INDONESIA AS NEW EMERGING MARKET

Monday, November 20, 2006

INDONESIA IMPOSES ZERO TAX ON IMPORTED GOODS FOR UPSTREAM OIL/GAS PROJECTS



Jakarta (ANTARA News) - The government has decided to impose zero tax on imported goods for upstream oil and gas projects in a bid to attract fresh investment into the sector, the Ministry of Finance said in a statement.

The move is retrospective from July 16 2006 and will be valid for one year until July 15, 2007.

The statement said the tax free facility is being given to companies that operate in cooperation with state-run oil and gas firm PT Pertamina and with upstream oil and gas regulator, BP Migas.




Lack of new investment into the oil industry has been cited as one of the reasons for a decline in the country's oil output. (*)

MINISTER CALLS FOR HIGH IMPORT DUTIES ON AGRICULTURAL TOOLS

Jakarta (ANTARA News) - Industry Minister Fahmi Idris called on the Ministry of Finance to impose high import duties on agricultural machineries and tools which could have been produced and met domestic demand at home.

"We should have stopped the import of agricultural machineries and tools which could have been produced and have met domestic demand," the minister said after a meeting with associations in the agro-chemical sector here on Monday.

Fahmi said that so far the existing policies had not yet supported the growth of agricultural tools and machineries which production at home was very simple such as mattocks and sickles. Chinese tools of these types had flooded Indonesia, he said.

"In the past our orientation was import but the import duty scheme of this goods did not support industries (at home)," the minister added.

As a result, Indonesia`s agricultural tool industry did not develop though Indonesia was an agriculture-based country.

The minister said that simple agricultural tools such as mattocks and sickles should have been developed by small and middle scale industries at home, and should have been evenly distributed to the country`s agricultural production centers.

Fahmi was also of the view that the import duties --which ranged at 5-7.5 percent and were effective until 2009-- on agricultural tools were not conducive for the development of industries in the country.

He said that the finance ministry should encourage efforts to increase the import duties of finished agricultural tools but reduce the import tax for their raw materials.

"At present, the import duties on finished agricultural tools ranged at 5-7.5 percent but the one for their raw materials were about 15 percent," the minister said adding that the import duty for raw materials of this good should be zero percent.

He also expressed his hope that the imposition of high import duties on agricultural tools would not be limited only until 2009.(*)

BUSH EXPECTED TO HELP BOOST INDONESIAN BIOFUEL DEVELOPMENT PROGRAM

By Andi Abdussalam

Jakarta (
ANTARA News) - Indonesia`s preparations to develop biofuel will seemingly get a further boost when President Susilo Bambang Yudhoyono and US President Geoerge W Bush meet in Bogor, West Java, on Monday.

It was reported that among the six topics the two leaders will focus on during their talk at the Bogor palace will be cooperation in the development of biofuel.

Once rich in oil reserves but now facing depletion of the energy source, Indonesia has launched an intensive biofuel production program aimed at cutting its fossil oil consumption by 10 percent in 2010.

Cooperation with the United States is expected to solve the problems Indonesia is facing in carrying out its biofuel development program such as lack of funding and technology.

So far the Indonesian government has mentioned four plant species that can be developed to produce biofuel, namely oil palm and jatropha curcas for biodiesel and sugarcane and cassava for bioethanol or gasoline.

The country is now producing some 14 million tons of palm oil per annum. In terms of production volume, this fact uggests that among the four plant types, only oil palm is ready to be developed to produce biofuel.

Jatropha, cassava and sugarcane still need to be planted on vast tracts of land to reach large enough production volumes. But most of the palm oil being produced is still intended for export. Of the 14 million tons, 11 million are exported and three million are for consumption as cooking oil.

Aware of the need to develop vegetable oils other than palm oil for the development of biofuel, Indonesia`s Agency for the Assessment and Application of Technology (BPPT) in cooperation with the University of Groningen in the Netherlands will hold an international seminar to discuss the economic prospects of jatropha curcas plants.

The two-day seminar will be held beginning on Monday when President Yudhoyono and his US counterpart also discuss the same topic at the Bogor palace.

"The international seminar will discuss government policies on jatropha curcas fuel oil, jatropha curcas plantations, jatropha curcas oil making processes, its economic prospects and jatropha curcas oil conversion into non-energy materials needed by pharmacies and industries," Dr Marzan Aziz Iskandar of the BPPT said.

On the same day, the
Indonesian Chamber of Commerce and Industry will also hold a national workshop on alternative energy business.

Marzan said the Indonesian government wants 10 percent of the country`s need for fossil fuels to be replaced by vegetable-based fuels by the year 2010.

But it was feared that the government would not be able to meet the target because it takes several years before jatropha curcas plants can be exploited optimally.

President Susilo Bambang Yudhoyono showed serious attention to development of bio-energy when he convened a limited cabinet meeting in Magelang, Central Java, last July to discuss national energy policies and bio-energy action plans.

"We will continue with the preparations and planning in 2006, and implement (the program) in 2007," the President said.

In order to carry out the program, the Indonesian government has set up a national team in charge of formulating policies for the development of bio-diesel or biofuel program.

Chaired by former manpower minister Al Hilal Hamdi, the national team would formulate policies, including on matters relating to cultivation of land, infrastructure, processing, marketing and funding.

With the program, Indonesia expects to be able eventually to reduce the use of fossil fuel oils by 10 percent in 2010, namely using bio-fuel to replace premium, kerosene, diesel oil and fuel oils used to generate electricity.

Hilal said some 6.5 million hectares would be made available for the development of bio-fuel. Thus it would provide employment for about three million workers and boost rural economies.

Of the 6.5 million hectares, three million hectares would be developed for oil palm, 1.5 million hectares for jatropha curcas, 500,000 hectares for sugarcane and 1.5 million hectares for cassava.

The investment per hectare was estimated at Rp30 million for oil palm, Rp15 million for sugarcane, Rp3 million for jatropha curcas and Rp3.5 million for cassava.

Hilal said the program needed an estimated investment of Rp100 trillion (US$10.8 billion) in the sector within the next five years.

The government also unveiled a crash program to build 11 biofuel plants, with production targets of 187 million liters next year and 1.3 billion liters by 2010, or equivalent to 3 percent of the country`s total fuel consumption of 41 million kiloliters in 2005.

Therefore, up to 2010, the use of fossil oils for the transportation sector was expected to be cut by 10 percent and by 50 percent in the power generation sector.

With the reduction in the use of fossil oils, the amount of foreign exchange that could be saved would reach some 10 billion dollars, Hilal said.

Friday, November 03, 2006

SOES SHOULD NO LONGER ACT AS PASIVE PARTNERS: MINISTER

Investors interested in participating in infrastructure projects need no longer worry about having to team up with freeloading state firms now that the government has reformed its policies on state-owned enterprises, says a minister.

Speaking during the second day of the Indonesia Infrastructure Conference and Exhibition 2006 on Thursday, State Minister for State Enterprises Sugiharto said the government had been working hard to shake up the country's SOEs and convert them into professional, commercial entities, and prospective business partners for investors.

Among the SOEs the government is touting as prospective partners for infrastructure projects are turnpike operator PT Jasa Marga, local-government water utilities, seaport operator PT Pelindo, power firm PT PLN, and telecommunications provider PT Telkom.

The government is offering 111 projects worth US$19.1 billion during the infrastructure conference, including 10 model projects worth $4.4 billion in the transportation, power, seaport, water-supply and telecommunications sectors.

In his presentation to investors, Sugiharto outlined three ways by which investors could work together with SOEs in promoting infrastructure projects, one of which was to form a new company to execute the project.

"Such an investment could be based on 85 percent ownership for the private investor and 15 percent for Indonesia, with a time horizon of 15 years," Sugiharto said.

Another way would be for the private investor and SOE to act as equal partners in a project, with the government playing the role of regulator.

Thirdly, the government would consider allowing a private investor to take a direct stake in an SOE undertaking an infrastructure project -- meaning that the government would sell part of its shares in the SOE.

Sugiharto said the government planned to sell stakes in up to 14 SOEs next year, including Jasa Marga and PLN subsidiary Indonesia Power. He also said the government planned to sell more shares in state gas utility PT PGN by the end of the year. -- JP/Urip Hudiono

Wednesday, November 01, 2006

COSMETICS AND PERSONAL CARE MARKET IN INDONESIA

With a total population in excess of 215 million inhabitants, Indonesia provides a potential large domestic market for personal care products. Considered to be indispensable in our daily modern life style, such products have already been long established in the Indonesian market. Traditionally, cosmetics, personal and beauty care preparations are deeply rooted and specifically among the ancient Indonesian society and the aristocracy, these products have always been part of the tradition. Indonesia, the largest archipelago in the world, is blessed with rich tropical rain forest and fertile soil, providing abundant natural plants and other materials used as basic ingredients in such products. Even until today, the Indonesian traditional cosmetics products and other beauty care preparations and treatments are gaining more and more popularity among domestic as well as international consumers in view of the popular trend of “back to nature”, whereby people nowadays prefer to use products made of natural materials and ingredients.

Although less sensitive towards overall economic condition, personal care products are generally items people are daily in need of and closely connected with the income level of the consumers. The potential vast domestic market has not only attracted major foreign companies to invest in Indonesia, also domestic manufacturers have expanded into international markets beside established substantial domestic market share. Foreign companies, who are the market leaders in the Indonesian market are
UNILEVER INDONESIA, PROCTER & GAMBLE, AVON, BEIERSDORF, CUSSONS, JOHNSON & JOHNSON, SARA LEE, KAO INDONESIA, just to name a few. Renowned international product brands such as AVON, LUX, and LIFEBUOY, CLEAR, SUNSILK, BRISK, BIORE, ZWITSAL, PEPSODENT and many more are present in this market. The latest popular trend “back to nature” has given rise to a number of domestic manufacturers to develop the market; among the famous companies are PT MARTINA BERTO, PT MUSTIKA RATU, PT RISTRA INDOLAB. The latest popular innovation is the beauty treatment and services of a spa, applying traditional and natural formula and ingredients aiming at providing a healthier, more relaxing body and mind. The overall economic and financial condition in Indonesia in the post-crisis era of 1998 is quite promising and progressing; per capita income, US$ 460.- in 1998, the lowest level ever for Indonesia, is expected to exceed US$ 1,100.- for the current year of 2004, an income level also, which will bring Indonesia back into the rank of middle-income level countries. The economy is expected to grow by between 4-5%, assuming that political stability and security is under control. With the completion of the legislative and direct presidential election as well as the formation of the new government by October, 2004 Indonesia shall fully concentrate on further developing and improving the economy and by doing so, improving the purchasing power and living standard of the majority of the population.

GOVT SELECTS 10 PROJECTS TO SERVE AS PILOTS

Urip Hudiono, The Jakarta Post, Jakarta

The upcoming three-day "Indonesia Infrastructure Conference and Exhibition 2006" will not only showcase major investment opportunities, but also the government's progress in improving the country's investment climate.

At least 10 infrastructure projects, involving the construction of power plants, toll roads, seaports, municipal water systems and telecommunications facilities worth an estimated US$4.5 billion, will be put up for grabs during the event, which starts Wednesday and will be opened by President Susilo Bambang Yudhoyono.

On top of that, Public Works Minister Djoko Kirmanto also plans to present another 20 projects worth Rp 30 trillion ($3.2 billion), during the event's first day of meetings with investors, said Suyono Dikun, the deputy for infrastructure to the coordinating minister for the economy, on Monday.

Meanwhile, Transportation Minister Hatta Radjasa may offer another 17 projects, while further projects will be put on the table by Communications and Information Minister Sofyan A. Djalil.

On the second day, Energy and Mineral Resources Purnomo Yusgiantoro will outline four power plant projects.

Coordinating Minister for the Economy Boediono, Finance Minister Sri Mulyani Indrawati and State Minister for State Enterprises Sugiharto are each scheduled to present updates on what the government has done to improve the investment climate.

The conference follows on from last year's "Infrastructure Summit 2005". It was originally scheduled to be held last November, but was then rescheduled to February and later to November due to the then unfavorable economic situation in the wake of last year's fuel price hikes.

Projects to be put on the table:

Telecommunications sector:
1. The "Palapa Ring" fiber optics network........US$1.5 billion

Power plants:
2. 2x600 megawatt (MW) coal-fired power plant...US$1.2 billion
in Central Java

3. 500MW coal-and-oil-fired power plant..........US$275 million
in Pasuruan, East Java

Toll roads:
4. 165-km Solo-Kertosono.............US$928 million
toll road in Central Java

5. 60-km Medan-Kuala Namu-Tebing Tinggi..........US$142 million
toll road in North and West Sumatra

Sea ports:
6. Surabaya's Tanjung Perak port expansion.......US$280 million
7. Margagiri-Ketapang ferry terminal.............US$ 97 million

Water projects:
8. Dumai, East Kalimantan........................US$ 44 million
9. Tangerang, Banten.............................US$ 37 million
10. Bandung.......................................US$ 26 million

Source: National Development Planning Board (Bappenas)