State firms miss 2008 profit target

The Jakarta Post | Fri, 02/27/2009 10:07 PM  

The State Own Enterprise (SOE) Ministry estimates that SOEs will fail to reach their overall projected target for 2008 net profits due to losses on currency exchange, says an official. 

“We estimate that we will earn around Rp 75 trillion (US$6.2 billion) in net profits from our enterprises last year, below the targeted Rp 81 trillion,” secretary to the SOE minister, Said Didu, said on Friday. 

The estimated net profits of 2008 are only around 4.7 percent up on that of the year 2007, and sluggish when compared to the 32 percent net profit growth in 2007. 

According to BUMN (SOE) Watch reports, profits from state firms reached Rp 71.59 trillion (US$7.9 billion) in 2007,  a 32 percent rise from the Rp 54.4 trillion booked in 2006. 

He said the weakening rupiah against the dollar last year led to currency losses which could amount to Rp 12 trillion, hence, undermining the ministry’s net profit target. 

“In January, the rupiah opened at Rp 9,300 but by the end of the year it had closed at around Rp 11,900,” he said.

Indonesia Sells Dollar Bonds Yielding Over 10 Percent

By Lilian Karunungan, Bloomberg  

Feb. 27 (Bloomberg) -- Indonesia, Southeast Asia’s biggest economy, sold $3 billion of bonds in the largest dollar debt fundraising by a developing nation this year after offering more than double the premium over U.S. Treasuries it paid in June. 

Indonesia sold $2 billion of 10-year notes to yield 11.75 percent, or 8.759 percentage points more than similar-maturity U.S. Treasuries, according to Barclays Plc, which along with UBS AG arranged the sale. It also sold $1 billion of five-year notes to yield 10.5 percent, 8.474 points above U.S. government debt. 

“Indonesia was just being realistic in accepting the higher yield given the tough market conditions,” said Goh How Phuang, a portfolio manager in Singapore at Schroder Investment Management Ltd., which oversees $158 billion. “They had to make it more attractive for investors to ensure a strong response.” 

The sale, twice the size of last month’s international bond sale by the Philippines, will help President Susilo Bambang Yudhoyono’s government finance its proposed 139.5 trillion rupiah ($11.6 billion) budget deficit. Policy makers in developing nations are seeking to boost supplies of foreign exchange as a deepening global recession pummels exports and prompts global funds to shun emerging-market assets. 

‘Attractively Priced’ 

Standard & Poor’s this week cut its credit ratings for Ukraine and Latvia, and lowered India’s rating outlook to negative from stable. The company downgraded Ukraine’s rating to CCC+, seven levels below investment grade, while Latvia’s was lowered to BB+, the highest junk rating. S&P had affirmed India’s BBB- long term credit rating, the lowest level in the investment grade. 

Bank Indonesia Governor Boediono told reporters in Jakarta today that the yield on the dollar bond was is in line with market conditions and the funds raised will add to the supply of foreign currency. 

The Philippines sold $1.5 billion of 10-year notes to yield 8.5 percent, or 6 percentage points more than U.S. Treasuries on Jan. 8 and Turkey, which has the same debt rating as Indonesia, the same day sold $1 billion of eight-year bonds to yield 5.01 percentage points above Treasuries. In Indonesia’s last international offering in June 2008, 10-year bonds were priced to yield 7.27 percent, 3.06 points more than Treasuries. 

Indonesia’s latest issue was “attractively priced,” said Anton Hauser, who helps oversee the equivalent of $1.1 billion of emerging-market debt at Vienna-based Erste Sparinvest KAG. “However, a relatively large issue size could weigh negatively on the bond’s secondary market performance.” Hauser said he didn’t buy because of “some outflows” from his funds. 

‘High Spreads’ 

The extra yield investors demand to own Indonesia’s dollar bonds instead of Treasuries has narrowed 119 basis points, or 1.19 percentage points, to 7.22 percentage points since reaching this year’s high on Jan. 15, according to JPMorgan Chase & Co. The spread averaged 1.69 percentage points in the first half of 2007, before a global credit crisis began. 

“Considering actual high spreads, there are good opportunities for investors who can discriminate between good and bad stories,” said Ernesto Bettoni, a London-based investment specialist at Fortis Investments, which oversees the equivalent of $244 billion in assets. 

‘Tap Markets’ 

Indonesia’s parliament approved this week a 73.3 trillion rupiah stimulus package to help the economy and endorsed the 2009 budget, paving the way for the country to sell as much as $4 billion of dollar-denominated debt. Philippine Finance Secretary Gary Teves said yesterday the nation, facing its biggest budget deficit in five years, will consider selling more debt overseas. 

“Countries are trying to tap debt markets as quickly as possible in case the situation deteriorates further in the second half,” said Paul Biszko, a senior emerging-markets strategist with RBC Capital Markets in Toronto. 

Indonesia’s gross domestic product rose 5.2 percent in the fourth quarter, the smallest increase in more than two years, and the government forecasts economic growth will slump to 4.5 percent this year from 6.1 percent in 2008. 

Debt from Indonesia, which raised $4.2 billion from dollar- denominated bond sales last year, is rated BB- by Standard & Poor’s and Ba3 by Moody’s Investors Service, three levels below investment grade. 

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net;

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Just landed

The Jakarta Post  |  Fri, 02/27/2009 9:30 PM 
 

 Indonesia President Susilo Bambang Yudhoyono, front left, and his wife, second left, are greeted by Thai Deputy Prime Minister Suthep Thaugsuban, center, and his wife upon Yudhoyono's arrival for the 14th Association of Southeast Asian Nations (ASEAN) summit at the Hua Hin airport, Thailand, on Friday. (AP/Nicolas Asfouri)

Poll shows Yudhoyono on course to win again

The Jakarta Post, Jakarta | Fri, 02/27/2009 4:51 PM  

President Susilo Bambang Yudhoyono is on course to win the presidential elections in July, with a strong lead over his main rivals, a poll released Friday showed, Antara reports. 

The Indonesian Survey Institute poll showed the incumbent President was the most popular candidate regardless of who he chooses as running mate. 

Asked who they would vote for if the election was held this month, half of the survey respondents opted for Yudhoyono, compared to 18.5 percent for his closest rival, former president Megawati Soekarnoputri. 

Yudhoyono's popularity had surged about seven percent while Megawati's had changed only slightly since January. 

Former military men Prabowo Subianto and Wiranto gained 4.3 percent and 3.0 percent respectively, while Sultan Hamengkubuwono X, the sultan and governor of Yogyakarta, gained 3.9 percent. 

Asked who they would support in the April parliamentary elections, almost a quarter of respondents chose Yudhoyono's Democrat Party (PD), while Megawati's Democratic Party of Struggle (PDI-P) scored 17.3 percent. 

The Golkar Party, whose chairman Jusuf Kalla is the current Vice President of Indonesia, gained 15.9 percent of respondents' support. 

The legislative election will be held on April 9 and the presidential election will take place three months later. 

Opinion poll was conducted among a sample of 2,455 Indonesians.

Stimulus can absorb 3m new workers

Aditya Suharmoko, THE JAKARTA POST, JAKARTA | Thu, 02/26/2009 10:35 AM  

The government expects its stimulus package to absorb an extra 3 million workers amid large scale layoffs from companies hit by the global economic downturn. 

On late Tuesday, the government received approval from the House of Representatives to launch the stimulus package. The House even raised the amount by Rp 2 trillion to Rp 73.3 trillion in total. 

The Rp 2 trillion increase, which will be added to fund infrastructure projects, is expected to help absorb an additional 3 million workers, said State Minister for National Development Planning Paskah Suzetta. 

His estimate was based  the assumption that each additional  1 percent economic growth achieved could generate employment for between 431,000 and 450,000 people. 

According to the Finance Ministry, as of January export-oriented industries had laid off 24,790 workers, and were planning to lay off 25,000 more in the coming months. 

Of the total Rp 73.3 trillion stimulus package, Rp 12.2 trillion is allocated to infrastructure projects and empowerement programs for the people living in rural areas. 

This amount is on top of over Rp 90 trillion already set aside in the 2009 state budget for infrastructure projects  under the auspices of various relevant ministries. 

“With an economic growth of between 4.5 percent and 5 percent, helped by the extra Rp 2 trillion increase in the stimulus, the poverty rate is expected to drop to between 12 percent and 13 percent. 

“Last year it was 15.4 percent,” said Paskah. 

Finance Ministry head of fiscal policy Anggito Abimanyu said the Rp 2 trillion increase would be allocated to build roads in villages and municipalities, and irrigation schemes, which “can quickly generate employment”. 

The House said the government should finish the stimulus package details in five days, launching it as early as March to limit the negative impact of the global financial crisis. 

“In five days the budget document will be ready. Thus, the money can be absorbed in the first semester (of 2009),” said Anggito. 

Critics said if the government failed to launch the stimulus in early 2009, Indonesia’s economy might have a slower growth than expected. 

Finance Minister Sri Mulyani Indrawati said the economy might only expand 4.5 percent this year, far lower than the 6.1 percent growth achieved last year. 

Bambang Susantono, the deputy minister to the coordinating minister for the economy, in charge of infrastructure, said the government would launch the stimulus in early March, although it “still depends on the projects”. 

He said the government had also worked with the International Labour Organization (ILO) to generate more employment. 

“ILO said there are labor-based methods, which can generate employment 1.5 times higher based on the (same) jobs and sectors.” 

He added that the government expected ministries and government agencies to create more employment without raising project costs or reducing project quality. 

To reduce the burden of low- to mid-income workers, the government will introduce an income tax cut to workers having a monthly income of less than Rp 5 million, said the Finance Ministry’s director general of taxation Darmin Nasution. 

He said the tax cut would be applied to February’s income tax, but the government was still designing which sectors would get the benefit of the tax reduction. 

The regulation is expected to be issued soon. 

Since last October Indonesia’s economy has increasingly suffered negative  impacts from the global economic downturn. 

According to the Central Statistics Agency (BPS), the economy grew the slowest in two years in the fourth quarter of 2008 as the global slowdown slashed commodity prices and export demand. 

The economy expanded 5.2 percent in the fourth quarter of 2008 from a year earlier, slower than the annualized growth rate of 6.4 percent booked in the previous quarter. 

Also, on a quarterly basis, the economy contracted by 3.6 percent in quarter four from the previous quarter, replicating a similar trend that occurred in the same period during the last two years.

Mandiri to help out debtors

The Jakarta Post,  JAKARTA   |  Thu, 02/26/2009 10:47 AM  

Bank Mandiri, the country’s largest bank, is to restructure Rp 3 trillion (around US$225 million) in debts owed by a number of firms hard hit by the global downturn. 

Mandiri director Abdul Rachman said on Wednesday the restructuring was being made at the request of the companies, which are mostly exporters facing financial difficulties as slower demand for their products has hurt their earnings. 

“I hope that with this restructuring program, their business will keep rolling in,” Abdul said.

Under the restructuring, which will start to take effect from March until June, each debtor would be given the chance to reschedule their debt payment. 

“We will give them options for delaying the overdue debts of up to one year,” Abdul said.

Each debtor could delay payment on the debt principal instalments, but would still be required to pay the interest. 

Abdul said that the most affected companies came from the footwear and textile sectors, where demand for products was severely affected as the biggest importers — the US and EU countries — have suffered most in the economic crisis. 

Such industries, especially export-oriented sectors, are the first to be hit hardest by the global economic crisis, which has  had an increasingly negative economic impact starting from last October onward. 

In turn, Indonesian banks have also had a fair share of problems reflecting global pressures on banks.  

Indonesian Bank data shows that bad loans held by commercial banks jumped by 35 percent to Rp 14.3 trillion (US$1.24 billion) in 2008, up from Rp 10.6 trillion in 2007. 

Banks included in this category include Bank Central Asia (BCA), Bank Danamon, Bank CIMB Niaga, Bank Panin, Bank Internasional Indonesia (BII) and Bank Permata. 

Aside from bad loans, some cases of high exposure by Indonesian banks to derivative transactions have also raised some concerns on the part of the central bank. 

BI deputy governor Budi Mulya has said 15 Indonesian banks were exposed to derivative deals worth up to $4 billion made before the December ban on such deals came into affect, with the banks originally hoping that these deals would all mature in the second half of this year. 

BI is tightening up the rules on these derivative products. 

Exposure to derivatives losses has already been felt by a number of banks, whose profits have been cut when they had to set aside large provisions against possible losses. 

The net profits of CIMB Niaga, the nation’s sixth largest bank, plummeted by 55 percent last year to Rp 678 billion after the setting aside of significant reserve funds to cover potential derivatives losses. 

For the same reason, Bank Danamon, the country’s fifth largest bank, saw its net profits drop in 2008  by 28 percent to Rp 1.5 trillion, down from Rp 2.1 trillion in 2007. 

A derivative transaction is a foreign exchange contract that derives its value from an underlying asset, commodity or liability, and is normally used as a hedging device.

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Stimulus package approved, raised

Aditya Suharmoko, The Jakarta Post, JAKARTA | Wed, 02/25/2009 8:45 AM  

Legislators approved late on Tuesday a provision in the 2009 state budget that enables the government to unleash its much-needed stimulus package, and even increased it by Rp 2 trillion (US$176 million) to help shield the economy from the global economic meltdown. 

The provision centers on Article 23 of the state budget, which can be used under "emergency" conditions only. 

"The emergency conditions constitute, among others, economic growth plunging 1 percent below the government's assumption and the significant rise in government bond yields," said Suharso Monoarfa, vice chairman of the House of Representatives' budget committee. 

The Rp 2 trillion increase, which puts the total stimulus at Rp 73.3 trillion, will be allocated to finance infrastructure projects, which lawmakers consider of high importance to generate employment to protect "people's prosperity", Finance Minister Sri Mulyani Indrawati said in a hearing with the committee. 

Suharso said ministries, government agencies and regional administrations that failed to execute the stimulus for the sake of the people would have their budget allocation cut in the 2010 state budget. 

The increase means the budget deficit is raised to Rp 139.5 trillion, or 2.5 percent of the GDP. The figure is Rp 88.2 trillion higher than the Rp 51.3 trillion stated in the 2009 budget. 

The government will have to finance it by using Rp 51.3 trillion of unused funds from last year's budget and seek additional loans worth Rp 44.5 trillion and program loans worth Rp 1.1 trillion, Suharso said. 

Mulyani said the economy was expected grow by 4.5 percent in 2009, far slower than the 6.1 percent booked last year. 

Exports may contract by 3 percent this year due to the slowing economies of Indonesia's trade partners. 

Investment will also likely be hit, down to 5.9 percent from the 7.5 percent previously expected as the liquidity crunch halts flows of money. 

All these factors, Mulyani pointed out, would contribute to a higher rate of unemployment and poverty. 

As of January, export-oriented industries had laid off 24,790 workers, and were planning to lay off another 25,000 in the coming months. 

However, she said, the impacts to the economy would be much heavier if the government failed to come up with the stimulus. 

With all economic indicators taking a beating, the unemployment rate is predicted to soar to 8.87 percent of Indonesia's 230 million population if the government does not act immediately.

The economic stimulus package, which is expected to take full effect as early as March, is estimated to contain the rate to less than 8.34 percent. 

The stimulus is aimed at maintaining private consumption, the main driver of the economy, growing at between 4 percent and 4.7 percent, Mulyani said. 

Of the total, Rp 12.2 trillion to be allocated to infrastructure projects and empowerment programs for people living in rural areas, considered the most efficient way to cushion massive layoffs.

Indonesia investment agency says FDI jumps 61 pct in Jan

Forbes.com, 02.24.09, 07:14 AM EST 

JAKARTA, Feb 24 (Reuters) - Foreign direct investment in Indonesia jumped 61 percent to 6.39 trillion rupiah ($536 million) in January from a year ago, the state investment agency said on Tuesday, despite the global economic downturn. 

Muhammad Lutfi, investment board chairman, said that the energy, infrastructure, agri-business and agriculture sectors are the main areas expected to attract foreign investment this year. 

Domestic investment rose by a third to 760 billion rupiah in January from a year ago, with total investment up 58 percent to 7.15 trillion rupiah. 

Indonesia, which holds parliamentary and presidential elections this year, has tried to make its investment climate more attractive, but analysts have warned that the country, which is a major exporter of commodities such as palm oil and rubber, could see a slowdown on the back of a slide in commodity prices. 

Investment in Indonesia rose 15.5 percent to $17 billion in 2008, below the target of around $20 billion rupiah, reflecting the worsening global economic conditions. 

The government has announced a fiscal stimulus package, including spending on infrastructure and other projects in order to boost growth and create more jobs. 

It has forecast economic growth of 4-5 percent in 2009, down from 6.1 percent in 2008.

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BI: Banking sector still safe from crisis

The Jakarta Post | Tue, 02/24/2009 8:12 PM  

The Indonesian Central Bank (BI) revealed Tuesday that the state of national banking is generally good and will be strong enough to endure the repercussions of the global financial meltdown because of sizeable capital and sound credit. 

"Generally, the banking situation is sound enough to withstand the crisis due to a high capital-to-asset ratio (CAR) and also low nonperforming loan (NPL) rates, as well as fund liquidity," BI director of banking research and regulation Halim Alamsyah said, as quoted by state news agency Antara. 

He added that the results of the reports, including foreign exchange loans, up until January, were solid. 

"Several banks are indeed troubled due to foreign exchange transactions, however, in general those banks have sufficient capital buffers and high reserves," Alamsyah said. 

According to Halim, BI is predicting a low NPL rate, though the results of this will not be available until the second semester, or next June. 

"We are predicting the gross NPL rate to increase above 5 percent, but won't surpass 6 percent in June," Alamsyah said. (amr)

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House approves more budget allocation on stimulus package

The Jakarta Post | Tue, 02/24/2009 4:07 PM  

The House of Representatives has approved the government’s request for an additional Rp 10.2 trillion to the economic stimulus package that will be disbursed on infrastructure projects this year. 

Vice chairman of House Budget Committee, Suharso Monoarfa, told reporters on Tuesday that the proposal was approved on a working committee meeting earlier that day, making the total amount of budget allocated for the stimulus package now stood at Rp 71.3 trillion. 

“The proposal was approved because it was in line with article 23 in the 2009 State Budget Law. Let’s just hope this stimulus can be implemented well,” he said as quoted by detikfinance.com. 

The article stipulates that should the economy is under an emergency situation the government, with the approval of lawmakers, can change its annual budget allocation without having to revise the State Budget Law. 

To safeguard the implementation of the stimulus package, Suharso said the House would directly monitor the central government’s financial report. 

“We do not want this stimulus to become a waste,” he said. 

Of the additional Rp 10.2 trillion, Suharo estimated that only Rp 8.2 trillion could be considered as a direct spending. However, he said, such amount would be able to create 2.4 million employment. (and)

Retail sukuk bonds a hit with investors

Aditya Suharmoko, THE JAKARTA POST, JAKARTA | Tue, 02/24/2009 10:54 AM  

The volume of  the new government retail sukuk (Islamic bonds) absorbed by individual investors is exceeding government expectations. 

That was according to official figures released by the Finance Ministry on Monday. 

The government managed to book orders of up to Rp 5.56 trillion (US$ 496.4 million) of retail sukuk in less than a month, or about 3 times its initial target of Rp 1.77 trillion as originally submitted by 13 designated selling agents. 

“It’s an example of how dynamic the financial market conditions are ... “ Finance Minister Sri Mulyani Indrawati said in a press conference. 

It was the first retail sukuk bond ever issued by the government.

 

 JP/IRMA

The selling agents are Bank Mandiri, Bank Syariah Mandiri, Citibank N.A., HSBC and Bank BII, as well as Danareksa Sekuritas, CIMB-GK Securities Indonesia, Reliance Sekuritas, Trimegah Securities, Andalan Artha Advisindo Sekuritas, Anugerah Securindo Indah, BNI Securities, and Bahana Securities. 

They had set a low target taking into account potential concerns of  investors over financial instruments during a financial downturn. 

“We’ll sell our bonds as long as the price is rational, and the profile won’t burden the state budget. We’ll always cope with the dynamic market conditions,” Mul-yani added. 

The retail sukuk is part of the government’s effort to plug the budget deficit, which is forecast to reach Rp 136.9 trillion, or 2.6 percent of the gross domestic product, this year. 

According to the Finance Ministry, 14,295 investors have so far ordered retail sukuk, 42 percent of whom are residing in Jakarta. 

A large proportion of these investors, 46 percent of them, ordered a retail sukuk purchase of less than Rp 100 million in total. 

The retail sukuk is sold at Rp 1 million per unit, with a minimum purchase of Rp 5 million. The yield is 12 percent, maturing on Feb. 25, 2012. 

Most of the investors are working as civil servants, private employees, housewives and entrepreneurs. Private employees ordered the largest bulk of purchases, equivalent to about 39 percent of the total volume of the retail sukuk, so far. 

Mulyani said the largest single purchase of retail sukuk amounted to Rp 35.3 billion, while the lowest single purchase was Rp 5 million. 

The Finance Ministry named Mandiri and HSBC as the best selling banking outlets, and then Trimegah and Andalan Artha as the best securities outlets. 

The retail sukuk will be on offer until Feb. 25. It can then be traded after being listed on the

Indonesian stock exchange as of Feb. 26. 

The government is still also considering selling international sukuk bonds and medium term notes (MTN) in the coming months. 

Bond issues are a government  option for securing funds to help cover the state budget deficit.

UNILEVER INDONESIA OPTIMISTIC ITS SALES WILL HOLD UP

Tradingmarkets.com, Mon. February 23, 2009; Posted: 12:07 AM    

MEDAN, Feb 23, 2009 (AsiaPulse via COMTEX) -- PT Unilever Indonesia Tbk (JSX:UNVR) is optimistic the sales of its products, particularly tea, would be continued despite the current global economic crisis. Its brand manager for tea-based beverages, Nanang Siswanto, said here on Sunday its tea products like "SariWangi" and "SariMurni" met people's basic needs and therefore they would still be sold. 

He made the statement on the sidelines of a "Segar Bundar Sarimurni Program" event in Bandar Khalifah Percut Sei Tuan, Deli Serdang. 

The program that contains activities useful for women will also be carried out in other regions until August. 

Siswanto declined to mention the sales target or growth of the company's SariWangi or SariMurni tea products. 

"One is sure, namely that the management keeps maintaining and boosting their quality to satisfy consumers' needs so that their interest in the products will continue to rise," he said.

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RI middle class braces for the crisis

The Jakarta Post, Jakarta | Mon, 02/23/2009 2:24 PM  

Indonesian middle class is busy tightening its collective belt to deal with the economic metldown. 

From invoice-sorting secretaries to guitar-strumming musicians, the country's burgeoning middle class is bracing the coming of the crisis. 

The financial doldrums that began in October last year have not left Indonesia unscathed, with the Jakarta's main bourse struggling to regain its feet and the rupiah sinking. 

Prices continue to rise and the unemployment rate is on a steady increase, but many experts and industry players agree the worst of the financial crunch has yet to be felt, forcing families to start cutting short their nonessential expenditures. 

"Our monthly budget of Rp 200,000 (US$18) for daily needs such as soap and shampoo can no longer sustain us," said Helda, a secretary at a foreign consumer goods company, whose husband works as an editor of a news website. 

She added that certain items had to be crossed off from the couple's shopping list in the past two months. 

"I don't buy imported snacks or frozen foods such as nuggets anymore," she said Saturday. 

The couple has also refrained lately from going to the movies or dining out, replacing those luxuries with DVDs and simple home cooking. Adit, a musician who is married with three children, said family recreation was indispensable for him, but he was also forced to trim his shopping list. 

"If there's something I need moderately but not urgently, such as mosquito repellent, I won't put it in the list right away. I will wait until the middle of the month and see if I still need it," he said. 

Even single professionals are adapting themselves to a simpler kind of life these days. Indah, a fashion enthusiast working at an advertising company, said the crisis had affected her leisure and shopping choices. 

Iqbal, a computer programmer, said he was lucky to have extra jobs to patch up his living during the crisis. 

"If it wasn't for my freelance designing jobs, I would be in a very tough situation right now," he said. 

Despite the extra income, he has had to tone down on life's pleasures, such as playing pool or getting a massage. 

"Previously, I'd go get a massage twice a week, but that's no longer feasible," he said, adding the ritual was reduced to once a week now. (dis)

Japan guarantees RI’s first samurai bond

Rendi A. Witular ,   THE JAKARTA POST ,   PHUKET, THAILAND  |  Mon, 02/23/2009 10:55 AM  

In agreement: Finance Minister Sri Mulyani Indrawati (right) and Japanese Parliamentary Secretary for Finance Shinsuke Suematsu shake hands after signing a financial sector deal in the Thai resort island of Phuket on Saturday. JP/Rendi A. Witular

Japan agreed Saturday to provide financial support worth US$1.5 billion for guaranteeing Indonesia’s planned yen-denominated bond, known as the samurai bond. 

Finance Minister Sri Mulyani Indrawati and Japanese Parliamentary Secretary for Finance Shinsuke Suematsu forged the guarantee deal during the special ASEAN+3 Finance Minister’s meeting in the Thai resort island of Phuket. 

Mulyani said the bond, which would be Indonesia’s first ever, was aimed at helping the government plug this year’s widening budget shortfall after it planned to unload more funds to stimulate the economy amid the global economic hard times. 

“The fund will be provided in the form of a guarantee by the Japanese Bank for International Cooperation (JBIC) to the Indonesian government in issuing yen-denominated foreign bonds in the Japanese capital market,” Mulyani said. 

“Under the deal, if the bond fails to lure the appetite of Japanese investors, and the yield is deemed too expensive for the Indonesian government to bear, Japan can convert the fund into ordinary loans to help cover the budget deficit.” 

Mulyani could not provide the exact timing for the issue, saying it would depend primarily on the condition of the global financial sector. 

Indonesia, Southeast Asia’s largest economy, will need to link the samurai bond with the JBIC because the country’s sovereign investment rating is insufficient for the issue, according to the Finance Ministry’s head of fiscal policy, Anggito Abimanyu. 

The JBIC has AAA rating. 

While primarily aimed at keeping the budget deficit in check, Anggito said the bond proceeds or the loans would be allocated mostly to finance trade and projects linked to Japan. 

The Finance Ministry’s director general for budget management, Anny Ratnawati, said last week

the deficit would swell to Rp 136.9 trillion ($11.1 billion), or 2.6 percent of the country’s GDP, from a previous forecast of Rp 129.5 trillion, or 2.5 percent of the GDP. 

Aside from the guarantee facility, Mulyani also said Japan had agreed to help the stability of the Indonesian economy and complement its current strong position of foreign reserves by upgrading the size of the existing bilateral swap arrangement. 

Under the Chiang Mai Initiative, Japan and Indonesia will double the swap deal to $12 billion.

The initiative was inked in Thailand in 2000, aimed at creating a network of bilateral swap arrangements among ASEAN+3 countries to address short-term liquidity difficulties in the region and to supplement existing international financial arrangements. 

ASEAN+3 includes the 10 members of ASEAN — the Philippines, Indonesia, Thailand, Malaysia, Singapore, Brunei, Vietnam, Myanmar, Cambodia and Laos — as well as the three East Asian nations of Japan, China and South Korea. 

The bigger swap allocation will strengthen Indonesia’s foreign currency reserves in case of a sharp depreciation in the rupiah against the US dollar. Latest central bank data shows Indonesia’s foreign exchange reserves currently stand at $50.87 million. 

Bank Indonesia uses the reserves to supply the financial market with the greenback, making sure the volatility in the rupiah can be maintained at favorable levels. 

The rupiah has been losing ground over the past weeks, hovering at above Rp 12,000 per dollar, higher than the Rp 11,000 earmarked under the planned revision of this year’s state budget, as banks shop for more dollars to pay for derivatives deals with exporters. 

While the declining value of the rupiah is in part good for exports, it creates a greater harm, especially for the country’s ability to pay dollar-denominated government and private sector debts, as well as the ability to finance international trade. 

“The deal with Japan, which is a very progressive move, can ease speculation in the rupiah because Indonesian foreign currency reserves are getting bigger and stronger. This will boost confidence in the market and in the businesses,” Mulyani said. 

She added Japan was ready to take part in a joint contingent loan facility for Indonesia, which is being elaborated by Indonesia and its development partners, including the World Bank, the Asian Development Bank and other countries. 

“Although the Indonesian economy remains sound, there’s still a need for a second line of defense in a bid to fully anticipate the worst from the impact of the global economic crisis,” she said.

Guarantee fund to go into effect this year

Benget Besalicto Tnb., THE JAKARTA POST, JAKARTA | Mon, 02/23/2009 10:53 AM  

The government will start operating the infrastructure guarantee fund this year with an initial fund of Rp 1 trillion allocated from the 2009 state budget, a senior official said Saturday. 

“We’ve finalized the draft of the regulation on the guarantee fund; now we’re waiting for President to sign it,” Bambang Susantono, infrastructure deputy to the coordinating minister for the economy, told The Jakarta Post. 

“I think we can start in the next few months.” 

He added the guarantee was “necessary to attract investors in developing infrastructure projects”. 

It was also important, he went on, to avoid any cancellation of infrastructure development, which is badly needed by Indonesia to accelerate economic growth and improve competitiveness at the international level, which is on a decline. 

He said the government regulation would rule what kind of infrastructure projects need to be guaranteed if there was any policy change made by governments. 

In the case of investors canceling projects due to policy changes on part of the government, the government may be required to pay financial compensation to the investors. 

Such stipulations are detailed in the upcoming government regulation. 

All of the guarantee fund will be used to guarantee infrastructure projects under the public private partnership (PPP) schemes for the next five to 10 years. 

“The existence of the fund will only be aimed at guaranteeing that the next governments will not make any changes to the agreed contracts already signed by previous governments,” Bambang said. 

But he added he could not yet disclose what projects would be guaranteed and how much each of them would be guaranteed for. 

“We’re waiting for the government regulation to be approved,” he explained. 

He also said part of the guarantee fund would be allocated from the state budget, while the rest would be in loans sourced from the Asian Development Bank (ADB) and the World Bank. 

The guarantee fund will differ from the planned infrastructure fund, which is also set to be established by the government soon to facilitate the financing of infrastructure projects. 

Due to the frequent shortages of funds for infrastructure development, the government recently announced the planned establishment of the Indonesia Infrastructure Fund Facility (IIFF), which could take place as early as March. 

This institution will be charged with raising funds to finance infrastructure projects under the public private partnership mechanism.

RI pledges continued reforms

Aditya Suharmoko, THE JAKARTA POST, JAKARTA | Mon, 02/23/2009 11:19 AM  

The government will continue trying to improve the investment climate, which has been reformed since 2005, to attract more investment to stimulate the country’s economy, according to senior ministry officials. 

On Sunday, Edy Putra Irawadi, industry and trade deputy to the coordinating minister for the economy, said the government would keep pushing for regulatory reform in various economic sectors amid the global economic downturn. 

“Along with the state minister for administrative reform, we’ve designed licensing guidelines for state officials at central and local levels. We also have a team whose job is to oversee the national single window for investment, providing electronic services for information and investment licensing,” he said. 

He added the government also had a logistics team to develop the national logistics system in a bid to reduce business costs, increasing Indonesia’s economic competitiveness. 

“All of those are expected to better Indonesia’s investment climate. But we can’t improve it overnight due to the dynamic in regional autonomies and democratization in the country,” Edy said. 

According to the latest report from the European Business Chamber of Commerce in Indonesia

(EuroCham), which represents more than 100 European companies and organizations here in the country, the government needs to address several issues to attract more foreign investment to generate higher growth. 

These include reforming heavy bureaucracy and difficult operating environment for businesses both at central and regional levels; improving rigid manpower regulations that force companies to limit hiring new employees; and developing infrastructure, particularly roads, ports and electricity networks, to help cut business costs. 

Foreign investment makes up a large part of investment in Indonesia. 

Last year, according to the Investment Coordinating Board (BKPM), Indonesia secured Rp 20.36 trillion (US$1.69 billion) and $14.87 billion in domestic investment and foreign investment, respectively. 

Mahendra Siregar, investment deputy to the coordinating minister for the economy, said the government would address EuroCham’s recommendations by improving the investment climate, while mitigating the impact of the global financial crisis. 

Edy said the government was “open to receive any complaint and recommendation” from businesses operating in Indonesia. 

“We’ll discuss their complaints at a coordination meeting called the Ekuin Club [comprising related ministry officials],” he said. 

Amid pressing economic times, investment growth may plunge to about 11 percent this year, from 20.5 percent growth in 2008, said BKPM head M. Lutfi. 

Bambang Susantono, infrastructure deputy to the coordinating minister for the economy, said the government had provided Rp 8.4 trillion in stimulus funds for important infrastructure projects, including trains, roads, ports and airports, in addition to more than Rp 90 trillion already set aside for infrastructure projects in the 2009 state budget.

Indonesia gets Japan help to guard rupiah

Rendi A. Witular, The Jakarta Post, Phuket | Sat, 02/21/2009 11:09 PM  

Indonesia and Japan inked Saturday a bilateral cooperation aimed partly at warding off the ailing rupiah against currency speculators amid the deepening global economic slowdown. 

Finance Minister Sri Mulyani Indrawati and Japanese Parliamentary Secretary for Finance Shinsuke Suematsu forged the long-awaited deal during the special ASEAN + 3 Finance Minister’s meeting in Thailand’s resort island of Phuket. 

Under the deal, Japan agreed to double its existing bilateral swap agreement with Indonesia to US$12 billion, strengthening Indonesia’s foreign currency reserve in case of a sharp depreciation in the rupiah against the U.S. dollar. Latest central bank data shows Indonesia’s foreign exchange reserves currently stand at $50.87 million. 

Bank Indonesia (BI) uses the reserves to supply the financial market with the greenback to help ease volatility in the rupiah, which is currently depreciating to above Rp 12,000 per dollar. Under the planned revision of the state budget, the government has set the currency at Rp 11,000 in average against the dollar for this year. 

“The deal with Japan, which is a very progressive move, can ease speculation in the rupiah because Indonesian foreign currency reserve is getting bigger and stronger. This will boost confidence in the market and in the businesses,” said Mulyani. 

The deal is part of the Chiang Mai Initiative inked in Thailand in 2000 which is aimed at creating a network of bilateral swap arrangements among ASEAN+3 countries to address short-term liquidity difficulties in the region and to supplement the existing international financial arrangements. 

ASEAN+3 includes the 10 members of the Association of Southeast Asian Nations — the Philippines, Indonesia, Thailand, Malaysia, Singapore, Brunei, Vietnam, Myanmar, Cambodia and Laos — as well as three East Asian nations — Japan, China, and South Korea. 

Thailand, RI agree on Rohingya, economic ties

Erwida Maulia, THE JAKARTA POST, JAKARTA | Sat, 02/21/2009 9:34 AM 

 Abhisit in Jakarta: President Susilo Bambang Yudhoyono (left) greets visiting Thai Prime Minister Abhisit Vejajiva at the Presidential Palace, Jakarta, on Friday. The plight of the Rohingya boatpeople and human trafficking are high on the agenda of Abhisit’s two-day visit. JP/R. Berto Wedhatama
 

Thai and Indonesian leaders agreed Friday to tackle the Rohingya refugee issue under the Bali deal, as well as advance cooperation in several fields between the two countries. 

During their bilateral talks, Thai Prime Minister Abhisit Vejjajiva and President Susilo Bambang Yudhoyono also discussed how the two neighbors would cope with the global economic recession and the prospects of the ASEAN Summit, which Thailand will host next week. 

Abhisit said Thailand supported regional cooperation to deal with the plight of Myanmar’s stateless Muslim minority Rohingya, including settling the problem through the Bali Process, a multilateral initiative launched in 2002 aimed at combating people smuggling, trafficking and related transnational crimes in the Middle East, Asia and Pacific regions. 

“We need to get all the countries involved, whether they are the destination countries, the countries of origins, or countries like Thailand and Indonesia,” Abhisit told a press conference after his meeting with Yudhoyono at the Merdeka State Palace. 

“We are in favor of having the Bali Process to help deal with this situation… we’ve always been supportive of regional cooperation because we don’t see other solutions.” 

Yudhoyono echoed Abhisit’s statement, saying Indonesia would work with the International Organization for Migration (IOM) and the UNHCR, as well as countries involved with the Bali Process to find “more permanent solutions to deal with 400 Rohingya presently stranded in our territories [Aceh]”. 

In the meantime, Yudhoyono said, Indonesia would continue an investigation into the origin of the Rohingya people, while assuring they would be provided with humanitarian assistance. 

In the economic sector, the two neighboring countries “reaffirmed [their] commitment to expand economic cooperation” in the fields of trade and investment, despite the global economic crisis. 

In 2007, bilateral trade was valued at US$7.3 billion, while in the first 10 months of 2008 that figure rose to $8.7 billion. The figure has grown by 21 percent annually in the last five years, according to Yudhoyono. 

Indonesia and Thailand have agreed to boost cooperation in food security, agriculture, fisheries and the development of alternative energy. 

Both also agreed to maintain communication, consultation and cooperation on the southern Thailand issues. 

Yudhoyono said Indonesia respected and supported the efforts of the Thai government in tackling the separatism problem, while Abhisit said Thailand was committed to a peaceful settlement. 

Last year, Vice President Jusuf Kalla facilitated an informal meeting between Thai government officials and representatives of a Muslim Thai separatist group.

Give Karen the Freedom to Bring About Change

The Jakarta Globe, Supramu Santosa, February 21, 2009 

Once again, Pertamina finds itself with a new captain at the helm, Karen Agustiawan, after three years commanded by Arie Sumarno, and short stints by Widia Purnama (two years), Afifi (one year), and Baihaki Hakim (three years). 

The fact that Pertamina is subject to so many leadership changes does nothing to benefit its growth and development. If meaningful change is to be brought about at Pertamina, management continuity is essential. A new leader of Pertamina who wishes to institute fundamental, comprehensive changes in the company — something Pertamina urgently needs if it is ever to become a world-class company — will need four or five years to develop and implement the necessary strategies. 

Pertamina has everything a corporation needs to become a world-class outfit. It has upstream, exploration and production assets with an amazing amount of potential. Its exploration areas are vast and, potentially, extremely lucrative and of huge interest to major international oil and gas companies. Pertamina’s exploration and production areas can be further optimized and maximized due to their current low recovery rates. By deploying state-of-the-art oil and gas technology, production from Pertamina’s fields can be significantly raised. By increasing exploration and optimizing exploitation, these upstream activities could become the cornerstone of incredible value creation for Pertamina. 

Pertamina also has huge downstream assets, including oil refineries and a vast distribution network throughout Indonesia of the sort that newcomers to the country’s downstream oil business, like Shell and Petronas, can only dream about. How much would it cost Shell, Petronas, or Exxon to establish distribution networks of the same extent as Pertamina’s? Although the oil and gas law has opened the door to competition in the downstream arena, Pertamina is light years ahead of its competitors. 

In terms of Pertamina’s human resource capabilities, it has competent and experts in many fields. While there is skepticism about the company’s human resources, this writer can vouchsafe, based on long interaction with Pertamina, that the company has a host of innovative and professional staff. What the company needs is to create a working environment and a culture that can motivate its staff to work professionally and to the best of their abilities. 

Under professional management, Pertamina should be able to develop into a well-respected, world-class oil and gas enterprise, as long as government gives the company the opportunities it needs to grow. Give Pertamina the chance to invest further in the upstream and downstream sectors. With its huge assets and major financing potential, growing Pertamina should not be difficult, whether based on cooperation with strategic industry partners, or through other sources of financing. 

However, in order for Pertamina to grow, political will on the part of all sides will be needed. Pertamina’s management needs to be given more space to implement its policies and decisions, just like any other oil and gas enterprise in the world, free of interference from the politicians. Place Pertamina under the supervision of a professional board of commissioners, the Development Finance Comptroller, or BPKP, and independent auditors, instead of the House of Representatives, or DPR, and the cabinet. To date, the head of Pertamina has had to spend too much time preparing for and attending meetings with the House and government. There is too much political interference in Pertamina’s policies, even as regards the nitty-gritty, such as the procurement of goods and services. 

While it is true that Pertamina has a duty to supply and distribute oil-based fuels at government-set, subsidized prices, the question of pricing and the size of subsidies, which are political decisions, should not be allowed to disrupt the company’s finances. Pertamina still needs to be allowed to earn a profit on these endeavors. Pertamina’s profit is also state profit, as the government is Pertamina’s sole shareholder. Unfortunately, the supply and pricing of subsidized fuels are highly sensitive areas, and it often seems that Pertamina’s performance is judged based solely on these issues. That’s why Pertamina needs to improve the management and monitoring of subsidized fuel supplies. Smooth distribution, free of the disruptions that are currently all too frequent, will diminish criticism of Pertamina, and allow management to concentrate on growing the company. 

We need to give Pertamina the freedom to act, just like other oil and gas enterprises. So, give Pertamina’s new president director, Karen Agustiawan, the time and the freedom she needs to realize her vision, accompanied, of course, by tight supervision by a professional board of commissioners. 

Supramu Santosa is CEO of oil and gas company Star Energy.

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