THE COORDINATING MINISTRY FOR ECONOMIC AFFAIRS REPUBLIC OF INDONESIA

Main Building, Ministry of Finance, Jl. Lapangan Banteng Timur No.2-4 Jakarta 10710Tel: (021) 351-1178    Fax: (021) 351-1186    Website: http://www.ekon.go.id

Trade and Investment News, 14 April 2008

Highlights

Politics Corruption Eradication Commission arrested central bank governor Debate sparked over new information bill as media defends freedoms Regions Proponents of South Papua province told to be patient Economy Car, heavy equipment and cement sales strongly up in first quarter House of Representatives passes bill on Islamic finance Business briefs Macroeconomy Bank Indonesia says it is ready to act if inflation soars Finance ministry says first quarter growth pushed by consumptionInvestment ArcelorMittal, world's top steelmaker, plans to tap mining and steel sector Italian-based contractor Saipem International builds $271 million fabrication yard State concerns Foreign investors may access state export financing Private sector hails new ports legislation, strike threat dropped SOEs PT Telkom to drop long-distance rates by up to 46% Adhi Karya posts 15% rise in incomePrivate sector PT United Tractors first quarter sales up 44% New cellular operator to enter crowded market Banks Bank Ekspor Indonesia to issue bonds before status change Power Korea Electric Power to sign on E. Kalimantan, Papua power projects PT PLN says close to deal with Mitsubishi on gas-fired plant Oil & gas Energi Mega Persada East Java well flows oil Pertamina says has cash to buy Tuban petrochemical operation Mining Southern Arc Minerals reports gold find in Lombok island Berau Coal to invest $120 million to double production

1

POLITICS BI governor arrested The Corruption Eradication Commission (KPK) arrested the outgoing governor a high-profile case that has hit morale at the battered bank, Reuters reported (11/4/08). Burhanuddin Abdullah had been named as a suspect in a case where a foundation linked to the central bank illegally paid parliament members. He has denied any wrongdoing.

Abdullah is one of the most senior officials to be detained in the fight against corruption.

Chief economics minister Boediono, who has been appointed as the next central bank governor, told legislators during a parliamentary hearing on Monday that the probes into Bank Indonesia had hurt morale and could affect its ability to carry out monetary policy.

The KPK also hit the headlines with the arrest on Wednesday of a legislator for allegedly accepting a bribe. KPK investigators caught House of Representatives member Al Amin Nasution of the Muslim-based United Development Party (PPP) red-handed receiving Rp4 million ($434) in cash from Bintan regional secretary Azirwan, who was also arrested.

The two were busted in a room at a hotel in Kuningan, South Jakarta, along with Azirwan's driver, Amin's secretary and an unnamed woman.

The KPK also seized Rp67 million in cash from Amin's car as evidence. KPK deputy chairman Moch. Jasin said Amin was promised Rp 3 billion for a deal involving conversion of around 200 hectares of a total of 7,300 hectares of conservation forest in Bintan, Riau Islands, into an administration offices complex. Amin is a member of the House's Commission IV overseeing forestry.

Debate heats up over information bill Debate on the new Electronic Transactions and Information Bill last week questioned Indonesia’s commitment to freedom of speech.

While the bill contains a number of business-minded articles regulating e-commerce and other electronic transactions, most attention was drawn to what media industry figures believe could be a threat to press freedom.

Article 27 paragraph 3 and Article 28 paragraph 2 are seen as contentious. Article 27 stipulates that any information regarded as potentially defamatory will be banned, while Article 28 contains a ban on information that could incite hatred or enmity among individuals or groups.

Press Council chief Ichlasul Amal was quoted as saying by Tempo magazine that some believed that journalists could be jailed under the new legislation.

Leo Batubara, a member of the Press Council, said the articles amplified existing vague sections of the Criminal Code outlawing defamation.

Meanwhile the House of Representatives endorsed the freedom of information bill Thursday (10/4/08) after years of debate.

Under the bill, state agencies and public bodies, including political parties and nongovernmental organizations, are obliged to disclose to the public their activities, performance, policies, project plans, annual cost projections, working procedures and agreements.

2

The law also seeks to make penalties heavier for distribution of pornography over the internet.

Ahmadiyah refuses evaluation, faces ban The Ahmadiyah Islamic sect, considered heretical by mainstream Islam, could face a ban for refusing to undergo evaluation, Tempo reported.

The sect had won a three-month stay on any ban when it promised to alter its practices and acknowledge Muhammad as the final prophet of Islam. Ahmadiyah recognizes its founder, Ahmad, as a prophet.

"There are indications that (the sect) cannot be tolerated," Assistant Attorney General for Intelligence, Wishnu Subroto, said Tuesday (8/4/08).

However, Subroto added that it was still too early to reach any conclusion because the government was still waiting for reports from the regions.

The government has been evaluating the group over the last three months since the sect released a 12-point press statement affirming that they were an Islamic organization.

Subroto explained that the Coordination Board for the Monitoring of Non-Institutionalized Religious Groups (Bakorpakem) would meet on Tuesday to discuss whether the sect should be banned.

REGIONSNo green light for South Papua province Activists in Merauke, Papua, who are pushing for the creation of an autonomous South Papua province, have been told that their request will not be considered for at least another two years, The Jakarta Post reported.

Head of the Indonesian National Youth Committee's (KNPI) Merauke chapter, Dominikus Gebze, said the people acted according to the correct procedures for the creation of a new province, including submitting their petition to the Papua legislature, the Papua People's Council (MPR) and the governor, despite the absence of a recommendation from the governor and the MRP.

MRP chairman Agus Alue Alua viewed the incident as an example of the people's aspiration, but maintained separation was contrary to Law No. 21/2001 and the president and vice president's policies on autonomy, stipulated in Presidential Regulation No.78/2008 on the evaluation of new autonomous provinces.

"It's a petition and they have a right to present it, but the people should be aware their aspiration is contradicted by the two laws," Alua said.

He said according to Presidential Regulation No. 78/2008, separation from regencies and provinces was prohibited, but that evaluations could be carried out on new autonomous areas.

"So, there won't be any separations in the next two years, including the separation of South Papua province."

ECONOMY

3

Q1 car, cement sales strongly upFirst quarter sales of cars, heavy equipment and cement moved up strongly, indicating that the effects of a global economic downturn had yet to dent the domestic economy.

Car sales in the first quarter rose 61% to 135,607 vehicles, data compiled by the country's biggest car dealer, PT Toyota Astra Motor (TAM), showed Friday (11/4/08), Thomson Financial reported.

In March, domestic sales reached 46,720 vehicles, down from 47,507 in February but higher than the 33,857 vehicles sold in March 2007.

Another Astra subsidiary, PT United Tractors, said sales of heavy equipment rose 44% in the quarter from a year earlier because of increased orders for coal-extraction and construction machinery. The company is Indonesia's biggest seller of heavy equipment.

The company sold 1,168 units of heavy equipment in the first three months of the year, according to preliminary data, a company official said.

Meanwhile national cement consumption rose 16.8% in the first quarter from a year ago, driven by strong demand outside Java, Indonesian Cement Association (ASI) chairman Urip Timuryono said Friday.

Domestic cement consumption in the period reached 8.78 million tons, against 7.52 million a year earlier.

In March, domestic cement consumption reached 2.99 million tons, rising 15.5% from the same month a year ago. In February, cement consumption totaled 2.7 million tons.

Timuryono said the first-quarter performance was surprising given that the government only expected the economy to grow in a range of 6.2% to 6.3%. "Normally, cement consumption growth is pretty close to GDP growth. So it is interesting to study what the key factors had been," he said.

The country’s third largest cement maker, PT Holcim Indonesia, meanwhile said it was planning to spend $500 million on a new cement plant with production capacity of 1.5 million tons a year.

Investor Daily quoted company president Timothy Mackay as saying the expansion would boost the company’s production capacity to 9.4 million tons per annum.

Reports meanwhile said the world's largest steel maker, ArcelorMittal (MT), will invest $3 billion into building a plant in the province of Kalimantan, once a feasibility study is conducted.

Mohammad Lutfi, head of the Investment Coordinating Board, told reporters Thursday the new plant will boost Mittal's annual production capacity in Indonesia to 700,000 metric tons from 60,000 tons currently.

More investment was expected from the Middle East with the passage by the House of Representatives on Thursday of a bill on Islamic finance, the Financial Times reported.

Rakesh Bhatia, the head of HSBC in Indonesia, said the legislation, which has taken two years to complete, was "extremely positive".

4

"Internationally, there is plenty of money available in this area, so the law will give the government and the country access to additional capital," he said. "We're already in advanced talks with companies that are just waiting for the government to take the lead."

Finance Minister Sri Mulyani Indrawati told the FT that the government intends to issue up to $1.6 billion in sukuk, or Islamic bonds, in the second half of this year, once the law's implementing regulations have been finalized.

The Indonesian Stock Exchange composite index closed 3.0% higher at 2,303.93 on Friday, with sentiment lifted by advances on Wall Street overnight and in Asian markets, Agence France-Presse reported.

BUSINESS BRIEFS MACROECONOMY Bank Indonesia ready to act if CPI soarsThe central bank is ready to respond to rising inflationary pressures "at any time" if necessary, its senior deputy governor told reporters Monday (7/4/08), suggesting that Bank Indonesia may soon turn hawkish in its policy outlook, Dow Jones reported.

"If (near-term) inflation continues to increase, Bank Indonesia has to respond to it at any time," Miranda Goeltom said.

The central bank this month kept the rate unchanged for a fourth straight month after on-year inflation spiked to 8.2% in March, its highest level in 18 months.

Bank Indonesia so far has been hesitant to raise rates, arguing that the country's high inflation environment is mainly due to rising commodity and energy prices globally and not because of its loose monetary stance.

It also feared that any rate hike will further damp the economic outlook for this year, as underlined by several official forecasts made in the past week.

Bank Indonesia on Monday predicted that economic growth will likely slow to 6.2% this year from 6.3% last year. The World Bank and the Asian Development Bank have made similar downward revisions to their 2008 gross domestic product growth forecasts for Indonesia to 6.0% from 6.4% previously.

Steady Q1 GDP growth on spending The economy is estimated to have grown by around 6.2-6.3% in the first quarter from a year ago, as steady consumer spending underpinned growth, the finance ministry said on Wednesday (09/04/08), Reuters reported.

The estimate compared to annual 6.25% growth in the last quarter of 2007 and 6.32% expansion for the whole of 2007, which was the fastest annual growth rate since 1996.

Anggito Abimanyu, head of fiscal analysis at the finance ministry, said steady consumer spending should support growth, despite problems in the global economy and the threat of inflation.

"Consumer spending remained strong. We have not seen the impact of a global economic slowdown on the real sector," Abimanyu said, without elaborating.

Exports performed strongly in the fourth quarter of last year, supported by global demand for commodities such as palm oil and rubber, while consumer spending and private investment were steady following interest rate cuts.

5

The government has cut its GDP growth forecast for 2008 to 6.4% from 6.8% because of concerns over the global economy.

Bank Indonesia said Monday that full-year economic growth is expected to slow slightly to 6.2% this year from 6.3% in 2007, and is likely to be between 6.2% and 6.8% next year, Dow Jones reported.

The central bank said growth is expected to be between 6.7% and 7.4% in 2010; between 7.2% and 7.8% in 2011; and between 7.4% and 8% in 2012.

For this year, the central bank predicted in a publication that household consumption would grow 5.4%; government spending to rise 3.8%; investment to increase 9.3% and exports to be up 7.9% and imports to gain 7.9%.

The central bank predicted the unemployment rate to be around 9% at the end of this year.

The World Bank earlier cut its Indonesia's 2008 growth forecast to 6.0% from 6.4%, and expects 6.4% growth in 2009.

House approves revised 2008 budget The parliament approved Thursday (10/4/08) a revised 2008 state budget that will lead to a bigger-than-expected deficit, as the government is forced to increase fuel subsidies to reflect record oil prices, Thomson Financial reported.

The government is now expecting a 2008 deficit of Rp94.3 trillion ($10.23 billion), or 2.1% of gross domestic product, up from a prior forecast of Rp73.3 trillion, or 1.7% of GDP.

To finance the deficit, the government will seek to borrow from the World Bank, the Asian Development Bank and Japan Bank for International Cooperation.

The government has also raised the targets for the proceeds from treasury bond sales and the disposal of assets managed by state asset manager PT Perusahaan Pengelola Aset (PPA).

The proceeds from treasury bond sales are now projected to reach Rp117 trillion, up from Rp91.6 trillion. PPA has been directed to generate proceeds of Rp3.9 trillion instead of Rp600 billion.

The government was forced to revise the budget after higher oil prices made the original budget assumptions less realistic.

Minister assures budget sustainabilityFinance Minister Sri Mulyani Indrawati assured business communities Monday (7/4/08) the state budget cashflow was sustainable despite a risk of soaring fuel subsidies and a greater demand for fiscal stimulus, The Jakarta Post reported.

"The amount of expendable cash in our state budget is now Rp64 trillion ($695 million). We are facing no cash flow difficulties at all," Mulyani said after a cabinet meeting at the State Palace.

"Revenues from oil and non-oil sectors, as well as from tax and non-tax sectors flow well to our state budget," she said.

The former economist explained the only concern facing the economy was accelerating

6

inflation, which the government had pledged to immediately contain.

The state budget is expected to save a total of Rp30 trillion from a 10% cut in expenditure by agencies.

"This year's deficit will also be covered through the sale of state bonds and from foreign debts," Mulyani said, adding the government had already secured an additional debt worth $500 million from the Japanese government, and another $2.6 billion jointly from the World Bank and the Asian Development Bank. She said the government will issue Rp12 trillion in bonds during the year.

End-08 forex reserves seen at $68.2BIndonesia's foreign exchange reserves are expected to rise to $68.2 billion by the end of 2008 from $56.92 billion at the end of last year, the central bank said in a statement on Monday (7/4/08), Reuters reported.

The central bank said the higher foreign exchange reserves are expected to come from a surplus in the balance of payments this year.

"Indonesia's balance of payments in 2008 is estimated to reach a surplus $11.3 billion. By the end of 2008, the foreign exchange reserves are estimated at $68.2 billion," the central bank said in a statement.

The country's foreign exchange reserves have steadily increased in recent years to record highs partly due to strong global demand for commodities such as palm oil and rubber.

Law passed on Islamic bonds Parliament passed a bill Thursday (10/4/08) that would pave the way for the government to sell Islamic bonds at home and abroad later this year, The Wall Street Journal reported.

The government has been working on the law for about four years to allow it to develop a market for Indonesian investors and to tap the flow of Islamic funds in places like the Persian Gulf region.

The need for the funding alternative has increased recently.

Rahmat Waluyanto, Director General of Government Debt Management at the Finance Ministry, said the government hopes to issue Rp7.5 trillion, or about $800 million, in Islamic bonds in the domestic market early in the second half, followed by an offshore bond offering late in the year.

Dahlan Siamat, a Finance Ministry official in charge of the planned Islamic bond issues said that the government could also opt to sell Islamic bonds to raise funds for infrastructure projects.

Islamic bonds, or sukuk, are structured in accordance with Shariah, or Islamic law, which bars interest payment as well as investment in activities such as gambling, alcohol production or weapon making. As such, coupon-style payments are based on the returns on assets that already exist or are in development.

Analysts say the delay in passing the law has meant Indonesia has potentially lost out on millions of dollars worth of Islamic funds. According to Moody's Investors Service, Islamic finance has grown by around 15% a year in each of the past three years to around $700 billion.

7

April inflation seen easingIndonesia will likely report lower inflation this month compared with March on easing rice prices, a government official said, Wednesday (9/4/08), Dow Jones reported.

"It seems that price increases are no longer as wild as (in March)," said Rusman Heriawan, the chairman of the official Central Statistics Agency, according to Jurnal Nasional newspaper.

Heriawan, however, didn't forecast April's inflation rate.

In March, inflation surged to 8.2% on year, its highest in 18 months, from the 7.4% recorded in February.

BI to offer 6-mth SBI, bond buyback The central bank plans its first an auction of six-month central bank certificates, known as SBI, in the third or fourth week of April, a Bank Indonesia (BI) spokeswoman said on Thursday (10/4/08), Reuters reported.

The central bank also planned to buy government rupiah bonds via a 14-day repo to help stabilize the volatile bond market, Filianingsih Hendrata, head of public relations at the central bank, said.

"Considering the situation in the government bond market, in the third or fourth week of April Bank Indonesia will start offering the six-month SBI," Hendrata said.

"In line with the statement from deputy governor Budi Mulya, Bank Indonesia will help the government bond market by offering to buy back government bonds through a 14-day repo," she added.

The move comes as domestic bond markets have seen yields jump, partly due to expectations of rising domestic inflation in March, which hit 8.17% year-on-year fueled by high energy and food prices.

INVESTMENTMittal studying prospects for $3B steel plant The chairman of the investment coordinating agency (BKPM) said Thursday (10/4/08) that ArcelorMittal, the world's top steelmaker, plans to team up with two Indonesian state firms to tap into the mining and steel sector, Reuters reported.

Muhammad Lutfi told reporters that ArcelorMittal plans to team up with state mining firm Aneka Tambang (Antam) to secure supplies of steel ore, nickel and manganese.

He also said that ArcelorMittal and Indonesia's state steel-maker Krakatau Steel plan to conduct a joint feasibility study for the construction of a steel plant in Indonesia.

"According to our calculation, the total cost of investment should reach at least $3 billion," Lutfi said.

Saipem spends Rp2.5T on Karimun fabrication yard Italian-based turnkey oil and gas contractor Saipem International has begun construction of a massive fabrication yard in Karimun, Riau Islands, with a total project investment of Rp2.5 trillion ($271 million), The Jakarta Post reported Monday (7/4/08).

Saipem offshore general manager Yves Inbona said the yard would be the company's largest production facility of its kind.

8

Occupying some 140 hectares of land, the facility would have a production capacity of 30,000 tons of oil and gas related components.

"Products from here will be allocated for demand in Indonesia as well as for neighboring areas," said Inbona, adding the company expected the facility to start operations in 2010.

He said Karimun Island was chosen to house the facility due to its free-trade zone status.

The company, which plans to employ 5,000 workers, has requested local administration improve business infrastructure on Karimun, including highways, power capacity and ports to help boost the operation's efficiency.

LG Electronics Indonesia to invest $30M PT LG Electronics Indonesia, the local unit of South Korea's LG Electronics, is set to chalk up a 20% increase in sales to $480 million this year from $400 million last year, Asia Pulse reported Thursday (10/4/08).

Company president Kee Ju Lee said his company will spend $30 million more in investment in the country in order to achieve the sales target.

Lee said the funds will be used to build molding facility for components of plasma TVs, liquid crystal displays and refrigerators.

Construction of the facility will start this month to be completed toward the end of this year.

President wants Lombok project fast-trackedPresident Susilo Bambang Yudhoyono wants immediate realization of a tourist resort project planned in Central Lombok by Emaar Properties LLC from Dubai, Asia Pulse reported Thursday (10/4/08).

Emaar plans to invest up to $700 million in the project in the island in West Nusa Tenggara province, Antara news agency said.

Susilo has sent an official to West Nusa Tenggara to discuss the project and remove hurdles hampering implementation of the project, provincial governor Lalu Serinata said.

A memorandum of understanding on the project was signed in Dubai last month during a visit there by the president.

Regent hotel chain returns The Regent hotel chain is set to return to Indonesia to manage and market a new luxury property to be built by Grand Pacific Properties Ltd. (GPP) on a four-hectare estate on Sanur beach, Bali, The Jakarta Post reported Tuesday (8/4/08). The investment is between $75 million and $100 million.

Carlson Hotels Asia Pacific Pty., which owns the Regent brand, signed agreements with GPP in Singapore last week covering hotel development services, hotel management and marketing trade licenses.

Victoria Tahir, GPP's managing director said GPP would also develop separate luxury villas, called the Regent Residences, near The Regent Bali complex.

"The Regent's return to Indonesia reflects a stronger investor confidence in the outlook of Bali as a favorite destination for global tourists, and we are glad to contribute to this

9

momentum of growth," she said.

The Regent once managed a five-star hotel in the Kuningan area in Jakarta but withdrew a few years ago after the hotel was inundated by floodwater. The property is now managed by the Four Seasons hotel chain.

STATE CONCERNS Foreign investors get access to state export financingWhile deliberations over a bill on state-owned Indonesian Exports Financing Agency (LPEI) are still at an early stage, the government and the House of Representatives have agreed such services will be opened to foreign investors, The Jakarta Post reported Tuesday (08/04/08).

"The distinction between domestic and foreign investment is no longer relevant," said Hasto Kristiyanto, vice chairman of the special committee for the LPEI bill.

"Both government and House members agree the state exports financing will be accessible to foreign investors," he said.

National Agency for Exports Development head Bachrul Chairi said domestic and foreign investors had the same right to export financing as long as they were registered under Indonesian companies.

"Our new laws on corporations and investment clearly state both domestic and foreign investors will be given equal treatment. So it is natural the financing be open to everyone," he said.

He added that House members had accepted the government's proposal for the agency's starting capital, which would come from government liquid assets, worth Rp4 trillion, previously stored in the already defunct Bank Ekspor Impor Indonesia (Bank Exim).

Private sector hails endorsed shipping bill The business community on Wednesday (9/4/08) praised the newly endorsed shipping bill, saying it would improve export and import activities and give private sector players more opportunities to engage in port and shipping businesses, The Jakarta Post reported.

The Indonesian Chamber of Commerce and Industry (Kadin)'s deputy chairman for transportation, Chris Kanter, said the bill would make port operations more efficient after years of inefficiency.

"Ports are essential in supporting the national economy. The approved bill ends the monopoly of state-owned port operator PT Pelindo (I until IV)."

Competition, he said, would encourage more investors to come to the country.

On Tuesday, the House of Representatives endorsed the shipping bill, after three years of deliberation, allowing foreign and domestic private entities to operate ports on an equal footing with state companies.

"There should also be an intense public campaign explaining the contents of the bill, especially to port workers, so that stakeholders understand entirely," Kanter said.

The bill also regulates the "cabotage principle", which allows only locally flagged vessels to ship domestic cargo between ports in Indonesian waters.

10

"Although this principle is no longer popular globally, we still need it to protect the interests of the local shipping industry from larger foreign firms," Oentoro said, adding that as an archipelago, Indonesia needed the principle.

Port workers have called off a threatened strike over the bill, saying the government had accommodated some of their demands.

"We will also seek an independent consultant to discuss the details of the law and continue to monitor it," said Djafar Achmad, the secretary general of the port workers union. He added that operations at the country's 112 ports were running normally.

Cement exports down 50% on strong domestic demandIndonesia's cement exports shrank 50% in the first two months of this year despite an increase in production, an official of the industry ministry said, Antara reported on Tuesday (08/04/08).

The decline was caused by strong demand on the domestic market and higher transport cost for exports, downstream chemical director Tony Tanduk said.

"Exports in the January and February fell to 196,000 tons down from 362,000 tons in the same period last year, on the contrary production rose 20% to 5.92 million tons," Mr Tanduk said.

He said transport costs have surged following the soaring price of crude oil and cement consumption rose 17.6% to 5.79 million tons from 4.9 million tons on improved purchasing power especially in the regions.

SOEsTelkom cuts long-distance call tariffs by up to 46%Largest telecom operator in the country, PT Telkom, lowered its tariffs for long-distance calls by up to 46% starting on Tuesday (8/4/08), a company official said, Thomson Financial reported.

The tariff reduction followed the government's move to cut most of the cost-based interconnection fees which telephone operators are allowed to charge one another by up to 55% from April 1, given the declining amount of investment required by the sector.

"The cut applies to long-distance calls from fixed-line telephones to both fixed-line and cellular phones," said Eddy Kurnia, vice president for public and marketing communication at Telkom.

The call charge for long-distance calls covering more than 500 kilometers, for instance, had been cut to Rp465 per 20 seconds from Rp865 previously. Kurnia said the tariffs for local calls were unchanged.

Telkom to buy stake in regional companies PT Telkom said Thursday (10/04/08) it plans to buy a minority stake in call center and content provider companies in Singapore and Malaysia and in wireless companies in Sri Lanka and Bangladesh, Dow Jones reported.

11

"We expect to complete the stake purchase in the four companies later this year," Telkom President Commissioner Tanri Abeng said.

The purchase is aimed at developing Telkom's business in the information and technology services, Abeng said.

He didn't give the names of the companies or the value of the purchases.

He said he expects Telkom's 2007 net profit to be around Rp12 trillion, up 9% from Rp11 trillion the previous year.

Adhi Karya posts 15% rise in income Publicly listed construction company PT Adhi Karya reported Rp4.97 trillion ($552 million) in income last year or an increase of 14.9% from the previous year, Antara reported Tuesday (08/04/08).

The net profit of the state-owned company rose 16.76% to Rp11.6 billion from Rp95.59 billion, corporate secretary Kurnadi Gularso said.

This year the company, which has expanded operation abroad including to India, Qatar and Oman, set income target at Rp6.7 trillion, Kurnadi said.

The result made Adhi the biggest earner among construction companies listed on the Indonesian Stock Exchange, followed by PT Wijaya Karya, another state company with income of Rp4.28 trillion.

PTKA to use nine new locomotives from Canada State-owned railway company PT Kereta Api (PTKA) will put into operation nine new locomotives for coal and other cargo transport in South Sumatra, a company official said, Asia Pulse reported Tuesday (8/4/08).

The locomotives, which were to arrive last week, were ordered from General Motors of Canada at a price of Rp180 billion ($20 million), finance director Achmad Kuntjoro Hadiwidjoyo said.

The locomotives will be used to transport cargoes, especially coal, between Tarahan and Kertapaiti in southern Sumatra, Hadiwidjoyo said.

He said the railway company also expects to receive 186 new units of carriage from PT Industri Kereta Api.

He said the new locomotive will increase the carrying capacity of the company by 20% from 50 cargoes at present in South Sumatra.

PRIVATE SECTOR United Tractors 1Q sales rise 44% PT United Tractors, Indonesia's biggest seller of heavy equipment, said sales rose 44% in the January to March period from a year earlier because of increased orders for coal-extraction and construction machinery, Bloomberg reported Thursday (10/04/08).

The company sold 1,168 units of heavy equipment in the first three months of the year, according to preliminary data, corporate secretary Sara Loebis said. That compares with 809 in the same period last year.

12

The sales increase was in line with a gain in coal and metals production as prices of the commodities reached records this year.

United Tractors is also a coal mining contractor with clients including PT Bumi Resources, the country's largest producer of the fuel.

United Tractors, formed in 1972, is more than 50% owned by PT Astra International.

New cellular operator for market The already crowded cellular industry is set to see more competition this year with PT Natrindo Telepon Seluler planning to expand its services nationwide, The Jakarta Post reported Monday (7/4/08).

Using the Axis brand name for its GSM services, Natrindo is set to launch its operations in Greater Jakarta and Banten on April 23.

Natrindo president director Erik Aas said that to support this year's network expansion, the company was planning to grow the number of its base transceiver stations from 500 in Java to 3,000 nationally.

"We are investing $1 billion for the operation and for the development of the infrastructure," said Saud M. Al-Daweesh, the president director of Natrindo's parent company, Saudi Telecommunications Company (STC).

STC holds a 51% stake in Natrindo, acquired from Malaysia-based Maxis Communications Berhad in June. Maxis now controls 44%.

Compared to its local competitors, Aas said, the company was transparent in terms of services charges. "There are no hidden fees behind what is being advertised ... what you see is what you get."

Axis sets flat rates of Rp60 for sending SMS to all operators, Rp600 per minute for calls to all operators and Rp60 per minute for calls to Axis numbers.

Meanwhile PT Mobile-8 Telecom is cutting tariffs and extending its wireless network as it aims to almost double users this year, Bloomberg reported.

"Our tariff is very competitive," said Wityasmoro Handayanto, who was named president last month after his predecessor failed to meet subscriber targets. The company is offering subscribers unlimited calls for Rp540 ($0.06) at nighttime.

Mobile-8 plans to focus on expanding its network in Jakarta and capital cities of the provinces of North Sumatra, South Sulawesi and South Sumatra, Handayanto said.

The mobile-phone carrier also plans to double the number of base transmitting stations to 2,000 this year, Handayanto said.

The company aims to end 2008 with between 5 million to almost 6 million users, he said.

Pancakarya to build Tangerang City PT Pancakarya Griyatama will build an integrated property project called Tangerang City with an investment of around Rp1 trillion ($111 million) in Tangerang, Banten, Antara reported Tuesday (8/4/08).

The project to be built over a 10-hectare plot of land in the center of Tangerang city is to be

13

completed in 2010, Pancakarya vice president Calvin Lukmantara said.

The first phase of construction will include construction ofshop houses and a shopping mall, to be followed by apartment towers with 1,500 units and a hotel with 250 rooms.

The company is seeking loans from a number of banks to help finance the project, Lukmantara said.

Sriwijaya to lease 13 new Boeing aircraft Sriwijaya Air said it will lease 13 new Airbus A320 aircraft and 737-800NG planes to support its expansion plan to serve regional routes, Antara reported Tuesday (8/4/08).

Airline president Chandra Lie said the airline is working toward mid- and long-term programs ahead of the implementation of the ASEAN Open Sky agreement.

Lie said the company will use 10 Boeing 737-800NG and three Airbus A320 starting in 2013 to serve flights in the region such as to Bangkok.

He said his company and Airbus have met twice to discuss the plan to use Airbus A320 aircraft, but the price has yet to be agreed upon.

Bakrieland expects toll road operations start in 2H 2009PT Bakrieland Development said Wednesday (9/4/08) its shareholders have approved a plan to buy a 34-km toll road project in Java which it expects will begin operating by the second half of 2009, Dow Jones reported.

"The income from this project will represent a significant contribution to our revenue for the next five years," Bakrieland chief executive Hiramsyah Thaib said.

The venture is part of the property company's efforts to generate recurring revenue. It is planning also to enter the tap water business in West Java.

The Kanci-Pejagan toll road is part of the Trans-Java toll road projects which the government is offering to investors.

Bakrieland Wednesday also got shareholder approval to sell a 30% stake in a unit that is developing an apartment, shopping and office complex in one of Jakarta's prime business areas.

The stake will be sold for $110 million to Limitless LLC, a subsidiary of Dubai World.

Cambodia, Rajawali to set up airline The Cambodian government and Rajawali Corporation agreed on Thursday (10/4/08) to set up a new national flag airline to serve Cambodia's growing tourism industry, the company said in a statement, Reuters reported.

The joint-venture company's capital is estimated to reach $50 million and the Cambodian government will own 51% while Rajawali Group will own the rest.

"With a national flag carrier, we envisage our economy and tourism industry will grow rapidly," Cambodia's Deputy Prime Minister, Sok An, said in the statement released by Rajawali.

Cambodia launched its own national flag carrier, Royal Air Cambodge (RAC), in the mid-1990s but it went bankrupt, resulting in heavy losses for the government.

14

The new carrier might have a better chance due to the rising number of tourists to Cambodia. In 2007, the country attracted more than 2 million tourists and more than 60% of them used air travel.

Rajawali was founded by entrepreneur Peter Sondakh, ranked by GlobeAsia magazine as 19th wealthiest Indonesian with a net worth of $510 million.

The group controls diversified businesses from a cement firm to department stores and a taxi company.

BANKSBEI set to issue bonds valued at $111M Export financing bank PT Bank Ekspor Indonesia (BEI) will issue bond valued at Rp1 trillion ($111 million) before it is converted into non bank financing agency in June, Asia Pulse reported Thursday (10/4/08).

The company needs to issue the bonds to carry a coupon rate of 9.5-10% to raise fund to support its long-term financing business, BEI President Arifin Indra said.

The government has decided to change the status of BEI into an export financing agency named LPEI to rid it from restrictive bank rules and allow it greater freedom in carrying out its financing business.

Demand for BEI financial service has increased notably from crude palm oil, coffee, and cacao producers, Indra said.

Part of the bond fund will also be used to refinance a Rp295 billion debt in bond issued in 2003 maturing this year.

POWERKEPCO to sign $750m power plant dealKorea Electric Power Corp (KEPCO) will sign a memorandum of understanding with the Indonesian government to build a power station and generators, a deal worth up to $750 million, Seoul's energy ministry said on Thursday (10/04/08), Reuters reported.

South Korea's vice-minister for the Ministry of Knowledge Economy who is on a two-day visit to Indonesia will sign the deal as part of expanding energy cooperation between the two countries, the ministry said.

Under the deal, South Korea's state-run Korea Midland Power Co will build and run a power station in Balikpapan, and generators for a pulp manufacturing plant in Merauke.

The Balikpapan plant deal is for two 100-MW coal-fired plants and is worth $550 million. The generators required for the Merauke unit are two 50-MW wood-burning units worth $200 million, the ministry said.

PLN says deal in sight with Mitsubishi State electricity firm PT PLN said on Friday (11/4/08) that it expects to sign a contract with Japan's Mitsubishi Corp. next month to build a new 720 MW gas-fired power plant, Reuters reported.

"Mitsubishi will build a new 720 MW power plant in Jakarta. This is a PLN power plant and we expect to sign a contract next month," Nasri Sebayang, PLN chief for primary energy, said. He gave no details about the cost of the plant.

15

The new plant will expand the existing Tanjung Priok power plant, which currently produces 1,000 MW.

Last year, Mitsubishi signed a contract to build another new 415 MW gas-fired plant to expand capacity at Muara Karang power plant near Jakarta, at a cost of about $451 million. The Muara Karang power plant already has 750 MW capacity.

Truba Alam to acquire 80% of Bhumi Listrikindo Publicly listed power generating company PT Truba Alam Manunggal said it will acquire 80% of PT Bumi Agung Listrikindo through subsidiary PT Enimax Power Energy, Asia Pulse reported Thursday (10/4/08).

Truba Alam President Sidarta Sidik said Enimax and Bhumi Agung will cooperate to build PLTGU Syngas, an integrated gasification combined cycle (IGCC) project in Bali.

The power generating project using synthetic gas will cost around $600 million with a capacity of 330 MW.

Earlier Truba acquired 50% of Maxima Coal Ltd Pte Ltd, a coal trading company based in Singapore and increased its stake to 51% in PT Meta Epsi, a contractor building power transmission networks and power relay stations.

OIL & GAS Energi Mega says new well flowing oil Oil and gas company PT Energi Mega Persada said Friday (11/04/08) test results from its newly drilled SED-3 well in the Sepanjang field in East Java show oil flowing at a rate of 3,000 barrels a day, Thomson Financial reported.

Another well, the SED-1A, earlier yieled oil at a flow rate of up to 3,500 bpd, it said. The field is operated by Energi's 50%-owned unit Kangean Energy Ltd.

Energi had expected its average oil output to reach 17,400 bpd this year, compared to 10,900 bpd last year. Gas output is also expected to rise to 88 million British thermal units per day from 80 million BTUs per day.

Oil made up about 78% of Energi's 2007 sales, which totaled Rp1.14 trillion ($123.38 million).

The company on Monday posted net profit of Rp115.64 billion ($12.5 million) in the year to December 2007 after it restated its 2006 earnings to a net loss of Rp263 billion.

Energi originally reported a net profit of Rp203 billion for 2006. The restatement was made to book investment losses of Rp430 billion.

The company said the investment loss was a result of the divestment of its wholly owned Hong Kong units, Kalila Ltd and Pan Asia Enterprises Ltd, which together own 100% of Lapindo Brantas Inc.

Energi has said that it sold the units for just $2.00 to an offshore entity.

Lapindo Brantas is the operator of the gas well in Sidoarjo, East Java, which has been spewing out thick mud since May 2006. The mud flows have inundated neighboring villages, displacing thousands of people.

16

Energi said sales dropped to Rp1.14 trillion in 2007 from a restated Rp1.46 trillion the year before, while operating profit fell to Rp123 billion from Rp306.41 billion.

Pertamina has capacity to acquire Tuban PetrochemState-owned oil and gas company Pertamina said it has financial capacity to acquire PT Tuban Petrochemical Industry (Tuban Petro), which is priced at Rp3.2 trillion ($348.8 million), Asia Pulse reported Wednesday (9/4/08).

Pertamina could use internal funds and loans to buy the majority shares of Tuban Petro, Meizar Rachman, a Pertamina commissioner said.

"Pertamina is highly profitable, therefore, there should be no financial problem," Meizar said in response to a statement by the office of the state minister for state enterprises that Pertamina should buy the asset.

State-owed asset management company PT Perusahaan Pengelola Aset (PPA) said it relies on the sales of Tuban Petro to meet its target of paying Rp3.85 trillion to the 2008 state budget.

House selects head of oil watchdog A parliamentary committee picked on Tuesday (8/4/08) an energy ministry official to head the influential state oil and gas watchdog, amid efforts to boost the country's flagging crude output, Reuters reported.

Priyono, currently upstream director at the directorate of oil and gas at the energy ministry, would replace current chief, Kardaya Warnika, who was appointed in 2005 and has faced criticism from lawmakers over the performance of the oil sector.

Agusman Effendi, a Golkar party member of the parliamentary commission in charge of selecting the new head of the watchdog, known as BP Migas, said the government was expected to confirm the appointment soon.

"Priyono has experience in the oil and gas sector. As new head of BP Migas, he is expected to increase oil production," Effendi said.

The government had previously proposed three candidates to head BP Migas including Priyono, who goes by only one name, Evita Legowo, an aide to the oil minister and Hadi Purnomo, the head of research and development at the energy ministry.

Govt. to activate aging oil fields The government will activate 5,000 aging oil fields under a newly issued ministerial regulation in order to optimize the country's crude oil production, says an official, Xinhua reported Tuesday (08/04/08).

"There are more than 13,000 aging fields in the country, 5,000 of which could produce 5,000 to 12,000 barrels per day (bpd)," Director General for Oil and Gas Luluk Sumiarso said. Out of 13,824 oil fields only 745 are active.

Most of the aging fields are located in the working area of state-owned oil and gas firm PT Pertamina's unit.

Energy and Mineral Resources Ministry upstream director R. Priyono said that under the 2008 regulation cooperatives were not the only operators working on the aging fields.

The government and the House of Representatives' budget committee agreed late last

17

month to set the oil lifting target for this year at 927,000 barrels per day.

MININGBig gold discovery claimed in Lombok Drilling at the Montong Botek high grade gold and copper porphyry target in Lombok has returned the longest mineralized intercept to date, which includes 0.25 g/t gold over 576.95 meters, New York's International Business Times reported Tuesday (8/4/08).

Southern Arc Minerals, which is developing the site as part of the Selodong Intrusive Complex (SIC) prospect, said the intercept included sections grading at 0.34 g/t gold over 113.9 meters, 0.30 g/t gold over 106.6 meters and 0.45 g/t gold over 52 meters.

The hole that returned the intercept was drilled 150 meters northwest of historic drilling to test for extensions of high grade mineralization encountered in previous work, the company said.

Returns from these holes had included 0.42 g/t gold over 442.2 meters, 0.40 g/t gold over 384.65 meters and 0.51 g/t gold over 363.50 meters.

Southern Arc said it plans to continue drilling at SIC, with further testing planned for lateral and depth extensions at Montong Botek, as well as the Blongas I and Blongas II zones.

A total of 12 other targets will also be tested by the company's three drill rigs, it added.

The SIC prospect covers an area of seven km by three km on the southeast portion of Southern Arc's property on Lombok.

Berau Coal to invest $120M to double production PT Berau Coal said it will invest up to $120 million over a period of five years to double its annual coal production to 30 million tons, Asia Pulse reported Wednesday (9/4/08).

Company president Bob Kamandanu said in the past several years the company recorded an annual increase of 3 million tons in coal production.

The fifth largest coal producer in the country has coal mines in three locations in its 118,400 hectare concession in the regency of Berau in East Kalimantan.

Kamamdanu said the company will open four new mines and build new infrastructure that will cost around $120 million.

Kamandanu added that parent company, PT Armadian Tritunggal, is likely to delay its plan to offer its shares through an initial public offering this year and would fund expansion out of cash reserves, Reuters reported.

Berau, which has 299 million tons of coal in its reserves, produced and sold 12 million tons of coal last year, and for this year Kamandanu said the company planned to produce 15 million tons and to set aside half a million tons for stocks.

Avocet to spend $20M exploring gold depositsBritish-based gold mining company Avocet has set aside $20 million in funds to finance exploration of gold deposits in different areas in Indonesia this year, its president director said, Antara reported Friday (11/04/08).

"We will do it in North Sulawesi, South Sulawesi, East Kalimantan, West Kalimantan and

18

Papua," Dean P Stuart said.

Avocet will increase the amount of its investment in Indonesia if the results of the explorations showed good prospects, he said.

The company is currently producing 70,000 ounces of gold a year from its gold mining concession in North Lanut, North Sulawesi.

IFC to invest $10M-$20M in 3 SE Asia mining projectsThe International Finance Corporation, the private financial arm of the World Bank, plans to invest between $10 million to $20 million in three junior energy and mining companies to help develop projects in Southeast Asia within the next year, a senior official said, Dow Jones reported Wednesday (9/4/08).

"We are currently negotiating three equity investments for junior exploration companies in oil and gas, and mining," Karsten Fuelster, senior investment officer at the oil and gas, mining and chemicals department in Southeast Asia, said on the sidelines of the Asian Mining Congress in Singapore.

IFC finances and invests in private-sector businesses and projects in developing countries to aid in poverty reduction and economic development.

In 2007, its worldwide portfolio rose to $25.4 billion from $21.6 billion in 2006.

The three projects comprise an oil and gas project in Indonesia, a mining project in Papua New Guinea and a mining project in the Philippines, Fuelster said.

All three projects are potentially large developments that may require investments of several hundred million dollars if they come to development, he added.

IFC aims to hold a 5% to 15% stake in the companies.

At the moment, the projects are at the exploratory stage, with feasibility studies still underway, said Fuelster.

===***===

19