Govt selects 10 projects to serve as pilots

Urip Hudiono, The Jakarta Post, Jakarta

The upcoming three-day “Indonesia Infrastructure Conference and Exhibition 2006” will not only showcase major investment opportunities, but also the government’s progress in improving the country’s investment climate.

 At least 10 infrastructure projects, involving the construction of power plants, toll roads, seaports, municipal water systems and telecommunications facilities worth an estimated US$4.5 billion, will be put up for grabs during the event, which starts Wednesday and will be opened by President Susilo Bambang Yudhoyono.

 On top of that, Public Works Minister Djoko Kirmanto also plans to present another 20 projects worth Rp 30 trillion ($3.2 billion), during the event’s first day of meetings with investors, said Suyono Dikun, the deputy for infrastructure to the coordinating minister for the economy, on Monday.

 Meanwhile, Transportation Minister Hatta Radjasa may offer another 17 projects, while further projects will be put on the table by Communications and Information Minister Sofyan A. Djalil.

 On the second day, Energy and Mineral Resources Purnomo Yusgiantoro will outline four power plant projects.

 Coordinating Minister for the Economy Boediono, Finance Minister Sri Mulyani Indrawati and State Minister for State Enterprises Sugiharto are each scheduled to present updates on what the government has done to improve the investment climate. 

 The conference follows on from last year’s “Infrastructure Summit 2005”. It was originally scheduled to be held last November, but was then rescheduled to February and later to November due to the then unfavorable economic situation in the wake of last year’s fuel price hikes.

Banks urged to lower lending rates

Andi Haswidi,  The Jakarta Post, Jakarta

The Association of Indonesian Retailers (Aprindo) has urged the country’s banks to lower their lending rates in line with the central bank’s benchmark rate so as to enable them to expand their businesses.

 “We believe that the banking sector has not been supportive of business in general. When the BI rate goes up, the banks instantly increase their rates.

 “But when the BI rate decreases, they never follow as quickly as we would expect,” Aprindo director Handaka Santosa told The Jakarta Post on Monday.

 The central bank has gradually cut its rate by 2 percent since May on the back of easing inflation and a stable rupiah. It expects the rate to fall below 10 percent by early next year.

 However, most banks have yet to lower their lending rates, which currently stand at around 16-17 percent.

 Handaka said the situation had resulted in many retailers not being able to take full advantage of the increase in demand over Idul Fitri.

 “With the current average lending rate of 16 percent, many retailers could not afford to take out loans to increase their stock in the run-up to this year’s Idul Fitri, when demand usually reaches its peak.”

 According to Handaka, with the central bank’s rate currently standing at 10.75, the banks should be able to lower their lending rates to an average of between 14 and 14.5 percent.

 He said that full sales figures for the Idul FItri celebration would be available within the next two weeks.
 Bank Central Asia (BCA) president director D.E. Setijoso said earlier this month that total lending in connection with the holiday had been lower than last year.

 “I cannot give you the exact figures yet but let’s say that if the usual trend in loan growth due to the
holiday is at 100, then this year we only came in at around 70 to 80. So, there was a 20 to 30 percent decrease compared to last year’s lending,” Setijoso said.

 Overall, however, Handaka remained optimistic about this year’s takings.

 “Because of increases in the prices of goods, we saw a 12 to 17 percent increase in sales value in the third quarter of the year,” he said.

 The retailers association has said it expects total retail sector revenue to increase by 20 percent this year to Rp 50 trillion compared with Rp 42 trillion last year.

Regions offer major investment projects

Domestic and foreign investors will have plenty of tempting opportunities laid out before them this week.

On top of large, national-level projects that the central government plans to offer at the upcoming infrastructure conference, the regions are also lining up ventures for investors to put their money into.

 More than 16 provinces will put projects worth some US$3.47 billion on the block at the upcoming Indonesian Regional Investment Forum (IRIF) on Nov. 2-3, says the event organizer.

 Toni Gourlay of Sound Initiatives said the projects were in such sectors as tourism, infrastructure, agribusiness, power generation, food processing and manufacturing.

 Among the participating provinces, Riau’s are the most valuable, including a new highway worth $506 million, the $1.41 billion Dumai international airport, the Pasir Pangarayan-Dumai railroad worth $555 million and a $222-million power plant in Rokan Hulu regency.

 Meanwhile, Jakarta province is offering a project worth $110 million for the expansion of the Tanah Abang market.

 “We have also specially invited one of the most influential thinkers on business strategy today, CK Prahalad, as the keynote speaker for this event to enlighten local bureaucrats on how to make their regions more investor-friendly,” steering committee chairman Irman Gusman said.

 “The problem is that these bureaucrats are not businessmen and in this forum we want to help them meet the needs of investors,” Irman said.  (JP/09)

PermataBank to offer Rp 500b in bonds

The Jakarta Post, Jakarta

PermataBank plans to issue its first-ever bonds worth Rp 500 billion (US$54.3 million) in late November on the back of increased profits this year.
The proceeds will be used in part
to finance the lender’s business
expansion plans and to strengthen
its capital and capability to finance long-term loans, PermataBank corporate secretary Imam Teguh Saptono said Sunday.
“We reported the bond issue plan to the Capital Markets Supervisory Agency (Bapepam) last week,” he said. “We will soon hold a public meeting for the offering, and then begin the book-building process.”
PermataBank, the country’s eight-largest lender by assets, has seen satisfactory results for this year’s third quarter, which may help buttress demand for its planned bond offering.
It reported an unaudited net profit of Rp 223.4 billion in the first nine months of this year ending on Sept. 30, up 21.6 percent from the same period in 2005.
The bank increased lending by 3 percent to Rp 22.2 trillion, its total assets grew 8.6 percent to Rp 36.4 trillion, while its capital adequacy ratio (CAR) improved to 12.8 percent, above the central bank’s minimum 8 percent requirement.
CAR compares a bank’s capital
with its risk-weighted assets, includ-ing loans.
PermataBank is majority owned by a consortium of London-based Standard Chartered Bank PLC and local partner PT Astra Internasional, with a total stake of 89 percent. Last month, the government sold its 25.9 percent in the bank for Rp 1.75 trillion.

Indonesia, China sign deal on six energy projects worth $5b

The Jakarta Post, Jakarta

The Indonesian government has signed an investment contract with the Chinese government on six energy projects worth up to US$5 billion.
As reported by Antara from Shanghai, the contract was signed by Indonesia Energy and Mineral Resources Minister Purnomo Yusgiantoro and China’s Planning Committee and State Reform Minister Ma Kai, and was watched by President Susilo Bambang Yudho-yono and Senior Vice Prime Minister Huang Zu in Shanghai last Saturday during
the Indonesia-China Energy Forum II.
Purnomo said the six projects included the establishment of a chemical factory for producing liquid coal in South Sulawesi worth $687 million, involving PT Sumber Gas Sakti Prima from Indonesia and Chenda Engineering Corporation of China and Sinchuan Chemical Industry Holding.
The two nations will also cooperate in enhancing coal energy plus other chemical research programs by establishing a plant in Kunming province, China, estimated to be worth between $300 million and $1 billion and involving PT Antarniaga Nusantara Indonesia, Yunan Chemical Industry Group and China National Chemical Engineering Group Corporation.
One project is the establishment of a steel factory and iron ore facility in Sukabumi, West Java, worth $300 million, involving PT Ciracap Sumber Prima and Yunan Geology and Mineral Resources.
A power plant, worth $170 million, capable of delivering two times 100 megawatts will also built in Jeneponto, South Sulawesi, involving PT Bosowa Energi and Chenda Energy Corporation of China.
Another power plant, estimated to worth $2.1 billion, will also be established in South Sumatera. It will be capable of delivering four times 600 megawatts of coal-powered electricity, and will involve PT Tambang Batu Bara Bukit Asam, the State Power Company, PT Indika Inti Energy and China Huadian Corporation.
Lastly, the contract includes plans to establish joint work worth $1.5 billion between the Energy and Resource Ministry and the China National Offshore Oil Corporation to explore crude oil beneath the Aru Island.
“Cooperation in the energy sector is something that is relatively new in the long history between Indonesia and China, but this is the area that will increase the geo-political and geo-economic relations between the two countries,” President Yudhoyono said.
The president also said
that he hoped that within a decade Indonesia could be the largest bio-energy provider in the world and that foreign investment from countries such as China could make this come true.
The president is in China to bolster economic cooperation between the two countries
and is expected to return home on Tuesday.

Govt may revise policy on dividends for state companies

The Jakarta Post, Jakarta

The government will consider determining the amount of dividends state firms must pay into the state coffers according to each operation’s business plans, State Minister for State Enterprises Sugiharto has said.
“There is no iron rule that state companies must pay dividends of 50 percent or 45 percent of their profits to the state,” Sugiharto was quoted by Antara as saying last week.
The government may lower the dividend pay-out ratio of state-owned enterprises (SOEs) if they can indeed reap more yields by reinvesting their profits as equity.
“We will consider accepting a lower dividend if each rupiah reinvested will generate a higher return. If not, then part of the SOEs’ net profits would be better paid in the form of dividends instead,” he said.
Sugiharto’s remarks came in response to requests from several state firms that their dividend pay-out ratios be reduced, or that they even be exempted from paying dividends altogether.
Among the state-owned companies that had requested such an exemption were construction firm PT Adhi Karya and worker insurance company PT Jamsostek.
The government is expecting to raise Rp 19.2 trillion (US$2 billion) from the dividend payments of SOEs to help finance next year’s state budget deficit. The figure, up from the government’s initial Rp 18.5 trillion proposal, has been approved by the House of Representatives.
The dividend payment figure is based on the assumption that all of the country’s 131 state companies would pay half of their net profits, which are expected to total around Rp 44.5 trillion, as dividends to the state.
Commenting on the request from several SOEs to be exempted from paying any dividends, secretary to the State Minister of State Enterprises Mohammad Said Didu said he disagreed and that it was not logical, as the function of SOEs was to make a profit for the state.
Such a request must also be approved by the House, he added.
Said Didu went on to say that there was at present no reason to approve such a request, unless the related state company had suffered large losses in its business activities.
“In any other case, if the management of a state company asks to be allowed to pay no dividends to the state, then it would be better if they just resigned from their posts,” Didu said.