Riau Islands FTZs to cut red tape

Fadli, The Jakarta Post, Batam    

The Batam, Bintan and Karimun (BBK) Special Economic Zone Commission has ensured speedy licensing procedures free from illegal levies in a bid to attract foreign investors impacted by the global financial crisis, given lower local production costs compared to other countries in the region, such as Vietnam, Malaysia, Thailand and China. 

Head of the commission, Ismeth Abdullah, also the Riau Islands governor, told The Jakarta Post recently the commission was resolved to complete every investment license procedure in three weeks, compared to up to three months previously. However, environmental impact analysis reports would still take more than a month to complete. 

"We have cut the long and costly bureaucratic red tape and there won't be illegal levies demanded from officers in the field because we have provided them with proper incentives, besides monthly salaries," said Ismeth. 

Ismeth considered that the economic crisis in the United States and Singapore would have positive impacts for foreign investment growth in the Riau Islands, despite some forecasts by provincial foreign investors of a decline in business in 2009. 

He said the competitive position of the area would remain advantageous, given the far higher production costs in neighboring countries. 

"The crisis in America and Singapore has apparently affected the productivity of companies from these countries, so (our) bureaucrats should be able to conjure up strategic breakthroughs and be more proactive toward the business world given the current economic situation," said Ismeth. 

Total investments in the Riau Islands are currently valued at US$10 billion, with Singapore having the lion's share at $4 billion, followed by the U.S.at $1.5 billion. 

The BBK Zone Commission has projected further foreign investments of $5 billion over the next five years. 

According to Ismeth, the BBK zone performs more competitively than other industrial areas in Asia. Commission data shows that the production costs of a company in BBK were 15 percent lower than a similar company in Vietnam and 10 percent lower than in Johor Baru, Malaysia. 

"We must ensure that the flow of goods in Batam can run smoothly and free of illegal payments," said Ismeth. 

He was positive this initiative would get a positive response from business circles and assured business people that this would not merely be lip service but could be counted upon. 

Investors can file a complaint to the commission if licensing procedures exceed the fixed time limits and receive incentives, such as facilities in the next licensing procedures. 

Riau Islands Chamber of Commerce and Industry head Johannes Kennedy Aritonang said the commitment by the BBK zone commission to speed up investment license procedures should be applauded, but his office expected that this would not be just lip service. 

"Although (licensing procedures in) a number of countries are faster, this new breakthrough must be well appreciated. This shows that the government is committed to facilitating the business sector, a prerequisite for a special economic zone," said Johannes.

Gubernatorial forum agrees to construct Sunda Strait Bridge

Batam (ANTARA News) - The Sumatra gubernatorial forum at a meeting here agreed to materialize the infrasturcture building among others the Sunda Strait bridge construction, which will connect Java and Sumatra islands.

The forum, during a coordination meeting here on Friday and Saturday, said it will seek construction funds from the national budget, domestic and foreign private companies, the Islamic Development Bank (IDB), World Bank and Asian Development Bank (ADB).

The infrasturture construction which should be immediately materialized were the Trans Sumatra railway, Trans Sumatra Toll Road and the national main road in Riau Island and Bangka Belitung.

The forum also agreed to urge the central government to immediately solve the energy crisis in Sumatra by means of deregulation to terminate the monopoly of the State Electricty Company.

The forum also said deregulation would make it easier for private businessmen to engage in power production to overcome the electricity problem in Sumatra.

Govt urged to decide on illegal logging in Riau

Ridwan Max Sijabat, The Jakarta Post, Pekanbaru

A House of Representatives team of legislators slammed the government for its slow handling of illegal logging in Riau, lamenting its effect on two major pulp and paper mills and the investment climate in the country.

The 17-member team of the House's forest, plantation and agriculture commission questioned the prolonged confiscation of hundreds of thousands of cubic meters of mixed wood belonging to PT Riau Andalan Pulp and Paper (RAPP) and PT Indah Kiat Pulp and Paper (IKPP) in Pelalawan and Siak regencies, respectively, and the two companies' commitment to forest conservation and reforestation programs in the province.

"The prolonged seizure of timber shows the government is not tough in handling the illegal logging cases. And in the end, it affects the investment climate in the country," team leader Syarfi Hutauruk said Thursday after making a field tour to the companies' mills and forests in Pangkalan Kerinci, Pelalawan.

The team held preliminary investigations into the case following recent friction between the National Police and the Forestry Ministry over confiscated logs.

The police seized the logs, which were allegedly taken from protected rain forests and national parks in the province and supplied to the two mills by their partner companies. The Forestry Ministry has defended the logs as legal since they were harvested from forest concession areas where licenses were issued by local administrations.

Maruahal Silalahi, a team member of the Democratic Party, blamed the prolonged cases both on the police and the ministry, which he said had no competence and professionalism in enforcing the law.

He said his commission was confused by the absence of an immediate decision from the government following the establishment of a joint government team led by Coordinating Minister for Political, Law and Security Affairs Widodo A.S.

"The President should take harsh action against those found unprofessional in handling the cases and order the prosecution of those allegedly involved in illegal logging activities," he said.

Ganjar Pranowo, a team member of the Indonesian Democratic Party of Struggle, criticized the President for his failure to replace the National Police chief or the forestry minister.

Both IKPP and RAPP lodged complaints in separate meetings with the team, saying they were ready to be held responsible if their mills were found guilty.

IKPP president Gandhi Sulistiyanto said it was too risky for a publicly listed company like his to get involved in illegal logging, and challenged the team to visit its industrial forests in the province to check whether his mill had supplied illegal logs or looted the conservation areas.

RAPP president Rudy Fajar concurred.

"We have never used raw materials obtained through illegal logging, and any of our partner companies supplying timber from conservation forests should be punished harshly."

The team also sought clarification from RAPP on its commitment to help cope with problems of unemployment and poverty after a report was filed by Pelawan Regent Asmun Jafar that its partner companies had supplied the illegal logs.

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West Sumba teacher takes home Kalpataru award

M. Taufiqurrahman, The Jakarta Post, Jakarta

Like Sysiphus of Greek mythology, who relentlessly carries a rock uphill, West Sumba native Elan Wukak Victor has for years carried out a similarly endless task, growing trees on rocks.

The 63-year-old English teacher started by encouraging his pupils to grow trees in their schoolyard, an idea he took from school to school.

And after 30 years, Elan has planted 400,000 trees, distributed 100,000 seeds to 23 green community groups he helped set up as well as built 81 water reservoirs across Waikabubak, a barren, hilly village in West Sumba, East Nusa Tenggara.

Elan's hard work paid off on Wednesday, when he, along with 11 other environmental activists, was awarded a Kalpataru, the highest award for environmentalists in Indonesia.

Elan won in environmental conservation pioneer category, together with Amandus Kaize from Merauke, Papua, and village head Slamet Tugiyanto from Magelang, Central Java.

Kaize was honored for his efforts to grow a rare variety of plants in a protected forest controlled by his tribal community, while Slamet won for promoting multiple crops among local farmers.

One notable figure who also won the award was former West Java governor Solichin Gautama Purwanegara, for his campaign against illegal logging and on the regreening of community-controlled forests in nine regencies in West Java.

Apart from the Kalpataru awards given to environmental activists, the government has handed out Adipura awards to cities that strive to promote cleanliness.

This year, the government gave the awards to 84 cities throughout the country. More than 300 cities were nominated for the Adipura awards this year.

All five municipalities in Jakarta won Kalpatarus in the category of metropolitan city. Other cities in the category which won Kalpataru are Palembang in South Sumatra and Surabaya in East Java.

Jakarta's gain, however, was at the loss of other cities in the greater Jakarta area such as Bekasi, Bogor and Tangerang. None of these cities won Adipura in this year's contest.

Other cities which also won Adipura include Padang (West Sumatra), Yogyakarta, Denpasar (Bali), Malang (East Java) and Pekanbaru (Riau).

President Susilo Bambang Yudhoyono said in his speech before presenting the two awards that the Indonesian people did not have to wait for people in other countries to save the environment.

"Let us save the earth together with other people in this world," Yudhoyono said.

The President also called on local governments to take environmental protection into account when making policy.

He also reiterated his statement about the need to prepare for global warming's fallout.

Yudhoyono said that global warming would have a disastrous impact on Indonesia as an archipelagic country, as the rising of sea levels would drown many of the country's small islands.

"The time is high for us to find a breakthrough and brace for global warming," he said.

Foreign ministry to play role in promoting investment

The Jakarta Post, Jakarta

The Foreign Ministry intends to play a greater role in promoting trade, tourism and investment on the international stage by holding a series of investor forums to showcase the untapped potential of Indonesia's regions.

"Through these forums, we are hoping to use our diplomacy to promote mutually beneficial economic transactions," Foreign Minister Hassan Wirajuda said Thursday during the launch of the first "Update from the Regions" forum.

"This forum will also promote interaction between the diplomatic community, businesspeople and local administrations," he said.

The launch of the forum was attended by ambassadors from some 30 countries, mainly from the Middle East, Europe and Africa, as well as representatives of national and international business associations.

Riau province, located near Singapore, has been chosen as the first province to be featured by the forums, which are to be held regularly.

Riau, which produces oil, gas, crude palm oil, and pulp and paper, has become a major destination for foreign and domestic investors.

According to data from the Investment Coordinating Board (BKPM), foreign investment in Riau amounted to about US$1.8 billion last year, the second biggest amount among the country's 33 provinces. Meanwhile, domestic investment in the province reached Rp 20.8 trillion (about $2.3 billion), the third biggest.

Riau Governor Rusli Zainal said that his administration had taken steps to create a more favorable climate for investment, including the setting up of a coordinating team to handle all bureaucratic problems.

The team, which comprised representatives of the provincial administration, the police, and immigration, customs and tax services, would work together to ensure that the province would become widely known as a good place to do business.

"We have also established a program called 'Riau Vision 2020', which focuses on poverty eradication, human resources development and infrastructure improvements, so as to support economic growth in our province," he said.

He added that his administration planned to organize an investment summit in the provincial capital, Pekanbaru, in September to provide more detailed information on investment opportunities in the province.

Ministry to issue investment update

The Jakarta Post - 2007-05-09 10:04:44

JAKARTA, May 9, 2007 (JP) - The Ministry of Foreign Affairs is to start publishing a periodic economic update on business opportunities in Indonesia's major provinces so as to help provide reliable information about the country's investment opportunities to foreign investors.

The ministry said Tuesday in Jakarta that the first edition of the newsletter, to be called Update from the Regions, would be launched at the ministry headquarters in Jakarta on Thursday. Minister of Foreign Affairs Hassan Wirajuda and Riau Governor Riau Rusli will be present for the launch of the update.

The first edition of the update will focus on business and investment opportunities in the agricultural, mining and tourism sectors in Riau, in addition to a number of proposals for projects, such as the construction of a highway linking Pekanbaru and Dumai, the construction of an international port and an industrial estate in Tanjung Buton, and the building of a cement plant in Rokan Hulu regency.

Riau Islands economic zone to be realized soon: Yudhoyono

The Jakarta Post

JAKARTA (JP): The government will speed up the realization of Exclusive Economic Zones in three islands -- Batam, Bintan and Karimun -- in the Riau Islands province, said provincial governor Ismeth Abdullah Tuesday.

"In the meeting (with President Susilo Bambang Yudhoyono) yesterday (Monday), the president promised to speed up the development of the Exclusive Economic Zone," Ismeth was quoted as saying Tuesday.

He said the government was now finalizing the legal basis for the establishment of the economic zone, expected to boost the economic growth in the province.

The deliberation of the legal basis were also involved members of the Provincial Legislative Council, Chamber of Commerce, and other relevant organizations, according to Ismeth.

He however, did not specifically mention when Riau would have the economic zone

Investment in first quarter 2007 up 27.16 pct from previous year

Jakarta (ANTARA News) - Capital Investment Coordinating Agency (BKPM) Chief Muhammad Lutfi said here on Tuesday investment in Indonesia in the first quarter of this year reached Rp40.59 trillion or up by 27.16 percent compared to the same period last year.

This meant investment growth had returned to a pre-crisis level, he said.

He said "the figure represents 30 percent of the government`s investment target for the year reaching 70 percent of the expected investment of 2005 totaling Rp172.77 trillion."

Lutfi said he believed the achievement would help push economic growth to meet this year`s target of 6.3 percent.

The target of investment for 2007 had been set at Rp83.08 trillion.

According to BKPM records, foreign investment grew by 15 percent from US$2.6 billion to US$2.99 billion from January to March.

Domestic investment meanwhile reached Rp13.68 trillion or rose 60.56 percent compared to the same period last year when the figure was Rp8.52 trillion.

Five sectors that had received the largest foreign investment were pharmaceutical and chemical industries (US$1.5 million), printing, paper and paper product industries (US$394.3 million), mining (US$252.3 million), food industries (US$189.8 million) and construction (US$149.3 million).

The five biggest sectors receiving domestic investment meanwhile were printing and paper industries (Rp3.8 trillion), metal, machineries and electronics industries (Rp2.9 trillion), food industries (Rp2.4 trillion), plantations and food crops cultivation (Rp1.73 trillion) and construction (Rp1.4 trillion).

Jambi enjoyed the biggest domestic investment (Rp3.7 trillion) followed by Southeast Sulawesi (Rp2.8 trillion), Jakarta (Rp2.4 trillion), Riau (Rp1.9 trillion) and East Java (Rp672.3 billion).

The largest foreign investment meanwhile was enjoyed by East Java (US$1.5 billion), followed by Jakarta (US$662.9 million), Riau (US$392.4 million), West Java (US$200.1 million) and Banten (US$86.5 million).

"Investment in East Java remains high meaning that it has not been affected by the Lapindo mudflow disaster," he said.

Lutfi said the largest foreign investment came from Britain totaling US$1.4 billion in 17 projects while the second largest investment was from Taiwan totaling US$398.4 million in 11 projects.

Australia came third with its investment reaching US$179.2 million in eight projects, followed by South Korea US$165,2 million in 46 projects and Japan US$149.1 million in 24 projects.

Walhi backs police fight against logging

The Jakarta Post, Jakarta

A leading environmental organization has praised police action against a company accused of illegal logging, but says it wants the authorities to take a harder line against the crime in the future.

The Indonesian Environmental Forum (Walhi) said the organization supported National Police chief Gen. Sutanto in setting up a police line around the production area of PT Riau Andalan Pulp and Paper (RAPP) after the company was suspected of illegal logging practices.

"This is what we have been waiting for. PT Riau Andalan Pulp and Paper has been exploiting the natural forest in Riau," Chalid Muhammad, the national executive director of Walhi, told reporters Friday.

"We hope the police will follow up this move by charging the company's directors as suspects," Chalid said, adding that the police chief should be consistent and not be afraid of officials who might be backing the company.

Troy Pantouw, PT RAPP's public relations manager, declined to comment on Walhi's accusations.

But he said that PT RAPP had always been careful in conducting its business and had always obeyed the government's regulations, including those on logging.

"Our company will be cooperative with the police and the authorities regarding the matter," Troy said when asked about the police's move to restrict the company's activities in Riau.

A coalition from the police's head office and the directorate general of forestry banned operations at the factory area of the company in Pangkalan Kerinci, Pelalawan regency in Riau on Thursday last week, Detik.com news portal reported.

PT Riau Pulp and Paper is a subsidiary of the Asia Pacific Resources International Holdings group, owned by Sukanto Tanoto, who is listed as Indonesia's wealthiest man by Forbes magazine.

Johny S. Mundung, Walhi executive director in Riau, also said that the police had made a big move against PT RAPP, one of the biggest pulp and paper players in the country.

He added that it was nothing new for the pulp and paper industry to use illegal logs from the country's forests.

According to Walhi, the pulp and paper industry in the country needs up to 27.71 million cubic meters of wood per year, some 80 percent of which comes from forests instead of industrial plantations.

Both sides of Suramadu bridge set for SEZs

Ary Hermawan, The Jakarta Post, Jakarta

The government plans to set up special economic zones (SEZ) in the areas to be linked by the Surabaya-Madura bridge, with the zones expected to cover some 600 hectares in total.

The SEZs on both sides of the bridge will be established upon the completion of the bridge, which is scheduled for 2008, according to National Development Planning Minister Paskah Suzetta.

"The bridge must be turned into more than just a link between Surabaya and Madura. We must also improve economic conditions in the surrounding areas," Paskah said Wednesday.

Accordingly, Paskah said the government had decided to set up a special agency to speed up the bridge's construction, and to prepare blueprints for the development of the proposed economic zones.

"The agency will focus primarily on land acquisition and the construction of infrastructure, including ports and residential areas to support the zones," he said, adding that the new agency would be headed by Coordinating Minister for the Economy Boediono and include local government officials as members.

Subsequently, Paskah said, the government would invite private firms to submit bids to run the zones as part of a public-private partnership.

"All companies. foreign and domestic, will be invited to invest in and develop the zones," he said.

Better known by its Indonesian acronym as the Suramadu bridge, the new link, which is still under construction, will connect Surabaya on the island of Java and Bangkalan on the island of Madura. It will be the longest bridge in the country at 5.4 kilometers in length.

China has provided US$400 million for the project, while the government has allocated Rp 1.4 trillion (Rp 147.3 million) from the 2007 and 2008 budgets.

Batam, Bintan and Karimun islands in Riau Islands province made up the first SEZ in the country. It has been deemed a success by the government, which now plans to create similar zones in other provinces.

In addition to the proposed SEZs in East Java, the government has said it will establish other ones in North Sumatra, South Sulawesi and Bojonegara in Banten, where a Rp 7 trillion international port is under construction.

The Coordinating Ministry for the Economy is currently preparing a government regulation in lieu of law as a legal basis in the hope that this will save time and accelerate the establishment of more investment-boosting SEZs around the country.

Issues pertaining to the SEZs will also be covered by the proposed new taxation and customs laws.

Lafarge stays on in post-tsunami RI to rebuild facilities

Abdul Khalik, The Jakarta Post, Jakarta

Even though its production facilities were ruined and 182 employees killed or missing after the tsunami that devastated Aceh on December 26, 2004, France-based company Lafarge, which owns PT Semen Andalas Indonesia, has opted to stay in the province.

The world's largest cement producer officially opened a cement packing terminal there last week as part of its post-tsunami recovery projects. These also include the construction of an upgraded cement plant and coal-fired power plant.

The company will spend a total of US$150 million for the project, making it the largest industrial investor in Aceh.

Below are excerpts from an interview with PT Semen Andalas president director Marcel Cobuz about the company's plans and expectations for running a business in Indonesia, especially in still-recovering Aceh.

Lafarge is probably one of the foreign companies hit hardest by the tsunami, Why did Lafarge decide to stay on in the province?

First of all, Lafarge has a strategy of maintaining a good balance of its presence between mature markets, such as Western Europe and Japan, and developing markets, such as Asia and the Pacific region. So, we give a lot of attention to Asia, particularly Southeast Asia. We are almost everywhere in the region. We are present in Malaysia, the Philippines, Bangladesh, India, China, South Korea, and Japan. And this trend will continue.

Of course, even before tsunami, we were quite small in Indonesia. But how else you can start or get a foothold in a market and test the appetite of customers for new products than to start a small operation and grow bigger.

The tsunami was an unfortunate event, leaving a lot of bad impacts. We lost over 180 employees and all of our industrial assets and the plant -- the only manufacturing facility we had in the country. But we got back on our feet quickly. First, we ran logistical efforts to help rebuild Aceh and provide logistical supplies. In fact, we were able to supply cement a couple of weeks after the tsunami.

After the tsunami, we had to think about how to maintain our market share and how to supply cement to our customers. We are fortunate enough to have a plant in Langkawi, Malaysia, to supply North Sumatra and Aceh. And we will continue to do so until our plant in Lhok Nga is completed sometime next year to supply our markets, which are mainly in Aceh, North Sumatra, and the Riau mainland and islands.

How is progress going on the plant reconstruction?

An investment budget of US$150 million has been approved to finance plant reconstruction, while an initial bridging loan of US$30 million from Citigroup has been leveraged to start the project. The new cement plant, which will have a production capacity of about 1.6 million tons a year, is expected to be fully built by the end of 2007 and will be commissioned in early 2008. We are just completing our fourth terminal in Dumai in Riau, and constructing our port in Lhoknga.

Today, we are importing 1.3 million tons of cement from Langkawi and channeling them through our four terminals in Lhoknga in Aceh, Batam in Riau, Belawan in North Sumatra, and Dumai terminal. We have approximately 35 percent of market share in our markets, which comprise Aceh, North Sumatra, and Riau.

What about the issue that the government will tax the proceeds of your insurance claim?

Our capacity depends very much on our financial capability. For instance, if the insurance claim is going to be taxed, then of course that will limit our investment capability. Look, we've already lost the plant and we hope our insurance claim will not be taxed. We are now discussing the issue with the Ministry of Finance, the Aceh governor, and the Investment Coordinating Board (BKPM). We hope we can find a proper solution on the issue by the end of January.

Do you have a legal basis for this?

Yes, the President of Indonesia has issued a post-tsunami presidential decree allowing tax exemptions in order to improve the business environment in Aceh. We believe we qualify for such an incentive.

Are there any new plans for expansion -- for instance, a new plant in North Sumatra? What about the failed attempt to acquire Semen Gresik?

Lafarge is a big international player. We keep on eye on many possible developments, not only the PT Semen Gresik acquisition. For the time being, what I can tell you is that we want to focus on the reconstruction of our state-of-the-art plant in Aceh. But we also see some other developments in Sumatra. Many things will happen in the future. North Sumatra, for instance, has a good potential market. Today, we don't see much infrastructure work but there are plans to build a new airport, expand Belawan port and do other infrastructure projects. So, a lot of cement will be needed, and we want to play an important role.

Speaking of political conditions in Aceh, how do you see the election of Irwandy Yusuf as Aceh governor?

I believe the business environment in Aceh will improve. First, anyone who becomes Aceh governor will realize that without infrastructure, educational development and a sound business environment, this region will be forced to depend on subsidies. We believe that by supporting the business environment, more and more revenues will be generated in the form of local taxes and central government taxes. That investment will create jobs and reduce unemployment, which is high in Indonesia. It will also create welfare and boost other businesses. There will be a full chain of value creation.

All in all, we believe in local autonomy. Whoever is in the decision-making position, they have only one option, which is to give incentives to foreign and local investors to put their money in the province.

Do you have any suggestions on what Aceh or Indonesia in general can do to attract more investment?

I think foreign investors want stability -- economic and political stability. Macroeconomic stability is one of the fundamentals that should be in place. Indonesia has proved over the past two years that its macroeconomic fundamentals are improving. The inflation rate is dropping towards single digits while economic growth is quite high. Foreign currency reserves are quite strong, and the level of debt allows the government to be flexible. I think the fundamentals are there, but we need political willingness to improve the business environment, fight corruption, and allow incentives.

Above all, we need some success stories, since the more success stories are available, the more foreign investment comes in. You see, foreign investors like the rainmakers. They look at Lafarge and other pioneers, and if they think these companies have success stories then they will follow.

PGN blames management, technical problems for pipeline delays

Ika Krismantari, The Jakarta Post, Jakarta

State gas company PT PGN has blamed a six-month delay in the opening of a key US$1.1 billion pipeline -- which sent its shares tumbling by 23 percent last week -- on management and technical problems.

The pipeline will span a total of 1,106 kilometers and link South Sumatra and West Java, and have the capacity to transport 1,000 million standard cubic feet per day (mmscfd) of gas. It was originally scheduled to open in December.

PGN's shares fell 23.3 percent last week to Rp 7,400 (US$0.81) from Rp 9,650.

"We should have realized there would be a delay earlier, but because of the explosion the directors, who were appointed in mid-November, were focused on that," PGN president director Sutikno said Sunday.

The explosion he was referring to involved a PGN gas pipeline in Sidoardjo, East Java, the site of the mudflow disaster.

It was not until the middle of December that the directors started analyzing the problems hindering the gas pipeline project, he said.

"We released a statement about the delay on Jan. 11, after we reached a final conclusion on how long the project would be delayed," Sutikno said.

He denied there was any effort on the part of the management to try and cover up the delay.

PGN director for development Adil Abbas said another problem facing the project was the issue of land clearance.

As a result of the delay in the opening of the pipeline, PGN revised down its gas production target for this year to 555 mmscfd from 787 mmscfd.

For 2007, PGN has set aside $517.11 million for a number of different projects, including gas pipelines linking Duri in South Sumatra, Dumai in Riau and Medan in North Sumatra.

Riau Islands sets up team to take new look at Natuna companies

Fadli, The Jakarta Post, Batam

Riau Islands province has set up a team to evaluate oil and gas production companies in Natuna to determine how best to increase production and revenue.

Riau Islands Governor Ismeth Abdullah told The Jakarta Post the team, consisting of senior staff members from the provincial administration, would be headed by Hamid Rizal, a former Natuna regent from 2000 to 2005.

In addition to cataloging the activities of each operator, the team also will make suggestions on steps the administration can take to boost exploration and production in the Natuna oil and gas field.

"The team will also determine the output capacity of each oil and gas company currently operating in Natuna so as to boost provincial revenue," Ismeth said.

An organization recently set up by the administration will later decide on production sharing schemes with the oil and gas companies, based on the information gathered by the evaluation team.

Ismeth also reiterated an earlier statement by Energy and Mineral Resources Minister Purnomo Yusgiantoro, that the provincial administration would in principle be involved as a stakeholder in the Natuna oil and gas field.

Ismeth acknowledged he was still unsure about the appointment of Transword Exploration Ltd. to explore the Duyung block and Indoreach Exploration the Pari block in the Natuna oil and gas field. However, he expressed confidence both operators would provide concrete contributions to the province if eventually appointed.

"We are looking forward to being involved in production at the D-Alpha block, which is the biggest block in the Natuna oil and gas field. We don't care whether Exxon is reappointed as the operator or a new company is appointed, as long as they make significant contributions to the province we will support them," Ismeth said.

The provincial administration earlier proposed it be involved as a stakeholder in the Natuna oil and gas field. As an initial step, the administration submitted a proposal to the government on its acquiring a stake in the D-Alpha block.

Ismeth said the government was still considering the proposal, adding that Minister Purnomo had expressed his opinion that every province was entitled to own shares in oil and gas exploration sites located in their territory.

In addition to Exxon, Conoco Oil, Premier Oil and Star Oil are involved in oil and gas production in Natuna. Natuna regency contributes about Rp 600 billion (about US$66.6 million) annually to the provincial coffers and another Rp 180 billion to other regencies and mayoralties in the Riau Islands.

Why does the haze come back every year?

The country emits 6.5 times as much CO2 from degraded peatland as it does by burning fossil fuels every year, the report said.

Alvin Darlanika Soedarjo, The Jakarta Post, Jakarta

Last year the annual haze in Sumatra and Kalimantan caused respiratory diseases, a month-long school holiday and an airplane accident. The haze is a continuing smoky gift that has spread itself across parts of Indonesia and neighboring countries for more than two decades.

It's led to huge economic losses for the region and been blamed on both negligence and dry weather. Malaysia, Singapore and to a certain extent Thailand and Brunei Darussalam are all regularly affected by it.

Certainly one significant contributor to the problem is the clearing of land for palm oil plantations.

The government offers low-interest loans to plantation companies, in the hope that 1.5 million hectares of new plantations can be added to the country over the next five years. The availability of peatland is attractive for those wanting to clear land for palm oil.

Palm oil can be processed into alternative energy source biofuel, although currently technology only allows it to be used in small amounts mixed with conventional fuel.

Many producers of palm oil, the price of which increased by 35 percent between January and November 2006 after fuel prices rose, have blamed the haze on local villagers, pointing to their traditions of burning land to clear it, combined with the hot weather.

Peatland fires are harder to extinguish than forest blazes. And occasional rainfall does little to diminish to smog.

A study by the Netherlands-based Wetlands International and Delft Hydraulics revealed earlier this year that during the last few decades, emissions from drained or burned peatland in Indonesia have reached 2 billion tons of carbon dioxide a year.

This shows that Indonesia has contributed to almost a 10th of global greenhouse gas emissions from human activities.

The country emits 6.5 times as much CO2 from degraded peatland as it does by burning fossil fuels every year, the report said.

Aside from the increasing role of palm oil producers, bad planning and ineffective forest management has contributed to the months of fires and smog.

Critics say the expansion of palm oil plantation land has been unnecessary, an easy way out rather than an effort to maximize available land.

Indonesian Forum for The Environment executive director Chalid Muhammad said the government had issued too many forest utilization licenses.

"Fifteen million hectares of land in Indonesia are in dispute for various reasons, so they cannot be utilized. That explains why there are so many forest concessions issued," Chalid said.

The government's plan to empower both civilians and officials to monitor the land has proved difficult -- even the governor in charge of one of the world's greatest tropical forest centers has expressed frustration.

"Many officials only care about the investors and neglect the ecological implications. Issuances of forest permits are rarely accompanied by an environmental impact assessment," said Central Kalimantan governor Teras Narang.

"Palm oil is important as an alternative fuel source. However, diversity in plantations is better for Kalimantan. There should be more rubber plants, meranti, jeruntu, and others," he added.

As for handling the annual smog problem, the government has been reactionary rather than take preventive measures.

Efforts to induce rain through cloud stimulation and "water bombing" have been costly and ineffective, particularly given the large scope of the haze and inadequate facilities.

Walhi says there are 40,000 hotspots, areas that have generated heat across Indonesia for the past five years.

Moreover, Indonesia has limited aircraft suitable for tackling the issue, although though it is aiming to buy more. This year the government used two Hercules aircraft from the Air Force. A larger and much more effective water bomber costs about Rp 400 billion (US$44 million).

Law enforcement in the affected areas is notoriously poor, to the disgust of neighbors Malaysia and Singapore.

Some critics have called for stronger legal instruments, such as a presidential decree to enable the instant revocation of forest permits or lawsuits against the company if the people are found guilty, apart from stricter enforcement.

"The Roundtable on Sustainable Palm Oil is also ineffective because the current law cannot revoke a plantation company's permit for land use if it is found guilty," said Chalid.

The Roundtable, grouping palm oil companies, environmentalists and other energy companies, aims to certify companies that adhere to sustainable ecology.

Many of the arrested culprits have been insignificant scapegoats, as the big players easily bribe their way out.

Governor Teras suggested a faster process of examination and gathering of evidence. The current legal process, the governor said, is long, arduous and costly.

Further, monitoring agents such as regents, public figures and kampong heads, had not really become aware of the importance of eradicating the haze, he said.

"Many of the community leaders are authorized to act but lack the will, facilities and funds," Teras said, adding that officials needed a detailed map marking smog-sensitive areas.

Indonesia has not even signed the Transboundary Haze Agreement, which has been ratified by a number of other Southeast Asian countries. This is despite the willingness of the Association of Southeast Asian Nations to allocate $50,000 to solving the problem from each country.

It's rather hard for Indonesians affected by the smog, let alone neighbors, to understand legislators' excuses that before signing, other regional environment problems should be handled -- except if locals and the elite of Java's major cities including Jakarta one day find themselves choking in smoke.

The costs incurred by the haze agreement are still seen to be a burden while, for instance, "Malaysia and Singapore have been accommodating and buying our smuggled logs," legislator and former environment minister Sonny Keraf said.

Neighbors are urging us to ratify the treaty to enable rapid deployment of assistance in event of fires.

Others say even if Indonesia doesn't ratify the agreement, ASEAN is reluctant to impose tough sanctions on Indonesia.

But nature can't wait for everyone to sort out priorities. Next year efforts to douse the smog could be even harder because of the forecast of a longer dry season, triggered by the El Ni¤o weather pattern in the Pacific Ocean.

IDB to help Indonesia set up US$1.5b fund

By Shahriman Johari,

January 4 2007, Business Times

THE Islamic Development Bank (IDB) is helping Indonesia to set up a US$1.5 billion (US$1 = RM3.51) fund which will invest in infrastructure projects in the country.

The fund could help kick-start big-ticket items like the construction of roads, houses and power plants, which is likely to draw interest from Malaysian firms.

However, the fund has yet to be finalised although talks started last year.

"It is a government-led deal. We are waiting for the Government. The discussion started some six months ago. It is still not finalised," Ahmed S. Hariri, director of the IDB's regional office in Kuala Lumpur, told Business Times in a telephone interview.

IDB may invest in the fund and it could also bring along other investors to subscribe, he said.

"We (could) both subscribe and we bring other investors along. Most investors are very comfortable with the IDB name. They will come along with the IDB name," Hariri added.

Companies from Malaysia, one of the top five foreign investors in Indonesia, have been active in the country, notably in the plantation and, more recently, banking sectors.

But there is strong interest in infrastructure projects as well.

Conglomerate Sime Darby Bhd is eyeing potential power plants in the country, while toll highway operator PLUS Expressways Bhd is looking for road projects.

In August last year, Indonesia's president, Susilo Bambang Yudhoyono, invited Malaysian firms to invest in the country's energy, housing and power sectors.

Companies can also bid for some US$150 billion worth of mega infrastructure projects, comprising power, roads, telecommunications, harbours and ports, spread over the next five years.

Indonesia also plans to offer more business incentives and create more economic zones to attract foreign investment.

The country has one economic zone on Batam island and hopes to have more on Riau and other nearby islands, Hariri said.

One recent example of Malaysian investment is gambling group Genting Bhd.

Through its associate Landmarks Bhd, it is investing in a RM4 billion tourism development on Bintan island. That project would have hotels, resorts and tourism attractions like wellness centres.

Bintan is close to Singapore, which is building casinos. Genting is one of the winners selected to build a casino on Singapore's Sentosa island.

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.

South Korea's SK sees a lot of potential in Indonesia

Ika Krismantari, The Jakarta Post, Jakarta

A high-ranking delegation of South Korea's third largest company SK led by chairman Tae Won Chey visited Indonesia recently to explore new business opportunities in the country.

Already engaged in 14 countries with its core business in energy and telecommunications, SK is committed to further strengthening its global presence.

With a workforce of about 25,000 employees, SK booked a total revenue of about 60 trillion won (about US$65.3 billion) at the end of 2005.

Read More ....

RI offers 15 sectors for S Korea investment

ANTARA News - 2006-12-05 11:02

Jakarta, December 5, 2006 (ANTARA News) - Indonesia offered 15 sectors for investment to around 70 South Korean businessmen attending the 13th meeting of the Indonesia-South Korea Joint Committee for Economic Cooperation here on Monday.

"Eleven of the sectors have already been filled by Korean businessmen," the head of the Capital Investment Coordinating Board, M Lutfi, said.

He said the government would give a tax allowance namely a tax cut by up to 30 percent for six years to investors in the 15 sectors.

He said the 15 sectors are:

flavor industry, textile and garment industry, pulp and hardboard industry, chemical industry, other chemical industries, rubber and rubber products industry, porcelain industry, iron and steel and non-ferrous metal industries, machinery and equipment industry, electric motor including generator and transformer industry, electronic, Information and Communication Technology industries, land transportation industry, ship building industry and repair industry.

On the occasion Lutfi also promoted special economic areas Batam and Bintan that provide special tax regulations for export-oriented industries.

"Imports of raw materials and capital goods to the areas will be given tariff concession while exports are exempted from export duty," he said.

Lutfi said Indonesia was seeking to develop manufacturing industries to create added value and employment. "We can no longer promote the sale of raw materials or half-finished products," he said.

Early next year his office in cooperation with the ministry of industry, the ministry of trade, the National Agency of Assessment and Application of Technology, and the National Development Planning Board would map out top industries for promotion to foreign investors.

One of the industries to be promoted are the petrochemical industries and its derivative industries. "With oil and gas production reaching 1.6 million barrels a day we need to have a good petrochemical industry. Now we only have one aromatic chemistry industry and one complete petrochemical industry," he said.

He said most of the raw materials of the country`s petrochemical industry were reprocessed in Singapore. He hoped with attractive incentives, the added value could be built in the country.

Government Gives Incentives for Infrastructure Project

Friday, 01 December, 2006 | 16:47 WIB

TEMPO Interactive, Jakarta: The Public Works Department has prepared a Rp2 trillion fund as an incentive for infrastructure projects such as roads, drinking water and housing, until 2009. This year, a Rp600 billion fund has been prepared for the drinking water projects which was offered in the Infrastructure Summit II early in November.

“The fund is prioritized for land acquisition so that we can anticipate investors' claims,” said Secretary General of the Public Works Department Roestam Sjarief at his office yesterday (30/11).

Eleven drinking water projects which were offered in the Infrastructure Summit II include three projects that are tender-ready: drinking water management installation project (IPA) Surakarta; IPA Sepatan, Tangerang and IPA Benda, Tangerang. The remaining—IPA Umbulan, Pondok Gede; Cikarang; Menganti; Semarang; Karawang; Dumau and Tangerang (Cikupa, Balaraja and Jayanti)--are still in preparation.

The fund, according to Roestam, is for accelerating the land acquisition process. First the government acquires land, then the investors repay it. In this way, there is a certainty of the land investment value. “Land acquisition will later be carried out by the regional governments, then be reported to Public Works General Service Agency,” he aid.

To accelerate infrastructure development, Roestam said he has founded the Indonesia Infrastructure Fund. The government will give between 5 and 10 percent seed capital. “The remaining 90 percent is the investors' responsibility,” he said.

Anton Aprianto