Govt to confine tin sand trading to two provinces

Jakarta (ANTARA News) - The government intends to confine tin sand trading to only two provinces -- Bangka Belitung and Riau Islands -- after noticing indications that the commodity is often smuggled abroad using domestic inter-island trade permits, a senior trade official said.

"The draft of a relevant regulation is almost finished. We have to do it in order to protect the competitiveness of our tin. So, eventually, tin sand can no longer be sent (from Bangka Belitung and Riau Islands, the tin producing regions) to Java or other provinces," Ardiansyah Parman, director general of domestic trade, said here Friday.

He said the measure would be taken as there was strong suspicion that tin sand (from the country`s tin-producing regions) was being exported under the label of inter-island trade, the practice was working only to the benefit of tin smelting industries in other countries which were thereby enabled to obtain the material at a lower price.

"Bangka Belitung is the only province in Indonesia where tin smelting is done. So , if tin sand is transported to another province, the question arises : what for?" Parman said.

The government had already banned export of tin sand but illegal tin miners circumvented the ban by sending the tin sand abroad in the shape of bars.

The ban was also imposed to reduce damage to the environment and boost the state`s income from tin exports, he said.

In the January-June period of 2006, Indonesia crude tin exports reached a total value of US$438.45 million, up from US$406.41 in a corresponding period last year. The exports went to Malaysia, Singapore and Thailand.

Parman said the trade ministry was also planning to tighten control over export of tin bars by issuing permits only to registered exporters.

Is Indonesia next in line as hot bed for investment?

John Riady, The Jakarta Post

Will 2007 see Indonesia's resurgence as a global hot bed for investment? A New York fund manager, asked why his company has not returned to Indonesia, said: "Well, Indonesia's small potatoes these days. Besides, there's too much risk and no upside." Such remarks are too often heard and leave a negative stereotype of Indonesia in the eyes of foreign investors.

In the early 1990s, Indonesia was touted as the next Asian tiger. Investors from around the world flocked to Jakarta struggling to get a slice of the action. Today, many people are anxiously holding their breath, asking when this long-awaited second coming of investment will arrive. The second coming is not imminent-at least not in 2007.

Many people believe corruption to be the main culprit behind Indonesia's weak investment and sub-optimal economic growth. But this is far from the truth. Anybody that has done business in China would concur that China is tantamount to corruption, yet they have been flirting with a double-digit growth rate. Corruption is not the problem. The problem with Indonesia is its lack of decisive government leadership, which unfortunately shows little sign of improvement.

Second of all, massive investment will not come until Indonesia's sovereign rating reaches a minimum of "investment grade" level. Although Indonesia is moving in the right direction, it cannot happen overnight. It is unlikely to happen even in the year to come.

Ultimately, the litmus test is whether Indonesia can compete. What has our government done to allow Indonesia to compete with other investment destinations? Indonesia's incentives are unattractive and its infrastructure is dismal. Indonesia does not have to be competitive in everything, but as it is, it is competitive in nothing.

On a slightly more positive note, it has been a year since the fuel subsidy cuts, and a combination of lower inflation and falling interest rates have helped Indonesian consumers to rebound. But government spending, which has helped push growth in the second quarter, seems to be slowing down, and growth in exports have been more in value rather than volume.

Investment too, has been sluggish. Foreign direct investment from January to October of 2006 has dropped 48 percent compared to the same period in 2005. A more dynamic economy must be driven by investment.

In response to the three challenges to attracting investment as stated above, here are some recommendations for the Indonesian government: First and foremost, the Indonesian government must show decisive leadership. Only if we can assume that our government actually has the ability to exercise decisiveness in policy-making and effective implementation -- a big if -- can discussion about the particular policies then be useful.

Granting the fact that our president comes from a party that controls only 11 percent of the House of Representatives, Susilo Bambang Yudhoyono must stop trying to please everyone. Our president's lack of decision making is attracting widespread ridicule. There are not very many areas where I believe Yudhoyono should learn from President George Bush. Learning to be unpopular is one of them.

More concretely, there are three areas that our government should focus on to increase Indonesia's competitiveness: in implementing the correct incentives, investing in infrastructure, and adjusting the "price" of doing business in Indonesia to an appropriate level. Allow me to elaborate.

Incentives can best be achieved through the use of taxes. Taxes serve four functions: To raise revenue, redistribute wealth, punish unwanted actions, and encourage favorable behavior. It is a pity that Indonesia currently only uses taxes for the first purpose, and arguably the second. The development of China's special economic zones was predicated on tax incentives. The same is true for Singapore's ability to attract investment. While Singapore, a country of four million people, attracted US$20 billion of foreign direct investment in 2005, Indonesia only attracted a mere $6 billion. Indonesia should follow suit.

No country is perfect. Having that said, to attract investment, a country must compensate its weaknesses. Workers in China are uneducated, yet factories choose to relocate there because it is cheap (although becoming less so) and relatively productive. Indonesia's workforce, like China's, is also generally uneducated. But in addition, due to labor regulations that dampen labor mobility and reward the wrong behavior, Indonesia's workforce is neither cheap nor productive. Indonesia must reform its labor and investment laws.

Infrastructure is also vital to attracting investment. Dubai and Sharjah, both neighboring emirates of the UAE, are real world examples. Both states are endowed with billions of petro-dollars; and both are also located in the middle of the dessert. The difference: While Dubai has received more investment than the combined amount of money controlled by the top four investment banks on Wall Street, its neighboring emirate has not changed much since the time of the Prophet Muhammad.

The variable that best explains the difference is the amount of hard infrastructure, such as roads and proper sewage, and soft infrastructure, namely an educated workforce, which Dubai has managed to accumulate. There are many reasons that make the Middle East a poor comparison to Indonesia. However, the fact remains that if a country makes the necessary investment in infrastructure, people will invest.

Indonesia needs around $70 billion of infrastructure investment over the next five years. Poor infrastructure is hampering Indonesia's ability to not only accelerate economic growth, but also in being able to deliver basic public services. Indonesia is already experiencing power shortages and 70 million people still have no access to electricity; this will be exacerbated as demand grows by 7-9 percent annually.

The same picture emerges with regard to sewage networks. Half of all district roads have been classified as "poor or in bad condition". There are around 649 km of toll roads, but the country needs a minimum of 2,000 km. Almost 75 percent of shipments out of Indonesia are re-loaded onto larger ships at Singaporean or Malaysian ports because of inadequate port capacity at home causing exporters to lose $700 million annually in foreign exchange. Furthermore, devastation caused by natural disasters in Central and West Java has increased the need for infrastructure.

While inducing investors through tax incentives and the development of infrastructure is good in theory, it may prove to be too difficult for Indonesia.

A more feasible alternative would be to adjust the value of doing business in Indonesia to a competitive level. This could be done, for example, by doing what China has done: adjusting the rupiah to, say, Rp10,000 to US$1. By doing this, goods made in Indonesia would cost less to produce, and hence making them more competitive. This should in turn boost exports and attract investment. This alternative no doubt has its pitfalls but our government should at least give it a serious consideration as it may be the wise course of action given the existing constraints.

If incentives, infrastructure, and value adjustments as explained above are relatively short term policy areas, two longer term measures that should also be enacted is in regards to Indonesia's country rating, and education.

First, positive country ratings is a prerequisite for large scale investment. Most investors manage funds that belong to other people. These managers take risks on every investment they make and must to some extent be able to justify the risk they incur. A more favorable rating will allow investors to justify investing in our country, and also give them a certain level of comfort. Also, bad ratings translate to a higher cost of capital and thus a loss in companies' competitiveness.

Before moving on to the fourth and final point, it is important to take a step back and remind ourselves why it is that a country desires investment, or more particularly, FDI. Economists tell us that FDI is desirable, amongst other reasons, because it facilitates the transfer of technology, and stimulates domestic investment. Such things are in turn favorable because they contribute to economic growth. Economic growth, then, is desirable because it will hopefully help eradicate poverty and decrease unemployment. This will in turn improve living standards.

Consequently, given the ultimate end of FDI in improving the living standards of Indonesians, this fourth point is perhaps the most compelling: Indonesia must invest in education to empower its people and accelerate growth.

Education's impact is twofold.

First, it has a direct positive impact on living standards, which we have said to be the goal of FDI. Second, more education means a better educated and more productive labor force-the kind of soft infrastructure Dubai has. Given that wages do not increase proportionally to equalize the relative price of labor in relation to productivity, this should attract more investment.

Economic measurements, such as GDP per capita or investment per head, are mere numbers that are supposed to reflect the well being of a country's population. While the achievement of more positive figures could be a result of a real improvement in the well being of a country, this is not necessarily so. For example, GDP per head could be increasing but if inequality also increases, the increase in GDP will be accrued by those who least need it.

Investing in education is probably the surest way to guarantee that a real and qualitative improvement in lives is attained.

Indonesia's future is promising and the second wave will come. Indonesia has gone a long way in rebuilding itself since the East Asian financial crisis, and it has also coped pretty decently with the constraints that this so-called democracy has imposed.

While it is proper and salutary that governments should in general leave economics alone, it is however, right that from time to time they offer leadership and encouragement. Currently, carrying out the necessary policies to set the stage for investment would be prudent.

Unfortunately, prospects for improvement are mixed given that Jakarta may find it hard to make politically difficult decisions as the 2009 presidential election draws closer.

However, if successful, perhaps by this time next year, Indonesia will be next in line as the world's premier destination for foreign investment.

The writer is a Government and Economics graduate of Georgetown University. He can be reached at jr284@georgetown.edu.

PT KAI receives 20 more electric carriages from Japan

Jakarta (ANTARA News) - State railway company PT KAI last Dec 24 received 20 more second-hand coaches from Japan which constituted the third batch of a total of 160 the company had ordered, a KAI spokesman said.

The second batch comprising 8 coaches arrived last Dec 3 and the first, consisting of 16 coaches, last July so that PT KAI had so far taken delivery of 44 of the 160 second-hand coaches bought from Japan, Ahmad Sujudi, the KAI spokesman, said.

"Although they are second-hand, their condition is still very good by Indonesian standards," Sujudi said on Tuesday.

After acquiring all the Japanese-made coaches it had ordered, PT KAI would increase the frequency of its services on the Jakarta-Bogor-Tangerang-Bekasi route which was being upgraded to become a double-track one, he said.

He said PT KAI would also introduce an automatic ticketing system on the Pal Merah-Serpong route as of February 2007.

Along the 24-km Pal Merah-Serpong route at least six stations were being built and each of the trains would have eight coaches.

With eight coaches, four of the trains would go to Serpong, and the other four to Jakarta.

"The automatic ticketing system will be identical to that in use at the Trans Jakarta bus stations," he said.

In the first stage, there would be 64 trips covered by eight trains, and the frequency would be increased in stages to 120.

With the application of the automatic ticketing system on the Pal Merah-Serpong route, the Indonesian railway company would enter a new era, he said.

He said with the automatic ticketing system, the doors leading to passenger waiting halls would open only after putting a ticket into a slot machine installed at the entrance.

Govt allocates Rp51 trillion to reduce poverty

Jakarta (ANTARA News) - The government will allocate Rp51 trillion to reduce the country`s high poverty and unemployment rate next year.

The government is optimistic with the synergized measures taken by the central government and regional administrations, in trying to meet the target of lowering the poverty rate to 8.5% in 2009, Coordinating Minister for People`s Welfare Aburizal Bakrie said in a statement read out by his special staff, Lalu Mara, here on Thursday.

It was also reported that the head of state had instructed Economic Affairs Coordinating Minister Budiono to immediately synergize the central government`s policy and the target to lower the proverty rate.

According to Aburizal, there were two short-cut programs designed to reduce poverty, namely Subdistrict Development Program and Urban Poverty Handling Program which were integrated into the Community Empowerment National Program.

Furthermore many efforts of the people`s welfare coordinating ministry in the field of manpower, poverty eradication, education and health had showed positive results.

Short-term challenges faced by the people`s welfare coordinating minister include lowering the poverty rate, birth rate and infant mortality rate.

It was admitted that in 2006, the poverty rate increased by 17.8 percent, as the serious challenge of the ministry in a short term was how to revive the trend in pursuing the declining target of poverty to 8.5 percent in 2009.

In education, the main focus was more given to educational access especially to the junior high school (SMP) students, quality improvement and educational management.

To improve the quality and competitiveness of education as could be seen on the average grade of their national tests (SMP), the grade of national condition in 2004 was 5.26, while its realization in 2005 reached 6.28. But the target in 2006 was about 6.54, and 7,05 realized.

"We concluded that the majority of the education target could be met. In the future, BLT program could be used as a solution to improve the result of education," he said.

Investment in Batam up 32.34 %

ANTARA News - 2006-12-28 12:54:56

Batam, December 27, 2006 (ANTARA News) - The Investment Coordinating Board (BKPM) in the January-November 2006 period licenced 72 new foreign investment projects worth US$172.96 million on the industrialized island of Batam.

Over the period, the board also licenced foreign expansion projects worth US$197.62 million, spokesman of the Batam Authority Dwi Djoko Wiwoho said on Wednesday.

The foreign investors were mostly engaged in the trade sector, the shipbuilding industry, the garment industry and accommodation services, he said.

Only two domestic investment projects worth more than Rp27 billion were approved in the period, he said.

Overall, investments in the first eleven months of 2006 rose 32.34 percent to US$376.59 million from US$254.739 million a year earlier, he said.

VP launches forest and land rehabilitation program

ANTARA News - 2006-12-28 14:30:03

Jakarta, December 28, 2006 (ANTARA News) - Indonesian Vice President Jusuf Kalla is scheduled to launch a national forest and land rehabilitation program in a ceremony held at Empol village, Sekotong, West Lombok, West Nusa Tenggara (NTB) on Thursday.

Kalla during the ceremony is also expected to present awards to eight governors, 15 district heads and mayors as well as 12 farmers` groups for their achievement in conducting forest and land rehabilitation programs in their respective regions.

Information from the Vice President`s Secretariat office said here on Thursday that among those receiving the awards would include Gorontalo Governor Fadel Muhammad.

During his stay in NTB, Jusuf Kalla is accompanied by Deputy Chairman of the People`s Consultative Assembly (MPR) Aksa Mahmud, Agriculture Minister Anton Apriyantono, Research and Technology Minister Kusmayanto Kadiman, Environmental Affairs Minister Rachmad Witoelar, Golkar Party Secretary General Sumarsono, and two legislators, namely Enggartiasto Lukito an and Rully Chairul Azwar.

Meanwhile, Mme. Mufidah Kalla is scheduled to visit a seaweed and cashew nut processing factory, PT Phonix Mas Persada, at Abian Tubuh, and a Lombok Pottery industry at Cakra Negara, Mataram city.

The Vice President and his entourage left Jakarta on Thursday by The Indonesian Air Force`s Boeing 737 presidential plane from the Halim Perdana Kusuma air force base.

An official reported earlier that the deforestation rate in Indonesia reached two million hectares annually while its reforestation rate was only around 600,000 hectares per year.

The deforestation rate has tended to increase from year to year, Dr. Harri Santosa, secretary of the organizing committee of the National Forest and Land Rehabilitation Program, said in Mataram, NTB Province on Wednesday.

Santosa said the deforestation rate in Indonesia was around 900,000 hectares in 1990 and it increased to 1.8 million hectares in 2004.

In 2006, the deforestation rate was recorded at 2.8 million hectares, he said, adding that the rate was two million hectares per year on the average.

The country`s total deforested areas were about 60 million hectares, he added.

Three Indonesian provinces, namely East Nusa Tenggara (NTT), Southeast Sulawesi and NTB, were currently being threatened by desertification, he added.

Tax incentives needed to spur business growth, says analyst

The Jakarta Post, Jakarta

Incentives should be given to businesses to improve their productivity and increase their taxable incomes, an economist says.

Aviliani said increased production would ensure businesses ended up paying more tax, allowing the government to meet revenue targets.

Taxation director general Darmin Nasution estimated Wednesday revenues from taxes as of Dec. 22 would be at 97.5 percent of the Rp 371.7 trillion (about US$40.4 billion) government target.

Aviliani said incentives could be in a form of a reasonable postponement period for property and income tax payments. This would give companies time to grow, she said.

Medium-term increases in income tax and value-added taxes collected would eventually offset any immediate loss in government revenues, she said.

A new tax bill currently being discussed by the House of Representatives includes other incentives, including a tax cut of up to 30 percent during the first six months for every investment worth at least US$100 million.

President Susilo Bambang Yudhoyono has acknowledged the need to provide tax incentives to small and micro-scale businesses to allow them to benefit from the expected growth forecast for next year.

"Fiscal, monetary and banking incentives are demanded by all businesses," Yudhoyono said Thursday in Jakarta.

Aviliani urged the government to create policies to ensure the availability of raw materials and otherwise support local industry.

"The aim is to ensure normal flows of production from upstream to downstream."

She noted the government had been unable to secure raw materials for the timber industry after raids on illegal logging operations intensified during past months.

President calls for dissemination of balances, constructive, objective information

Jakarta (ANTARA News) - President Susilo Bambang Yudhoyono has asked Indonesian National ANTARA News Agency to disseminate balanced, constructive and objective information in the nation`s and people`s interest.

"In my opinion, our common goal is for ANTARA News Agency to disseminate balanced, constructive and objective information in the nation`s and people`s interest," Yudhoyono said in his address at the peak event of the news agency`s 69th anniversary commemoration here on Tuesday.

According to the president, the state and its people had a common desire to face the present with confidence and to look into the future with assurance.

Therefore, Yudhoyono noted that ANTARA`s role and function were to develop its business to enhance its assets for the sake of its employees` welfare.

"This is a twin role. Do it well, the government will support and encourage both missions," he said.

The head of state said it was about time that the Indonesian press could audit that the state institutions have done in an objective, constructive and balanced manner.

"If they have shortcomings, tell them, and if they have done well, tell them, too. So, there will be no lies among us," he said.

In the current reform era, the government would not tell ANTARA what to write, because ANTARA should know by itself what to do, Yudhoyono said.

"So, I am not going to give any advice but only views in the interest of ANTARA`s progress. I particularly congratulate ANTARA on its 69th anniversary," he said.

He recalled the valuable and heroic contribution of ANTARA during the struggle of Indonesian independence. Yudhoyono expressed hope and optimism for ANTARA to be a world-class multimedia company in the future.

The President also asked the nation to support ANTARA`s plan of hosting the next General Assembly of OANA (Organization of Asia-Pacific News Agencies) in December 2007.

Ministry allocates Rp 4.2t for forest restoration

The Jakarta Post, Jakarta

The government has announced a Rp 4.2 trillion program aimed at encouraging people to participate in efforts to restore the country's forests and revitalize the forestry industry.

"Up to now, the public has been relegated to the role of spectator, but now communities will be able to actively participate in both forest conservation and the revitalization of the forestry industry," Forestry Minister MS Kaban said last week.

Indonesia has approximately 141 million hectares of forest, of which an estimated 95 million hectares have been set aside as production forests and conversion areas. The country is currently the ninth biggest pulp producer in the world.

The government plans to encourage people living near pulp factories to help develop production forests that will support the expansion of local pulp production, while discouraging the felling of trees in natural forests.

Currently, only two of the seven pulp firms in Indonesia, PT Musi Hutan Persada and PT Tanjung Enim Lestari, both in Sumatra, use their own production plantations to provide timber for pulp processing. All of the other companies use natural forest timber.

"People living within a maximum radius of 200 kilometers from a factory site will be trained to plant for forestry plantations," said Kaban.

The Forestry Ministry and Finance Ministry are in the process of establishing a general services body to support the implementation of the forestry plantation program among local communities.

Kaban said he expected Indonesia to become at least the third largest pulp producer in the world by 2009, through the expansion of forestry plantations from the current two to three million hectares to five million hectares.

The Forestry Ministry is targeting the establishment of one million hectares of new forestry plantations in 2007 alone. Kaban predicted that nine million hectares of forestry plantations would be available by 2014 if this new program was properly implemented.

Total pulp production for 2006 is expected to come in at 5.8 million tons, an increase of 7.4 percent from last year's 5.4 million tons.

As much as 45 percent of pulp produced in Indonesia and 35 percent of paper is exported.

Last year, Indonesia supplied 2.7 percent of the total global demand of 200 million tons of pulp and 2.5 percent of total global demand of 350 million tons of paper.

Global paper consumption is expected to rise to 490 million tons by 2020.

Govt to maximize 'local potentials' in building power plants

JAKARTA (Antara): The government will maximize the use of local resources in building coal-fired power plants outside Java currently in bidding process, a senior official at the Ministry of Energy and Mineral Resources said Tuesday.

"The local potentials include goods, manpower as well as funding," said the ministry's director general of electricity and energy utilization J Purwono.

"We will ask the contractors to use local resources including machineries, construction materials and manpower although the funding come from foreign sources, which usually are binding ones," he added.

Purwono pointed to the construction of a foreign-funded 7 megawatts (MW) coal-fired power plant which could use up to 30 percent of local content.

He also called local financial institutions to be proactive in funding power plant projects saying it could be a market for local lenders.

"Indonesian banks should also compete to finance power projects. Don't be passive," he said.

The government has announced on Dec. 19 a tender for the construction of 25 coal-fired power plants outside Java.

Four power plants will have the capacity of 100 to 200 MW to be built in Aceh, North Sumatra, West Sumatra and Lampung provinces.

Another four power plants with 50-65 MW of capacity slated for West Kalimantan, South Kalimantan, Central Kalimantan and South Sulawesi provinces.

There are also 17 plants with smaller capacities of 7 to 25 MW scattered nation wide in Bangka Belitung, Riau, Riau Islands, West Kalimantan, Maluku, North Maluku, Papua, East Nusa Tenggara,West Nusa Tenggara, Gorontalo, Southeast Sulawesi and North Sulawesi provinces.

These power plants are part of the government's plan to generate additional 10,000 MW of electricity by 2009.

As for Java island, the government has started bidding process for 10 power plants. Seven power plants will the capacity of 300 to 400 MW while the remaining three with 600 to 700 MW of capacity.

Indonesia rushes relief to flood-ravaged Sumatra island

The Associated Press

Published: December 24, 2006, The International Herald Tribune

BANDA ACEH, Indonesia: Indonesia rushed tents, food and other emergency aid to flood-ravaged parts of Sumatra island on Monday while the United Nations pledged US$2 million (€1.5 million) for survivors.

Soldiers loaded the aid into a military cargo plane in the capital, Jakarta.

It will be distributed by helicopters because the floods — triggered by days of heavy rain — have washed away roads and bridges in the worst hit area of Tamiyang in eastern Aceh province, said Syamsul Maarif, the executive director of the National Coordination Body for Disaster Response.

An aerial view from an aid flight over the region on Sunday showed many houses submerged, while only the roofs of others were visible. Some families were trapped on the roofs of their homes.

The death toll was at least 87, with dozens others reported missing, while some 110,000 people have been forced to flee their homes and are now staying in tents, government buildings or with relatives, said Burhanuddin, an Aceh government spokesman who goes by a single name.

Government seismologist Ahmad Zakir said rain had now stopped falling over the affected regions, but said light drizzle was a possibility later Monday.

The U.N. said it would provide an initial US$2 million (€1.5 million) in emergency relief to the region from its Central Emergency Response Fund.

Aceh was the region worst hit by the 2004 Asian tsunami, but this week's flooding was in areas unaffected by that disaster.

A lesson from History Thailand's stock and currency market compared with 1997

By: Mike Larson, Money and Markets , Dec 24, 2006 - 12:10 AM

Nine years, five months, and twenty days ago, Thailand revalued its currency, the baht. That one small move ultimately brought down stock markets, currencies, and economies throughout Southeast Asia and the world.

Now, Thailand is in the news again — implementing capital controls on international investors. Those rules would lock up a chunk of foreign investors' funds for a year in an attempt to curb currency speculation. But the circumstances of this new situation couldn't be more different from those of 1997. Instead of being provoked by a strong U.S. currency, Thailand is reacting to a weak dollar. That speaks volumes about just how far the once-mighty greenback has fallen.

Today, I want to look back at the fateful days of the 1997 Asian contagion ... compare it to the current situation ... and, most importantly, explain what it means for your investments.

The Baht Took a Bath and Thailand's Stock Market Dropped 55%

In the 1990s, Thailand ran a large current account deficit for years ... with few, if any, consequences. The country had no trouble attracting foreign capital. International banks, hedge funds, and other lenders were eager to shovel money its way. Domestic banks also ran amok on the credit front. They lent money for speculative real estate projects, stock purchases, and just about anything else, with little regard to risk.

But in the spring of 1997, whispers, rumors, and warnings started sweeping through the markets — Thailand's exports were slowing and its economy looked shakier. Slowly but surely, investors were looking elsewhere. Yet Thailand stubbornly kept the baht fixed to a basket of currencies, of which the dollar was the biggest component. Speculators saw opportunity and pounced. They placed massive bets that Thailand wouldn't be able to maintain the value of its currency. The country's central bank watched its currency reserves plummet. Policymakers fought hard, but they couldn't hold back the tide forever.

Finally, on July 2, 1997, all hell broke loose. In one fell swoop, Thailand gave up and allowed its currency to float. The baht immediately plunged almost 20% in value and interest rates surged.

Within a few weeks, the country's stock market was plunging. The Bangkok SET index ended the year with a whopping 55% loss! Thailand's Pain Was Just the Beginning of a Bigger Disaster

Many of Thailand's neighbors suffered from the same fundamental problems — overvalued currencies, extreme current account deficits, and massive real estate speculation.

So soon enough, Thailand's “sneeze” was spreading an Asian contagion throughout the region:

• Indonesia's currency, the rupiah, lost 30% of its value.

• Hong Kong was forced to jack interest rates up to 300% to fight off speculative attacks.

• One by one, the dominoes fell in Malaysia ... the Philippines ... Singapore ... and eventually, South Korea.

And the U.S. wasn't immune, either. On October 27, 1997, the Dow Jones Industrial Average plunged 554 points — its biggest one-day point decline ever. Ultimately, the International Monetary Fund was forced to step in with bailout packages totaling $17 billion for Thailand ... $40 billion for Indonesia ... and a whopping $57 billion for South Korea. That's the biggest in history. Add it all up, and you can see that Thailand's minor currency move provoked one of the worst financial market crises in modern history.

Meanwhile, the U.S. dollar reigned supreme throughout. It proved to be a rock-solid store of value during those turbulent times. In fact, the broad U.S. Dollar index surged after Thailand's devaluation, finishing the year with a 13% gain.

Now, Times Sure Have Changed: Asia Is Soaring While the U.S. Is Lagging

In 1997, investors believed the baht was dramatically overvalued, so they pulled their money out of Thailand by the boatload. But this time around, Thailand decided to implement its new capital controls because its economy is performing too well and attracting too much money. Foreign inflows are so great, in fact, that the baht has surged 16% against the dollar in 2006. That's a nine-year high! The country's exporters have been griping because such a strong currency makes their goods less competitive on world markets.

Another difference between now and 1997: Foreign stock markets have been surging throughout Asia, while U.S. shares have been lagging. Hong Kong's Hang Seng Index is up 29% year-to-date ... Indonesia's Jakarta Stock Price Index has surged 52% ... and China's Shanghai Stock Price Index has more than doubled. That compares with a 16% rise in the Dow.

True, Thai stocks initially got walloped when the new currency measure was announced. But they're already bouncing back ... and exchange-traded funds that track other foreign markets barely blinked! This time around, our economy is the one running the worst current account deficit in history. The U.S. deficit set a full-year record of $805 billion in 2005, almost six times the $141 billion owed in 1997. Heck, in the third quarter of 2006, our deficit hit an all-time quarterly high of $226 billion!

Plus, today, the U.S. dollar is the overvalued currency falling off a cliff. The U.S. dollar index, which measures the greenback against a basket of the world's currencies, topped out at 121.02 in 2001. It's now down about 31% since then. If it rounds out 2006 with a loss ... which is all but guaranteed at this point ... the greenback will have dropped four out of the past five years. And this time around, it's our public officials who are going around the world pleading for relief. As Larry told you yesterday, Treasury Secretary Henry Paulson, Fed Chairman Ben Bernanke, and several cabinet ministers just begged China to revalue its currency in order to boost exports and “save” American jobs.

What This Power Shift Means for Your Investments

Do I think the U.S. dollar is going to plunge 20% in one day? No.

Do I think the Fed will have to push overnight rates to 300% to defend the buck? Of course not.

There are plenty of other differences between smaller Asian countries and the U.S., too.

But I simply can't ignore the echoes of 1997. And neither should you. Every day, the once-mighty dollar looks a lot more like the once-lowly Thai baht.

If we continue to screw over our foreign creditors and foreign investors, we can expect to see:

• More central bankers shifting their reserves out of dollars and into alternatives like the euro and gold.

• More inflation, as foreign producers of everything from oil to toys raise their prices to compensate for the loss in value of the dollars we're sending them for their goods. That could push interest rates higher.

• More gains for foreign stocks and bonds. As I told you in “ Buy American? Not in Bonds ,” U.S.-based investors can get a currency “kicker” by investing in overseas assets. Indeed, just this week, the Chinese stock market became the largest among all emerging markets, with no end in sight.

• More profit opportunities in 2007 than we've seen in decades — in ETFs and LEAPS options ... in China and Japan ... in gold, silver, oil and other natural resources.

Components traced to find e-waste routes

Adianto P. Simamora, The Jakarta Post, Jakarta.

The State Ministry of the Environment is tracing the electrical components reused in secondhand goods to find how much electronic waste is being dumped in the country.

A preliminary survey revealed that refurbished electronic devices sold in Bogor, Depok, Tangerang and Bekasi were supplied by equipment brokers in Jakarta.

"The survey aims to track the distribution links of secondhand and refurbished electronic goods. The data is needed to identify the total electronic waste in the country," ministry official and survey head Herri Hamdani said.

Indonesia is a signatory to the Basel Convention on the environmentally sound management of electronic waste but it has yet to pass any laws regulating its disposal.

This process looks set to take longer, after officials attending a two-day workshop on solid waste management Thursday were unable to agree what constituted electronic waste, also known as "e-waste".

Four large companies were invited to share their experiences dealing with waste but none of the firms' representatives showed up.

An official from the Industry Ministry, Warsito, said the e-waste issue was a "sensitive one", which unless it was properly approached, could hamper IT development in the country.

"We are now struggling to improve the IT sector which is being left behind by other countries. Therefore, we must come to a clear definition about what e-waste is. Many people think used computers are not waste because these are computers they can afford to buy," he said.

Data from the United Nations Environment Program finds more than 500 million computers will have become obsolete in the United States between 1997 and 2007.

About 610 million cellular phones will have been discarded in Japan by 2010, the data says.

Thailand produces around 60,000 tons of e-waste every year from refrigerators, air conditioners, television sets, washing machines and computers.

The convention prohibits rich countries from exporting their electronic waste to developing nations.

The Environment Ministry says large quantities of e-waste are being exported to Indonesia for the purposes of re-use, repair, refurbishment, recycling and the recovery of non-ferrous and precious metals.

E-waste often contains toxic substances such as lead, cadmium, beryllium, mercury, zinc which can harm human health and the environment.

In many European countries, regulations on e-waste have been introduced to prevent it from being dumped in landfills.

However, in Indonesia there are no such controls and recycling is done by hand in scrap yards.

In Batam -- a main destination for e-waste -- the refuse is buried in forested areas.

The electronics industry is the country's second-largest contributor to national exports after the textile sector.

Exports reached US$6.06 billion in 2005 compared to $1.58 million in imports.

Industry ministry officials said they had found some modern shopping centers selling refurbished television sets.

"We have found many television sets -- mainly 14-inch ones with recycled computer picture tubes -- that are being sold in modern retail outlets," official Ahmad Rozy said.

We need to get in fast lane, minister admits

The Jakarta Post, Jakarta

With Indonesia needing to build 54 new expressway sections totaling 1,835 kilometers to enable high economic growth to take off, the Public Works Ministry is seeking ways to speed up highway construction.

"Things will need to be accelerated if we want to meet the targets within a reasonable timeframe," Public Works Minister Djoko Kirmanto said Thursday, while admitting that the pace of expressway construction had been unacceptably slow over the years.

"From 1978 to the time when the financial crisis struck, we were able to build at least 25.75 km of turnpike per year," said Djoko, during a discussion on "The Role of the Private Sector in Turnpike Construction".

Since then, the rate of expressway construction had fallen drastically to 9.25 km per year. "So, at this pace, if we want to build 1,800 km of expressway, it will take us some 162 years."

"The clock is ticking, and since we set our targets in 2005, only 47 km of expressway have come onstream," Djoko said.

Meanwhile, 48 km of expressway were under construction, contracts had been signed for 612 km, negotiations were underway for 204 km, 61 km were at the tender stage, and 177 km were at the prequalification stage.

In addition, projects for the construction of 683 km of expressway were being prepared to go to tender.

Frans S. Sunitro, president director of state-owned turnpike operator PT Jasa Marga, said the main reason for investor reluctance to put money into expressway projects was the prevailing investment and regulatory climate.

"Land acquisition is not easy, and the government doesn't provide any guarantees in this regard. This often delays our projects and costs us extra money," said Frans.

Agus Sidharta, a member of the Turnpike Regulatory Board, suggested that the land for turnpike projects should be acquired by the government, rather than by the investors.

"This would make such schemes more feasible and attractive to the private sector."

USAID to help agribusiness to tune of $13.75m

The Jakarta Post, Jakarta

The United States Agency for International Development (USAID) will provide aid worth US$13.75 million over three years in the form of equipment and technical assistance to help the government develop the agribusiness sector, it was announced Thursday.

The scheme, called the Agribusiness Market and Support Activities (AMARTA) program, will be implemented through USAID's main office in Jakarta, as well as its regional offices in Medan, Makassar and Denpasar, in partnership with the U.S.-based development consulting firm, Development Alternatives Inc.

"USAID has awarded a contract to Development Alternatives Inc., of the state of Maryland, to implement the AMARTA project. So, these funds will be disbursed via Development Alternatives Inc," David J. Anderson, chief of party of AMARTA, said Thursday during the launch of the program in Jakarta.

Each office will forge cooperation with the private sector, industry associations, the government, NGOs, chambers of commerce and industry and other stakeholders for the purpose of jointly developing the agribusiness sector in Indonesia, said David.

Under the program, eight sectors would be prioritized: cocoa, coffee, high-value horticultural products (fruit and vegetables), fishing, spices, biofuels and livestock.

"The ultimate goal is to improve productivity and the quality of products so as to ensure better market access," said William M. Frej, USAID's mission director.

Qualitywise, Indonesia's cocoa, for instance, is between 60 and 70 percent below international market standards.

"One of the aims of this project is to improve the quality of the cocoa exported to the U.S. so that we can secure incentive bonuses, rather than a 10 percent reduction from the normal price," said Syukur Iwantoro, head of the Agricultural Quarantine Unit at the Agriculture Ministry.

"After finishing our assessments, we will have identified the primary interventions for the program in collaboration with the stakeholders by the end of 2007," said Anderson.

In general, the AMARTA program will provide assistance such as training, capacity-building, consultation, promotion and facilitation in the agribusiness sector.

Jakarta airport using iris scanner

The Age Company Ltd

Jakarta's busy international airport has introduced an iris scanner system aimed at business travellers willing to pay around $US200 ($A255) per year to avoid long immigration lines.

Under the "Saphire" program, frequent flyers register with the immigration authorities, pay the annual fee, and submit to scans of their left and right eyes, which authorities say are as individual as prints of the fingers or palm.

On arrival, users scan one eye and are cleared for entry, a process expected to take about 10 seconds.

The Indonesian-Dutch venture behind the project says the main thrust of the program was one of convenience, although they hoped that speeding through registered users would allow the authorities more time to scrutinise other travellers for possible security threats.

Australian and US authorities sounded warnings this week of possible attacks on Western targets in Indonesia over the Christmas and New Year period.

The country has been relatively calm lately, with no major attack since suicide bombings on the resort island of Bali in October 2005.

"The government always takes precautionary measures to ensure safe travelling within Indonesia, eventually gaining back trust from the international community," Hamid Awaludin, minister of Law and Human Rights, told an opening ceremony for the scanners.

A spokesman said 550 passengers have already registered to use the service, which is offered by the Schiphol Group, an airport operator based in the Netherlands, and PT (Persero) Angkasa Pura II, Indonesia's state-owned airport managers.

The operators plan to expand to other Indonesian airports and hope to attract at least 20,000 users, mostly Indonesian nationals.

A similar system in the Netherlands has 33,000 members, they said.

Central Kalimantan to produce 1.4 million tons of CPO in 2007

Palangka Raya, C Kalimantan (ANTARA News) - Central Kalimantan province is expected to produce 1.4 million tons of crude palm oil (CPO) in 2007, an industry spokesman said.

"After the drop in CPO supply this year, we estimate that there will be high overseas demand for CPO next year. So, Central Kalimantan is ready to supply 1.4 million tons annually," Teguh Patriawan, chairman of Central Kalimantan`s Oil Palm Businessmen`s Association (Gapki), said here on Thursday.

He said in the past six months, there was a drop in CPO supply from two major exporting countries, namely Indonesia and neighboring Malaysia, due to an El Nino-induced prolonged drought affecting the two states` CPO production.

Patriawan expected that the CPO price would improve next year as demand for CPO, especially in China and European nations, would increase. CPO is among other things used as material to make bio-diesel energy.

China, which earlier needed CPO supply of around 1-2 million tons annually, would increase its demand to 5 or 6 million tons per year starting next year, he said.

Central Kalimantan has oil palm plantations covering a total area of 530,000 hectares and 24 CPO processing plants.

"Up to November 2006, CPO production reached 924,000 tons, an increase from last year`s 813,000 tons," he said.

The province was planning to plant oil palm in 14 districts on a total of 427,000 hectares of land over the next few years, he added.

He said he was optimistic that Central Kalimantan`s CPO production target of 1.4 million tons would be achieved in 2007 as four new CPO processing plants would become operational soon.

Having oil palm plantations on a total land area of 5.447 million hectares, Indonesia produces around 12 million tons of oil palm fruit per year. Malaysia which has a smaller oil palm plantation area turns out 15 million tons annually.

Russia s Alfa plans to invest up to $2b in RI

Andi Haswidi, The Jakarta Post - 2006-12-21 12:03:41

Jakarta, December 21, 2006 (The Jakarta Post) - One of Russia's largest privately owned holding companies, the Alfa Group, announced Wednesday that it planned to invest up to US$2 billion in Indonesia's mobile telecommunications industry through its subsidiary, Altimo.

"The Asian mobile market is developing very rapidly and Indonesia is the leader here with its large population, making it the most prospective market. So, we have decided to enter this market," Altimo vice president Kirill Babaev told reporters Wednesday in Jakarta.

The plan was conceived after company chiefs met with President Susilo Bambang Yudhoyono in Moscow earlier this month, when they expressed their interest in helping develop Indonesia's mobile telecommunications industry.

"We are targeting some kind of stake in one of the larger mobile operators here. Certainly, some time will pass before we start our actual project, but we are ready to invest up to $2 billion in the country's telecoms industry," Babaev said.

"It's not settled yet, but we will do what is best for us. We don't have a deadline. So we are basically looking for a good opportunity," he explained, adding that the plan would be realized next year.

Altimo is a strategic investment company that focuses on telecommunications, and which owns stakes in major cellular operators in Eastern Europe and Turkey with a total subscriber base of 130 million globally, far higher than the world's largest mobile operator, Orange, which has 80 million subscribers.

"We just celebrated our first anniversary earlier this December. Our investment portfolio now stands at about $14 billion, representing significant growth from when we Babaev said.

"We have significant stakes in two of Russia's largest mobile operators, and a 40 percent stake in the largest operator in Ukraine. In addition, we have a minority stake in Turkcell, which also owns mobile assets in Ukraine, Georgia, Moldova, Kazakhstan and Azerbaijan," he explained.

Kirill said that as an investment company, Altimo possessed the know-how to clinch investment deals in emerging markets like Russia, Turkey and Indonesia. "These markets are very similar," he explained.

Echoing Kirill's comments, Andrei Zemnitsky, also a company vice president, said, "We really believe that we have the know-how to manage businesses in'emerging markets, to add value, to serve consumers in emerging markets where people have limited incomes. But this doesn't mean they should be deprived of having mobile telephones."

Zemnitsky said Russia had 100 percent mobile penetration, meaning that every person in Russia had a mobile telephone.

"We see that a lot remains to be done in Indonesia in order to increase mobile penetration. The telecoms market is overly concentrated, there is not enough competition in that sense, and that severely limits the development of the sector," he explained.

Zemnitsky said his company had been observing Indonesia's mobile industry for some time before finally deciding to enter the market.

It established an operations office in Jakarta on Dec. 19, and appointed Soeharto as the company's chief representative here.

"We aim to improve Indonesia's mobile telecoms industry. What we have here is high communications costs due to the poor competitive climate. This was the foremost factor in encouraging us to enter the market," Soeharto said, promising that the arrival of the Russians would benefit .

Five Indonesian banks pledge US$2.84 bln to develop biofuel

Source: ANTARA News/Asia Pulse - 2006-12-21 16:44

Jakarta, December 21, 2006 (ANTARA News/Asia Pulse) - Five state banks have promised to provide loans totaling Rp25.56 trillion (US$2.84 billion) to finance the development of bio energy and revitalize Indonesia's plantation sector.

The banks signed a memorandum of understanding on Wednesday for the loan scheme with Finance Minister Sri Mulyani Infrawati and the chief economics Minister Boediono.

Bank Rakyat Indonesia (BRI) (JSX:BBRI) made a loan commitment of Rp12 trillion; Bank Mandiri (JSX:BMRI) pledged Rp11.08 trillion; Bank Bukopin, Rp1 trillion; while West Sumatra BPD and North Sumatra BPD both agreed to loan Rp500 billion.

The banks will provide loans carrying a 10 per cent fixed interest rate to small plantation owners growing oil palm, cocoa and rubber.

Water Financing Program 2006-2010

Water Makes WFP Countries Grow

Asian Development Bank


Under its new Water Financing Program (WFP), the Asian Development Bank (ADB) is offering to double spending on water projects as a means for ramping up investments in infrastructure that is critical to capturing and sustaining the huge new opportunities emerging in Asia’s booming economies.

WFP will initially focus on six countries that believe in water to either support or juice up their growth rates.

Read More ....

World Bank approves US$600 mln devt program assistance to RI

Jakarta (ANTARA News) - The World Bank said its board has approved 600 mln usd in development program assistance to Indonesia.

It said the program assistance, also known as Development Policy Support, consists of a 20-year 530 mln usd loan and 35-year 70 mln in concessional credit, which carries significantly lower interest rates and longer maturity than private financial markets.

The program brings together the Asian Development Bank, the Government of Japan, and the World Bank on a common platform to support Indonesia's reform agenda.

"Indonesia has shown strong commitment to restoring sound economic fundamentals. The challenge now is to encourage investment that will spur growth and create jobs to ensure the needs of the most vulnerable are being adequately addressed," Andrew Steer, the World Banks country director for Indonesia, was quoted by XFN Asia as saying.

He added the governments decision last year to reallocate 1.5 bln usd in fuel subsidies to programs that benefit the poor was "an extremely positive step."

"This program of development assistance puts the government in the lead in deciding what works best for the country, said P.S. Srinivas, the manager of the four-year development assistance program.

RI enjoys surplus of 404 million euros in its trade with Belgium

Jakarta (ANTARA News) - Two-way trade between Indonesia and Belgium reached 795.38 million euros in the January-August 2006 period with the former enjoying a surplus of 404.35 million euros.

"Trade relations between the two countries always favour Indonesia," Indonesian Ambassador to Belgium, Luxemburg and European Union Nadjib Riphat Kesoema told ANTARA by phone on Wednesday.

Indonesia enjoyed a surplus of 807.68 million euros in its trade with Belgium in 2002. The figure slightly fell to 700.43 million euros in 2003, 650.77 million euros in 2004 and 622.04 million euros in 2005.

Trade between the two countries dropped to 1.1 billion euros in 2003 from 1.25 billion euros in 2002. The figure declined further to 1.10 billion euros in 2004 but moved up to 1.16 billion euros in 2005.

He expressed optimism that trade between the two countries in 2006 would be ahead of last year`s.

Indonesia`s exports to Belgium included wood, footware, furniture, garments, fish, paper, pulp and tobacco, while its imports from the European country included chemicals and machinery.

He further said Belgian investments in Indonesia had shown an upward trend since 2001.

Belgium was listed as the 16th biggest foreign investor in Indonesia in 2005 with US$16.4 million in six projects. However, in the first half of 2006 Belgian investments reached US$1.1 million.

Data from the Investment Coordinating Board (BKPM) show that from 2002 to July 2006 Belgian investments in Indonesia reached US$33.9 million in 25 projects. Most of Belgian investors are engaged in plantations, waste treatment, and textile industry.

Germany swaps $24m debt for education in Yogyakarta

Urip Hudiono, The Jakarta Post, Jakarta

The German government has provided a 20-million-euro (US$24-million) debt swap to Indonesia to support the rehabilitation of schools in Yogyakarta and Central Java that were devastated by an earthquake earlier this year.

Germany has also provided another 6 million euros in additional grants, bringing the total amount of money involved to 26 million euros, for post-tsunami housing reconstruction in Aceh and Nias.

The agreement on the debt swap and grant was signed Monday between the Finance Ministry's director general for debt management, Rahmat Waluyanto, and German Development Bank (KfW) vice president for Asia Pacific, Hans-Peter Mssig.

The debt swap is the fourth and last tranche of earlier schemes that Germany provided to Indonesia, worth some 93.6 million euros so far.

In 2004, Germany provided 25 million euro in a debt swap for nature scheme to enhance the environmental awareness of SMEs and the protection of natural parks, following a debt swap worth 23 million euros earlier the same year for improving junior high school education in eastern Indonesia, and 25.6 million euros in 2002 for elementary education.

Under the latest debt swap scheme, Germany will cancel up to 20 million euros of debt after Indonesia sets aside half of the amount for rebuilding 213 primary and junior high schools in Yogyakarta and Central Java.

Indonesia's total debt to Germany stands at some 1.1 billion euros. Current project loans include 443.5 million euros for transportation, health, education, the environment and telecommunications.

Germany's grants for the post-tsunami reconstruction work in Aceh and Nias, meanwhile, totaled 250 million euros.

Rahmat welcomed the debt swap schemes, saying they were a mutually beneficial solution to the debt problem. The government will remain prudent in managing the country's debt, he said, and will only accept other debt swap schemes whose terms and conditions are feasible.

Mssig said that although the latest debt swap scheme was the last in the series, Germany might consider future ones following an assessment of their benefits to the welfare-improvement effort in Indonesia.

Other creditor countries have also been considering debt swap schemes for Indonesia, although no progress on these has been made to date.

Madrasah Education Development Project

Asian Development Bank, November 2006

The Project supports the Government’s efforts to improve madrasah education so it meets national education standards, within the Government’s broader education policy and strategic framework. The Project will cover primary, junior, and senior secondary private and public madrasahs in 27 poor districts of Central Java, East Java, and South Sulawesi provinces.

The Project will benefit 120,000 students in 500 madrasahs.

The Project will support a mixture of demand- and supply-side interventions to enable project madrasahs to (i) improve teacher professionalism; (ii) upgrade teaching–learning resources and facilities; (ii) increase their internal efficiency; and (iii) strengthen their governance, management, and sustainability.

The Project will help madrasahs meet national education standards according to the needs identified in madrasah development plans, through a range of interventions, including teacher qualification upgrading and professional certification, provision of substitute teachers, and teaching skills development; upgrading or expansion of facilities (classrooms, libraries, and laboratories); and provision of teaching–learning materials. These interventions will be selected by individual madrasahs according to their development needs.

The Project will enhance the internal efficiency of project madrasahs by increasing enrollment, decreasing dropout and repetition rates, and increasing completion rates at all levels through remedial and scholarship programs, particularly for poor and female students.

Governance, management, and financial sustainability of project madrasahs will be improved through training and performance-based madrasah development planning and management, and advocacy programs to enhance the perception of madrasah education quality and encourage stakeholder participation to ensure better resource mobilization and transparency.

Read More : Madrasah Education Development Project (Indonesia) [PDF]

South East Asia expanding biodiesel feedstock production

by Dane Muldoon, Autobloggreen - 2006-12-19 10:06

Dec 18th 2006 (Autobloggreen) - While rapeseed/canola continues to be the main biodiesel feedstock in Europe, and soy dominates U.S. biodiesel production, a host of other plants are moving biodiesel forward in other parts of the world. In the Philippines, the Biofuel Act is about to pass into law mandating the immediate use of one percent biodiesel, increasing to two percent after two years.

The numbers seem small but it has prompted a massive in-surge of investment in biodiesel production capacity with Chemrez Technologies planning to start construction of their third biodiesel processing plant shortly. The third plant, which cost more than P2 billion (US$40 million) and can produce 240,000 tons of biodiesel annually, is designed to meet the surge in demand once the second phase of the Biofuel Act comes into effect. The Philippines are heavily promoting the Jatropha Curcas plant as their preferred biodiesel feedstock.

Jatropha is also gaining popularity in Indonesia with a Dutch expert claiming that Indonesia may be the first country in the world to commercially use biodiesel produced from jatropha.

Professor H.J. Heeres, of the University of Groningen in the Netherlands says that more then 25 million hectares (62 million acres) of land could be suitable for jatropha in Indonesia.

Officials in charge of biofuel development in Indonesia have said that the government plans to produce just over 15,000 tonnes of biofuels from jatropha by the end of 2007.

Jatropha, which is being planted in India and western China as well, is seen as more environmentally friendly and sustainable than palm oil, but at least for the time being, the bulk of Indonesia's biodiesel production will come from palm oil.

Biodiesel produced from palm oil is already being exported overseas from Malaysia and biodiesel export dollars are expected to have a big impact on the Malaysian economy. The Malaysian government has already granted around 75 licenses to produce the biodiesel and five production plants are already in operation or in the process of getting off the ground.

The Malaysian Palm Oil Board, the governing body for the palm oil industry, itself is building three biodiesel plants. Biodiesel is exported from Malaysia to Germany, the U.S. and other European countries.