IMF forecasts strong economic growth in Asia to continue

The Jakarta Post

WASHINGTON (AP): Led by China and India, Asia recorded strong economic growth in 2006 and the outlook for the rest of this year is for the solid performance to continue, the International Monetary Fund said Friday.

Growth for the region is expected to moderate in 2007 to just over 7 percent down slightly from 7.6 percent last year, said David Burton, director of the IMF's Asia-Pacific Department, presenting a report on the outlook for the region.

"This moderation reflects an easing of external demand, particularly from the United States but also assumes an effective tightening of (monetary) policies in China and India," he said.

Burton said the region faced risks from a larger than expected slowdown in the United States and a spike in oil prices, underscoring the fact that the region's fortunes are closely linked to external conditions.

The report breaks Asia down into an industrial area -Japan, Australia and New Zealand - and emerging area comprising South Korea, China, India, six other countries and Hong Kong and Taiwan.

Growth for the industrial Asia was 2.3 percent in 2006 and is projected to hit 2.4 percent in 2007, the IMF said.

"In industrial Asia Japan's expansion remains solid and growth should continue to firm in Australia and New Zealand," the report said.

In China, rapid growth continued to be largely investment led, the IMF said, although exports have been contributing a growing share.

India's domestic demand gained more momentum, taking growth there to more than 9 percent in 2006, the IMF said.

Exports for the region "were buoyant in 2006, although there was a loss of momentum late in the year, particularly in technology goods" and "some uncertainty to the near-term outlook," the report said.

The IMF said inflation pressures were contained in much- though not all - Asia, the IMF said. Factors holding inflation down included soft domestic demand, some appreciation of exchange rates, tightening monetary policy, and to a lesser extent, loweroil prices.

Overall, inflation is expected to remain at around 3 percent for emerging Asia this year, the IMF said, with India and the ASEAN countries- Indonesia, Thailand, Malaysia and the Philippines - somewhat higher.

BI to limit ex-pat bank workers

Business and Investment - April 13, 2007

Urip Hudiono, The Jakarta Post, Jakarta

The central bank is currently drafting a regulation to restrict the employment of expatriate labor in the banking sector amid recent concerns in some circles about perceived foreign domination of the country's banking industry.

Banks with a foreign-ownership level of 25 percent or more will still be allowed to employ non-nationals, but only in positions higher than middle-management level -- two levels below directorial level -- and only in the credit, treasury, risk management, investor relations and IT departments, Bank Indonesia Deputy Governor Muliaman D. Hadad said during a discussion on the issue Thursday.

Non-nationals with special expertise that is not available locally may also be employed, but will required to transfer their skills to local employees within three years, he said.

The human resources and compliance departments of banks would be specifically barred from employing expatriates, and at least half of the members of a bank's board of commissioners and board of directors would have to be Indonesians.

Meanwhile, banks with a foreign-ownership level of less than 25 percent would have to employ Indonesians at all levels.

Muliaman admitted that the regulation was still at the proposal stage pending further discussions with bankers, adding that it was intended to improve the overall human-resources situation in the domestic banking industry.

"Our main concern is to ensure the transfer of knowledge from foreign to local bankers.

"But, non-national employees can actually learn a lot as well by working here. So, lets not get the matter out of proportion and get stuck in shallow nationalistic arguments, or in a foreigners-versus-Indonesian scenario," he said.

BI Governor Burhanuddin Abdullah first alluded to the proposed new policy during the central bank's annual Bankers Dinner last year. He said the policy was being considered as part of the effort to ensure that overseas-owned banks fully participated in job creation.

Expatriate bankers are currently subject to a BI requirement that all bankers working here be certified by the Indonesian Bankers Institute (IBI).

Some analysts have voiced concern that the Indonesian banking sector is coming under the control of foreigners, which, they say, threatens employment prospects for Indonesians.

At the moment, Indonesia has only 41 foreign-owned banks out of a total of 131 banks, but they manage nearly half of the industry's total assets. Concerns have also been expressed that efficiency and consolidation drives by the foreign-owned banks could result in Indonesian workers being laid off.

Burhanuddin, however, dismissed these fears, saying foreign investment and the employment of foreign bankers in Indonesia had greatly benefited the industry by making it healthier and more professional, although he expressed the hope that the foreign-owned banks would make further efforts to expand lending.

Muliaman said the knowledge-transfer requirements proposed under the envisaged new regulation were intended to protect local workers by providing them with sufficient skills to retain their jobs.

He further said that BI had already received submissions from foreign-owned banks regarding the new policy. They had referred to possible difficulties in implementing the regulations due to the lack of adequately trained banking professionals in Indonesia.

"Banks sometimes have no option other than to hire expatriate employees. They also face a dilemma when training their local workers as, after training, they might then be tempted to jump ship to other firms," he said.

Asia's growth in domestic demand will outstrip US

Gulf News Report

Dubai: Gulf investors should be quick in taking advantage of the Asian investment opportunities as the the continent's growth in domestic demand has the potential to overtake that of the US and emerge the key driver of global economy said an expert in Dubai yesterday.

Speaking at the first 'Pulse of Asia' investor conference organised by the Dubai branch of the Singapore based DBS bank, David W. Carbon, Managing Director, Economic and Currency Research of DBS said: "Asia is no longer small to be ignored. Increasingly it is the domestic demand from Asia that is driving its growth. In 2007, for every dollar of fresh demand the US generate, Asia will generate demand worth 89 cents. In three to four years Asia is likely to overtake US in terms of domestic demand."

Recognise opportunities

The huge domestic demand is driving Asian growth rates to above 6.5 per cent while US and the euro zone are growing at 2.75 per cent and two per cent, respectively.

"Recognising the Asian opportunities, investors from the GCC have been pouring money into real estate, banking and infrastructure across Asia in the recent months. With the Pulse of Asia event in Dubai we are now bringing Asia and Middle East culturally and economically closer," said John J Baggerman, General Manager of DBS Dubai.

Structural slowdown

Although Asian growth rates are expected to experience a mild slow down in 2007, Carbon expects the slowdown to be more structural than cyclical. "India and China are adopting measures to cool down their econ-omies through both fiscal and monetary measures.

"Central banks of these two countries are expected to further tighten interest rates to maintain sustainable growth. However the growth trajectory of other Asian economies are inclined upwards," he said.

Commenting on the fears of a global economic slowdown, Carbon said the risk of a recession is receding as US current account deficit situation is past its peak, oil prices are not unidirectional and the US housing prices area stabilising.

"About 90 per cent of the slowdown has already happened and the on policy front the Federal Reserve is expected to cut interest rates by 25 basis points in the third and fourth quarter of 2007."

Indonesia to develop three reliable industries in 2025

Jakarta (ANTARA News) - Industry Minister Fahmi Idris said that in order to become an advanced industrial country, Indonesia would give priority to developing three sectors into reliable industries in 2025, namely agro-industry, telematics and transportation equipment industry.

"Agro-industry is given the main priority. The ones are currently developed intensively are oil palm, cacao and rubber," the minister said at state enterprise forum here on Friday.

He said that in focusing its industrial development, Indonesia selected sectors of industries which could be developed and had potential competitive edge in the future.

These types of industries, once developed, would help boost the development of other industries, he said.

According to the minister besides the three industrial sectors which would get priorities, there were two others on which Indonesia would give development focus, namely manufacturing and selected small and medium-scale industries.

The strategy to be applied in the development of agro-industry, the minister said, is to strengthen the chain of values of this industry such as building its structure, diversifying its products, increasing its added values, quality and expanding its market.

"We are able to produce 550 thousand tons of cocoa a year but 80 percent of our exports are cacao seeds. This is unlike Malaysia which produces only 50 thousand tons of cocoa but is able to export 250 tons of cocoa. This means we are weak in down stream industries", the minister said.

Therefore, he said, Indonesia needed to carry out main strategies for increasing its competitive edge, namely added values, efficiency and structure improvement. Besides, the industries that were developed should be sustainable and should be those of small and medium scale ones.

The minister also cited cluster industry development as an operational strategy, namely by expanding industries into regions and developing business environment.

Thus, the target to become an advanced industrial state in 2005 would be achieved, he said.

Identify your greatest strengths and develop them, says analyst

Urip Hudiono, The Jakarta Post, Jakarta

In today's global economy where managing market information is the key to staying ahead of the competition, Indonesia must firstly identify those sectors in which it has advantages, and then focus on developing them, an expert says.

Indonesia must also take cognizance of how the global market is diverging into a number of regional markets, and set up "industrial clusters" to supply appropriate products to each market, says Alain Juillet, an global markets analyst.

Juillet is also a senior advisor to the French government on "competitive intelligence".

"The open global world is full of opportunities, as well as threats, in the process of producing goods and services. Every country, therefore, has to analyze its strengths and weaknesses," Juillet told a seminar Wednesday.

"Mastering information on one's capabilities and on the market is the strategic issue now. Not just acquiring it, but, more importantly, how to create value from the information."

The term "competitive intelligence" refers to the gathering and analysis of public information on products, customers and competitors to be used in planning and decision-making by a company or sovereign nation.

Juillet argued that Indonesia, like every other country, should get involved in "competitive intelligence" in the interests of the national economy, starting out by identifying those industries in which it is strong, and promoting their development.

It would then need to create "poles of competitiveness", or industrial clusters, like Silicon Valley in the U.S., where businesses share information and cooperate in creating a business network, with the academic community supporting research and development.

An Indonesian Institute for Competitive Intelligence (IICE) study has urged Indonesia to promote the export of added-value products -- rather than just unprocessed raw materials -- and to focus on the transfer of technology, rather than just employment.

The government, in collaboration with the Indonesian Chamber of Commerce and Industry (Kadin), has identified 10 sectors that will be prioritized for development, consisting of the textile, footwear, electronics, automotive, shipbuilding, construction and utilities, machinery, petrochemicals, fisheries, plantation and handicrafts industries.

President Susilo Bambang Yudhoyono has also announced an ambitious plan to make Indonesia one of the top five world economic powers by 2025. Wednesday's seminar, sponsored by the IICE, was held to discuss the President's plan.

Juillet said that the state was perfectly entitled to lend a helping hand to its national companies, but only to the extent that they would then be able to compete for themselves.

"The government can, for example, lobby another country or company that is not playing according to the fair rules of the game," he said.

"However, the world has not turned out to be a single uniform market, but groupings of countries sharing similar economies, culture and environments have been emerging, like Europe, Latin America, China and South East Asia. Information about each of these markets is again crucial if we are to produce suitable products."

RI could be a production base for Japanese firms

The Jakarta Post - 2007-04-12 10:49

Jakarta, April 12, 2007 (The Jakarta Post) - One of the Indonesian teams involved in the negotiation of the Japan-Indonesia Economic Partnership Agreement (EPA) will propose that Indonesia serve as a production base for Japanese industry in at least three sectors.

"The three consist of the automotive and spare parts, electrical components and heavy machinery sectors," said Indonesian Industry Ministry negotiator Achdiat Atmawinata upon arriving Wednesday at Narita airport in Tokyo, as quoted * by Antara.

Achdiat was in Japan to join the members of other Indonesian delegations scheduled to conduct a further round of negotiations on the EPA with their Japanese counterparts later this week.

Achdiat said that if the Japanese agreed, Indonesia would end up producing more cars for both the domestic and export markets.

He admitted, however, that Indonesia would first have to develop the necessary support industries for the three sectors, adding that Japan could do a lot to help in this regard through the transfer of

knowledge within the EPA framework.

"If the three sectors grow, additional benefits will accrue for the two countries. This is \vhere Japan can help Indonesia by providing the technological know-how, and maybe capital," he said.

"After all, Japan would also benefit," he said, adding that Japanese cars had long dominated the Indonesian market.

Besides Achdiat's team, other teams representing the Energy and Mineral Resources Ministry and the Trade Ministry had traveled ahead to Tokyo and were already engaged in negotiations.

Talking to The Jakarta Post by phone, Indonesia's chief EPA negotiator, Soemadi Bro-todiningrat, said the teams would conduct follow-up negotiations with their Japanese counterparts on the EPA's chapters on goods and mineral resources.

Soemadi said that there were still a number of demands from the Indonesian side that Japan had yet to agree to, especially as regards such issues as industrial cooperation.

"Japan's commitment to cooperation in. the industrial sector is still vague," Soemadi said in Jakarta.

"On the other hand, they are still waiting for us to agree to the User Specific Duty Scheme." This scheme would exempt designated industrial products from Japan from Indonesian import duty.

When-asked when the EPA would be signed after the original March deadline had been missed, Soemadi said that it would have to wait for the next bilateral meeting between the leaders of the two countries.

"Last time, it was President Susilo Bambang Yudhoyono who visited Japan. So, it would be ideal if Prime Minister Shinzo Abe came to Indonesia this time," he said.

In November, the President and the Prime Minister signed a joint statement announcing that the two leaders had agreed on the key elements of the Rl-Japan EPA.

"A date for the next bilateral meeting has yet to be set," Soemadi admitted.

Upon the signing of the EPA, Japan will drop more than 90 percent of its tariffs on most Indonesian products, including agriculture products, while Indonesia will remove around 35 percent of its tariffs on Japanese products over a period of between three and 15 years.

Indonesia`s wooden furniture exports continue to drop

Jepara (ANTARA News) - Indonesia`s wooden furniture exports have continued to decline in volume over the past three years although world demand is increasing, Industry Minister Fahmi Idris said here on Wednesday.

Due to the decline in exports, the utility rate of the industry`s capacity had also dropped, the minister said in a written speech read by the director general of small-and medium-scale industries, Sakri Widianto, at the handing over of assistance in the form of tools and machineries for wood and metal furniture industries in Kudus, Jepara and Pati in Central here on Wednesday.

He said in 2004 the utility rate of the industry`s production capacity still reched 75.22 percent but it then dropped to 68.51 percent in 2005 and to 66.41 percent in 2006.

Wooden furniture production in 2004 reached 2,483,067 cubic meters but in 2005 it dropped to 2,330,389 cubic meters and in 2006 to 2,258,882 cubic meters.

Production of processed rattan products had also dropped. In 2004 it reached 386,180 tons a year but in 2005 it declined to 384,165 tons and in 2006 to 372,761 tons.

Although the volume and rate of utility of production capacity dropped significantly, the nominal value of exports of the products rose.

In 2005 , it reached US$2.49 billion and in 2006 rose to US$2.38 billion.

"The rise follows a hike in the price of processed products and furniture components," he said.

Wooden furniture makes the largest contribution to national exports reaching 672,311 tons worth US$1.32 billion while export of furniture components reached 907,158 tons worth US$746.08 million.

Fahmi said the drop in the production utility rate and volume was caused by shortage of wood and rattan supply as a result of smuggling activities, in addition to lack of capital, tighter competition and low quality human resources.

Therefore, he said, the government would continue to support national furniture industry development.

He said export prospects for Indonesian furniture were still bright as the country`s share in the market was still small. "We have the pontentials to increase the share," he said adding the country`s share in the world furniture market was not still 2.9 percent or US$2.2 billion.

Indonesia first quarter GDP seen up 5.7-5.9 pct yoy

Jakarta (ANTARA News) - The country's gross domestic product (GDP) in the

first quarter to March likely grew 5.7-5.9 pct year-on-year, Finance Ministry fiscal policy chief Anggito Abimanyu said.

The ministry's estimate tops Bank Indonesia's forecast of just 5.4 pct, and is well above the 5.0 pct growth posted in the first quarter last year.

Abimanyu told a press briefing that private consumption, which accounted for about 63 pct of total GDP in 2006, likely rose 3.6-4.1 pct year-on-year in the first quarter, while government spending rose 4.5-5.0 pct.

Investment in the quarter meanwhile is expected to have risen 6-6.5 pct, with exports up 14-15 pct.

The government has predicted GDP to grow 6.3 pct this year after rising 5.5 pct in 2006.

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.

Govt to build disaster relief depots

Urip Hudiono, The Jakarta Post, Jakarta

The government plans to set up a nationwide network of depots for emergency relief supplies and form a new national agency tasked with managing natural disasters in the country.

The "disaster logistics depots" will be established in each provincial capital, Coordinating Minister for People's Welfare Aburizal Bakrie said. They will be stockpiled with enough food and medicine supplies to handle the occurrence of a natural disaster in each region.

The depots will also be supplied with equipment and transportation vehicles to ensure the quick and effective distribution of supplies to disaster victims during emergency relief efforts.

"This is part of our effort to improve disaster management in the country, by `regionalizing' it," Aburizal told reporters after a meeting Monday with Vice President Jusuf Kalla and National Coordination Agency chief Syamsul Maarif.

"The plan for the logistics depots is to overcome logistics and transportation problems in relief situations. These are areas which have hampered the quick mitigation of disasters in the past," Aburizal said.

The government expects the establishment of logistics depots to make future relief efforts more efficient and avoid the high costs associated with "sending out Hercules planes from Jakarta just to ship supplies of instant noodles," Aburizal said. Managed as a network, the depots could support each other, with those in the vicinity of a disaster-affected region serving as the nearest back-up facility.

However, he declined to mention how much the establishment of the network of logistics depots would cost, or when operations would commence.

The government has allocated Rp 2 trillion (US$219 million) for disaster mitigation purposes in this year's state budget, with several disaster-affected regions already proposing an additional Rp 2.7 trillion in funds. The government also plans to set up a nationwide early warning system throughout the country by 2008.

A string of disasters have hit the country in recent years. The Coordinating Ministry Office has cited floods as the most frequently occurring disaster, while earthquakes cause the most human casualties and fires cause the greatest material losses.

Aburizal said the depots will be managed locally in each region, but will remain under the auspices of the central government -- in this case, the new National Disaster Management Agency that will be formed.

"We are still working out who will manage the facilities. It may either be the local administration, or the local military," he said.

Aburizal also said the depots would be separate from the rice stockpile depots managed by the National Logistics Agency, although they may work in cooperation.

Aburizal said the government expects the new National Disaster Management Agency to be formed within 6 months, as required by a new law on disaster management that the House of Representatives passed in March. However, the government is still discussing how it will replace the existing National Coordination Board (Bakornas) and National Search and Rescue Agency (Basarnas).

Indonesia's Rubber Gloves Products Beat China's

Monday, 09 April, 2007 | 16:11 WIB

TEMPO Interactive, Jakarta: Indonesia's rubber gloves products on the world market have managed to beat China's products, which use synthetic raw materials.

Synthetic rubber gloves products are considered less safe compared to natural rubber gloves products.

Today, the global market share of natural rubber gloves is 90 percent, while synthetic rubber gloves only account for 10 percent.

“Rubber gloves are one of Indonesia's products that have very rarely beaten Chinese products,” said Henry Tong, Head of the ASEAN Association of Rubber Gloves Manufacturers, last week.

Research studies have shown that the failure rate of synthetic rubber gloves is higher than natural rubber gloves.

The last research that the Rego consultant agency conducted stated that the failure rate of synthetic rubber gloves was between 0 and 4 percent.

“This has triggered consumers to choose natural rubber gloves,” said Henry.

The use of natural rubber gloves in the world, said Henry, has increased rapidly over the past few years because of special regulations in the health sector.

Some countries have made it obligatory to use natural rubber gloves in the health sector.

“In addition, it has become a habit in developed countries for rubber gloves to be used in everyday life,” said Henry.

However, there is less demand for natural rubber gloves in Indonesia, he said, because no regulation has yet been issued regarding their use.

According to Henry, Indonesia was among the leaders of natural rubber gloves, in addition to Thailand and Malaysia.

Currently, there are 16 rubber gloves companies in North Sumatra and six companies in Java.

These include six existing Malaysian enterprises with a total investment of US$100 million.

Indonesia exports between 10 and 15 billion pairs of gloves each year, providing employment for between 10,000 and 15,000 workers.

YULIAWATI

BI holds key rate steady on inflation concerns

Urip Hudiono, The Jakarta Post, Jakarta

The central bank kept its key interest rate unchanged at 9 percent Thursday, marking a pause in its series of monthly reductions since July, on fears of a possible uptick in inflation ahead.

Bank Indonesia said, however, that its "neutral stance" on the rate -- used as a benchmark for bill sales and bank lending rates -- would not have any adverse effects on the economy, which it believed had grown by 5.4 percent during the first quarter.

Announcing the outcome of the central bank's board of governors' policy meeting and economic assessment Thursday, BI governor Burhanuddin Abdullah said inflation was expected to remain within its forecast range of 5 to 7 percent in 2007, and between 4 and 6 percent next year. However, he warned that inflationary pressures could yet gather steam.

"There are now indications that a number of consumer prices are exhibiting tendencies that need to be guarded against. Public expectations on inflation are also on the rise in line with the acceleration in domestic demand and economic growth," he said.

"We will hold the rate steady until these inflationary pressures have subsided."

The central bank last kept its rate steady in June, following a quarter percentage point cut the previous month. Since then, BI has steadily cut its rate amid easing inflation and the need to promote higher economic growth.

March's inflation figures were mixed, falling on a monthly basis to only 0.24 percent from February's 0.62 percent, yet rising on an annualized basis to 6.52 percent as compared to 6.3 percent in February.

The economy grew slightly more slowly last year than in 2005, by 5.5 percent compared to 5.6 percent.

Miranda S. Goeltom, BI senior deputy governor, said that the pause in the rate-cut cycle did not run counter to the effort to bring down bank lending rates to more affordable levels for borrowers.

The pause, she said, was balanced by recent regulations issued by the government and the central bank designed to relax lending rules and hopefully encourage more borrowing, and hence growth, on the part of the real sector.

"It is expected that the inflationary pressures will subside during the course of the pause as the real sector responds to the new policies," she said.

"The BI rate is just one factor that affects lending rates. In addition, banking-sector efficiency and the overall investment climate need to be improved."

BI recently relaxed its rules on new borrowing by existing large-scale defaulters in an effort to encourage more bank lending, particularly to small businesses.

Bank lending grew by a less-than-expected 14 percent to Rp 792.3 trillion last year, compared to growth of more than 20 percent in previous years, as many businesses were reluctant to borrow due to persistently high bank lending rates and stagnant market demand.

Lending in February increased by a disappointing Rp 8.9 trillion to Rp 826.3 trillion, compared to an increase in January of Rp 15.5 trillion. Meanwhile, the level of non-performing loans in the banking industry stood at 3.4 percent.

Regarding BI's economic assessment, Burhanuddin said that a strong export performance and a pick-up in private investment should keep growth on track at between 5.7 and 6.3 percent in 2007, and between 5.7 and 6.7 percent in 2008.

A good export performance is believed to have produced a US$3.3 billion surplus in Indonesia's balance of payments as of the end of March, which would increase the country's foreign exchange reserves to US$47.2 billion.

Jamsostek vows to fight corruption

Ridwan Max Sijabat, The Jakarta Post, Jakarta

The management of state-owned workers' insurance company PT Jamsostek signed an integrity pact Thursday vowing to work as a professional team to reach the company's goals.

President director Hotbonar Sinaga and six other directors signed the pact.

Senior officials and heads of Jamsostek's branches are obliged to comply with the pact and implement health principles for businesses and codes of conduct.

In order to guarantee maximum benefits for workers, the company's management promised to create efficient and clean corporate governance over the next three years when managing its assets of almost Rp 50 trillion (US$5.34 billion).

"By signing the integrity pact, we send a strong message that we will work professionally and transparently and reject any external intervention," said Hotbonar, adding that Jamsostek would monitor claim payments and investments, which are prone to corruption.

"We will no longer receive fees for placing funds in banks and when sharing the equity of other companies through the stock market. We will also ... provide full protection for whistle-blowers reporting irregularities inside the company," he said.

Hotbonar said numerous institutions and individuals have requested financial aid from Jamsostek, but the company's new management -- appointed in early March -- rejected their applications.

Jamsostek has been shaken by numerous financial leakages in the past during the investment of its assets in state and private banks and enterprises.

The latest case, the purchase of Rp 100 billion in bonds from troubled Bank Global, landed former Jamsostek president Achmad Junaidi in prison for eight years.

Several corruption cases at the company have yet to be settled. Police and the Attorney General's Office are currently investigating the purchase of Rp 40 billion in PT McDonald's bonds by Jamsostek in 1993, the Rp 200 billion financing of an annulled labor law in 1997 and the placement of Rp 70 billion in Bank Mandiri through Bank Rakyat Indonesia in 2002.

Jamsostek was a moneymaker for government officials and political parties during the New Order regime.

Deputy to the state minister for administrative reform on supervision affairs, Gunawan Hadisusilo, said he appreciated the company's move to repair its tarnished image and to help accelerate the elimination of corruption in line with presidential instructions in 2005 calling for a nationwide war on corruption.

Vietnam and Indonesia push for greater economic ties

NhanDan Online

Vietnam and Indonesia agreed to further bilateral co-operation during the fourth meeting of their Joint Committee for Economic, Scientific and Technological Co-operation in Jakarta on April 3-5.

According to a document signed at the end of the meeting, the two countries will boost their co-operation in the fields of trade, investment, oil and gas industry, fisheries, agriculture, communications and transport, education and training, health, tourism and the banking industry.

The Head of the Vietnamese delegation, Trade Minister Truong Dinh Tuyen emphasised that increased economic ties will benefit not only the two countries, but also the Association of Southeast Asian Nations (ASEAN), of which they are members, as Indonesia and Vietnam rank first and second in the bloc in terms of population.

Trade Minister Mari Panghestu, who led the Indonesian delegation, noted that Vietnam is Indonesia 's strategic partner in ASEAN and wanted to see bilateral co-operation grow further.

The two Ministers expressed their hopes to work out specific steps to execute the agreements reached in the meeting.

During the meeting, President of the Vietnam Pepper Association Do Ha Nam and President of the Indonesia Pepper Exporters Hassan Widjaja signed a memorandum of understanding on the establishment of a join committee to research and implement policies to improve their marketing activities, as well as the quality and supply sources of pepper.

Vietnam is currently the world's largest pepper exporter while Indonesia is two ranks behind. (VNA)

Significant increase in RI-China trade over past few years

Bejing (ANTARA News) - The value of Indonesia-China trade rose significantly in the past few years as hoped for in an agreement concluded by the two countries` leaders in April 2005, an Indonesian embassy official said.

In an agreement reached by President Susilo Bambang Yudhoyono and his Chinese counterpart Hu Jintao, their countries` two-way trade was projected to reach a total value of US$ 30 billion by 2010.

"Trade between the two countries progressed and grew quite significantly, especially after their two leaders reached an agreement to step up bilateral trade," Andriana Sugandy, economic affairs head at the Indonesian embassy in the Chinese capital, said on Thursday.

The total value of bilateral trade in 2008 is projected to reach US$20 billion and in 2010 US$ 30 billion, she said.

In 2006 Indonesia-China trade already reached a total value of US$19.06 billion. "With bilateral trade standing at that level in 2006, we are optimistic the trade boosting targets for 2008 and 2010 wlll be achieved," Andriana said.

She said the upward trend in Indonesia-China trade was also due to the trade promotion efforts Indonesia had been making in China over the past few years.

"We are now trying to find opportunities and make breakthroughs in getting access to the markets in Chinese provinces we have so far not yet entered such as Lioning, Hubei and Hunan," she said.

Indonesian businessmen`s attttention was so far still focused on traditional markets in China such as Hong Kong and Beijing. "Yet, other provinces in China also badly need products from Indonesia," she said, adding that efforts to promote Indonesian products in China needed to be made on a constant basis.

Among Indonesian products for which there was high demand in China were crude palm oil (CPO), paper and pulp, wooden goods, petroleum and natural gas.

Indonesia`s imports from China mainly consisted of electronic goods, organic and inorganic chemicals, textiles and textile products.

Andriana said six years ago (2001) the value of Indonesia-China trade stood at only US$6.7 billion but in 2006 the figure had increased more than three times to US$19.06 billion.

"This means the two countries potentials to increase trade relations are very great and can still be stepped up," she said.

To further intensify their bilateral trade, the two countries had set up a "Working Group on Bilateral Trade Resolution" which was tasked with identifying trade potentials that can be further developed and existing impediments.

The working group meets at least once a year in either Indonesia or China on alternating basis but the frequency of meetings culd be increased if necessary.

Busway supplier gets five year on corruption

The Jakarta Post

JAKARTA (JP): Anti-Corruption Court Wednesday punished busway supplier Budi Santoso into five years for committing collusion when supplying buses for a busway project, MetroTV television reported.

Budi, together with former head of City Transportation Agency Rustam Effendi, were accused of marking-up price of 54 buses for the busway first corridor from Blok M in South Jakarta to Kota in Central Jakarta.

Prosecutors previously said the prices of buses were decided before the tender bid was opened. The price was based on a figure calculated by Budi, who is the president director of PT Armada Usaha Bersama.

Anti-corruption had previously punished Rustam to three year jail term.

The corruption case caused state loss worth Rp 10.6 billion (US$1.16 million).

WB: RI`s investment to grow 11.7 percent in 2007

Jakarta (ANTARA News) - The World Bank has predicted that investment`s contribution to Indonesia`s economic growth this year will increase to 11.7 percent from 2.9 percent a year earlier.

The central and regional governments` consumption expenditures were expected to increase in 2007 so that it would raise investment, World Bank economist William Wallace said here Thursday.

Private investment would increase but state investment would slightly fall in 2008 so that investment growth would drop slightly to 9.3 percent, he said.

The slowdown in investment in 2008 would also be the result of investment`s high contribution to the gross domestic product, he said.

"Investment was very low in the four quarters of 2006, so it is not difficult to increase in the first quarter of 2007," he said.

He said the downward trend in lending rates which was expected to raise the private sector`s consumption expenditure would also boost the investment growth.

"The decline in the benchmark interest rate will prompt banks to lower their lending rates," he said.

He said the new investment law was not enough to improve the country`s investment climate as other laws such as taxation and manpower laws needed to be amended.

"The key is to improving the country`s infrastructure as one of the factors to improve the investment climate," he said.

Indonesia Has Become the Second Largest Exporter of Coal in the World

DUBLIN, Ireland--(BUSINESS WIRE)--Research and Markets (http://www.researchandmarkets.com/reports/c53347) has announced the addition of World Coal Report Ed 2 2007 to their offering.

Coal is making a come-back. A relentless increase in world demand for energy, large price increases for natural gas, growing concern about imported energy and security of supply, indecision about nuclear power are all factors which are contributing to the renaissance of coal. Despite the ‘dash for gas’ in the last two decades, coal remains the number two source of primary energy. This renaissance is taking place in many countries, but by far the most important driver is escalating demand in China, accompanied by growth in India and by continued strong demand in the USA.

The report provides a global overview of the coal market with production and demand, the structure of coal rank, an analysis of the international coal trade looking at the structure, geographical distribution of international coal production, development of a single coal market and international coal prices, the shipping and freight rates, the new technologies for coal extraction and the effects on the environment, global environmental legislation and a detailed review of the 12 key global markets.

Key Findings

- The big international coal mining companies are now rivaling the oil and gas giants in the extent of their energy reserves

- A new coal mining force is entering the global marketplace and moving into the first league on the strength of their vast domestic market, the giant coal producers of China

- A vitally important issue is the development of clean coal technology

- Coal is the largest emitter of carbon dioxide, a major emitter of sulphur dioxide, nitrous oxide, mercury and particulate matter (polluting ash and dust)

- Billions of dollars are being invested in the development of technologies to clean emissions, to capture and store carbon and to generate electricity with reduced carbon emissions. The target is zero emissions generation

- In the last 40 years the global coal market has changed radically

- In 1965, the United States was overwhelmingly the largest producer and consumer of coal, accounting for 20% of consumption, followed by the United Kingdom and Germany

- The US share has increased slightly to 22% but the US has moved from first place into second pace quite a long way behind China

- In 1965 China had an 11% share of the global market but this has grown to 36.9% in 2005

- The role of the key exporters was established in the first half of the 1980s

- The main impetus to growth of coal exports came initially from the US and Poland, but Australia and South Africa both expanded their market shares considerably during the 1980s

- More recently Indonesia has become the second largest exporter

- US exports fell under intense price pressure from other suppliers

Cement giants report concrete results

Andi Haswidi, The Jakarta Post - 2007-04-03 14:44

Jakarta, 03-April-2007 (The Jakarta Post) - The country's largest cement manufacturer, PT Semen Gresik, has reported hefty growth in net profit and sales for last year, despite lower overall demand.

The publicly listed company said Monday that it had booked a total net profit of Rp 1.3 trillion (about US$140 million) in 2006, about 29.3 percent higher than in the same period of 2005, when the equivalent figure was Rp 1 trillion.

The significantly higher net profit was attributable largely to an increase in net sales from Rp 7.53 trillion in 2005 to Rp 8.73 trillion last year, and to an increase in operational income from Rp 1.54 trillion to Rp 1.78 trillion.

The company's earnings per share jumped by 29.3 percent to Rp 2,184.13, compared with Rp 1,688.9 in 2005.

Cholil Hasan, finance director, said that despite last year's slower growth in domestic demand -- about 1.8 percent compared with 4.3 percent in 2005 -- Semen Gresik managed to boost its sales through effective marketing, as shown by 4.8 percent growth in domestic sales alone.

In 2006, domestic demand for cement reached 32.06 million tons, of which Semen Gresik supplied about 14.96 tons. The company successfully increased its domestic market share to 46.9 percent from 45.4 percent in 2005

Including exports, the company recorded total sales of 16.76 million tons, an increase of 2.6 percent from the 16.34 million tons sold in 2005.

Of the company's overall 2006 sales, 46.9 percent was accounted for by the company's own-brand sales, while subsidiary PT Semen Padang accounted for 33.2 percent and subsidiary PT Semen Tonasa the remaining 19.9 percent.

"The improved performance in 2006 was due to better synergies between all our subsidiaries, and our internal consolidation program," president director Dwi Soetjipto said.

After last year's robust performance, Semen Gresik is targeting an increase in total sales this year of 17.2 million tons on the back of an expected 4.6 percent increase in demand for cement, Dwi said.

Another cement giant, PT Holcim Indonesia, also reported its 2006 results Monday, which showed that the company earned total sales revenue of Rp 3 trillion last year, around the same as it booked in 2005.

"Sales for the period were virtually unchanged year on year at Rp 3 trillion. However, our net income of Rp 176 billion, or Rp 23 per share, represented a distinct improvement," Holcim president director Tim Mackay said in a press release.

The company made a loss of Rp 334.08 billion in 2005.

Mackay said that domestic demand, especially in Java, had contracted by 2 percent in 2006, in contrast to the 4.3 percent growth seen in 2005, despite the additional demand for cement for rebuilding work after the Aceh tsunami, and a spate of earthquakes and floods in different parts of the country.

Holcim currently controls around 16 percent of the domestic cement market.

Textile producers need to adopt lean manufacturing, say experts

The Jakarta Post, Jakarta

Textile manufacturers should adopt the "lean manufacturing" method, instead of the batch method widely used here at present if their sunset industry is to be rejuvenated, and efficiency and competitiveness improved, experts said Monday.

Through lean manufacturing, they said, manufacturers could eliminate their current time-consuming batch processes and replace them with continuous processes, without having to resort to dismissals.

Factories here usually produce, assemble, package and distribute their products in batches.

Using the continuous method, all the links in the chain are processed continuously without any interruptions or breaks, unlike the situation that prevails using the batch method.

"Basically, all processes from manufacturing to product delivery to the end consumer constitute batches of work that have no added value," said Michael T. Fralix, the president of TC2, a non-profit organization offering solutions to the textile industry.

Speaking on the sidelines of a seminar sponsored by the U.S.-based Cotton Council International (CCI), Fralix said that by adopting lean manufacturing, production costs and unemployment would decline, while productivity and product quality would increase.

The managing director of the University of Indonesia's Management Institute, Budi Soetjipto, offered a rough comparison, saying that 500 workers who could make products worth Rp 100 million (US$11,000) over a certain period of time using the batch method might be able to make Rp 1 billion-worth of products during the same period of time using the lean manufacturing approach.

Achmad S. Ruky, an expert on wage bargaining, said that Indonesian workers, together with those in the Philippines, had the lowest productivity levels in Southeast Asia.

Based on 2003 figures, he said, Indonesian and Philippine workers in the manufacturing sector were able to finish their tasks in eight hours, and earned 33 U.S. cents per hour.

By comparison, Thai workers earned 92 U.S. cents per hour and could finish similar tasks in two hours and 45 minutes.

Meanwhile, in Singapore and Malaysia, workers could finish similar tasks within 11 minutes, and an hour and five minutes, respectively.

Do Indonesian companies really need foreign help

The Jakarta Post

Duncan Graham, Contributor, Surabaya

"Do not copy U.S. management texts. Write your own. Put advice in the context of Indonesian case studies. Local solutions can only come out of local cases." David Schrieber, consultant.

Schrieber, a former University of Wisconsin (U.S.) professor of business administration and economics who has been involved with Indonesia for 37 years, knows well that management systems that have been developed overseas do not always travel well.

A template solution that might work in the Western world could make a bad fit in Indonesia, particularly when the issue is personal.

"In many cases when consultants are called in they find that the problem is the CEO," he said during a recent visit to Malang, East Java. "That can make for difficulties if not handled well.

"A consultant should be hired to tell the company something that it has chosen not to hear beforehand. There has to be a clear identification, and acceptance, of the problem. There has to be mutual understanding. Without that, you have nothing.

"No one likes to be accused of being incompetent, but if the problem person isn't included in the solution, you are wasting time. Consultants have to be aware of the culture and the protocols. Managers can take offense at advice and their egos can get in the way."

Schrieber, who is now a human resources consultant with the non-profit overseas voluntary aid organization ACDI-VOCA, first came to Indonesia in 1970. He was sent as part of a Ford Foundation program to help upgrade courses and teaching in faculties of economics and business.

He spent his first year in Indonesia at the University of Gadjah Mada in Yogyakarta, and his second year at the University of Indonesia in Jakarta.

Although he had undertaken a three-month Indonesian language and culture course in the U.S. before flying to Yogyakarta, he found this prior learning of little use because the language used on campus was Javanese.

The other shock was the lack of facilities, resources and staff. The few books in the library were 20 years out of date and could not be borrowed. He was supposed to be helping 40 academics but few could be found.

"I discovered that a university qualification in Indonesia gave status, but not money," he said. "Staff came, delivered a lecture and left for jobs elsewhere. There was no relationship between staff and students."

It was a critical test for the new consultant. As a Westerner he found the idea of paying staff members to upgrade their skills distasteful, yet realized those who attended his seminars would be losing income to do so. However, the Ford Foundation had not allocated funds for this purpose.

He also learned that many academics teaching business had no experience in the outside world and in those days students were too shy to challenge the credentials and competence of their superiors.

Schrieber, who spent ten years with General Electric before turning to teaching and advising, commented wryly that "texts can't be teachers."

In Jakarta, he found UI slightly better prepared, though again staff were busy with off-campus jobs, often with the government in senior ministerial offices.

Since then Schrieber has returned to Indonesia on programs funded by the World Bank and the Asian Development Bank. He has worked at state universities in Semarang (Central Java), Pontianak (Kalimantan) and Padang (Sumatra).

He has also worked as a consultant in Africa, Russia and South America.

"When I completed my first assignment in Indonesia I said progress could not be made until decentralization was introduced," he said. "If you depend on the center you make bad decisions. That is the truth everywhere.

"The changes in Indonesia in the teaching business and economics have been impressive. Academics have learned that simple memorization is not the point of education and that just reading notes to students is ineffective.

"A lot of good management is common sense. It's delegating to the lowest possible level in the organization. Managers have to trust their people to make decisions by themselves.

"This requires a system of giving those people the skills and resources to do what is asked. That doesn't necessarily mean having a degree.

"Having a degree is no guarantee that you'll get a job, but it does increase your odds.

"Good management is using your human resources properly, having open communication and strategic planning.

"This means sitting back and asking: Who are our customers? What do they want, and are we satisfying their needs? If we didn't exist, would they care? Are we doing any good? Do we have values that are worthy?

"I define open communication as managers spending as much time listening as they do talking, and that the process has to be ongoing. Management has to be circular, not linear, so decisions are made and passed on, they don't just drop off the end."

During his career, Schrieber studied many aspects of human nature. We might ask for feedback, but most of us do not really want to hear nasty comments about ourselves and the way we do things, even when we know it is for our own good.

Ironically, the funding bodies that have sent Schrieber around the world fall into this category. His recommendations that projects have some continuity and allow for participants to maintain contact have been largely ignored. "Aid projects tend to be one-shot affairs," he said

He also learned that employees can be hostile to outside consultants and not prepared to be honest about their difficulties. It's the 'If it ain't broke, why fix it?' syndrome.

These people are happy with the way things are and do not want their effectiveness challenged or their cozy practices disturbed. They are unwilling to take the risk of trying something different, even though it might boost profits and expand the company.

"The great thing about Indonesia now is that learning is in the air," Schrieber said. "Campuses are less hierarchical. There's more of a worldview in universities and businesses. Administrators realize the role of a university is to teach students how to think."

Schrieber, 80, still makes regular visits to East Java with his wife Janet and maintains contact with university colleagues.

The couple's daughter Karen has married famous Malang dalang (puppet master), Soleh Adi Pramono, and has become a celebrated pesinden (female singer in a gamelan orchestra.)

Does Indonesia still need outside consultants? Schrieber, usually quick to reply, took time to answer. "If it's at the request of Indonesians, yes," he said.

"Consultants can't be imposed from outside and must be conscious of cultural differences. A good business consultant helps people confront themselves and find their own solutions.

"As consultants we have the means and processes which can help you know how you can grow."

Eminent Persons See New Paradigm for ADB in Transformed Asia

Asia Development Bank, 2 April 2007

MANILA, PHILIPPINES - A report by an independent panel of eminent persons projects that by 2020, Asia will be dramatically transformed into a region that has largely conquered extreme poverty, with 90 percent of the continent’s people living in “middle income” countries, and with a regional economy comprising 45 percent of global GDP and 35 percent of world trade.

The panel, chaired by Mr. Supachai Panitchpakdi, Secretary General of the UN Conference on Trade and Development, was established to advise the President of ADB on trends and challenges facing the Asia Pacific region, and to inform the Bank’s long-term direction.

The panel is also comprised of Ms. Isher Ahluwalia, Chairperson, Indian Council for Research on International Economic Relations; Mr. Nobuyuki Idei, Chief Corporate Advisor, Sony Corporation; Mr. Caio Koch-Weser, Vice Chairman, Deutsche Bank Group; Mr. Justin Yifu Lin, Professor and Director of the China Center for Economic Research, Peking University; and Mr. Lawrence Summers, Charles W. Eliot University Professor, John F. Kennedy School of Government, Harvard University.

The panel’s report sets forth a new paradigm for development banking in Asia that moves beyond the traditional model emphasizing transfers of external aid resources. The report sees ADB as the institution of choice to continue delivering development assistance to the region.

“To effectively carry out its new role in a rapidly changing Asia, ADB must radically change itself, and adopt new models of development banking that allow it to be responsive to the region’s evolving needs between now and 2020,” said Mr. Supachai.

The report says the “New ADB” must be more focused, and driven by three strategic directions: from fighting extensive poverty to supporting higher and more inclusive growth; from economic growth to environmentally sustainable growth; and from a primarily national focus to a regional and ultimately global focus.

To achieve this, the report says the “New ADB” must realign operations and focus its work on six core areas:

* infrastructure development, with an emphasis on public-private partnerships

* financial sector development that supports the growth of regional financial markets

* energy and environment activities focusing on global issues, such as climate change

* regional integration, which would be central to all of the Bank’s operational activities

* technological development and innovation

* knowledge management, with the Bank serving as a platform for knowledge sharing

Under this new paradigm, the ADB’s work would significantly differ from its main areas of activity in the past.

The report suggests that as ADB embarks on this transition, it should continue to focus on poverty alleviation in low-income and fragile economies, begin to address new challenges in countries expected to become middle-income, and strengthen its internal capabilities in its core activity areas.

The report envisages a more nimble, flexible and decentralized ADB, with clusters of technical staff housed in regional hubs in major Asian business and academic centers, which the report says is an essential step for attracting world-class talent consistent with the new agenda.

On receiving the report, ADB President Haruhiko Kuroda expressed his appreciation to the EPG members and said, “The panel’s report is both thoughtful and thought-provoking, and provides us with invaluable insights that will help chart the future course for ADB.”

Article from ADB News and Events