies subsidize the income tax liabilities of their workers, thus giving businesses more of a burden.

In those job-intensive sectors however, most workers in general are paid around Rp 1 million per month, just above the regional minimum salaries where they work. The taxable income threshold is Rp 1.32 million per month, according to the income tax law enacted late last year.

Chris added that if the government continued with its plan to pay employees' income taxes, it might instead end up paying the income taxes of managerial-level employees “who are not supposed to receive such an incentive”.

“It would be better if the government allocated that money to paying the electricity bills for poor households, for instance. That can raise people’s purchasing power; they can spend their money buying more goods,” he said.

Indonesia's economy is driven mainly by private consumption.

This year, the economy is predicted to expand between 4.5 percent and 5.5 percent, down from an estimated 6.2 percent last year.

The government says it will boost spending this year to compensate for the decline in private consumption.

However, economists point out that government spending has slowed over recent years and cannot help jump-start the economy.

Legislator Dradjad H. Wibowo said the government’s tax cut was questionable if it was aimed at managerial-level employees.

“The stimulus allocation should have a strong basis,” he said.

Mulyani previously said the tax cut could be targeted at job-intensive industries that employed a large number of workers and had a good track record in paying taxes.

However, Anggito Abimanyu, the ministry's head of fiscal policy, said the ministry had not yet mapped out which industries would receive such a tax incentive.

“We have not made a mapping of the industries; we have just allocated the money and will talk with the House of Representatives regarding the industries,” he said.

He added the Finance Ministry would then issue a regulation before the industries could eventually benefit from the tax cut

The rupiah was slightly down against the US dollar in the Jakarta interbank spot market on Thursday afternoon.

The Indonesian currency traded at Rp11,325/11,335 per US dollar, down 15 points from Rp11,305/11,330 per US dollar earlier.

The rupiah`s depreciation was quite small thanks to Bank Indonesia (BI)`s intervention in the domestic money market, Rully Nova, a foreign exchange analyst of PT Bank Himpunan Saudara, said here on Thursday.

The country`s central bank also closely monitored trading activities of foreign currencies especially in foreign banks, he said.

Nova said that market`s activities in the afternoon were not much different from those in the morning because market players still focused their attention on the government`s planned stimulus package amounting to Rp71.5 trillion to boost the national economic growth.

The government planned to increase the funds of the economic stimulus package from Rp10.2 trillion to Rp71.5 trillion to push the real sector and deal with the impacts of the current global economic crisis, he said.

The economic stimulus package was expected to help boost the people`s purchasing power and reduce the number of worker lay-offs.

However, market players were not too optimistic about the stimulus package because the global crisis got worse and the Indonesian exports in January 2009 dropped significantly, he said.

BI intervened the domestic money market to prevent the local currency from slumping down further, he said.

The market seemed to be fluctuating, but BI`s intervention by releasing the foreign exchange reserves in the market was expected to improve the market`s activities, he said.

The rupiah tended to be under pressure because the supply of the US dollars in the market decreased, after foreign investors took the greenback to their home countries, he said.

Foreign investors preferred to take the US dollars to the United States, for instance, because the US needed fresh funds to help boost its economic growth and curb the global financial crisis, which was getting worse, he said.

Bank Indonesia (BI) has reminded that the global crisis is not over yet and any time the impacts could hit the economy of any country, including Indonesia. BI Governor Boediono made the statement when speaking in a workshop on "The Empowerment of Regional Development Banks (BPD) in order to Accelerate the Regional Development" here on Thursday.

"It`s like being hit by a series of earthquakes, one earthquake is not over yet, another follows. The quake`s epicenter is located in the United States, and its impacts affect all over the world," Boediono said in the meeting organized by the Association of Regional Development Banks (Asbanda) and the Association of Provincial Administrations throughout Indonesia.

The most important agenda in 2009 after the General Elections, is how to take the Indonesian economy pass the difficult time amidst the impacts of the current global economic crisis, said the governor of the country`s central bank.

He said that the national economic condition at present was relatively better than that of other countries, or 11-12 years ago.

"However, like an earthquake which is difficult to predict, the global crisis which probably affects the national economy, is also hard to predict. What we could do is to safeguard our home so that it could be quake-proof," he said.

He reminded that efforts to curb the impacts of the global economic crisis could not be done by only one or two institutions.

"Every time there is a financial crisis, BI is always in the front, but BI could not deal with it alone, and therefore cooperation among institutions needs to be intensified," he said.

The BI governor said that efforts to curb and anticipate the impacts of the crisis needed abnormal or unconventional measures to deal with the emergency condition.

"Those abnormal steps need a strong legal basis, and in advanced countries, too, there is a legal basis for decision making in emergency condition," Boediono said.

Riau Airlines (RAL), owned by the Raiu provincial government will introduce Friday two Avro RJ100 aircraft to serve the Pekanbaru-Jakarta route, a Riau provincial officer said Thursday.

"RAL will debut tomorrow," Riau provincial spokesman, Zulkarnain, said, as quoted by the Antara news agency.

Zulkarnain added that Riau province governor Rusli Zainal would officiate the debut of the Pekanbaru-Jakarta-Pekanbaru route.

He added that the British-made 100-seater planes would fly twice daily from Pekanbaru's Sultan Syarif Kasim Airport to Tangerang's Soekarno-Hatta International Airport.

By the end of the week the government will announce the names of people being considered as candidates for the replacement of Ari Sumarno as president director of state oil producer and distributor PT Pertamina.

State Minister for State Enterprises Sofyan Djalil told reporters in Jakarta on Thursday that Pertamina's board of commissioners had proposed five candidates that the ministry would assess before holding elections at the next, as yet to be scheduled, shareholder meeting.

"We are currently trying to find the appropriate timing to conduct the assessment. Hopefully we will be ready to announce the names by the end of this week," Sofyan said.

Sofyan said the decision to replace Ari had more to do with the necessity of passing leadership to the younger executives than with Pertamina's recent performance.

"We asked the commissioners to come up with names from within the company. They will know who to choose," he said.

After more than 10 years of dispute over the recovery of central bank bailout funds, several recalcitrant debtors have agreed to cooperate.

As a result of progress after enquiries last year by the House of Representatives into the settlement of squandered Bank Indonesia liquidity support (BLBI) funds worth Rp 702 trillion (US$ 62.1 billion) of taxpayers money, the Finance Ministry disclosed Wednesday that eight debtors have agreed to relinquish more assets to settle the dispute.

After a hearing with the House's BLBI supervisory team, Finance Minister Sri Mulyani Indrawati said eight debtors supervized by the ministry have signed a deal to settle their debts once and for all.

"They have inked the debt settlement deal. We are now valuing their assets. If the value is still lacking, they have to top up to cover the shortfall," she said.

According to the Supreme Audit Agency (BPK), the eight debtors under the ministry's settlement deal, owe the state a total of Rp 2.3 trillion.

However, the figure can reach higher than that, if the BPK include interests and fees which should be paid by the debtors, say lawmakers.

Bank Indonesia provided the liquidity support funds BLBI to help ailing banks during the Asian monetary crisis in 1997 and 1998.

Only a small part of Rp 702 trillion lost was recovered after the crisis.

Dradjad H. Wibowo, a member of the BLBI's supervisory team, said debtors had agreed to settle debts with assets, which would then be sold by the government.

"We expect the money (from the asset sale) could be included in the 2009 state budget. The assets should be sold this year considering the case started 10 years ago," he said.

An investigatory motion by the lawmakers was launched early last year with the aim of pushing the government to set legal and political parameters for the conglomerates accused of stealing BLBI funds and concerning the amount of money that could be returned to the state.

Deputy House budgeting committee chairman Hari Azhar said the queries showed political commitment by lawmakers to end the case.

Chairman of the BLBI's super-visory team Aulia Rahman said lawmakers would hold a meeting with the ministry on Feb. 4 to oversee the progress in recovering the BLBI funds, with the Attorney General's Office and National Police on Feb. 11 and Feb. 18, to seek progress in the parallel prosecution of these cases.

The Attorney General's Office (AGO) and the National Police are each handling eight debtors.

Golkar and the Indonesian Democratic Party of Struggle (PDI-P), the two largest House factions, had previously opposed questioning the government as this might disclose alleged fund flows to both parties.

Several figures from the two parties are believed to have been involved in the disbursement of BLBI funds to eight private banks during the economic crisis. The PDI-P was also blamed for halting investigations into certain BLBI debtors under the so-called Master of Settlement Agreement during the administration of President Megawati Soekarnoputri.

Eight BLBI debtors under Finance Ministry supervision

1.James Januardy (Bank Namura)
2.Adisaputra Januardy (Bank Namura)
3.Atang Latief (Bank Bira)
4.Lidya Mochtar (Bank Tamara)
5.Omar Putihrai (Bank Tamara)
6.gMarimutu Sinivasan (Bank Putera Multikarsa)
7.Agus Anwar (Bank Pelita/Istismarat)
8.Ulung Bursa (Bank Lautan Berlian)

Producers of crude palm oil (CPO) expect prices to reach as high as US$600 per ton this year, betting on higher domestic sales which would help avoid oversupply in global markets, thus stabilizing the prices.

The Indonesian Palm Oil Association (GAPKI) said Tuesday the current prices of around $550 per ton was already far better than in the slump in late last year, which saw CPO prices go as low as $400.

"Our target is to maintain the CPO average price between US$500 and US$600 per ton this year. Last week, the price averaged US$550 per ton," GAPKI executive chairman Derom Bangun, who is also a member of the Palm Oil Research Center (PPKS) Advisory Board, said.

"Market conditions might not be as good as they were during the boom in the first half of 2008, but they are better than the conditions when the price slumped dramatically in the second semester of last year," he added.

Bangun said producers planned to increase domestic sales, in line with a predicted rise in production for 2009.

"Our production target for 2009 is 20 million tons, of which around 4 to 5.5 million tons are targeted for domestic sales. However, if the government can promote the use of biodiesel more vigorously, domestic sales can be increased up to between 5 and 6.5 million tons," Bangun said.

"With more domestic consumption, we can reduce the pressure on the international market which in turn will help to stabilize the commodity's average price."

Last year, Indonesia produced some 18.5 millions tons of CPO, around 14.5 million of which were exported.

Indonesia exports CPO to over 100 countries, including 15 countries in western Europe such as the Netherlands and Germany.

CPO producers are now exploring to improve sales penetration in eastern European countries.

"Slovakia, for example, does not have an oil refinery plant, and we can cooperate with them to supply crude palm oil to their neigboring countries," Bangun said.

However, sales in western Europe might face a new obstacle as the EU will require CPO to be "certified and sustainable" as of 2010.

To have the certification, CPO should pass an environment-friendly test to prove whether or not it can reduce the greenhouse gas effect, also known as greenhouse effect, by as much as 35 percent. So far, only one out of about 300 listed producers in Indonesia has passed the test.

Further details and development on the industry will be discussed in the International Conference and Exhibition on Palm Oil on May 27.-29 in Jakarta.

The event will feature international speakers and host over 1,000 participants and provide 150 booths for multinational companies. Delegates from Britain, Malaysia, China, India, Nigeria, Vietnam, Thailand, Singapore and Germany have confirmed their participation.

The Indonesian government may challenge a World Trade Organization (WTO) decision allowing the Australian government to impose anti dumping duties on imported tissue paper products

Trade Ministry director general for international trade cooperation, Gusmardi Bustami, said recently the government would first analyze all the necessary legal aspects before making such a decision.

"We have to learn the case thoroughly... to support our arguments so we can file a complaint with the WTO," he told The Jakarta Post.

Anti-dumping duties are measures to counter dumping by imposing additional import tariffs, while dumping happens when a manufacturer exports his products to another country at prices below those charged in his home market or even below his production costs.

The Australian Customs Service has imposed additional anti dumping duties of 8 percent and 40 percent above the existing five percent tariff on tissue paper products after it found in December that China was dumping those products on the Australian market, www.proprint.com.au reported on Jan. 14.

Following this, Australian paper distributor Paper Force, along with suppliers PT Pindo Deli and Gold Hong Ye, may appeal against the Custom's findings on the grounds of WTO anti dumping rules.

Pindo Deli and Gold Hong Ye - two pulp mills which are managed by Asia Pulp & Paper (APP) in Indonesia and China respectively - are among tissue paper suppliers that are accused by Customs of practicing dumping, in addition to PT Lontar Papyrus and PT Univenus.

Pindo Deli, Lontar Papyrus and Univenus are subsidiaries of Indonesia's vastly diversified business empire Sinar Mas Group.

Sinar Mas Group executive director Gandhi Sulistianto confirmed their appeal plan to the Post.

Products in question are primarily for the Select brand of tissue products, for which the Australian paper distributor won the tender in August 2006, with the supply contract expiring in August 2008.

Paper Force spokesman Steve Nicholson said the Australian Customs carried out a flawed process when they decided upon the additional anti dumping duties.

The government's first retail sukuk will carry a yield of 12 percent, higher than the average return of comparable government bonds.

Finance Ministry's director general of debt management Rahmat Waluyanto said Wednesday the 12 percent coupon had taken into account "the condition of the domestic financial market, and the cost that could be borne by the government in managing its debts".

"The coupon is also comparable to the yield of three-year government bonds," he said.

Rahmat made such a comparison because the government's first retail sukuk, coded SR-001, will have a three-year maturity.

The retail sukuk is aimed at individual investors, with a minimum purchase of Rp 5 million and its multipliers. There is no purchase limit.

Director of sharia financing Dahlan Siamat said the Finance Ministry did not set any certain target for the issuance of the retail sukuk.

"We do not set any limit (for the retail sukuk issuance), unlike the government's retail bonds," he said.

However, he added, the government could issue retail sukuk only up to Rp 13.6 trillion, based on the amount of the government's available underlying assets.

"It is the maximum amount, although we will not issue that much as we still want to issue global sukuk sometime this year," Dahlan said.

The ministry plans to issue global sukuk later on this year, taking into account market conditions.

Investors are now choosing safer financial instruments after the earlier collapse of the financial market.

"Amid the crisis, we have to carefully issue bonds so that it will not crowd the market out. We need to make the market confident in our bonds," Rahmat said.

He said the Finance Ministry decided to accelerate the issuance of retail sukuk as individual investors were in better position than institutional investors now.

"The crisis creates tight liquidity, which makes demand for bonds drop and yields rise. That is what happens to institutional investors," he said.

The retail sukuk issuance is expected to help plug the 2009 budget deficit, which may reach Rp 132 trillion, up from Rp 51.3 trillion set for the 2009 budget.

Terms and conditions

1.Date offered Jan. 30 - Feb. 20
2.Allotment date Feb. 23
3.Settlement date Feb. 25
4.Maturity date Feb. 25
5.Nominal value per unit Rp 1m
6.Price per unit 100% (at par)
7.Minimum purchased Rp 5m and multiplier
8.Maximum order -
9.Yield/coupon 12 percent per year
10.Payment period Date 25 every month
11.First coupon payment March 25, 2009
12.Investor target: Indonesian individuals

Source: Finance Ministry

Publicly listed oil and gas services provider PT Apexindo Pratama Duta may soon disappear from the signboards in the Indonesia stock exchange (IDX) as the stock market authority sees the recent acquisition of the company by another publicly listed company, PT Mitra Rajasa, as being involved in a chain listing.

A chain listing happens when the acquired company makes a revenue contribution of more than 50 percent to the purchasing company, so the acquired company has to be delisted from the bourse.

In the Apexindo case, it has contributed 88 percent of Mitra's revenue after the acquisition, leaving Mitra with no option but to delist Apexindo, IDX president director Erry Firmansyah said Wednesday.

"The company's management has come to us and requested suspension to be able to carry out the delisting plan," he said. "We will execute the plan as soon as possible."

Mitra, which was once focused on the transportation business, acquired 98.14 percent of Apexindo for US$ 500 million in November last year, making it the largest integrated oil and gas services company.

The acquisition of Apexindo has contributed significantly to Mitra's net profits which rose by a multiple of 35 times from Rp 1.6 billion (US$142,400) in January-September 2007 to Rp 58.4 billion in the same period last year.

Apexindo announced earlier that it expects to book $55 million in net profits this year, up on the estimated $30-$40 million last year.

Apexindo currently operates eight on-shore rigs, six off-shore rigs and an FPSO (floating production storage and offloading facility)

Crude palm oil (CPO) exports for February 2009 shipments will be subjected to zero percent export taxes because The CPO reference price is still less than US$750 per ton, a senior trade official said.

"Export tax for CPO exports is still set at zero percent, the same as that two months ago because the CPO reference price in the world market is only US$555.98 per ton," Director General for External Trade of the Ministry of Trade Diah Maulida said here on Tuesday.

CPO export reference price is set based on the average price of CPO at the Rotterdam Bourse in the previous two months. The price become a reference in fixing the percentage of the CPO export tax rate.

Although the CPO export tax is still zero percent, the trade ministry set the CPO domestic export reference price (HPE) at US$482 per ton, she said.

Since December 2008, the government had not collected export taxes for CPO exports (export tax zero percent) because the price of CPO in the international market fell to about US$400 per ton.

Diah Maulida said that the HPE of CPO for the January 1 - 31 period was set at US$418 per ton while its reference price was US$490.73 per ton.

The deepening global economic slowdown, lack of skilled workforce, and limited capital are likely to slow growth in Islamic-sharia banking activities.

Primarily due to these factors, the central bank has forecast that the market share for sharia-based banking, in terms of assets, will only reach 3 percent of the country's whole banking industry assets.

Bank Indonesia (BI) deputy governor Siti Fadjrijah said Wednesday, that the initial forecast of 5 percent market share was too optimistic.

"The five percent market share is a moving target, it's impossible during these hard economic times. Thus, we've lowered it the moderate target (of 3 percent)," she said.

In the optimistic scenario, sharia banking assets would grow to 5 percent of the market share reaching about Rp 127 trillion (US$11.23 billion) this year.

In the moderate scenario, it will grow by 3 percent to between Rp 80 and Rp 90 trillion, while in the pessimistic scenario it will grow by only 1 percent to around Rp 60 trillion.

As of November last year, Islamic banking activities accounted to 2.08 percent of the banking industry, with a total asset base of Rp 47 trillion, up by 36 percent from the same period of last year.

"Islamic banking is still new here, with the first bank only established in 1992 and it started booming in 2000," Siti said.

She said that people were still unaware of Islamic banking as an alternative to conventional banking by seeking earnings from methods other than using interest rates.

Sharia-based banking complies with Islamic Sharia law by using returns on assets to pay investors instead of interest.

Growth in Islamic banking by number of customers and disbursed loans were relatively moderate last year, with BI recording 3.79 million customers as of November last year, up from 2.84 million as of 2007.

The numbers of disbursed loans increased to 589,000 in 2008 rising from 512,000 in 2007, according to Fadjrijah without citing any figures on volume.

"Loan disbursement is like a walking tortoise" she said.

The number of Islamic banking outlets is also rather small, still less than 1,452 compared to 6,500 conventional banking outlets.

"Currently, we're focusing on increasing the number of Islamic banks, and there will be no consolidation between the banks," Siti said.

The central bank is optimistic about its bid to promote Islamic banking, but may face several challenges including low public awareness, lack of human resources, limited capital few product innovations.

"People are still unaware of Islamic banking because it has only just started. We need to catch up with conventional banking that has been here a long time," Siti said.

"We also need more human resources, we're short of 25,000 qualified employees if we want to achieve optimistic targets," Siti added.

Siti also said that Islamic banks needed to strengthen their capital base for expanding businesses and to absorb losses, adding that, it also needed to train creative bankers that could produce innovative products.

Although Indonesia, Southeast Asia's largest economy, houses the world's largest Muslim population it is still lagging far behind neighboring countries like Malaysia and Singapore in developing sharia-based banking and capital markets.

The government will launch its first Islamic retail bonds (sukuk) on Friday, testing for the first time also the appetite of individual local investors over the competitiveness of the products.