[Marinir] Indonesia Digest: No: 23.05 ; 30-06-'05

[Yap Hong Gie]

INDONESIA DIGEST

Indonesia's complex Issues in a Nutshell
By: Ms. Wuryastuti Sunario
Published by: TBSC-Strategic Communication
No.: 23.05 - Dated: 30 June 2005
In this issue:

MAIN FEATURE:

FOUR-PRONG ACTION TO AVERT FUEL CRISIS:
PERTAMINA TO RAISE STOCK TO A SAFE 22 DAYS SUPPLY

NEWS AND BACKGROUND:

1.      Tourism and Transportation :
Garuda flies Jakarta-Lombok/Mataram starting July

2.      Science, Culture and the Environment
The President sends SMS: "Stop Narcotics Now"
Mangrove Forest Destruction and Reforestation

3.      The Economy, Trade and Industry:
Government-Exxon Cepu Oil Exploration Deal Signed
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MAIN FEATURE:

FOUR-PRONG ACTION TO AVERT FUEL CRISIS:
PERTAMINA TO RAISE STOCK TO A SAFE 22 DAYS SUPPLY

Late on Thursday, 23 June, after a lengthy meeting, the Cabinet finally
decided on a four-prong action plan to overcome the domestic fuel crisis.
These measures are firstly, Pertamina national stock must be raised to a
safe level, up from the present remaining 17.2 days to a safe 22 days.
Secondly, the Government is to devise an energy saving plan. The President
urged the public to reduce its comforts, said Energy Minister Purnomo
Yusgiantoro, however, economic activities must not be reduced.  Thirdly,
Pertamina and law enforcing agencies are to arrest fuel smugglers and
distributors who dilute the quality of petrol or hoard supply. And last but
not least, Pertamina must improve its productivity.

Immediately, the following day the Finance Ministry confirmed that it has
transferred Rp. 9.3 trillion to Pertamina's account, from the Rp. 19
trillion requested by the company.  With this amount in hand, Pertamina
Senior VP for Marketing, Ari H. Soemarno, explained that the stock level of
18.5 days should be reached before 29 June. Further the level of 20 days
should be reached by the third week of July, whilst the 22-day stock level
by late July or early August.


Meanwhile, the government has also decided to temporarily waive the 10% on
VAT on refueling of avtur aviation fuel for aircrafts departing to
international destinations; the final regulation on VAT on avtur to be
deferred indefinitely awaiting final, legal confirmation through Government
Regulations, that needs still to be vetted by the State Secretariat. While,
VAT on refueling for domestic flights is still being reviewed.

The decision is based on the consideration that VAT on avtur contravenes the
international convention, and so as not to further deteriorate Indonesia's
image in the aviation and tourism sector. Pertamina estimates that potential
loss of income for Pertamina when VAT was imposed, would have been about Rp.
3.8 trillion for the whole year, as airlines would fill up in Singapore or
Kuala Lumpur, where avtur is known to be15% cheaper than in Indonesia.

Whereas, seen from the point of view of state revenue, potential loss to the
government is estimated at Rp. 1 trillion, said Director General of Tax and
Revenue, Hadi Poernomo to a Parliamentary Hearing.

Earlier, Pertamina had threatened to stop refueling aircrafts of airlines
who had until 30 June not paid the necessary VAT on fuel, as required by the
Directorate General of Tax and Revenue.

World Crude Oil hovers at US$60 per barrel

Meanwhile, Kompas daily reports that on Monday, 27 June, the price of crude
oil in the world market has surpassed the US$60/per barrel mark, to reach
US$60.47 a barrel, the highest price ever reached since 1983. This is caused
by the present high demand for crude oil in the world market, especially
from the United States, which can not be met by a commensurate rise in world
oil supply. While, President Yudjoyono estimates that when oil prices remain
above US$ 60/barrel, then oil subsidies in the Budget for 2005 will
overshoot the ceiling of Rp. 100 trillion, which is beyond what the national
Budget can tolerate. Nonetheless, until today, the government has no plan,
momentarily, to raise fuel price at the pumps.

As it is, long queues of cars and motorbikes are still seen in many cities
across the country, as distribution of fuel is still below needs.

On Thursday 30 June, Kompas daily reports that Jakarta's private car
population has more than doubled in the span of 10 years, from 680,794 in
1994 to 1,361,239 in 2004, with motorcycles doubling from 1,083,853 in 1994
to 2,534,480 in 2004, with steepest rise in 2004, (and most presumably again
in 2005, judging by the throngs of motorbikes on the road this year.ed). On
the other hand, the number of public buses has remained steady at 23,901 in
1994 to 255,307 in 2005 ( with most of these in a sorry state of
dilapidation.ed).

It appears, therefore, that one of the measures that the Jakarta government
must take, including to save on public fuel consumption, is to build its
mass rapid transportation system, which is sorely lacking, while stemming
the steep growth of cars and motorbikes.
(Sources: Kompas, Media Indonesia, Bisnis Indonesia)                  (Tuti
Sunario)
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NEWS AND BACKGROUND:

1.      Tourism and Transportation:

Garuda flies Jakarta-Lombok/Mataram starting July

Garuda Indonesia's Lombok General Manager, I Wayan Subagia announced that
starting July, the airline will operate Jakarta-Mataram flights daily,
leaving Jakarta at 17.30 local time, while on the return leg, the flight
leaves Mataram 6.20 a.m, arriving Jakarta at 7.0  a. m. local time (there is
a one hour difference between Jakarta and Bali/Lombok). The flight uses
Boeing 737 aircraft with seat capacity for 110 passengers.

2.      Science, Culture and the Environment

The President sends SMS: "Stop Narcotics Now"

A president receiving short messages of complaints on his cell phone from
the people is no news, but a president sending an SMS message to all cell
phone owners is news. And that was exactly what president Yudhoyono did to
mark Anti-Narcotics day on 28 June.

And thus, I found to my surprise a "message received" sign on my phone ,
which when I opened  read in bahasa Indonesia: "Stop the abuse and crime of
narcotics now. Let us save this nation and build this country into a
healthy, intelligent and progressive nation. Sender: the President of the
Republic of Indonesia." I have saved this for posterity.

A call to my niece asking her whether she had received the message, came the
reply laconically: "no, I believe that it is sent to narcotic users only!"
Such is envy. She did receive it the next day, though.

The message was, apparently sent to a number of service providers, among who
was PT. Telkom. According to Telkom, the message will be sent to around 3
million cell phone owners throughout Indonesia, but it will take about10
days to send, in order not to disturb the normal flow of messages.

Earlier in June, president Yudhoyono gave his personal phone number to a
group of farmers when they asked the president how they could contact him.
The occasion just happened to be broadcast "live" over national television.
The next day the number was jammed by more than 2,000 messages.  Now, anyone
who has a complaint or suggestion to make, may send an SMS to the direct
attention of the president through no. : 9949, - which, by the way, stands
for 9 September 1949, the date of birth of the president.

Mangrove Forest Destruction and Reforestation

Half of 4.2 million hectares of mangrove forests in Indonesia, or equal to
2.1 million hectares, - are in spoilt condition or are destroyed, said Head
of the Mangrove Information Center in Bali, Arief Mahmud, as reported by
Kompas daily.  Of the 18.1 million mangrove forests worldwide, 25 percent,
or around 4.2 million hectares are in Indonesia. When compared to total
forested area in the country which covers 119 million hectares, mangroves
constitute a mere total of 3% only.

Destruction of mangroves is caused by a number of reasons, among others, the
areas are to make way for the construction of harbours, for industry, or
else trees are cut for exports or to make paper pulp. There is also
widespread misconception among the population that mangroves are breeding
grounds for malaria mosquitoes. This is incorrect, since mangrove marshes
are known to be breeding grounds for a large number of fish species.

Mangroves are necessary to act as the first bulwark to reduce the power of
tsunamis and to prevent abrasion and erosion of beaches. Mangroves also
prevent intrusion of seawater inland into sweet water resources on land.

Reforestation started

For these reasons, the Department of Forestry plans to reforest 1.74 million
hectares of critical mangroves in the coming five years to the year 2010,
said Head of the Mangrove Information Center in Jakarta, Transtoto
Handadhari, as reported by Bisnis Indonesia.

Transtoto, however,  mentions a different set of statistics, saying that
Indonesia has a potential of 9.36 million hectares of mangroves, where 27%
or 2.54 million hectares are in good condition, 40% or 4.51 million hectares
in so-so condition, with the remainder 23% or 2.14 million hectares spoilt
or destroyed.

In 2005, the Department of Forestry plans to rehabilitate 29,526 hectares.
In the tsunami ravaged province of Aceh, 28,700 hectares will be replanted
and 113,620 hectares reforested with mangroves in other provinces of
Indonesia.

In this context, Minister for the Environment, Rachmat Witoelar, emphasized,
that reforestation and protection of the environment are the responsibility
of regencies and the local population following the Law on Regional
Autonomy. However, the national government will step in wherever required.

A major mangrove area of 1,373 hectares on Bali, which has been developed
into an eco-tourism attraction is the Ngurah Rai Mangrove Forest, located
south of Bali's capital city, Denpasar. However, due to its proximity to the
city, it is threatened by city pollution and oil thrown by nearby anchoring
ships.


3.      The Economy, Trade and Industry:

Government-Exxon Cepu oil Exploration Deal Signed

On Friday, 24 June, after two months of tough negotiations, the Government
and Exxon Mobil Oil have finally come to an agreement on joint operation and
production sharing of the Cepu oil field block in East Java, said
government's
chief negotiator Martiono Hadianto at the Department of Finance, as reported
by Media Indonesia. Also present at the press briefing were team members
Mohammad Ikhsan and spokesperson Rizal Mallarangeng. The agreement will be
reported to the Minister of State Enterprises and the Pertamina shareholders
meeting on 30 June.

According to Media Indonesia, the agreement is for an 85%-15% split at
highest price, and 70% (government) -30% (Exxon) at lowest price.
Shareholders shares will be 45% for ExxonMobil Oil, 45% for Pertamina and
10% for the Regional District of Bojonegoro.

On its side, Exxon Public Relations Indonesia, Deva Rachman, told the press
that the company has agreed in principle to the offer made by the
negotiating team, on production sharing, shares and compensations to
Pertamina.

According to Media Indonesia, the Cepu block, with a major part located in
East Java, and one part in the province of Central Java, is estimated to
hold a potential 700 million barrels of crude oil and 5 billion cubic metres
of gas. Four of the six fields will be jointly explored by Exxon and
Pertamina, which are the Banyuurip, Alas Dara, Jimbaran and Kemuning fields,
while the Sukowati and Kedung Tuban fields will be operated solely by
Pertamina.

For your comments or further inquiries, please e-mail to:
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