[Marinir] Trade and Investment News, 15 August 2005

[Yap Hong Gie]

THE COORDINATING MINISTRY FOR ECONOMIC AFFAIRS
REPUBLIC OF INDONESIA

Main Building, Ministry of Finance, Jl. Lapangan Banteng Timur No.2-4 
Jakarta Pusat
Tel: (021) 380-8384    Fax: (021) 344-0394    Website: http://www.ekon.go.id

Trade and Investment News, 15 August 2005


Highlights

Politics:
·         A peace agreement in Aceh to be signed today, with hopes high for 
successful implementation
·         A suspect in the Australian embassy bombing faces a death sentence

Regions:
·         President Yudhoyono met with Papuan leaders, and a new team will 
look at solutions to the region's dissatisfaction

Economy:
·         Bank Indonesia moved key interest rates higher to restrain 
inflation and protect the economy against high oil prices
·         Investment remains strong, with a Chinese group talking of an $8 
billion palm oil project in Kalimantan

Macroeconomy:
·         The central bank raised its benchmark BI rate to 8.75% from 8.5% 
to address inflationary pressure

Investment:
·         Singapore's United Fiber System poised to buy pulp and paper 
company PT Kiani Kertas
·         Motorcycle manufacturer Yamaha and cell phone manufacturer LG 
Electronics to build factories

State concerns:
·         Vice President Jusuf Kalla urges authorities to improve legal 
certainty in the capital market
·         Trade Minister Mari Pangestu says tax and customs reforms will 
make business easier
·         India and Indonesia seek to boost their bilateral trade to $10 
billion by 2010

Private sector:
·         Indonesia's third largest mobile phone company PT Excelcomindo 
Pratama to IPO
·         Natural rubber exports to feel little pain from the end of 
European Union GSP benefits

SOEs:
·         State Enterprises Minister Sugiharto said there are plans to halve 
the number of state-owned companies

Power:
·         State electricity company PT PLN has cut electricity demand by 500 
MW per day through a power conservation campaign

Oil & Gas:
·         The Oil Palm Research Center in Medan to start producing biodiesel 
oil

Mining:
·         A consortium to build coal transport infrastructure projects



POLITICS
Aceh Peace Deal to be Signed
Indonesian ministers and other officials arrived in Finland on Sunday 
(14/8/05), ready for today's signing of an agreement with separatist rebels 
to end decades of bloodshed in tsunami-hit Aceh province.

Justice Minister Hamid Awaluddin, the head of the government delegation at 
talks with the Free Aceh Movement (GAM) in Helsinki, traveled with top 
security minister Widodo Adisucipto, several legislators and acting Aceh 
Governor Azwar Abubakar.

Awaluddin is due to sign the agreement with Malik Mahmud of GAM, at 3.30 PM 
Jakarta time today in the Finnish capital.

Four members of the Indonesian delegation, including Information Minister 
Sofyan Djalil and former Aceh military commander Maj. Gen. Bambang Dharmono, 
were already in the Finnish capital.

The government and GAM capped months of talks with an agreement on July 17 
to end hostilities. The pact contains clauses for an amnesty for rebels, 
their disarmament, a withdrawal of non-local government troops and 
monitoring by foreign observers.

"We are hopeful," Djalil told AFP by telephone when asked if he was 
confident that peace could prevail in Aceh. In comments broadcast on 
Indonesian radio, he told journalists in Helsinki that he had "great" hope.

"I think if we can solve this peacefully it is a very great achievement. It 
is very important to create a peaceful condition as right now we are in the 
reconstruction and rehabilitation process in the aftermath of the tsunami," 
said Djalil, who is Acehnese.

Devastated by the December 26 tsunami, Aceh has been the scene of a 
separatist revolt since 1976 in which nearly 15,000 people have died.

Djalil said both sides were committed to a peaceful end to the conflict. "I 
have no doubt that both sides are very genuine in finding a peaceful 
(solution to the conflict)," he said, adding that he foresaw no obstacles in 
implementing the pact.

Awaluddin shared his colleague's optimism. "We have prepared everything and 
technically there are no problems. We are hopeful everything will proceed 
smoothly," he told reporters in Jakarta.

Parliament has voiced unanimous support for the agreement despite earlier 
criticism by some legislators who worried that GAM would use the lull in 
fighting to build up its forces. But on Wednesday, parliamentary leaders 
came out of a meeting with President Yudhoyono pledging to endorse the 
historic agreement.

"The (parliament) supports the government efforts to end the conflict in 
Aceh in a peaceful, comprehensive and honest way that is within the 
framework of the unitary state of Indonesia and in accordance with the 
constitution," said House Speaker Agung Laksono. "The peace deal will speed 
up the rehabilitation and reconstruction process of Aceh following the 
tsunami."

About 200 unarmed military and civilian officials from the European Union 
and the Association of Southeast Asian Nations will monitor implementation 
of the pact.

The first members of the Aceh Monitoring Mission were expected to arrive in 
Aceh today, hours after the signing ceremony in Helsinki.

Sporadic violence has occurred since the July 17 deal but officials have 
expressed optimism that this time the agreement will lay the foundations for 
a lasting peace.

GAM has dropped its demand for independence in return for greater control 
over the province's rich natural resources which include natural gas, timber 
and coffee.

For its part the government is willing to work to allow local political 
parties in Aceh, currently prohibited. Jakarta has also agreed to release 
all GAM political prisoners over the next fortnight.

Bomber Faces Death Sentence
Indonesian prosecutors on Thursday (11/8/05) demanded the death sentence for 
suspect charged with helping plan the 2004 Australian Embassy bombing in 
Jakarta that killed 11 people.

Iwan Darmawan, also known as Rois, is accused of buying a van and materials 
for explosives used in the attack. The 30-year-old clothing salesman is also 
accused of hiding some of the key suspects.

Authorities say Rois took his orders from Azahari bin Husin, a leader with 
the regional terror group Jemaah Islamiyah whom police believe was the 
mastermind of the attack. He remains at large in Indonesia.

Rois, who attended a militant training camp in the Philippines in the 1990s, 
acknowledged buying the materials, but insisted he did not know they would 
be used for the bombing. He has maintained his innocence.

"We've demanded that the defendant Rois be sentenced to death," said Nendra, 
a state prosecutor.

"The fact is that Rois is guilty of helping plan the attack as well as 
hiding the key suspects," Nendra said. "During the trial, he never expressed 
regret about what he had done. His actions caused the death of innocent 
people and threatened national stability."

Rois appeared to be shocked and on the verge of tears as the sentence 
request was read.

"The allegations against me are untrue and based on something I've never 
done," Rois said.

Two of the six Australian Embassy bombing suspects have already been 
sentenced to 3 1/2 years and 4 1/2 years on charges relating to the 
September 9, 2004 blast.

A fourth suspect, Heri Sigu, is on trial for allegedly helping hide some of 
the key suspects. Prosecutors on Thursday demanded a seven-year jail term 
for Sigu, who has denied involvement in the bombing.

"All the evidence presented in my defense has been useless. The trial has 
been designed to find me guilty," said Sigu.
.
Government Won't Ban Islamic Sect
The Government will not ban the teachings of the Indonesian Ahmadiyah 
Congregation (JAI) nor dissolve the group, but will let the state-sanctioned 
Indonesian Ulemas Council (MUI) decide whether to file such a request with 
the courts, Social Welfare Coordinating Minister Alwi Shihab said on 
Wednesday (10/8/05).

Shihab said the administration continued to acknowledge a government decree 
issued in 1980, which allows Ahmadiyah followers to propagate the teachings, 
but only among themselves.

"The government has decided to let the judiciary have the final say on this 
issue," he said after attending a ceremony at the presidential palace.

Ahmadiyah was established in Pakistan in the 19th century by Mirza Gulam 
Ahmad. Its followers believe that he was a prophet who came after the 
Prophet Muhammad.

Ahmadiyah is little known in Indonesia. It did not take root in the country 
until the 1980s and there are only an estimated 200,000 followers in the 
country.

Truth Commission Seen as Closure
Indonesia and East Timor said Thursday (11/8/05) a truth commission set up 
to probe violence surrounding East Timor's independence vote is one way to 
bring closure to a troublesome chapter in their relations.

The presidents of both nations were on the Indonesian island of Bali on 
Thursday to swear in the 10 members of the Indonesia-East Timor Truth and 
Friendship Commission. Each country provides half of the personnel for the 
body.

"We are expected to prove to all the skeptics that this is a wise decision. 
This is a creative step forward in highlighting the presence of a not so 
pleasant history in a frank and open manner," said East Timor President 
Xanana Gusmao, a former guerilla leader who spent years in a Jakarta prison.

Indonesian counterpart Susilo Bambang Yudhoyono said the commission's 
establishment was "a sign of maturity in the relationship between our 
countries."

"It underscores the resolved intention of Indonesia and East Timor to 
develop a constructive relationship that is forward looking, the way a 
relationship between two neighbors should be," he said during the 
swearing-in ceremony.

In a news conference after the ceremony, Yudhoyono reiterated the commission 
had no intention to seek prosecutions. "Remember, it is not a commission of 
justice but a commission of truth. What we are seeking is the genuine 
truth," he said.

The commission is co-chaired by a former Indonesian Supreme Court judge and 
a former Dili district judge.



REGIONS
New Team to Study Papua Autonomy
Vice President Jusuf Kalla has announced that a small team headed by 
Coordinating Security Minister A.S. Widodo will study the implementation of 
special autonomy for Papua, and determine how to treat the province of Irian 
Barat.

The announcement on 10 August followed a meeting between President Susilo 
Bambang Yudhoyono and 29 prominent Papuan political figures.

In his comments to the group, reported by Kompas, Yudhoyono endorsed 
autonomy for Papua in general terms: "Special Autonomy for the province of 
Papua is the preference of the Papuan people and the Indonesian nation. If 
there are shortcomings in its implementation, the government will 
continually improve them."

National Police Chief Gen. Sutanto said the security situation in Papua is 
'quite favorable', adding that there was no need to send reinforcements to 
the region, according to a report from state news agency Antara.

 'No Third Party': Yudhoyono
President Susilo Bambang Yudhoyono has stressed that the government will not 
hand over the resolution process of Aceh and Papua to any third party and 
the government will solve the problems on its own.

"We will not hand over the solution of Aceh and Papua to the United Nations 
or any third party. Those regions are our sovereign regions," he told 
journalists on Tuesday (9/8/05).

The president stated that after a peaceful solution is achieved, the problem 
of Papua would also be solved with the same principle; that is a solution 
within the framework of the unitary state of the Republic of Indonesia.

"There will be no intervention from any party, but we will solve the problem 
wisely and the problem will be well solved" stressed the President.

Poso Terror Suspects Moved
National Police Headquarters have transferred three terror suspects to the 
Central Sulawesi Police in Palu for questioning. The three -- identified 
only as Hkl, Hnc and Frd -- were arrested in June in Semarang by officers 
from National Police Headquarters, according to Adj. Sr. Comr. Rais Adam, a 
spokesman for the Central Sulawesi Police.

The Jakarta Post reported that a preliminary investigation by the team from 
National Police Headquarters had found the three were responsible for a 
spate of bombings in Palu city and Poso regency. The suspects also are being 
charged in the murder of prosecutor Ferry Silalahi in the city of Palu. He 
had been investigating terrorism cases.

Meanwhile, Agence France Presse reported on Monday (8/8/05) that another 
arrest had been made in South Sulawesi. Ramlan, 26, was wanted over 
suspected links to a series of bombings in both South and Central Sulawesi, 
police said.

He was questioned over the bombing of a cafe-cum-disco in Palopo on January 
10 last year in which four people were killed and three others hurt, said an 
officer.



ECONOMY
Rate Hike Targets Inflation
Bank Indonesia (BI) raised its benchmark BI rate to 8.75% from 8.5% to 
address inflationary pressure driven by rising oil prices, Dow Jones 
reported.

"Inflation expectations remain high in the wake of rising oil prices, which 
could increase (domestic) prices and weaken the rupiah," said a BI statement 
issued late Tuesday (9/8/05).  "The increase in the BI rate is considered to 
be capable of supporting the continuity of economic recovery."

Analysts said the rate increase was linked to the toll taken on foreign 
exchange reserves by recent central bank interventions in the foreign 
currency market to check the steady slide of the rupiah since the beginning 
of the year.

The bank statement said the rate increase also aims to offset the "increased 
risk to macroeconomic stability" of other outside influences, including 
rising US Federal Reserve rates and a weakening of major currencies against 
the US dollar.

BI's emphasis on the potential domestic economic impact of the rising Fed 
rate is a welcome proactive move, said Standard Chartered's Ichsan. "Many 
analysts are upwardly revising forecasts of US interest rates to 4% by the 
end of the year...and think the Fed rate will rise to 4.5% next year," he 
said.

As part of its forward-looking policy, BI might assume that to cut down fuel 
subsidy spending this year -- which could soar to Rp130 trillion from the 
revised forecast of Rp76.5 trillion -- the government might raise heavily 
subsidized fuel prices for transportation and household consumption.

Last month, state oil and gas firm Pertamina hiked fuel prices for industry 
and, starting next month, it will also raise the price of its high-grade 
fuels Pertamax and Pertamax Plus.

BI Sees 2005 CPI Inflation 8%
Consumer price (CPI) inflation would be at 8% this year with a 100 bps 
deviation, the central bank, Bank Indonesia (BI) said in a statement 
received by Reuters.

BI also said it sees consumer price inflation slowing down next year due to 
expected minimal impact of administered prices.

The monetary authority predicted core inflation for this year and next year 
at about 7%, as it sees minimal impact from administered prices, and 
inflation from food components could be kept under control.

"Reviewing the latest developments, the central bank's board of governors 
sees that there are some factors that can disrupt macroeconomic stability," 
the bank also said.

Those factors include higher global oil prices and the possibility of 
weakening global currencies against the dollar, which could affect the 
rupiah.



INVESTMENT
United Fiber Nears Deal with Kiani Kertas
Singaporean company United Fiber System Ltd is poised to take over 
debt-ridden pulp and paper company PT Kiani Kertas, The Wall Street Journal 
reported.

PT Fayola Investment Ltd, a private company controlled by Indonesian 
businessman Prabowo Subianto, is expected to sell its 99.9% stake in Kiani 
Kertas to United Fiber for as much as $200 million, according to executives 
familiar with the proposed arrangement, the paper said.

United Fiber will also assume Kiani Kertas's $500 million debt to local and 
foreign banks as well as Indonesian trade creditors.

Although final pricing of the purchase is still to be settled, the 
executives said Fayola and United Fiber have overcome a major hurdle in the 
negotiations on Kiani Kertas' debts.

"The due diligence into Kiani's operations is very advanced.  We should have 
a deal before the month is out," said a Jakarta-based financial executive 
involved in the negotiations

United Fiber's Chief Executive Officer Kishore Dass said his company has 
signed a contract with Fayola to operate and manage Kiani Kertas's pulp and 
paper plant in East Kalimantan, pending the completion of the acquisition.

United Fiber said it will resume operations at the Kiani Kertas pulp mill by 
the end of the month after securing wood supply from government-owned 
forestry company PT Inhutani II, AFX reported.

It said the supply deal with Inhutani for 1 million metric tons of acacia 
mangium wood was secured based on prevailing rates and will be valid until 
December 2008.

Oil Palm Plantations for Kalimantan
Chinese investors will develop oil palm plantations along the border of 
Kalimantan and Malaysia for $8 billion, Antara reported.

The project will be financed by the China Development Bank, chairman of the 
Infrastructure Development Financing Team Raden Pardede said.

The plantations, to be built along 2,000 km at the western and northern 
parts of Kalimantan, are estimated to produce 10 million tons of oil palm 
fruit a year and provide jobs for at least 500,000 people, he said. 
Construction is expected to start in 2006 or 2007.

He said so far only China has indicated strong interest in infrastructure 
projects offered by the government during the Infrastructure Summit held 
early this year.

Yamaha to Build New Factory
Yamaha Motor Co is planning to build a second motorcycle factory in 
Indonesia to increase production from the present 800,000 units, Bisnis 
Indonesia reported.

The new factory will start operations in January, Yamaha President and 
Representative Director Takashi Kajikawa said.

In 2007, the company aims to sell 1 million Yamaha motorcycles or 70% of its 
total sales target for Southeast Asia, Kajikawa was quoted as saying. He 
said motorcycles sell faster in Indonesia than in Thailand or Vietnam.

LG to Build Cell Phone Factory
Top officials of South Korea's LG Electronics met with Post and 
Telecommunications Director General Yusuf Iskandar recently to discuss plans 
to build a cellular phone factory in Indonesia, reported Antara.

LG Electronics Executive Vice President Bae Jae Hoon said the company is 
serious about building the plant with local partners as Indonesia's cellular 
market is growing fast.

LG Electronics already has a subsidiary in the country, PT LG Electronics 
Indonesia, which produces TV sets, video cassette recorders, refrigerators 
and air conditioners. Hoon did not give others details about the plant and 
the value of the investment involved.

Japanese Electrical Giant to Expand
The Japanese electrical goods giant Best Denki has confirmed it has set 
aside millions of dollars for overseas expansion in Indonesia, Taiwan, 
Malaysia and Singapore, Deutsche Presse-Agentur reported.

The company hopes to expand in all countries where it operates as well as 
move into new markets, said Nobuchika Izawa, director of Best Denki's 
overseas division.

In a breakdown published in Singapore's Business Times, S$7 million ($4.2 
million) will be invested in Singapore; Indonesia and Taiwan are to receive 
S$5 million each; with S$2 million for Malaysia.

A joint venture company, PT Best Denki Indonesia, will start selling the 
products in Jakarta starting next year, Izawa said.

Trade, Tourism, Investment Expo
The second Indonesian trade, tourism and investment expo will be held in 
Beijing from Aug 30 to Sept 3, an Asia Pulse/XIC report said.

The expo, co-sponsored by China's Ministry of Commerce, China Council for 
the Promotion of International Trade (CCPIT), Indonesia's Departments of 
Trade and Indonesia's Chamber of Commerce (KADIN), will be held at the China 
International Exhibition Center.

Indonesian companies from industries such as oil and gas, tourism, 
agriculture, fishery and trade will participate in the expo, seeking to gain 
more investments from China and expand exports.

The expo also aims to provide Chinese companies more information about the 
Indonesian economy, to help build long-term, cooperative links between the 
two countries.

According to the People's Daily, China has become an increasingly important 
buyer of Indonesian products.  In 2004, trade volume between China and 
Indonesia reached $13 billion.




STATE CONCERNS
Boost Capital Market Supervision: Kalla
Improvements in law enforcement and legal certainty in the country's capital 
markets are key to maintaining investors' trust, Vice President Jusuf Kalla 
said, The Jakarta Post reported.

If officials from the Capital Market Supervisory Agency (Bapepam) and 
related authorities such as the Jakarta Stock Exchange (JSX) do not meet 
public expectations, then investors' trust would decline, he said.

"People buy hope when investing their money in the capital market, based on 
trust and values on the equities that they invest in.  If this hope is 
tarnished, then there will no longer be any trust," he said.

Kalla also emphasized the need for public accountants and capital market 
analysts to prevent corruption.

More Open Trade Policy Promised
Indonesia is planning to implement tax and customs reforms that will make it 
easier for foreign investors to do business in the country, Trade Minister 
Mari Pangestu said.

Indonesia is streamlining import procedures and eliminating "excessive" 
local taxes, as well as pursuing trade negotiations with South Korea, 
Australia, New Zealand and Japan, with the end in view of having a more open 
trade regime, the Associated Press quoted Pangestu as saying.

India, Indonesia to Boost Trade
India and Indonesia are looking into ways to boost their bilateral trade to 
$10 billion by 2010, Indonesian Trade Minister Marie Pangestu said.

"We have decided to set up a joint study group to examine the possibility of 
a Comprehensive Economic Partnership Agreement," Pangestu told reporters 
after a meeting with Indian industrialists in New Delhi, reported the Press 
Trust of India (PTI) news agency.

Both countries have to iron out a number of issues, with India campaigning 
for the removal of non-tariff barriers on its exports, including meat and 
other processed food, and Indonesia wanting to increase its palm oil exports 
to India and seeking lower tariffs on processed oil, PTI said.

"We have asked the Indian government to look into the issue of differential 
duty structure on soya oil and processed palm oil besides the conditions on 
sulfur content of coal," Pangestu said.

Indonesian companies could team up with their Indian counterparts in 
textiles, steel, IT and telecoms, pharmaceuticals, health and other 
services, she added.

Firms Re-Exporting Shrimp Warned
The government warned it will punish Indonesian fish exporters found to 
re-export shrimp from six countries which face anti-dumping sanctions from 
the United States, Antara reported.

The government will not issue quality certification to exporters who 
re-export shrimp imported from China, Thailand, Vietnam, India, Brazil and 
Ecuador, Fishery and Maritime Minister Freddy Numberi said.

The US suspects Indonesian suppliers of re-exporting the shrimp from the six 
countries, passing them off as Indonesian commodities, and has threatened to 
take action.  Last month, it sent a team to investigate charges against a 
number of Indonesian exporters. Numberi said this could hurt Indonesia's 
fishing industry.

Reporting Rules for Drug Imports Tightened
Indonesia's Drug and Food Control Agency (BPOM) has issued a new regulation 
requiring importers to report their import of medicine and basic 
pharmaceutical materials.

The regulation is aimed at preventing or reducing the distribution of fake 
medicine, the agency was quoted as saying by Antara.

Previously, importers were required only to submit such reports to the 
Customs and Excise Directorate General.

Authorities have suspected that importers have been misusing import 
documents to import basic pharmaceutical materials to produce medicine under 
fake brands.

BPOM said the distribution of fake medicine has increased in the past year, 
prompting it to issue the new regulation.



PRIVATE SECTOR
Excelcomindo to Offer 20% Stake in IPO
Indonesia's third largest mobile phone company, PT Excelcomindo Pratama 
(XL), has announced its plan to sell some 20% of its stakes through an 
initial public offering (IPO), Reuters reported.

"XL announced its IPO plan of a maximum 1,427,500,000 of its shares to the 
public which will be listed in the Jakarta Stock Exchange," the company said 
in a statement.  "This represents about 20% of the company's total shares."

The announcement did not indicate the price of each share or the expected 
proceeds from the offering.  However, Malaysian media, quoting unnamed 
sources, said the IPO could raise up to $300 million.

"Proceeds from this IPO will be used for business expansion," said XL 
President Director Christian Manuel de Faria.

The company said it had registered its IPO plan with the Capital Market 
Supervisory Agency (Bapepam).

The Jakarta Stock Exchange had said earlier that the IPO was planned for 
September.

Telekom Malaysia bought a 27.3% stake in Excelcomindo in December and has 
said it plans to gain majority control.

Excelcom had 4.5 million users as of end of June, about 11% to 12% of the 
total cellular phone users in the world's fourth most populous nation.  The 
total number of users is expected to grow by 50% this year to 45 million.

With the IPO, Excelcomindo will become the third telecommunications company 
to have listed shares at the Jakarta bourse, after PT Telkom and PT Indosat.

Vehicle Sales Up 28.3% in July
The number of new vehicles sold in Indonesia in July increased 28.3% 
compared to the same month last year, the local paper Bisnis Indonesia 
reported, quoting data from the Indonesian Motor Vehicle Industry 
Association (Gaikindo).

Some 49,332 cars and trucks were sold last month, compared to 38,840 units 
sold in July 2004.

This brings total vehicle sales in Indonesia to 345,106 from January to 
July, close to the full-year target of 550,000 units.  Toyota topped the 
sales with 15,925 units sold, or 32% of July's total.

Meanwhile Indonesia suffered a deficit of $238.5 million in its trade of 
automotive products with other ASEAN member countries in 2004.

GSP Abolition No Effect on Rubber Exports
The Indonesian Association of Natural Rubber Companies said this year's 
natural rubber exports would not be affected by the European Union's (EU) 
decision to abolish the Generalized System of Preference (GSP) facility for 
that commodity.

Antara reported that the EU had decided to scrap the GSP facility for 40 
Indonesian commodities starting January, as they are considered competitive 
even with normal import duties.

Association chairman Asril Stan Amir predicted this year's target to raise 
exports to Europe by 6% could still be achieved.

The Central Bureau of Statistics (BPS) however said exports of commodities 
whose GSP facility will be abolished, declined in June compared to the 
previous month.

The GSP comes in the form of lower import duties on certain commodities, 
offered by rich nations to developing nations.



SOEs
State Enterprises to be Reduced
State Minister for State Enterprises Sugiarto said there are plans to reduce 
by half the country's 158 state-owned companies in the next four to five 
years.

The 158 companies have total assets of $150 billion, generate $50 billion in 
revenues and earn profits of between $3.5 billion and $4 billion, Bloomberg 
quoted Sugiarto as saying. These companies will be reduced to between 70 and 
85, he said.

"Indonesia is committed to the process of consolidating its state-owned 
enterprises to increase their efficiency and boost their performance," he 
said.

The sale of the state-owned companies would help the government raise as 
much as $150 billion to spend on roads, power plants and other 
infrastructure projects to create more jobs and accelerate economic growth 
in the next five years.

Dirgantara Delivers CN-235 to Malaysian Air Force
Aircraft maker PT Dirgantara Indonesia has delivered one of two 
VIP-configured CN-235 aircraft ordered by the Malaysian Air Force.

Dirgantara's operations and production director Budi Wuraskito presented the 
airplane to Malaysian Air Force Chief Gen Nik Ismail bin Nik Mohamed, 
according to Antara. The airplane, which was ordered in 2002, is worth about 
$34.23 million.

"The second airplane is expected to be delivered this year," Wuraskito said, 
noting that four other countries -- South Korea, the United Arab Emirates, 
Pakistan and Malaysia -- have placed orders and have been using the 
VIP-configured CN-235.




BANKS
PPA Wants to Sell Govt Stake in BII
State asset management company PT Perusahaan Pengelola Aset (PPA) is 
planning to sell the government's remaining 5.53% stake in PT Bank 
Internasional Indonesia (BII) this year, Bisnis Indonesia quoted Chairman 
Mohammad Syahrial as saying.

The plan is awaiting approval from the finance minister, Syahrial said. The 
government still owns a 5.53% stake in BII after PPA sold a 15.25% stake in 
the bank for Rp1.35 trillion in January.

Selling the government stake in BII will help PPA meet its new revenue 
target of Rp5 trillion for this year against the Rp4 trillion previously 
stated in the state budget, he said.

It has so far raised Rp3.98 trillion this year, Rp2.68 trillion of which 
came from the sale of the government's 10.5% share in PT Bank Danamon.  It 
is also planning to sell the government's 5.02% stake in PT Bank Central 
Asia.

Proceeds from PPA's asset sales are earmarked to help cover the state budget 
deficit.
POWER
Daily Power Demand Down
State electricity company PT PLN has managed to reduce electricity demand by 
some 500 MW per day through its recent power conservation campaign, but is 
aiming for a bigger reduction as a result of planned raises in electricity 
charges next month, disclosed The Jakarta Post.

"This (campaign) has so far saved us Rp2.5 billion ($255,000) per day," PLN 
President Eddie Widiono said.  "Our target is to push down the daily power 
demand by 1,000 MW."

Widiono stressed that the company has no intention to hurt the country's 
business and industrial sector through its plan, saying it will offer 
incentives to industries which shift their power use to off-peak hours.

"The recent fuel price hike for industrial purposes has also presented us 
with challenges," he said, referring to higher power generation costs. 
"That is why we are consulting the industry to seek their understanding in 
the matter."

PLN said it has noticed a surge in peak-hour demand after the government 
hiked fuel prices in March, an indication that many companies have switched 
to using power generated by the state firm instead of generating their own 
electricity.

The government has effectively hiked fuel prices again this month, by 
allowing state oil and gas firm PT Pertamina to sell fuel oil and diesel to 
industry at market prices.



OIL AND GAS
Commercial Production of Biodiesel
The Oil Palm Research Center in Medan, North Sumatra will start producing 20 
tons of biodiesel oil per day.

The center can produce only 3,000 liters of biodiesel oil processed from 
palm oil per day, head of the Agriculture Department's Research and 
Development Center Achmad Suryana was quoted as saying by Antara.

Suryana said palm biodiesel oil could serve as an alternative to 
petroleum-based diesel oil.

The idea of developing palm biodiesel oil came after the country was 
recently hit by an energy crisis brought about by soaring global oil prices.

Rise in Premium Oil Prices
State oil and gas company Pertamina is planning to increase the prices of 
its environment-friendly fuel oils Pertamax and Pertamax Plus early 
September, a company official said.

"We are considering an increase in the fuel prices.  The decision will be 
made public next month," oil division head Ahmad Faisal was quoted as saying 
by Antara.




MINING
Coal Transport Infrastructure Projects
A consortium consisting of Citic, China Coal, Indonesia's Sinar Mas Group 
and PT Trimitra Adiyasa, is planning to build coal transport infrastructure 
projects in Indonesia, Antara reported.

The projects, estimated to cost $490 million, will include 85 canals and a 
60-km railway linking Tanjung Enim and Sungai Gasing in South Sumatra, an 
executive of the Sinar Mas Group Gandi Sulistiyanto said.

The project was signed in Beijing during President Susilo Bambang Yudhoyono's 
recent visit to China, he said.

After the completion of the projects, China will buy 20 million tons of coal 
under a 15-year contract with PT Bukit Asam, which has a large coal mining 
concession in South Sumatra, Ismet Harmaini, president of the state-owned 
coal mining company said.


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