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Updated News September 1, 2010

Wed, 09/01/2010 - 16:20

In today's news, Governor of Bank Indonesia Darmin Nasution reaffirmed his commitment to continue reforming Indonesia Banking Architecture (API), particularly in term of foreign ownership in national banking.

From the energy sector, Indonesia's Pertamina has shortlisted five companies, including Japan's Toyo Engineering, Sinopec Corp and Italy's Saipem to build a $1 billion refinery unit on Java.


In the News:





Government Relations & Economic Development

Government spends IDR514.6 trillion as of August
Agus Supriadi. Bisnis.com, Jakarta – 01/09/2010

Ministry of Finance published the realization of state expenditure per August 23 for about IDR514.6 trillion or 45.7% from the total of 2010' State Budget Revision  (RAPBN), while state revenue was recorded for about IDR573.5 trillion or 57.9% from the target.

Minister of Finance Agus D.W Martowardojo said central government spending, goods, and capital spending have not take half of the budget which are 38.1% and 24.6%.

Only personnel expenditure was in better level, 57.5% from 2010' State Budget Revision. "Government, till August 23, has been spending 45.7% from target [State Budget 2010] for about IDR1126.1 trillion," as he said after attending plenary meeting at DPR, today. 

The realizations consist of ministries/boards spending (IDR147 trillion or 40.2% from target), subsidiary (IDR74.4 trillion or 37%), and transfer to the regions (IDR190 trillion or 55.2%).

Meanwhile from the revenue, until August 23, government recorded revenue as much as IDR539 trillion or 54% from 2010 State Budget Revision's target

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Darmin to regulate foreign ownership in banks
Anggi Oktarinda & Hendri T. Asworo. Bisnis.com, Jakarta – 01/09/2010

Governor of Bank Indonesia Darmin Nasution reaffirmed his commitment to continue reforming Indonesia Banking Architecture (API), particularly in term of foreign ownership in national banking.

However, as Darmin asserted, the regulation of foreign ownership may not directly limit the portion of foreign stake, considering Indonesia's commitment to international community. Foreign investors now can own up to 99% stake in national banking.

He admitted that the central bank is focusing on reviewing foreign majority ownership which can be up to 99%. “Philosophy of ownership will be reviewed. Why must the majority stake dominate more than 51%?” he uttered, after his official inauguration as BI's Governor at Supreme Court in Jakarta today.

According to him, in developed countries like United States and Australia, the majority ownership only takes up 10%-20% of the total shares. The situation, as he added, can minimize any misuse of rights.

Dermin added that the option to review the majority ownership is more realistic rather than the option to limit foreign ownership. The regulation, as he continued, should not be retroactive. “If it is retroactive, it violates the rules,” he confirmed.

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Finance Minister rejects BUMN Fund project
Nani Afrida. The Jakarta Globe, Jakarta – 01/09/2010

The Finance Ministry has turned down the State-Owned Enterprises (SOE) Ministry’s proposal to hand over management of the government’s minority stakes in a number of firms to a private company.

The Finance Ministry refused the proposal because it would violate the existing regulation which stated that the government’s stakes in the firms should be managed solely by the state enterprise ministry, State-Owned Enterprises Ministry secretary Said Didu said Tuesday.

“Government regulation No. 41 stipulates that government stakes in companies are under the management of the State Owned Enterprises [SOE] Ministry, but there is no regulation saying that the SOE Ministry will be able to hand over the stakes to other companies,” Said Didu said.

The government has minority stakes in 21 companies, which among others include telecommunication company PT Indosat Tbk, mining firm PT Freeport Indonesia and Bank Bukopin Tbk.

The State Owned Enterprises Ministry planned to appoint fund management firm PT Danareksa Capital to manage the government’s stakes in these 21 companies, which are estimated to be worth about Rp 4.2 trillion (US$ 471,910 million) Said said.

Besides managing the government’s minority stakes, Danareksa Capital will be also named to manage an SOE Fund (also known as the BUMN Fund) which would be established by the ministry to manage funds for expansion of state owned companies. The Finance Ministry’s rejection also meant the SOE Ministry would have to withdraw its SOE Fund project.

“The legal basis for the SOE to hand management of government’s minority stakes over to Danareksa is not strong enough, and it is therefore understandable why the Finance Ministry turned the plan down,’ Said said.

The government should consider issuing another regulation that could be used as the legal basis for the establishment of the BUMN Fund, Sidu added.

The SOE office would go ahead with its plan to establish the BUMN Fund, which will collect funds from different sources to help finance expansion of state companies, SOE Minister Mustafa Abubakar said.

By pooling the funds, state companies would no longer have to rely on banks to finance their expansion projects, he said, adding that for this reason his office would consider issuing its own regulation as the legal base for the establishment of the BUMN Fund.

“The regulation will regulate rules and requirements,” Mustafa said, adding that he hoped the regulation could be issued before Idul Fitri in the second week of September.

Currently Indonesia has 141 state firms concentrating on various business sectors such as mining, telecommunications, banking and transportation. Firms include oil and gas company PT Pertamina, PT Telkom, PT Bank Rakyat Indonesia (BRI), PT Bank Mandiri, PT Bank Negara Indonesia, gas distributor PT Perusahaan Gas Negara, cement producer PT Semen Gresik, state fertilizer PT Pupuk Sriwijaya and state steel maker PT Krakatau Steel.

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Indonesian Inflation Accelerates in August as Electricity Costs Increase
Shamim Adam and Novrida Manurung. Bloomberg, Jakarta – 01/09/2010

Indonesia’s inflation rate climbed to the highest level in 16 months as electricity costs increased after the government raised power prices this quarter.

Consumer prices rose 6.44 percent last month from a year earlier, the Central Bureau of Statistics said in Jakarta today. That compares with a 6.22 percent gain in July reported earlier. The median forecast in a Bloomberg News survey of 18 economists was for a 6.69 percent increase.

Bank Indonesia has chosen to strengthen growth rather than respond to faster inflation, holding out as counterparts including South Korea, India and Malaysia raised borrowing costs. Policy makers have said the country’s faster inflation in recent months was temporary, while an appreciating currency may temper price increases.

“The global economic outlook has worsened in recent weeks, and this may temporarily strengthen Bank Indonesia’s pro-growth bias,” Helmi Arman, an economist at PT Bank Danamon Indonesia in Jakarta, said before the release. “We think Bank Indonesia will hike starting November, when the evidence on inflation becomesmore compelling.”

Indonesia’s inflation rate may be more than 6 percent for the whole of 2010, central bank Governor-designate Darmin Nasution said yesterday. Inflation next year may be about 6 percent, he said.

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Energy and Mining

One Step Towards An Open Newmont
Nieke Indrietta, Padjar Iswara, Supriyantho Khafid. Tempo Magazine
No. 01/XI, September 01-07, 2010

Newmont Nusa Tenggara will sell shares through the stock exchange. The governor agrees to the plan as long as the divestment is completed. However Pukuafu rejects it.

FIFTEEN representatives of shareholders in PT Newmont Nusa Tenggara (NNT) had already gathered in the Sanur Room at the Gran Melia Hotel, Jakarta, on Thursday morning two weeks ago. They were present for the shareholders extraordinary general meeting of this copper and gold mining company. CEO Martiono Hadianto, who was leading the meeting, delayed the meeting for 30 minutes. Martiono was waiting for the arrival of a representative of PT Pukuafu Indah, one of the shareholders.

However, after waiting for one hour, the invited guest still had not arrived. Eventually, the meeting went ahead even though a representative of the company owned by Jusuf Merukh was absent. There were 12 important items on the agenda. One of these was requesting approval for NNT’s plan to become an open company by selling shares through the stock exchange with an initial public offering (IPO) of around 10 percent. The management was also requesting that shareholders give up their rights to buy shares so that Newmont’s initial shares could be owned by members of the public.

This plan has been responded to by Didik Cahyanto, a Director of PT Multi Daerah Bersaing—which owns a 24 percent share of NNT—when he requested that shares be offered to the public after the divestment of seven percent of Newmont Nusa Tenggara shares is completed. After that, a special shareholders meeting would be held to discuss selling shares to the public. “Around 80 percent of shareholders agree with the IPO but only if this is after the 2010 divestment is carried out,” said Martiono last week.

NNT wants to sell off shares to the public because seeking fresh funds through the stock exchange is certainly much easier. If it is still a closed company, says Martiono, the company will have difficulties because it soon will need large amounts of funds. The sale of shares to the public will also give the public the opportunity of owning Newmont shares. “People in Sumbawa could also buy these shares,” said Martiono.

Because of this, since last February, Martiono has been making sustained approaches to shareholders, including West Nusa Tenggara Governor Muhammad Zainul Madjdi, the government authority of Nusa Tenggara, West Sunbawa regency government, and regency Government of Sumbawa. Andy Hadianto confirmed this. In front of Zainul, this former Managing Director of PT Pertamina has presented the plan to sell off Newmont Nusa Tenggara shares
through the stock exchange. “At that time there were no confirmed agreements,” he said.

In principle, regional governments do not object to NNT selling shares through the stock exchange. “As long as all the divestment processes are completed,” said a Tempo source in Mataram last week. According to the Seven Doctors Team from Mataram University, it is proper for regional governments to reject the selling of initial shares if this is realized before the divestment of 31 percent of Newmont shares is completed. The reason is that it would drastically reduce the share ownership of regional governments. It is proper for regional governments to reject the selling of initial shares if the divestment of 31 percent of Newmont shares has not yet been completed. “If this is carried out once the divestment has been completed, then there’s no problem,” said this source, quoting Governor Zainul.

In line with the mining contract of work, the Nusa Tenggara Mining Corporation (Sumitomo Japan) and Newmont Indonesia Limited (Newmont United States) are responsible for the release of 31 percent of shares to the government or companies in Indonesia. The divestment of 24 percent of shares in the 2006-2009 period is now already complete. Multi Daerah Bersaing—the consortium of the Bakrie Group and the West Nusa Tenggara government—succeeded in fully buying out these shares.

Now the remaining divestment is seven percent. The Energy & Mineral Resources Ministry is currently negotiating the price of Newmont shares, US$444.4 million. This final divestment will be completed this coming November, while the sale of the initial shares will perhaps be made at the end of this year.

There is still support from entrepreneurs in Mataram who are making plans for the sale of the initial shares. However the problem comes from Pukuafu, which opposes this plan. The absence of Pukuafu’s representative at the shareholders’ meeting on Thursday two weeks ago was a form of opposition. “Since the beginning, we considered that our invitation was not legal,” said the Vice President for Pukuafu’s Legal and External Relations Division, Tri Asnawanto Aji, in Jakarta last week.

Pukuafu is angry at Newmont’s foreign shareholders. Tri said that, based on the report of the Newmont shareholders’ meeting in Lombok on November 15, 2005, if the Indonesian government was not interested in purchasing the divestment shares, Newmont International Limited and the Nusa Tenggara Mining Corporation had decided to sell 31 percent of the shares to Pukuafu. But, in fact, they sold a 24 percent share to a consortium of the Bakrie Group and the West Nusa Tenggara government. As a result, Pukuafu’s dream of owning a 51 percent share was shattered. Now these shares have been reduced to 17.8 percent.

Pukuafu’s legal counsel, Wisye H. Koesoemaningrat, added that the sale of shares through the stock exchange could make foreign investors again control the majority share in NNT. This was also against the company’s articles of association, the limited company state decree, and the lex specialis working contract. But Newmont spokesman, Rubi Purnomo, denied the charge that the company had violated the working contract. “There is no provision in the contract that forbids an IPO,” he said.

The Energy and Mineral Resources Ministry has not yet taken a stance against this corporate action. We are waiting for something official first from Newmont, then we will respond with the follow-up process, said the Empowerment Director for Minerals and Coal, Bambang Gatot Aryono.

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Pertamina shortlists 5 firms for refinery upgrade
Muklis Ali. Reuters, Jakarta – 01/09/2010

Indonesia's Pertamina has shortlisted five companies, including Japan's Toyo Engineering, Sinopec Corp and Italy's Saipem to build a $1 billion refinery unit on Java, a company official said on Wednesday.

The state oil and gas firm's spokesman Mochamad Harun said SouthKorea's Hyundai Engineering and another local firm have also been shortlisted to upgrade its Cilacap refinery.

Pertamina had previously reached a preliminary agreement with Japan's Mitsui & Co (8031.T: Quote) to build a residue fluid catalytic cracking unit (RFCC) with a capacity of around 60,000 barrels per day (bpd) to produce gasoline and other products at Cilacap.

In March, Mitsui pulled out from the project because of disputes over majority share holder issues and Pertamina said it will build the RFCC by itself.

"We expect to decide the winner later this year and to sign an engineering contract early next year," Harun said.

"We expect the RFCC will be commissioned by the end of 2013 or early 2014," he said.

Pertamina's Cilacap refinery has two crude distillation units with capacities of 118,000 bpd and 230,000 bpd. The refinery also has a 29,000-bpd gasoline-making reforming unit.

Harun said Pertamina also plans to build a $300 million platforming unit at Cilacap to produce high octane gasoline.

The platforming unit will have a capacity of 50,000 bpd and construction is expected to begin next year.

Harun added that Pertamina is looking at scrapping a planned $3 billion joint venture with Iran and a Malaysian firm to build a 150,000 bpd oil refinery in Java.

In 2008, Pertamina signed a preliminary deal to build a refinery in which it and the National Iranian Oil Refining and Distribution Company would take a 40 percent stake, with 20 percent for a Malaysian partner, Petrofield.

"Pertamina will talk with Iran and the Malaysian firm about whether to continue the project or to cancel it. Because the project seems to be not economically viable," Harun said.

The pace of developing both downstream energy projects has been disappointing and often hit by political squabbling, hindering badly needed foreign involvement and technology.

Indonesia, Asia's biggest gasoline importer, has nine oil refineries with a total combined capacity of around 1 million barrels per day (bpd), but about 30 percent of the country's oil product consumption is still imported.

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Measure to Shine Light on State Firms Delayed
Faisal M. Baskoro. The Jakarta Globe, Jakarta – 31/08/2010

The State-Owned Enterprises Ministry’s plan to make state oil and gas company Pertamina a non-listed public company has been delayed until next year because the government has yet to finalize regulations for such firms.

“The government is formulating regulations for state companies that are going to become non-listed public companies,” Muhammad Said Didu, secretary to the state-owned enterprises minister, said on Tuesday.

Non-listed public companies will remain state-owned but follow the Indonesia Stock Exchange’s disclosure guidelines and issue quarterly financial results and annual reports.

The intention is to increase their transparency.

For two years the ministry has been discussing making Pertamina its first non-listed public company due to its stature as one of the biggest state companies and because it is often accused of corruption and inefficient management.But with the plan on hold, it appears Pertamina will be just one of many in the first wave of non-listed public companies.

“Not only Pertamina will become such a company,” the secretary said. “The goal of this is to make as many SOEs as possible as open as possible.”

He said the government expected the regulations to be finalized sometime next year.

According to Didu, the Ministry of Finance and the State-Owned Enterprises Ministry are still deciding on the criteria for determining which state-owned enterprises will become non-listed public companies.

“One of the criteria we are discussing is the amount of assets a company should hold,” he said. “However, the amount of assets does not always reflect a company’s readiness to become a non-listed public company.”

Didu said state-own companies had average assets of Rp 20 trillion ($2.22 billion).

“If we use [Rp 20 trillion as the threshold], many state companies will qualify,” he said.

“That’s good, but most of them are not ready to become non-listed public companies. But if we set Pertamina’s assets [around Rp 150 trillion] as the benchmark, it would be too high.”

Didu also said the government would exclude state-owned enterprises related to national security, namely arms contractor Pindad, plane manufacturer Dirgantara Indonesia and ship builder PAL.

But he said the delay would not set back the ministry’s broader plans to promote transparency as there were other available measures, such as encouraging state-owned enterprises to issue bonds.

“By doing that they would naturally open themselves up for scrutiny in order to attract investors,” Didu said.

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Antam set to build US$450m alumina project early next year
The Jakarta Post, Jakarta – 01/09/2010

State mining company Aneka Tambang (Antam) will launch its US$450 million chemical grade alumina (CGA) project in Tayan, West Kalimantan early next year, the company said Tuesday.

“We expect the construction to be completed by December 2013 and commercial production to start in the first quarter of 2014,” Antam corporate secretary Bimo Budi Satriyo said in a statement.

Bimo said that CGA plant would be built and operated by Antam in cooperation with Showa Denko of Japan.

Indonesia Chemical Alumina (ICA), the two companies’ joint venture to run the project, has named a consortium comprised of Wijaya Karya, Tsukishima Kikai and Nusantara Energi Abadi to build the plant. The engineering, procurement and construction  (EPC) contract for the construction of the CGA plant was signed on Tuesday.

“The Tayan CGA project will add value to Antam’s vast bauxite reserves,” Bimo said, adding that the project will produce 300,000 tons of CGA per year.

Showa Denko will use 200,000 tons, or 66.67 percent of the Tayan plant’s total alumina production, to substitute for the current alumina output from its Yokohama plant. The remaining 100,000 tons will be sold on the Indonesian domestic market.

CGA products are used to produce functional and electronic materials. Alumina is a processed material which uses bauxite as a raw material. It can be made into many products, such as aluminium and toothpaste. Aluminium hydroxide, an intermediate product in alumina production, is used as coagulant for water purification.

The joint company will transfer Antam’s bauxite production to the Tayan CGA factory, which will be built on a 36,410 hectare plot in Tayan, West Kalimantan.

Earlier this month, Antam spent $525,000 to buy a 15 percent share of ICA to maintain a controlling 80 percent stake in the joint company, which was established in 2007. Showa Denko currently owns a 20 percent stake in ICA.

Analysts previously said the increased stake in ICA and realization of the Tayan CGA project would increase Antam’s revenue in the future, as it will no longer rely on its gold production to boost revenues.

In its first half financial report issued on Tuesday, Antam reported it booked Rp 4.31 trillion in revenue, down 2.05 percent from the same period last year at Rp 4.4 trillion.

Antam’s first half net profits increased more than three fold to Rp 756.3 billion — up from Rp 223.77 billion in the same period last year — ballooning operating profits as sales charges decreased. Operating profits for the state-owned company increased 447.79 percent to Rp 1.09 trillion from Rp 198.98
billion in the same period.

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Pertamina Cuts Down 2010 Investment Target
Alfian. The Jakarta Post, Jakarta – 31/08/2010

State oil and gas company PT Pertamina has revised down its investment target by Rp 18.6 trillion (US$2.06 billion) or nearly 42 percent of the initial target due to stronger rupiah and delay of some projects.

Pertamina's director for investment and risk management Ferederick ST Siahaan said Tuesday the company planned to slash its investment target from Rp 44.6 trillion to Rp 26 trillion. "This is due to some external factors, including currency and the government’s decision delay in some projects," he said.

Ferederick said the initial investment target was set based on an assumption that rupiah was steady at Rp 10,000 against US dollar. "Now the rupiah is around Rp 9,000 per US dollar. The stronger currency contributes around Rp 4 trillion to the investment reduction," he said.

He added that the government's late decision in some important sprojects, including the Donggi Senoro LNG development project, also contributed to the lower realized investment.

"Previously, we estimated that the decision on the Donggi Senoro project would be made in January of February, but this has not been signed until today," Ferederick said.

He said the delay investment would be carried over to the following years.

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Transportation

Garuda to appoint IPO selling agents this week
Raydion Subiantoro. Bisnis.com, Jakarta – 01/09/2010

Garuda Indonesia will soon declare the international selling agents for its initial public offering (IPO) within two days at the latest.

President Director Garuda Indonesia Emirsyah Satar said the agents will probably be different from the ones determined by PT Krakatau Steel.

Emirsyah said that the company will likely choose three securities companies to serve the global selling agents.

“We’ve already held the names of the selling agents, but we can not unveil them now. Wait for the announcement in the next two days,” Emir emphasized.

Previously, Ministry of State-Owned Enterprises (SOEs) mandated PT Mandiri Sekuritas, PT Bahana Securities, and PT Danareksa Sekuritas, as the local underwriters that will handle Garuda’s IPO.

"We have appointed three securities companies to work in a consortium. Foreign underwriters will be selected by them, including the lead arranger,” Minister of SOEs Mustafa Abubakar said.

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Indonesian Government: Rp 1 Trillion Needed to Build Air-Traffic Control at Soekarno-Hatta
Nurfika Osman & Dion Bisara. The Jakarta Globe, Jakarta – 01/08/2010

The government needs about Rp 1 trillion ($111 million) to build a new air traffic-control system at Jakarta’s Soekarno-Hatta International Airport, Hatta Rajasa, the nation’s top economic minister, announced on Tuesday.

The old radar system, which has been in operation since the airport opened in 1984, malfunctioned on Sunday, causing costly delays and adding another blemish to the country’s already spotty record for flight safety and aviation infrastructure.

“When we build a new system, the budget will be about Rp 1 trillion, including for the radar,” Hatta said. “The money will be taken from the state budget. However, the available budget now is only Rp 150 billion.”

“We are asking Angkasa Pura to contribute some portion of the budget,” the minister added, referring to the state airport management company.

Hatta acknowledged that the quality of Indonesian airports was on the decline.

“It’s because passenger traffic has exceeded capacity, and the trend is that the number of passengers will always increase,” he said.

Hatta said the new air traffic control system would be housed at the airport and serve the western half of the country.

The equipment would also be integrated with the eastern command in Makassar, South Sulawesi, which was built in 2004 and updated in 2009.

Hatta told reporters that he was conducting coordinating meetings concerning the radar blackout over the weekend.

“We are still analyzing the cause of the failure,” he said. “We are going to talk about how we will entirely modernize our airports.”

The meeting will also determine whether Angkasa Pura II, which manages Soekarno-Hatta, and the city of Jakarta would be capable of cooperating with the private sector to develop the airport into a modern facility.

An Angkasa Pura II, spokesman, Andang Santoso said that in the meantime, the company would make sure all its equipment was operating properly.

“We have experienced staff who have been doing this for a long time,” Andang said. “Our back-up system is also enough. We do not have to worry about safety and security.”

Tri Sunoko, chairman of Angkasa Pura II, said after the radar mishap that there would a “thorough audit of Soekarno-Hatta’s inventory” to identify which systems were fully operational and which were not.

Sunday morning’s disruption, which lasted for 30 minutes, led Angkasa Pura II to temporarily switch control systems to manual to minimize flight delays.

The airline operator’s corporate secretary, Hari Cahyono, said that more than 20 domestic flights were affected.

The incident came just three weeks after a 1.7-second power outage at the airport on Aug. 6 caused hours of chaos and delayed 62 flights.

Meanwhile, Central Java Governor Bibit Waluyo said Ahmad Yani Airport in Semarang, the provincial capital, needed a new terminal to deal with rising passenger traffic.

He said about Rp 750 million was needed for the expansion, and that the central government was expected to provide some of the funding.

“We hope for central government participation in supporting the Ahmad Yani Airport expansion,” Bibit said after attending a plenary session of the Provincial Legislative Assembly.

He said the funds would be used to build a new terminal on the north side of the airport.

He emphasized that the central government’s participation in the expansion would be of great importance because Angkasa Pura I has been slow in responding to the airport’s expansion needs.

“Compared with other airports in the country, Ahmad Yani airport has had the slowest development,” the governor said.

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Volkswagen Set to Invest 140 Million Dollars in Indonesia
Kompas.com, Jakarta – 01/09/2010

Volkswagen AG (VW), the German giant automotive company, will make a 140 million US dollar investment in Indonesia, for which it had a meeting with the Industry Ministry.

"The meeting early this week discussed investment prospects in Indonesia. And a VW representative will return and again meet the industry ministry for finalizing the investment plan," President Director of PT Garuda Mataram Motor (GMM) Andrew Nasuri said here on Tuesday.

Andrew said VW planned to build a factory with a capacity of producing 50,000 units in 2012. The plant was scheduled to become operational in 2013. VW was still making a selection of the location of the plant, including in Cikampek, West Java.

The building of the plant, Andrew said, was aimed to make VW products to become competitiveness in the Indonesian market, in meeting VW’s ambition to become the number one player in the automotive business in the world, beating Toyota and General Motors. He believed that the price of VW products can be reduced by up to 40 percent if production is done in Indonesia, because VW will enjoy import duty cuts, if the cars are imported in CKD (completely knocked down).

Andrew said cars that had been imported in CBU (completely built-up) had reached 45 percent, and only 10 percent in CKD.  Right now, he added, the import duty of VW cars is still too high, although some had already been built in Indonesia, like  Touran and Golf TSI, because the shipment of the cars from Germany was still in roll form.Giving an example, he said that the price of a Touran (multi purpose vehicle/MPV) reached Rp395 million, much higher than Rp 250 million of a Toyota Kijang Innova.

"Localisation would be necessary for competitiveness. Risks had to be taken to enjoy a high growth of the Indonesian market," he said.

This year, GMM planned to raise its sales by 236 percent reaching 400 units, while last year reached only 122 units. The increase in the sales was triggered by the release of locally assembled VW Golf TSI with a price tag of Rp339 million.

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Infrastructure

Infrastructure Plans Can’t Be Left Hanging
The Jakarta Globe. Jakarta – 01/09/2010

Administrative red tape and wrangling between the Finance Ministry and the State Enterprises Ministry may delay, if not totally disrupt, a plan to raise funds for vital infrastructure development. If this does indeed come to pass, it would be a major setback for the nation and the economy.

It was announced on Tuesday that the government had canceled plans to create an SOE investment fund that would have helped finance infrastructure projects.

Plans for the fund, which would have used government minority stakes in partially-privatized SOEs to raise money, were apparently illegal.

The plan was to have a new state-owned investment company use these shares, valued at Rp 13 trillion ($1.44 billion), as collateral for loans to finance the fund.

It is now understood that these shares are in fact controlled by the Finance Ministry and not the State Enterprises Ministry.

The ministry had expected the plan to generate up to Rp 40 trillion to help fund much-needed infrastructure development in the country.

Muhammad Said Didu, a secretary at the ministry, said on Tuesday that the proposed fund conflicted with a law that gives the Finance Ministry control over the government’s minority stakes.

“According to letter S-377/MK-06/2010 from the Finance Ministry to the SOE Ministry, dated Aug. 2, managing minority shares will still be the authority of the Finance Ministry, as stated by the state financial law,” Didu said.

It is unclear if this was an oversight or if this is a turf sbattle between the two agencies. It is clear, however, that the impasse will have a major impact on the government’s grand plan to improve infrastructure, and thereby put the economy on a much better footing.

The plan was first proposed by former State Enterprises Minister Sofyan Djalil and was later taken up by successor Mustafa Abubakar.

If no fresh funds are made available in the very near future, we can expect more breakdowns like the radar system failure at Soekarno-Hatta International Airport over the weekend. Not only do such failures create delays, they endanger lives.

Given the importance of the infrastructure fund, President Susilo Bambang Yudhoyono should get personally involved to resolve the situation.

The president must show leadership on this issue, as he had made it a central interest of his administration. If this idea is unworkable, other ideas must be developed quickly.

A lot of time has already been lost. Without modern infrastructure, our economy will not be able to reach its full potential.

More importantly, without new infrastructure, the lives of the people will not improve and the future will be no brighter. A way to move forward must be found.

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Information and Communications Technology

Bakrie Telecom to invest US$110 million in 2010
Arif Gunawan. Bisnis.com, Jakarta –

JAKARTA: CDMA-based operator PT Bakrie Telecom Tbk (BTEL) plans to invest US$110 million this year, mostly used to fund their connecting data business for the year ahead. 

CEO Bakrie Telecom Anindya Bakrie explained the small part of this year investment is a loan in the amount of US$300 million denominated in renmimbi from Industrial and Commercial Bank of China (ICBC).

"Through this year, we have been using 10% from the loan. The amount is small since we only take it when it necessary," he said during fasting break with the press, today.

At the end of this year, the company targets US$300 million investment or IDR2.7 trillion, it will be used to expand telecommunication network either cellular or data. They have targeted 14 million subscribers.

Bakrie Telecom Jastiro Abi said this year spending, for about $100 million, will be mostly used to fund investment in PT Bakrie Connectivity while the rest used for company development.

Besides the ICBC's loan, the company also has US$250 million from recently issued bond, which expired in 2012. Most of the short-term loans are financing lease. 

Responding the cooperation issue between PT Telekomunikasi Indonesia Tbk, Telkom Flexi and Bakrie Telecom, Anindya clarified that the discussion is still on progress. 

"Both parties have good corporate governance that must be met especially with their public status," he said.

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