THE COORDINATING MINISTRY FOR ECONOMIC AFFAIRS REPUBLIC OF INDONESIA

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Trade and Investment News1, 3 March 2008

Highlights

Politics The visit of the US Defense Secretary Support waning for a new UN Security Council resolution on Iran Regions A report says spatial planning changes needed to avert disasters in Java’s cities Former members of the Free Papua Organization demand end to flag use Economy Analysts say inflation likely to have stayed high in February Government to introduce controls on access to subsidized kerosene Business briefs Macroeconomy Central bank imposes tougher controls on foreign loans Bank Indonesia to prevent volatility in currency trade Invesment Major investments entering Indonesia from Middle East Sampoerna family takes major stake in timber producer State concerns Luxury sales tax on electronics goods to be slashed Additional one million workers to go overseas, boosting remittances SOEs PT Telkom says rates to come down on lower interconnections tariffs PT DI will team up with Eurocopter Private sector Profit jumps at PT Astra Internatonal and two subsidiaries jumps Property company PT Bumi Serpong Damai, furniture maker, plan IPOs Banks Bank Internasional Indonesia to be sold by Temasek unit Banks report higher full-year profits Power PT Star Energy planning two more units at Wayang Windu geothermal plant PT Bukit Pembangkit wins loan for coal-mouth plant Oil & gas National oil production moves closer to one million barrels per day Mining Inco doubles 07 profit on high nickel prices PT Indika Inti Energy plans $400 M IPO

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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POLITICS Gates visit to strengthen relations between democracies The visit of US Defense Secretary Robert Gates to Indonesia, India and Australia last week was an unmistakable signal to China that the US is not ceding its military or diplomatic interests in the region, The Associated Press’ defense writer Lolita C. Baldor said.

Back in Washington on Thursday (28/2/08), Gates talked about strengthening and expanding military ties with Indonesia, India and Australia.

He demurred when asked if his effort to bolster relations with these nations should be seen as a hedge against China's expanding influence.

"I don't see our improving military relationships in the region in the context of any other country, including China," he told reporters. "These expanding relationships don't necessary have to be directed against anybody."

Gates, asked what he believed he accomplished in the visits, said his aim was to strengthen and expand military relationships with the democracies that are "friends of the United States and .... are deeply involved on the international scene in a variety of ways."

In talks in Jakarta, Gates said the US wanted to forge closer military ties with Indonesia. Indonesia expressed interest in buying six F-16 jet fighters at $30 million each and Defense Minister Juwono Sudarsono said the US has agreed an assistance package to upgrade four other F-16s already in service.

Gates told an audience from the Indonesian Council on World Affairs that while the US and Indonesian government have been through some rocky times, he knows that the American and Indonesian peoples share the same principles of tolerance, pluralism, and religious freedom.

He also said that regional cooperation would be played out against a backdrop of the rise of India, the growth in China's military might and the ongoing threats from North Korea.

In what appeared to be a response to previous Indonesian criticism that the United States can be overbearing in its foreign and military policies, Gates said the US can play a supportive role as countries like Indonesia map out their own futures.

"In the end, we have always realized that our own democracy's strength ultimately depends on the strength and independence of other democracies around the world, including new ones such as Indonesia," Gates said.

UNSC vote on Iran lacks support Opposition from a number of members of the United Nations Security Council including Indonesia for a new resolution against Iran caused a vote on the issue to be delayed until at least Monday (3/3/08), Al Jazeera reported.

A Western diplomat said that Britain and France, which are co-sponsoring the resolution, delayed the vote on a third round of sanctions to try to get more support.

The two countries are seeking the same unanimous vote that they got for the first two sanctions resolutions, or close to it.  Four non-permanent council members, Indonesia, Libya, South Africa and Vietnam, have raised a variety of concerns.

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Council diplomats involved in the negotiations said on Friday that progress was being made, though it was still uncertain whether any of them would vote "yes."

The vote, which had been expected on Saturday, had now been put off until Monday morning and the resolution will be circulated in its final form early Saturday, the diplomats said, speaking on condition of anonymity because negotiations are still taking place.

The draft resolution would expand travel restrictions and the freezing of assets to more Iranian officials linked to the nuclear effort, and impose a travel ban on some of those most involved in proliferation activity.

For the first time, it would ban trade with Iran in goods that have both civilian and military uses. It would introduce financial monitoring on two banks with suspected links to proliferation activities, and call on all countries "to exercise vigilance" in granting export credits, guarantees or insurance.

It would also authorize inspections of shipments to and from Iran that are suspected of carrying prohibited goods.

Indonesian Foreign Minister Hassan Wirayuda, in an article in Kompas on Saturday, said the issue of the new resolution was very different to that in March last year, which Indonesia supported.

Wirayuda said the International Atomic Energy Agency (IAEA), the competent body to judge Iran’s compliance with international demands, had issued a statement on February 22 stating that Iran was cooperating with its officials and was acting transparently over its nuclear program, which it maintains is peaceful in nature.

Sutiyoso, Wahid say they’ll run Two new figures entered the presidential race last week, although neither of them has yet found a party to nominate them.

Wahid, 67, served as president between 1999 and 2001, a former chairman of the country’s largest religious organization, Nahdlatul Ulama (NU). He was the main driver in the formaton of the National Awakening Party (PKB), and is still the chairman of the party’s advisory board.

The Muslim leader, who is completely blind and has suffered two severe strokes, was refused permission to run in the 2004 presidential elections because of his health problems.

This time, he says, if he is barred from running for the same reason, mass street rallies will occur. "The people know that I am fighting for their best interests, not for the elite," he said.

Former Jakarta governor Sutiyoso, a retired Army lieutenant general, used a badminton championship in Pasuruan, East Java, to push for his nomination on Wednesday (27/2/-08).

He told badminton fans his record as governor in Jakarta, were he had raised teachers’ salaries and renovated school buildings, demonstrated his credentials as a candidate.

Neither Wahid nor Sutiyoso have figured in polls on voters’ intentions, with President Susilo Bambang Yudhoyono still the most popular. Dr. Yudhoyono himself continues to decline to comment on a possible nomination for a second term, saying he will get on with his job and only announce his readiness to stand three months before the vote.

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Screening begins for new parties The government has begun screening documents of 47 new political parties hoping to contest next year's general elections, with another 65 failing to complete requirements before the end of the registration period.

Syamsuddin Manan Sinaga, Director General for Legal Administration at the Ministry for Justice and Human Rights, was quoted as saying by The Jakarta Post on Thursday that it would be another 60 days before the list of parties that had been approved to run could be announced.

Among the new parties being verified are the People's Conscience Party (Hanura) led by Gen. (ret) Wiranto, who lost the 2004 presidential election on the Golkar Party ticket, and the Indonesian Justice and Unity Party (PKPI), chaired by Meutia Hatta, the current state minister for women's empowerment.

The National Democratic Party, led by former administrative reform minister Ryas Rasyid, and the Labor Party, led by Muchtar Pakpahan, also reached the verification stage.

The law requires new parties to have at least 50 members with chapters in at least 60% of the country's 33 provinces, and branches in 50% of the more than 500 regencies.

REGIONSJava needs planning fix: ReportA report issued by the Association of Indonesian Planners (IAPI) said the spatial layouts of 80% of cities in Java are prone to frequent disasters such as floods, landslides and tsunamis.

The report says what many in the government have known for quite some: fix the spatial layouts of Java’s cities or face huge economic losses due to natural disasters.

Recent disastrous floods and landslides that wrecked parts of Java early this year were widely blamed on deforestation, caused by activities that have gone unchecked for years.

Yayat Supriatna, head of study and planning at IAPI said in a report in Tempo magazine that during the 2004-2006 period, at least 102 regencies and towns in Java were hit by floods, 52 suffered landslides and 97 others suffered droughts, most of which can be blamed on poor spatial layout.

“In general, the spatial layout of most Java cities has not been based on the mitigation of natural disasters. Despite these disasters, we have been takings things easy,” he said.

Supriatna said spatial layout must be reviewed with consideration to building layout and green spaces. According to a regulation on spatial layout, cities must have green spaces at least 30% of a city’s total size.

IAPI general chairman Iman Soedradjat said cities in Java need to copy Singapore, a densely populated island with the ability to manage disasters.

The Public Works Department has asked local governments to review and revise their layout plans, with provincial governments given two years and regional and municipalities three years, saying all layout revisions should be made in regards to a new national plan that has been completed and is awaiting presidential approval.

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Public Works Minister Djoko Kirmanto admitted recently that regional layouts at present are being overwhelmed by rapid growth, adding that for disaster-prone areas of Java, the government is preparing special layouts.

Ex-Papua fighters urge OPM flag crackdown An association of former Papuan fighters urged greater government efforts to publicize a regulation that prohibits regions from using secessionist flags, according to a report from The Jakarta Post.

The Former Papua Liberalization Fighters Big Family (KKBPPIB) said most Papuans were unaware of the existence of Government Regulation No. 77/2007, which bans the use of secessionist flags, including the Morning Star flag of the separatist Free Papua Movement (OPM).

"The regulation should be made known to the public at large and the provincial government should get its own flag which is completely different from the OPM flag," KKBPPIB secretary Mesak Womsiwor said Friday (29/2/08) after a meeting between Papuan community figures and the chief of the Cenderawasih Military Command, Maj. Gen. Haryanto Soetanto.

He criticized local administrations for allowing the flying of the secessionist flag during cultural festivals and other events.

"The OPM flag is not a cultural symbol of the province but a symbol of the struggle for Papua's separation from Indonesia," he said.

Soetanto said it was the job of the central and local governments to introduce the regulation to people, adding the military would provide whatever support it could.

Aging population growing: Experts Indonesians are set for a boost in life expectancy, experts say. The number of over-60-year-old citizens is expected to reach more than 70 million by 2050, an increase from 16.6 million currently.

A professor of demography at the University of Indonesia (UI), Sri Moertiningsih Adioetomo, said Wednesday the number of elderly people in the country would continue to grow slowly until 2015 before increasing rapidly through 2050, said a report from The Jakarta Post.

This is mainly due to an increase in life expectancy which reached 65.4 years in 2000 and is predicted to grow to 69.9 in 2015 and 76.9 in 2050, she said, quoting data from a 2006 revision of the World Population Projection 1950-2050 and 2005 data from the National Socio-Economic Survey.

In 2005, 63% of elderly people in Indonesia consisted of those aged between 60 and 69 years old, the group known as the young-old group; 29% between 70 and 79 years old, or the middle-old group; and 8% 80 years and older, or the grand-old group.

"There will be more old women across the age groups with the gap between the two sexes growing wider in the older groups. Women live longer than men," Adioetomo told a seminar titled "Aging, Gender and Health" at the University of Indonesia campus in Depok.

According to the World Population Projection the total number of elderly men would reach 33.1 million nationwide by 2050, while the number of elderly women would reach 40.3 million.

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She said the increasing number of elderly people would have many consequences. "Who will take care of them and ensure their economic welfare?" said Sri.

ECONOMY Analysts forecast Inflation tipped to stay high Inflation was expected to come in at a similar rate to January’s level of 7.4%, according to a range of analysts, with prices only expected to start falling again in March with the major rice harvest.

A survey of analysts by Bloomberg said rising prices of cooking oil, soybeans and other basic foods are likely to prevent Bank Indonesia from further cutting its benchmark rate.

“We expect the policy rate to stay at 8% for the whole year,” said Helmi Arman, an economist with PT Bahana Securities. “The surge in soft commodity prices continues and this will eventually pass through to the food component.”

The government last month trimmed this year's growth forecast to 6.4% from 6.8%.

The trade surplus is expected to have shrunk last month as exports fell amid slower demand from major markets like the United States while rising prices of crude oil and other commodities lifted imports, economists quoted by Thomson Financial said.

Economists polled by the agency said the country's trade surplus probably fell to between $2.52 billion and $3.78 billion in January from $4.06 billion in the previous month.

'The global slowdown would affect demand for Indonesian goods. But with commodity prices still high, the value of Indonesia's exports remain supported,' said Gundy Cahydai, an economist at Ideaglobal Ltd.

A 3.6% rise in the rupiah this year may help reduce costs of imports.

The government also moved to protect the poor against the effect of high prices, but also said it would implement restrictions on access to subsidized kerosene to reduce the impact on the budget.

It cut import taxes for soybeans, wheat and flour as part of a $4 billion package to tackle the problem of rising prices.

The Jakarta administration will distribute 3.6 million liters of subsidized cooking oil to meet public demand over the next six months in a related attempt to cushion the impact on the poor, The Jakarta Post reported.

Cooking oil would be subsidized by Rp2,500 making it substantially cheaper than market prices of between Rp10,800 and Rp11,000 a liter.

The government will go ahead with its plan to limit household use of subsidized kerosene in April, after securing key approval from the lawmakers last week.

Tubagus Haryono, downstream Oil and Gas Regulator BPH Migas chairman, said the government would at first limit the sales of kerosene by setting a consumption quota for 9.5 million low-income households in Java and Bali.

Under the plan, the quota determined for each household is set at 12.15 kiloliters a month.

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The government will monitor the consumption of kerosene in households by using a control card, which will be distributed to every family.

The government is hoping to save Rp1.09 trillion ($119 million) in subsidy spending this year under the program.

BUSINESS BRIEFSMACROECONOMYBI issues new regulation on foreign loans Bank Indonesia has issued a new regulation on foreign loans by non-bank companies to minimize the negative effect caused by the foreign exchange loan, Asia Pulse reported Monday (25/2/08).

The regulation signed by central bank Governor Burganuddin Abdullah says short- and long-term borrowers must adopt risk management including market, credit and liquidity risks.

Long-term borrowers must have a certain rating from a national or international rating agency and are required to submit a full report to the central bank.

Short-term borrowers are required to submit only financial ratio and financial reports.

Foreign loans have positive and negative effects on the balance of payments and monetary stability, therefore, the principle of prudence must be observed, the central bank said.

BI to act to prevent sharp rupiah movesBank Indonesia (BI), will continue monitoring the rupiah exchange rate closely to prevent sharp fluctuations in the currency, deputy governor Budi Mulya told Reuters on Friday.

Most Asian currencies rose on Friday after Federal Reserve Chairman Ben Bernanke signalled further interest rate cuts to avert a US recession.

"BI will continue monitoring the rupiah exchange rate movements closely so that it will not fluctuate sharply because a stable exchange rate is very important for business," Mulya said.

The rupiah has strengthened about 3.6% against the US currency so far this year, after falling around 4% last year. It is now trading just above the psychological 9,000 per dollar level.

The central bank deputy reiterated that a stronger rupiah would help contain prices.

"A stronger rupiah exchange rate will have a positive impact as it will ease pressures from imported inflation."

Rising food price pushed up annual inflation to 7.36% in January, the highest since September 2006, when inflation soared 14.6% from a year ago.

Govt. aims to raise Rp3T from bond sales The finance ministry said on Monday (25/2/08) it aims to raise Rp3 trillion ($328.7 million) from the sale on March 4 of bonds maturing in 2015 and 2018, Reuters reported.

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INVESTMENT Middle East oil money will be invested in Indonesia’Businesses in oil-rich Middle Eastern countries are investing money into Indonesia, according to an Asia Pulse report on Friday (29/2/08).

Investments are targeted at a wide range of industries, from telecommunications and utilities to property development and financial services.

Emirates Telecommunications Corp. (Etisalat), a major telecommunications company, will take a 15.95% stake in PT Excelcomindo Pratama, the country’s third-largest cellular provider as early as this year.

The UAE firm will buy the interest from a local conglomerate for an estimated $438 million. The deal will give Etisalat, which operates in 16 countries, mostly in the Middle East and Africa, an opportunity to branch into Asia.

Emaar Properties PJSC, a major real estate company in the UAE, plans to begin resort development in Lombok in West Nusa Tenggara. A hotel, golf course and other facilities will be built on a 1,200-hectare property with an investment estimated at $600 million.

Gulf Petroleum of Qatar and a Bahraini mining firm plan to jointly build a 300-MW power plant at a cost of $400 million, teaming up with a local company.

In the financial sector, the Qatar Investment Authority, a government-backed fund, late last year reached an agreement with the Indonesian government to form a joint venture capitalized at about $1 billion.

The new venture, to be owned 85% by the Qatari side, will invest in oil and gas development and infrastructure projects.

Sampoerna family acquires 42% of Samko Timber The Sampoerna family has acquired 42.6% of Samko Timber, which has a 32% share of the plywood market in Indonesia, making itself the second largest timber company in the country, Asia Pulse reported Wednesday (27/2/08).

Samko, which has a production capacity of 1.14 million cubic meters of plywood a year, is the fifth largest timber processing company in the world.

Last week Samko raised Rp582 billion from share sales through an initial public offering (IPO) on the Singapore Stock Exchange.

The Sampoerna family through its Sampoerna Forestry Limited acquired the stake from Koh Boon Hong, the newspaper Investor Daily reported, without giving details about the acquisition.

Market supervisor to ease share, bond issues The stock market regulator plans to introduce a "shelf registration" scheme to ease procedural requirements for bond and share issues, The Jakarta Post reported Monday (25/2/08).

The head of the Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK), Fuad Rahmany, said the agency would put into effect the scheme later this year.

The scheme allows firms to issue new shares or bonds over a shorter duration.

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"The scheme will also be useful for companies wanting to do initial public offerings," said Erry Firmansyah, Indonesia Stock Exchange chairman.

Currently, it can take companies up to three months to fulfill all the requirements before they can issue new shares or bonds.

The shelf registration scheme involves the registration of a new bond or share issuance that can be prepared up to two years in advance, so the issue can be offered quickly as soon as funds are needed or market conditions are favorable.

The scheme allows a single registration document to be used multiple times within two years.

It also gives underwriters greater flexibility in timing market issues and involves little or no increase in direct costs.

According to Bapepam-LK, the scheme has been adapted from the US, where the Securities and Exchange Commission -- whose main job is to enforce federal securities laws and to regulate the stock market -- permits the issuance of multiple securities through a single document.

Keppel Land eyes 20% stake in New CenturyLeading Singapore property company Keppel Land Ltd wants to acquire 20% of PT New Century Development at a price of Rp95.39 billion ($10.5 million), Asia Pulse reported Thursday (28/2/08).

Keppel plans to buy the stake from Grand Plus Investment, which owns 60% of New Century, Handoko Gunawan, director of the property company, told the newspaper Investor Daily.

Handoko said Keppel, which is listed on the Singapore Stock Exchange, and New Century are still negotiating the acquisition plan.

Meanwhile New Century plans to launch rights issue in the next two or three months to raise Rp600 billion to strengthen its capital.

STATE CONCERNS Luxury sales tax on electronics to be cut To reduce the price of electronic goods in the country and to help stop rampant smuggling practices, an inter-ministerial team has decided to cut luxury sales taxes on electronics, The Jakarta Post reported Thursday (28/2/08).

"The 20% luxury sales tax imposed on electronic goods will be reduced to 10%, while the 10% tax imposed on the goods will be eliminated," the team's vice chairman, Director General of Taxation Darmin Nasution, said.

But Nasution said not all electronic goods within the 10% tax category would be freed from the tax and that it would depend on the size of the product.

Currently, the government imposes a 20% luxury sales tax on 43-inch LCD televisions and a 10% tax on televisions under 42 inches. It previously eliminated luxury sales tax on televisions between 14 and 21 inches.

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PT Panasonic Gobel Indonesia president director Rachmat Gobel, a vice chairman of the Indonesian Chamber of Commerce and Industry (Kadin), has repeatedly said the government should cut luxury sales tax on electronic goods to compete with black-market products entering the country.

Many people prefer to buy black-market products as they are much cheaper. Nasution said cutting the luxury sales tax would help bolster sales of locally manufactured electronic goods.

Govt. to send 1M workers abroad this year The labor ministry said one million more Indonesians are expected to have jobs abroad this year, earning the country $4 billion in remittances, Asia Pulse reported Tuesday (26/2/08).

The number is 33% higher than last year's target of 750 workers, who sent back $3.63 billion in remittances.

Labor Minister Erman Suparno said the government will improve the quality of workers, dominated by housemaids and construction workers, sent abroad.

What is more important is not the number or the value of remittance but the quality of the workers, Suparno told lawmakers of the House Commission IX in a meeting Monday.

There are around 6 million Indonesian working abroad mainly in Malaysia, the Middle East, Taiwan, Kuwait, Hong Kong, Singapore and South Korea.

Japanese special steel exemption from import duty Japan's special steel products will be exempted from import duty under the economic partnership agreement (EPA) between the two countries, an official said, Asia Pulse reported Tuesday (26/2/08).

Under the EPA, a number of Japanese manufactured products will be exempted from import duty from May, 2008, while Japan is give the same treatment to certain Indonesian export commodities.

Special steel products for automotive and electronic industries are included in the scheme, Metal, Machine, Textile and Multifarious Industries Director General Ansari Bukhari said.

Indonesia imports up to 1.5 million tons of special steel a year with import duties of 7.5-10%.

The steel, used mainly for car engine blocks, bodies and piston and electronic components, is not yet produced in the country, Bukhari said.

Indonesia to seek energy deals with Germany The government is exploring opportunities to establish cooperation with Germany in the energy sector, Foreign Minister Hassan Wirayuda said Wednesday (27/2/08), Xinhua reported.

"We are assessing possibilities of cooperation in electricity supplies or other resources," he said in a press conference in his office after a meeting with his German counterpart Frank-Walter Steinmeier.

Hassan said the German delegation included a group of entrepreneurs who intend to have first-hand knowledge of business climate in the country.

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The bilateral trade volume between Indonesia and Germany totaled $3.54 billion in 2007. Indonesia also received $18.5 million of German investment last year.

Indonesia buys 4,000 tons of US beefThe government has allowed two companies to import 4,000 tons of beef from the United States for April delivery, marking the resumption of US beef import to the country, Xinhua reported Thursday (28/2/08).

Like many other countries, Indonesia previously banned the import for fear of mad cow disease.

"We have issued the import permit to them earlier this month and deliveries are expected to start in April," Fauzi Luthan, a senior official with the Agriculture Ministry, was quoted as saying by Bisnis Indonesia daily.

"Beef imports are needed to meet growing domestic demand because the cattle population in the country remains low," he said.

Indonesia last year imported 64,000 tons of beef, mainly from Australia, up from 54,000 tons a year earlier.

SOEsTelkom ready to cut rates by 20%State telecommunication operator PT Telkom will cut the retail tariff of all of its services by an average of 20% when a government-sanctioned reduced cost-based interconnection tariff takes effect on April 1, a spokesman said.

"Our telephone tariff will be reduced by an average of 20%. It will apply to all our services, including cellular phone (Telkomsel) and fixed wireless (Flexi)," Telkom's enterprises and wholesale services director Arief Yahya told Antara on Friday (29/2/08).

The government on February 4 announced a new cost-based interconnection tariff which implied a reduction of 20-40% in cellular phone tariffs and a cut of 5-20% in fixed-wireless tariffs.

Interconnection is the connection among telecommunication operators or termination from different operators.

DI to team up with Eurocopter State-owned aircraft maker PT Dirgantara Indonesia (DI) said it will team up with European helicopter producer, Eurocopter, to produce helicopters to meet short term targets, Asia Pulse reported.

PT DI signed a memorandum of understanding with Eurocopter on cooperation in the production of components for Super Puma MK II helicopters, joint study of BO-105 expansion and helicopter assembling.

Under the agreement Eurocopter will help in the production of three units of Superpuma and BO-105 helicopters for civil aviation and evacuation.

PT DI said it expects the cooperation with Eurocopter will improve the productivity of its helicopter production line in the long term.

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Company president Budi Santoso said the company is seeking to change its production orientation by teaming up with strategic partners to improve its production capacity.

PRIVATE SECTORAstra 2007 net profit jumps on auto salesPT Astra International, the country's largest automotive distributor and a major plantations operator, reported a better-than-expected 76% rise in its 2007 net profit on Thursday (28/2/08), as declining interest rates lifted car sales, Reuters reported.

Astra, the second-biggest firm by market value on the Indonesia Stock Exchange, said net profit rose to Rp6.5 trillion ($718.4 million) in 2007, up from Rp3.71 trillion in 2006.

The company, 50.1% owned by Singapore's Jardine Cycle & Carriage, said its revenue rose to Rp70.2 trillion last year from Rp55.7 trillion a year earlier.

Auto sales rebounded in 2007 as interest rates declined and consumer spending recovered. Total vehicle sales increased nearly 40%, while motorcycle sales rose around 6%.

Astra Agro '07 profit jumps on palm oil Largest listed plantation firm in the country, PT Astra Agro Lestari, reported a better-than-expected 151% jump in its 2007 net profit on Wednesday (27/2/08), driven by a surge in palm oil prices, Reuters reported.

Astra Agro said full-year net profit was Rp1.97 trillion ($216.9 million), up from Rp787.3 billion in 2006. Sales jumped to Rp5.96 trillion, against Rp3.76 trillion in the previous year.

Analysts had forecast net profit of Rp1.8 trillion on sales of Rp5.84 trillion, according to Reuters Estimates.

Property firm Bumi Serpong plans IPO Property developer PT Bumi Serpong Damai (BSD) said on Monday (25/2/08) it plans to offer 30% of its share capital through an initial public offering in April, Reuters reported.

The company, which plans to offer 4.22 billion new shares between April 23-25 to fund more housing projects, has not set the price of the offering but a source familiar with the deal said the IPO would value the entire company at $1 billion.

That would put the amount of money due to be raised from the IPO at around $300 million.

CLSA Indonesia, Nusadana Capital and Sinarmas Sekuritas have been appointed to handle the offering.

The firm, one of the biggest property developers in Indonesia, has a major integrated residential complex in the town of Serpong, west of the capital Jakarta.

It has a total assets of Rp3.6 trillion ($392.7 million) and booked a net profit of Rp106.6 billion last year.

Mandala grounds B737-200 aircraft Mandala Airlines said that it has grounded all its B373-200 aircraft starting Tuesday (26/2/08) and will replace them with new aircraft as part of a move to modernize its fleet, Thomson Financial reported.

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The airline's chief executive officer, Warwick Brady, said Mandala has decided to accelerate retirement of its B737-200s and will from now operate only the new generation B737-400 and Airbus A320 and A319 aircraft.

Mandala has used the B737-200 for almost 25 years. Retirement of the aircraft took into account the fact that fuel cost for older aircraft is about 30% higher than for modern-generation aircraft.

The decision also considered the issue of reliability on key routes, as well as sourcing problems for parts and additional maintenance costs.

Meanwhile, Xinhua reported that Mandala Air is preparing a budget to acquire 30 brand new Airbus jetliners until 2011 at the cost of Rp1.8 billion.

In April 2006, Cardig International Aviation bought out Mandala for Rp300 billion from Yayasan Dharma Putra Kostrad, a foundation of the Army Strategic Reserve (Kostrad), and PT Dharma Kencana Sakti, a company also related to Kostrad.

In September of that year, US firm Indigo Partners LLC purchased 49% of PT Mandala Airlines from Cardig Aviation. Cardig retained 51% of the airline.

Indosat mobile subscribers jump 47% PT Indosat, the second-largest mobile phone firm in the country, said Monday (25/2/08) it had 24.5 million cellular subscribers at the end of December, up 47% from a year ago, Reuters reported.

The total number of subscribers nationally is expected to hit 120 million this year, up from an estimated 90 million at the end of 2007.

While Indosat reported a strong jump in cellular subscribers, the average revenue per user (ARPU) per month dropped 10-11% to Rp53,000 ($5.78), Indosat's president director Johnny Sjam said.

Asia Mobile Holdings (AMH) owns about 40% of Indosat. Singapore's ST Telemedia, a unit of state investor Temasek Holdings, has a 75% stake in AMH, while Qatar Telecom holds the rest.

BANKS Temasek-linked firm to sell stake in BIIBank Internasional Indonesia (BII), the eighth largest bank in the country, said Monday its majority shareholder, a unit of Singapore's Temasek, is taking the option to sell its interest in the bank.

Fullerton Financial Holdings Pte Ltd. expects to complete the sale before December 2010," BII said.

The decision is in line with the ownership structure adjustment plan submitted by Fullerton to the central bank in December 2007, it said.

"After evaluating both options as stated in the ownership structure adjustment plan, Fullerton Financial Holdings has selected the option to sell its investment in BII," the bank said in a statement.

"The management of BII respects Fullerton's decision. This is, however, a shareholder's issue

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and does not affect the day-to-day operations of the bank. The bank continues to operate on the basis of business-as-usual," BII president Henry Ho said.

Fullerton Financial holds a 75% stake in Sorak Consortium, which in turn owns 56.13% of BII shares. South Korea's Kookmin Bank owns the remaining 25% stake in Sorak.

Temasek also controls Bank Danamon through Fullerton.

Selling BII or merging it with Danamon were options given to Fullerton as means of complying with a Bank Indonesia regulation, the single presence policy, which prohibits ownership of more than one local bank by the end of 2010.

BCA 2007 net profit Rp4.5T The country's second-biggest bank, PT Bank Central Asia (BCA) posted an unaudited net profit of Rp4.5 trillion in 2007, up from the Rp4.24 trillion it reported for 2006, according to figures published on the central bank's website Tuesday (26/2/08), Thomson Financial reported.

BCA is expected to announce its audited results on March 12.

BCA booked unaudited interest income of Rp16.37 trillion rupiah and net interest income of Rp9.7 trillion rupiah last year, according to the Bank Indonesia website.

Bank Lippo 2007 net profit up 46% Midsize PT Bank Lippo said Tuesday (26/2/08) its 2007 net profit rose 46%, aided by loan expansion, Thomson Financial reported.

Bank Lippo booked a consolidated net profit of Rp738 billion in 2007 against Rp507 billion a year before.

"This is the third consecutive year that our loan book has grown in excess of 50%, underlining the strength of the banking model and franchise," said treasury director Gottfried Tampubolon.

Bank Lippo posted net interest income of Rp1.86 trillion in 2007 against Rp1.65 trillion a year before.

Bank Lippo and another Indonesian bank, PT Bank Niaga, are majority owned by the investment arm of the Malaysian government, Khazanah Nasional Bhd.

To comply with a Bank Indonesia ruling that disallows a party to control more than one bank by end 2010, Khazanah has said that it wants to merge the two banks.

Foreign investors eye BTPN stake Nine foreign investors are eyeing a 28.39% stake in Bank Tabungan Pensiunan Nasional (BTPN) to be sold when its launches an initial public offering early in March, Asia Pulse reported.

BTPN president Paulus Wiranata said the foreign investors from the United States, Hong Kong and Singapore showed strong interest in the stake owned by state-owned asset managementcompany PT Perusahaan Pengelola Aset (PPA).

PT PPA is expected to earn Rp763.68 billion ($84 million) from the share sales from March 3 to 5, Wiranata said.

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BTPN, which is now controlled by the Texas Pacific Group, and lead underwriters CIMB-GK Securities Indonesia and BNI Securities offered the stake to foreign investors in a recent road show in Singapore.

POWERStar Energy to expand geothermal plant PT Star Energy will at least invest $440 million to build two new units of geothermal power plant in West Java, Asia Pulse reported Tuesday (26/2/08).

A contract has been signed for the construction of the 3rd and 4th units of the Wayang Windu geothermal power plant in the Pangalengan area of Bandung, the report said.

Under the contract PLN will buy power generated by Star Energy, Star Energy spokesman Sanusi A Satar said.

Currently Star Energy is building the 2nd unit of Wayang Windu geothermal power plant, with capacity of 110 MW, at a cost of $220 million.

Construction of the 2nd unit started in the middle of 2007 and it is to be completed in 2009.

The company currently operates the first plant of the Wayang Windu geothermal power project.

Bukit Pembangkit wins loan for power plant PT Bukit Pembangkit Innovative has received a loan pledged of Rp1.64 trillion ($180 million) from a syndicate of Bank Mandiri and PT Bank Ekspor Indonesia, Asia Pulse reported Tuesday (26/2/08).

The loan fund will be used to build a coal-fired power plant in a coal mine area in the regency of Lahat, South Sumatra.

Bukit Pembangkit is 41% owned by state-owned coal mining company PT Tambang Batubara Bukit Asam, 39% by PT Navigat Innovative Indonesia and 20% by PT Pembangkit Java Bali, a subsidiary of state-owned electricity company PLN.

Eko Budhiwijayanto, Bukit Asam corporate secretary, said construction of the power plant is to be completed in 30 months, therefore it should be operational in 2010.

OIL & GAS Oil Production nears 1M barrels per day Indonesia's production of crude oil and condensate averages 994,720 barrels per day so far this year with crude oil making up 867,876 barrels, Asia Pulse reported Tuesday (26/2/08).

The production is higher than the target of 950,000 barrels set by the upstream oil and gas regulatory agency BP Migas.

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The higher than expected production was attributable to additional output from the B Blok off Natuna operated by ConocoPhilipsKerisi, a BP Migas executive Dodi Hidayat said.

Hidayat said Chevron is expected to remain the largest contributor to the country's total output with production averaging 414,000 barrels per day, followed by state-owned oil and gas company Pertamina 145,000 barrels and CNOOC 42,000 barrels and ConocoPhilips 40,000 barrels.

Pertamina signs $183.5M deal for 5 vessels State-owned oil and gas company Pertamina has signed a $183.5 million agreement with Zhejiang Chenge Shipbuilding Co. for five vessels with a capacity of 30,000 long ton dwt each, a company spokesman said Tuesday (27/2/08), Platts Commodity News reported.

"The vessels are expected to be ready by 2010-2011," Wisnuntoro said.

The five vessels, which cost $36.7 million each, are part of seven new oil tankers worth $212.7 million which Pertamina planned to buy in a bid to stem its leasing expenses.

Pertamina signed a $29.157 million contract with PT Dok & Perkapalan earlier this month for two tankers, each with a capacity of 6,500 long ton dwt. The vessels are expected to be ready by March and September 2011, respectively.

The company had said earlier that it would require $400 million over the next 3-4 years to buy between six and eight tankers.

Finance director Frederick Siahaan said in January that 70% of the investment would be met through loans.

Pertamina currently has 140 vessels, 36 of which it owns while the rest are leased.

PTT in talks on LNG Thai oil and gas conglomerate PTT PCL is in talks to buy liquefied natural gas from state-owned Pertamina and expects to conclude a deal by the end of this year, a PTT executive said Monday (25/2/08), Dow Jones reported.

PTT would annually buy 1 million to 1.5 million tons of LNG for 10 to 20 years starting from 2012, said Chitrapongse Kwangsukstith, chief operating officer of PTT's upstream petroleum and gas division.

PTT is also considering buying LNG from Australia, Malaysia, Africa and the Middle East, he said.

Thailand, a net oil importer, relies heavily on natural gas to fuel its power stations.

MINING Inco doubles 07 profit on high nickel pricesInternational Nickel Indonesia (Inco) said Friday (29/2/08) its 2007 net profit doubled to $1.17 billion from $513.4 million a year before, aided by higher nickel prices, Agence France-Presse reported.

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Sales for the nickel miner rose 74% to $2.33 billion.

"Despite an 11-day strike in November 2007, the company recorded production of nickel-in-matte in 2007 of 76,748 metric tons compared with 71,622 metric tons in the previous year," it said.

"Our annual production of 76,748 metric tons of nickel-in-matte was the highest in PT Inco's production history and above our 2007 target of 74,843 metric tons," said company president Arif Siregar.

Inco plans capital spending of $212 million in 2008, said Siregar, with it aiming to optimize production and minimize costs to benefit from the current strong nickel price, he said.

Inco's major shareholders are CVRD Inco Ltd., with a 60.8% stake, and Sumitomo Metal Mining Co. Ltd., with a 20.1% stake.

Indika Inti Energy firm plans $400M IPOEnergy company PT Indika Inti Energi is planning to raise $400 million by selling between 20-30% of its share capital in an initial public offering, a source familiar with the deal said on Monday (25/2/08), Reuters reported.

The company planned to offer the shares by June at the latest and had appointed Mandiri Sekuritas, Danareksa Sekuritas, Indo Premier Securities, Citibank and Deutsche Securities to handle the IPO, said the source, who declined to be identified.

Indika controls 46% of the country's third-largest coal miner, Kideco, which produce around 20 million tons of coal a year.

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