The Next Great Emerging Markets

By Kristin Graham, The Motley Fool, May 24, 2008

Close your eyes ...

Imagine yourself as an investor more than a century ago -- prior to the industrialization of the United States. Would you have bet your money on the growth potential of our nation? Knowing the outcome a hundred years later, you wouldn't hesitate to answer.

We can't rewind to the past

Unfortunately for our generation, those days are long gone on domestic soil. The opportunity for high-flying GDP growth and rapid infrastructure development is in the past.

GDP growth in the United States has averaged just 3.3% annually for the past 25 years. It will struggle to reach even 1% this year, despite continuous technological advancement in the United States. And because many guru investors, including Warren Buffett, argue that GDP growth is a key ingredient to long-term market returns, the future doesn't look so bright for domestic-only investors.

But even if you weren't around for the roaring '20s, you didn't completely miss your chance for the exponential growth that infrastructure development can offer. While the U.S. can no longer capitalize on heavy infrastructure expansion for growth, beyond our borders lies a world full of nations -- exploding with growth -- that can.

A new investment frontier

China and India certainly won't be running out of steam soon, but these countries are already emerging and are off to a great start. To capture the even more exciting early years of initial growth, you need to find economies that possess characteristics that point toward becoming the next emerging market.

While not as prominent as the BRIC foursome of Brazil, Russia, India, and China, investor buzz is starting to collect around tiny economies such as Vietnam, Indonesia, and Bulgaria. Dubbed as the "Frontier Markets" by the Barra Index, these economies are just beginning their development stages; they hold less than 1% of the money invested in stock markets worldwide.

But that will all change soon. Goldman Sachs anticipates that Indonesia and Vietnam will be two of the 15 largest economies. And looking at the accomplishments of past emerging markets, the prospects are enticing. According to a recent Newsweek article, the current major emerging markets, including China and India, also held fewer than 1% of worldwide stock market money back in 1987. Today, that share has increased to 12%.

Sign me up

Unfortunately, gaining access to these markets isn't always that easy. While a handful of notable American Depositary Receipts (ADRs), such as Telkom Indonesia (NYSE: TLK) or Bancolombia (NYSE: CIB), offer investors direct exposure to these frontier economies, there aren't many companies available for direct investment. But that doesn't mean your only option is to fall back on an ETF or closed-end fund. 

The key is to search for strong global players that can capitalize on the growth in these countries by investing portions of their business there. This will provide exposure while minimizing some of the risk inherent in investing in frontier markets. 

For example, American International Group (NYSE: AIG) owns a majority stake in a Bulgarian telecommunications company, and Allied Irish Banks (NYSE: AIB) agreed to purchase a stake in a Bulgarian bank earlier this year. General Electric (NYSE: GE) has been investing in Vietnam since 1993, and energy behemoth ConocoPhillips (NYSE: COP) has become the largest foreign investor in any industry in Vietnam -- plowing more than $1.3 billion into invested capital projects since 1996. And while you probably associate Nigeria with scam emails, it's the largest oil producer in Africa. ExxonMobil (NYSE: XOM) is so bullish on the country's prospects that it will continue its $11 billion investment in the country's oil sector through 2011. 

And it isn't just enormous firms who are optimistic. Fund managers are tapping into these countries for foreign portfolio exposure. According to Cliff Quisenberry, manager of the Eaton Vance Tax Managed Emerging Markets Fund, countries in the bottom 4% of the world capitalization universe returned roughly 18.1% annualized over the past decade, versus a 5.6% average return for developed markets. 

Don't miss your chance this time

A recent U.N. conference had good reason to rank Vietnam as the sixth most desirable place to invest. Simply put, frontier markets offer untapped potential to informed investors. 

That's why our Motley Fool Global Gains team is headed to some of these markets (Indonesia, Vietnam, and Singapore, as well as China) in a few weeks for a firsthand look at the growth opportunities in these regions.

Pertamina to upgrade refinery

The Jakarta Post, Sat, 05/17/2008 11:15 AM 

JAKARTA: State oil and gas firm PT Pertamina will soon seek financial support to upgrade its Cilacap refinery, an executive said Friday.

Pertamina processing director Rukmi Hadihartini said the company would first complete the Final Decision Investment for the project in October.

According to Pertamina, the preliminary cost needed would be about US$1.9 billion.

However, Rukmi said "The cost is expected to increase as the price of raw materials, such as steel, has soared. We are still calculating it."

The upgrade will add one processing unit to the Cilacap refinery.

United Tractors plans to spend $170 million on coal expansion

The Jakarta Post, Jakarta | Sat, 05/17/2008 11:15 AM

Publicly listed heavy machinery supplier PT United Tractors plans to inject up to US$170 million into its subsidiary in the mining sector, PT Pamapersada Nusantara, which is citing the acquisition of a new coal mine this year.

United Tractors director of administration and finance Gidion Hasan said the company was considering several coal mines in Kalimantan with reserves ranging from 20 million to 40 million tons.

"There have been a lot of offers from companies in the Kalimantan region, but nothing is set yet. We are definitely looking to acquire at least one more coal mine there," Gidion said, adding that Pama managed two coal mines in Kalimantan under PT Tuah Turangga and PT Dasa Eka Jasatama.

Dasa Eka produced a total 3.6 million tons of coal last year and expects to increase production by 10 percent to 4 million tons this year.

Tuah Turangga, acquired by Pama in January for $115 million, has yet to start production, but is expected to generate between 2.5 million and 3 million tons a year starting 2010.

Parent company United Tractors, Gidion said, was also budgeting $30 million for its own capital expenditures this year to spend on equipment maintenance and upgrades.

To achieve total spending of up to $200 million -- including on the capital injection for Pama -- Gidion said the company would allocate $30 million from its capital and gather the rest from banks.

The company recently secured a loan facility worth $150 million from Mizuho Corporate Bank Ltd., and Overseas Chinese Banking Corp. Ltd., with Sumitomo Mitsui Banking Corp. of Singapore serving as facility agent.

United Tractors is the largest mining contractor in Indonesia, and supplies heavy construction equipment for mining, agriculture, forestry and infrastructure projects.

It aims to sell 4,250 units of heavy machinery in 2008, a 23 percent increase from 3,454 units sold in 2007. Gidion said around 50 percent of this year's sales would go to the mining industry.

Director of marketing and operations Paulus Bambang said the agriculture and mining industries greatly contributed to the company's rising profit margin.

"In 2006 and 2007, both industries contributed up to 70 percent of our revenues, with mining being the top contributor," Paulus said.

President director Djoko Pranoto said the rising prices of coal and crude palm oil would help the company maintain its profit amid fuel increases proposed by the government to take effect in June.

"Coal prices are also rising, along with crude palm oils, so I don't see the planned fuel increase as having an adverse effect on our company," Djoko said.

UT continues to make profits this year, increasing its first quarter revenue by 55 percent to Rp 5.78 trillion from Rp 3.73 trillion during the same period last year. (anw)

Large projects up for grab at Forum

Novia D. Rulistia, The Jakarta Post, Jakarta | Sat, 05/17/2008 11:15 AM

More than 50 infrastructure projects will be offered to potential investors during the second Indonesian Regional Investment Forum, slated to run from May 26 to 27, the forum organizer says.

The projects include the construction of the Balaraja agribusiness terminal, Cilegon-Bojonegoro tollroad, the Bajanegara International Port in Banten province, the Kaliwungu port and industrial area in Kendal, Central Java, and a railway network system and industrial area in Dumai regency, Riau.

"The Bajanegara International port development will be the largest project offered by the regions by value at US$784 million. But no matter how big or small the values of the projects, they all create employment and eventually wealth," the forum's CEO Tony Gourlay said.

In addition to infrastructure projects, he said, the forum would also offer mining and energy sector projects, including the Cisukarame Cisolok and Tampomas geothermal power plants in West Java, a water power plant in Kutai Kertanegara regency, as well as drinking water and mining projects in Tulang Bawang.

More than 66 regencies have committed to offering a total of 200 projects estimated to be worth a combined $6 billion to $8 billion.

The forum, scheduled to be opened by President Susilo Bambang Yudhoyono, hopes to attract over 500 investors, including 70 foreign, to channel funds to provinces, cities and regencies.

Participating regions are required to present feasible projects worth at least $50 million per region to potential domestic and foreign investors.

In addition to foreign investors, the forum also hopes to secure Rp 151 trillion in investments from state-owned enterprises, which would be an increase from the Rp 114 trillion generated through the forum last year.

The forum will also feature lectures from noted international speakers, including former Thailand prime minister Thaksin Sinawatra, chairman of Sime Darby and former deputy prime minister of Malaysia Tun Musa Hitam and noted Japanese writer Kenichi Ohmae.

Thaksin, who owns telecommunications company Shin Corp, will discuss regional competitiveness.

13 new oil fields to help secure output target

Ika Krismantari, The Jakarta Post, Jakarta | Wed, 05/14/2008 10:32 AM

Upstream oil and gas regulator BPMigas announced Tuesday 13 oil and gas fields would start producing this year, helping to secure the country's oil production target.

Among the fields are the Tangguh gas block in Papua operated by British-based energy giant BP, the Cepu block in East Java owned by U.S.-based oil firm Exxon and the Mahakam block in East Kalimantan owned by France's Total.

BPMigas chairman Priyono said during a press briefing the agency targeted an additional combined oil and gas production of 47,100 barrels of oil equivalent per day from the 13 fields, with 9,300 of the barrels oil.

"We are optimistic we can reach the 977,000 barrel-per-day oil production target," he said.

He said the country's oil production had reached 955,847 barrels per day in January, 986,848 barrels per day in February, 985,872 in March and 978,960 in April, and that the country would not find it difficult to meet this year's oil production target of 977,000 barrels per day.

Fields that failed to start producing this year, include the Senoro gas block in Central Sulawesi, where delays are owing to ongoing gas price negotiations, state oil and gas firm Pertamina's Pulau Gading and Sungai Kenawang blocks in Jambi, delayed by uncertainty over the blocks' estimated value, and American oil company Chevron's Sadewa block in East Kalimantan, where the company is still conducting studies.

13 fields that will begin producing in 2008

(No. field contractor block investment location production in billion$ oil gas barrels per day million cubic feet )

1. Tangguh BP Tangguh Tangguh 7.2 Papua 380 134.9
2. Banyu Urip Exxon Cepu 1.5 East Java 1,700 -
3. North Duri Chevron Rokan 1.1 Sumatra 630.14
4. Bekapai Total Mahakam 0.117 Kalimantan 1,400 29
   
5. Sumur Lukah Star Energy Kakap 0.005 Kalimantan 73 3.8
   
6. KBB-01 Pertamina Java 0.0075 Java 123.2 0.13
   
7. NCJ-01 Pertamina Java 0.001 Java - 0.17
   
8. Handil Total Mahakam 0.135 Kalimantan 3,400 2.7
   
9. Kaju Medco E&P Kampar 0.008 Central Sumatra 262.5
   
10. Randegan Pertamina Java 0.007 Central Java 190.3 0.08
    
11. Anggor (Aro) Pertamina Gebang 0.038 Sumatra - 3.28
    
12. Sumur Lengowangi Petrochina Tuban 0.002 East Java - 2.52
    
13. Tunu13A Total Mahakam 0.885 Kalimantan 1,002 36
    

Bakrie Sumatera to expand oil palm plantation area on surging price

The Jakarta Post, Jakarta | Thu, 05/15/2008 12:35 PM

Publicly listed plantation company PT Bakrie Sumatera Plantations plans to add 50,000 hectares to its oil palm plantation by 2010 with an investment of US$260 million.

"Thirty million dollars will come from Bakrie Sumatera's subsidiary, PT Bakrie Sentosa Persada (BSP). We will get $80 million from an international consortium and the remainder from local bank loans," president director Ambono Janurianto said Wednesday.

Bakrie Sumatera established its subsidiary palm oil producer BSP in June 2007.

Bakrie Sumatera is now operating on a plantation 87,415 hectares large, of which 67,745 hectares is dedicated to oil palm and the rest to rubber.

The company also acquired five oil palm plantations and one rubber factory last year, in addition to establishing BSP.

Through the acquisitions, Ambono said, the holding company was aiming to increase its palm oil production to 340,000 tons this year, from 180,000 tons in 2007, and its rubber production to 40,000 tons from 29,500 tons.

Bakrie Sumatera, the country's fifth-largest plantation developer in terms of market value, booked a 794 percent increase in its first-quarter net profit to Rp 18.5 billion ($1.99 million), compared with the same period last year.

"The year 2007 was a great year for palm oil and natural rubber as prices surged to record levels," said president commissioner Soedjai Kartasasmita.

In 2007, the price of crude palm oil ranged from $600 to $800 per ton on the world market, almost doubling in price compared to the previous year.

New power plants to be built next year

The Jakarta Post

Antara, Jakarta | Thu, 05/15/2008 3:25 PM 

The government is set to build a new 10,000 MW-capacity power plant next year in order to meet increasing electricity consumption nationwide, Energy and Mineral Resources Minister Purnomo Yusgiantoro said Thursday. 

He said the construction was part of a two-phase 20,000 MW- capacity power development plan to meet the rising demand for power resources. 

"Power consumption continues to increase on Java and on the outer islands," Purnomo said. 

He said all of the new plants would be located on Java and that they would be powered by a mixture of coal, geothermal and natural gas. 

Two coal-generated plants, one with a 7,000 MW capacity and the other with a 3,000 MW capacity, have already been built during the first phase of development.

Bali builds modern port for cruise ships

The Jakarta Post

Antara, Denpasar | Thu, 05/15/2008 6:31 PM

A modern port aimed at attracting more foreign cruise ships is under construction in Karangasem district, Bali, Bali transportation agency head Putu Sujana said here Thursday.

Once the port is completed, foreign cruise ships passing Indonesian waters could schedule a few days for a port call in Bali, Sujana said.

"Luxury cruise ships carrying tourists from other countries to Singapore are expected to come to Bali once the modern, permanent port is ready."

Sujana said at least 300 luxury cruise ships arrived in Singapore every year, each carrying around 1,500 to 2,000 tourists.

"Floating hotels on their way to a number of countries in Asia usually pass Indonesian waters. They are expected, therefore, to stop in Bali when the port is ready."

Even if only a half of the 300 cruise ships stop in Bali, it would have a positive impact on tourism in the province, he said.

Financial support for the port is coming from the central government, Bali provincial administration and Karangasem district administration, Sujana said.

Construction is expected to finish in 2009.

At least 17 cruise ships with thousands of foreign tourists stopped at the old port in Karangasem in 2007 and 15 cruise ships in 2006.

One of them was the Italian Costa Marina with 496 tourists, which anchored at Karangasem port for two days.

Before the Bali bombing tragedy, said Sujana, more than 20 cruise ships stopped in Bali and in 1995 alone 70 of them with hundreds of thousands of tourists arrived at the resort island.

SBY approves cash aid for poor

Abdul Khalik, The Jakarta Post, Jakarta | Thu, 05/15/2008 1:21 AM

President Susilo Bambang Yudhoyono has issued a presidential instruction for the disbursement of Rp 14.1 trillion (US$1.55 billion) in direct cash assistance to help 19.1 million lower income households cope with planned fuel price increases.

Coordinating Minister for People's Welfare Aburizal Bakrie said late Wednesday after a Cabinet meeting the presidential instruction would serve as the legal basis for the cash disbursement program, expected to be launched in June when the government plans to raise fuel prices.

"The first phase of the program will cover a period of seven months until December. We are now printing the cash disbursement cards to be distributed across the country. We'll be ready by the third week of the month," Aburizal said.

Under the scheme, households that qualify will receive Rp 100,000 per month in compensation for the maximum 30 percent increase in fuel prices, he said.

The second phase of the program is expected to last until December next year.

Aburizal said that according to government data, the 19.1 million households that qualify for the program comprise 76.4 million people.

Paskah Suzetta, chairman of the National Development Planning Board, said the President has instructed the attorney general, Indonesian Military chief, National Police chief, governors, regents and mayors to ensure the money reached qualified households.

He warned that legal action would be taken against any officials found to be hindering the flow of funds to rightful recipients.

Finance Minister Sri Mulyani Indrawati said the government would propose the inclusion of funds for the cash disbursement program in the 2009 state budget.

"We can make sure that poor families get compensation through December 2009," she said.

The government plans to raise fuel prices to cap fuel subsidies and protect the state budget in the face of soaring global crude oil prices.

It is preparing a number of programs, including direct cash disbursements, to help lower income households cope with the higher prices.

The government has launched a Rp 13.2 trillion credit program in 4,000 districts across the country, and has extended Rp 5.3 trillion in credits to approximately 400,000 micro and small businesses.

With these programs, the government hopes to cut the poverty rate from 14 percent in 2008 to 12.5 percent in 2009.

Leighton Wins $350 Million Indonesia Coal Mine Order

By Jesse Riseborough and Jason Scott

May 14 (Bloomberg) -- Leighton Holdings Ltd., Australia's largest construction company, won a $350 million contract for a coal mine expansion in Indonesia, the largest exporter of the fuel used by power stations.

The expansion of PT Mahakam Sumber Jaya's MSJ coal mine will be completed in April 2013, the Sydney-based company said today in a statement. Leighton also said its 45 percent owned Middle Eastern venture, Al Habtoor Leighton Group, won a AED$1.2 billion ($327 million) contract from Mubadala Development Co. to design and build a university campus in Abu Dhabi.

Chief Executive Officer Wal King is pursuing growth in Asia and the Middle East to replenish his order book amid concerns a global slowdown would curb available contracts. Indonesia is building new mines as prices for the fuel almost doubled in the past year.

``We have now won over $1 billion in new mining work in Indonesia over the past 12 months, and we have identified a number of additional opportunities,'' Leighton International Managing Director David Savage said in the statement.

Leighton fell 7 cents, or 0.1 percent, to A$49.88 at 10:53 a.m. in Sydney trading. The shares have tumbled 23 percent since reaching a record high of A$64.50 on Dec. 6.

Leighton has been operating the MSJ coal mine since 2004, it said. Construction of the Paris Sorbonne University campus will be complete in August 2010, Leighton said in a separate statement.

Spot prices for power station coal from Australia's Newcastle port, the largest coal-export outlet in the world's second-biggest exporter, more than doubled in the year to May 2, according to McCloskey Group Ltd.

Leighton, a subsidiary of Germany's Hochtief AG, in April won a A$1 billion order to develop and operate a mine at the Chitarpur coal project in India's Jharkhand state for 20 years. In March it won a A$720 million order to build pipelines for Oil & Natural Gas Corp., India's biggest fuel producer.

To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.netJason Scott in Perth at Jscott14@bloomberg.net.

Australia grants $38 million for farmers in eastern Indonesia

Antara, Lombok, West Nusa Tenggara | Tue, 05/13/2008 6:43 PM

The Australian Agency for International Development (AusAID) has allocated A$38 million (about US$35.7 million) toward increasing the earnings and productivity of farmers in four provinces in eastern Indonesia.

The four provinces are West Nusa Tenggara, East Nusa Tenggara, South Sulawesi and Southeast Sulawesi.

"The Aus$38 million program is aimed at farmers to help them utilize market opportunities and to increase the added value of their agricultural products," said AusAID Indonesia's minister- counselor, Blair Exell, on Tuesday at a peanut harvest in a 420- hectare plantation, a pilot project supported by AusAID in northern Lombok.

The project is part of the Australian-Indonesian Partnership program known as the Smallholder Agribusiness Development Initiative (SADI)

The program aims to improve farmers access to technology for rural enterprises, improve business practices and address critical constraints such as market access, finance and infrastructure gaps.

The funds will go towards promoting efficient production in areas including horticulture and livestock in rural areas of eastern Indonesia.

Exell said the program so far has been successfully implemented through three institutions namely the National Program of People Empowerment (PNPM), World Bank Group and Australian Center for International Agricultural Research (ACIAR).

PNPM is responsible for the improvement of farmer's production and marketing, IFC supported entrepreneurship and ACIAR supported the market research.

New Bintan Island resort gets millions

Fadli, The Jakarta Post, Bintan | Mon, 05/12/2008 10:51 AM

PT Bintan Resort Cakrawala, an integrated resort developer, over the weekend launched a new 1,300 hectare resort development site on Bintan Island, already attracting US$32.99 million in transactions from a host of investors and partners.

Bintan Resort Cakrawala has sold up to 300 hectares of land on the site to 12 investors, including Sahid Group, Alila Hotel, Ayako Corporation Pte Ltd and Polo retail.

Named Lagoi Bay, the site will feature international standard resorts, residences, shopping outlets, restaurants, entertainment venues and water sport facilities.

"We will develop Lagoi Bay to become a world-class resort," said Bintan Resort vice president director Chin Chow Yoon.

He said the company had developed access for transportation from the site to the main road in Lagoi, as well as telecommunications, water and electricity.

"Sahid is allocating around 10 hectares of land in Lagoi Bay for its resort development," he said.

President director of the Sahid Group, Yanti Sukamdani, said the group considered Lagoi and Bintan as a whole ideally situated for attracting foreign tourists, especially from Singapore.

"Bintan offers nature tourism which Singapore doesn't have," Yanti said.

"Tourists in Singapore usually spend three days on average to explore the country. They might want to spend more days on different tourism attractions in nearby countries, such as (Indonesia's) Bintan."

More than 10 million foreign tourists visit Singapore every year, as compared to 320,000 foreign tourist arrivals in Bintan.

Regent of Bintan, Anshar Ahmad, said around 70 percent of Bintan Island's revenue, or around Rp 60 billion ($6.48 million) per year, come from the Lagoi tourism area.

"With further development within the Lagoi area, the local administrator of Bintan is expecting to receive Rp 30 billion more per year," Anshar said. (rff)

SBY to issue new economic package

Rendi Akhmad Witular, The Jakarta Post, Jakarta | Mon, 05/12/2008 6:46 AM

The administration of President Susilo Bambang Yudhoyono is slated to issue its last package of economic policies later this month to help expedite private investment and spur economic growth ahead of next year's elections.

A copy of the draft package, titled Focus of Economic Programs 2008-2009", obtained recently by The Jakarta Post from the Coordinating Ministry for the Economy consists of a series of planned regulations and actions by the economic ministers.

"It will be a kind of guidance for ministers until the end of 2009 .... I cannot say about the timing of its issuance as the President is still reviewing it," outgoing Coordinating Minister for the Economy Boediono told the Post recently.

An official with Boediono's office said the package had been scheduled to be issued this week, but because the government planned to raise fuel prices it would likely be delayed.

"The package is on the President's table now. He may change or put in some additional points to help cushion the impact of the fuel price increases," said the official.

According to the package, the economic team will focus in the remaining 16 months before next year's general election on improving the investment climate and stabilizing the macro-economy and financial institutions.

Improving the management of the country's natural resources, environment, and agriculture sector, empowering small and medium enterprises, and reforming the labor and transmigration sectors are other key policies.

The package also addresses energy supply, upgrading infrastructure and speeding up the economic integration of the Association of Southeast Asia Nations (ASEAN).

Among the key issues in the economic package is a revision of government decree No. 1/2007 on income tax facilities for investment in certain sectors and regions.

Investors have yet to enjoy the privileges outlined in the decree due to different legal interpretations between the tax office and the Investment Coordinating Board, which pledged the facilities.

Under the decree, investors are meant to be given a 30 percent income tax reduction for a period of six years. At present, there are more than 17 firms with a total investment of US$7 billion waiting for the decree to be implemented.

Another important issue in the package is a revision of a cost recovery scheme for oil and gas producers, as well as transparency in the revenue and management of the energy and the mining sectors.

The government has been under public pressure over the contracts and facilities given to private energy and mining firms, which are seen as lacking transparency and being riddled with questionable transactions.

Senior officials from the Finance Ministry have demanded the Energy and Mineral Resources Ministry strictly supervise the energy and mining sectors to maximize state revenue to finance development.

Indonesian Chamber of Commerce and Industry (Kadin) chairman Mohamad Suleman Hidayat expressed doubt over the effectiveness of the planned economic policy package.

"Businesses are skeptical about the implementation of the policies. The previous economic packages have run aground because of bureaucratic problems. All of the business problems in this country stem primarily from bureaucrats," he said.

President Yudhoyono has issued more than five economic packages to help lure foreign investment and spur growth.

Indonesia, Southeast Asia's largest economy, has trimmed its economic growth target to around 6 percent this year from an initial forecast of 6.4 percent due primarily to accelerating inflation from skyrocketing global commodity prices.

Eyebox Key policies in the draft package

Draft laws: 1. Special economic zones 2. Financial safety net 3. Pawn services (liberalization) 4. Credit management 

Presidential decrees and government regulations: 1. Integrated investment license processing 2. Railway infrastructure 

Ministerial decrees: 1. Immigration privileges for foreign-direct investment 2. Acceleration of import process for capital goods and raw materials for foreign-direct investment 3. Fiscal incentives for foreign-direct investment 4. Facility expansion for tax rebates 6. Synchronization of logistic services 7. Revision of decree on pension fund investments 8. Gas retail prices 9. Revision of regulations on upstream oil and gas sector 10. Electricity retail prices from geothermal power plants 11. Food estates 12. Trade facilitation and tariff exemption within the ASEAN integration frame 13. Liberalization of air freight services within ASEAN 14. Labor dispute settlement through third parties 

Action plans: 1. Highway expansion to Tanjung Priok Port 2. Accelerating the implementation of the National Single Window for improving export and import procedures 3. Completing financial system architecture 4. Completing early warning system for financial stability 5. Regrouping of state firms, from 139 to 87 firms 6. Privatization of 44 firms by 2009 7. Securing coal supply for 10,000 MW power projects

Summarecon issues bonds for expansion

The Jakarta Post, Thu, 05/08/2008 11:03 AM  

Publicly listed property developer PT Summarecon Agung issued Wednesday its first Islamic bonds (sukuk), worth Rp 200 billion (US$21.69 million), and conventional bonds, worth Rp 100 billion, carrying returns of between 13.75 and 14 percent per annum. 

The bonds, to be offered between June 10 and 12, would have a five-year maturity period and would be listed on the Indonesia Stock Exchange on June 18, President Director Johannes Mardjuki said Wednesday during a press conference. 

"Around 70 percent of the proceeds from these bonds will be allocated for purchasing land in Kelapa Gading and its surrounding area in North Jakarta and 30 percent for working capital," he told reporters. 

Corporate secretary Michael Yong said previously the company intended to issue up to Rp 500 billion in bonds. 

"Since interest rates on state bonds have increased to 12.5 percent from less than 11 percent two months ago, we decided to reduce our bonds to Rp 300 billion," he said. 

Summarecon has appointed PT Andalan Artha Advisindo Sekuritas and publicly listed PT Kresna Graha Sekurindo to underwrite the bonds. 

The company's net profit in the first quarter decreased to Rp 36.76 billion from Rp 43.83 billion due to the increasing tax charge, Michael said. 

In anticipation of increases in the price of construction materials, the company has signed agreement contracts with its suppliers to ensure fixed prices for six months to a year. -- JP/rff

Indika Energy plans to raise Rp 2.1 trillion from IPO

The Jakarta Post, Jakarta | Fri, 05/09/2008 9:38 AM 

Energy and infrastructure company Indika Energy plans to unload 18 percent of its stake to the public via an initial public offering (IPO) scheme later this month to help finance its business expansion.

The company, of which its subsidiaries include coal producer PT Kideco and engineering company PT Tripatra, is expecting to raise more than Rp 2.1 trillion (US$228 million) from the IPO.

Indika finance director Azis Armand said 56.6 percent of the proceeds would be used to fund an expansion in energy resource business, including potential acquisitions and the development of coal resources.

The remaining 28.2 percent, he added, would be used to expand the infrastructure business, and 15.2 percent would be used for the energy service business.

"We're hoping to use the proceeds to acquire a coal mine in East Kalimantan worth around US$100 million," he said.

Indika will also use some of the proceeds to invest in a joint power plant project in Cirebon, West Java, at a cost of around $779 million.

However, the company will only spend around $47 million in the project, while the remaining costs will be financed jointly by other investors.

Indika president director M. Arsjad Rasjid said Thursday the company would sell some 937 million shares with a par value of Rp 100 each.

The company, he said, would start offering its shares from June 10 to 12, at a price of between Rp 2,300 and Rp 2,950.

Indika plans to list the shares on the Indonesia Stock Exchange on June 18.

Controlled by a group run by local businessmen Agus Lasmono and Wiwoho Basuki, who are linked with tycoon Sudwikatmono, Indika has appointed PT Danareksa Sekuritas, PT Indo Premier Securities and PT Mandiri Sekuritas as underwriters for selling.

Citigroup Global Markets Limited and Deutsche Bank AG have been appointed as the company's agents outside Indonesia.

Last year, Indika had assets worth more than Rp 5 trillion, with revenues of Rp 2.3 trillion and a net profit of Rp 265 billion.

The company's flagship Kideco, the country's third largest coal producer, booked $95 million of net income last year.

The unit sold 20.5 million tons of coal last year, while this year the company is expecting to sell 22 million tons at a price of between $45 and $48 per ton.

Indika has some 46 percent shares in Kideco, while the remaining 49 percent are owned by South Korea-based Samtan, and 5 percent by PT MIU. (dia)

Bumi Serpong Damai announces IPO

The Jakarta Post, Sat, 05/10/2008 10:34 AM

PT Bumi Serpong Damai (BSD), developer of the popular satellite city complex west of Jakarta, will sell shares in an IPO expected to generate Rp 872 billion (US$94.42 million) in capital.

Director Teky Mailoa said Friday 1.09 billion shares would be sold for Rp 388 to Rp 800 per share between May 28 and 30. BSD will officially be listed on the Indonesian Stock Exchange on June 5.

"About 30 percent of the capital raised will be allocated to developing infrastructure in the city, such as roads, water treatment facilities and electricity and phone networks," Teky said.

He said another 25 percent of the proceeds would be used to refinance the company's Rp 600 billion bonds, 20 percent for financing the expansion of property projects, 20 percent for buying land and the remaining 5 percent for capital.

The issuance of the new shares will be underwritten by PT Sinarmas Sekuritas, PT CLSA Indonesia and PT Nusadana Capital.

Teky said by the end of April BSD had recorded Rp 954 billion in revenue this year.

BSD City is located on 5,920 hectares of land about 20 kilometers west of Jakarta. The company plans to build 80 housing clusters, seven community centers and an integrated commercial area on the site.

Currently there are 4,100 commercial outlets and 20,600 homes with 100,000 residents in BSD.

The company is winding up the second phase of 2,000 hectares of land development begun in February last year, said president director Harry Budi Hartanto.

It expects to complete the third phase of 2,150 hectares of land development later this year. -- JP/Novia D. Rulistia

Govt speeds up $10b Java Sumatra bridge

Oyos Saroso H.N., The Jakarta Post, Jakarta | Fri, 05/09/2008 9:38 AM

The government is slated to begin construction next year of the country's longest and most expensive bridge, linking Sumatra and Java islands, a year ahead of schedule.

Lampung Governor Sjachroedin Z.P. said Thursday the government would start work on the 29 kilometer bridge across the Sunda strait early in a bid to boost economic activities in Sumatra.

The bridge, connecting Bakauheni in Lampung with Merak in Banten, will cost about US$10 billion over the next 15 years, Sjachroedin said.

"All the governors in Sumatra want the development to begin soon and they expect it won't burden the government financially," he said, adding the bridge was expected to be operational by 2025.

Public Works Minister Djoko Kirmanto said the construction costs would be shouldered mainly by private investors, with the central government financing only 5 percent of the project.

"We will attract investors to finance the bridge development by offering them incentives," he said. (rff)

ArcelorMittal offers $10b to RI

Novia D. Rulistia, The Jakarta Post, Jakarta | Fri, 05/09/2008 9:38 AM

Largest steel maker ArcelorMittal has raised its investment cap for new operations in Indonesia to US$10 billion from $3 billion in a bid to outstrip other competitors in acquiring shares in state-owned Krakatau Steel, an official said.

Representatives of the Luxembourg-based company met with the Minister of State-Owned Enterprises Sofyan Djalil in Jakarta on Thursday to learn more about the government's plan to privatize Krakatau.

Separately, top officials of Australian-based steel maker BlueScope Steel Ltd. were also in the town that day, meeting the Minister for Industry Fahmi Idris.

Mittal's executive vice president for finance, mergers and acquisition, Sudhir Maheshwari, told reporters during a media briefing that during the meeting, the firm had explained it would spend up to US$10 billion.

"But we still don't know how much we will set aside for buying a stake in Krakatau Steel. We're still waiting for the government's decision on the privatization plan," Maheshwari said.

He added that the company was aiming to hold the maximum 49 percent stake in the company while also acquiring shares or a partnership with PT Aneka Tambang, the country's second largest nickel producer.

"For Mittal there is nothing more critical, nothing more emotional, nothing more sentimental than coming back to Indonesia," he said, nostalgically recalling how the company had its humble beginnings in Surabaya, East Java, in the seventies.

The company first announced its interest in Krakatau early last month during the visit of founder and CEO Lakhsmi Mittal to the presidential palace.

Mittal is focusing on developing markets as economic growth slows in the U.S., where it raised prices in the first quarter because of rising raw material costs.

Last year, the company booked $10.4 billion in net profit, $105.2 billion in revenue and $14.8 billion in operating income. Mittal produced 116 million tons of steel or equivalent with about 10 percent of the global steel production.

After a meeting with BlueScope officials, Industry Minister Fahmi Idris told reporters that the company had explained its readiness to take part in Krakatau's privatization plan and compete with other interested parties.

"As there are many parties which are interested in Krakatau, the process of privatization will be in the form of a tender," Fahmi said.

Currently there are four foreign firms interested in Krakatau, including two Indian-based companies Tata Steel Ltd. and Essar Steel Ltd.

Fahmi said the government had proposed two important requirements for competition -- investment in technology which could help create efficiency, and investment to create new work fields.

Krakatau's president commissioner Taufiequrrahman Ruki said the government should instead sell shares in an initial public offering.

The government is still considering whether to privatize the company through an initial public offering or by conducting a strategic sale where stakes would be sold in blocks to selected potential investors.

RI, S. Korea jointly setting up ICT training center in Cikarang

Jakarta (ANTARA News) - Indonesia, in cooperation with South Korea, is setting up an Information and Communication Technology (ICT) Training Center at Cikarang, Jababeka, West Java.

Communication and Informatics Minister Muhammad Nuh, accompanied by South Korean Ambassador to Indonesia Lee Sun-Jin, laid the first corner-stone of the building to house the training center in Cikarang on Wednesday.

The Indonesian government was developing a quality community in the ICT field because the need to master technology was rising, he said.

The head of the communication and informatics ministry`s research and development body, Aizirman Djusan, said the South Korean government had provided a grant amounting to US$8.9 million and the Indonesian government had earmarked Rp10 billion for the development of the training center.

He said the training center was expected to become a center of excellence and a model for similar training centers in Indonesia.

Standing on 2.5 hectares of land, the training center building would comprise among other things class rooms, laboratories and a large auditorium.

The construction of the ITC Training Center was a follow up of an agreement signed by the Indonesian communication and informatics ministry and the Korean International Cooperation Agency (KOICA), Djusan said.

Meanwhile, South Korean Ambassador to Indonesia Lee Sun-Jin said the training center would focus on ITC networking, multimedia, database and computer programming.

The ambassador hoped the training center could improve the ITC skills of about 5,000 people annually.

Minister Nuh said Cikarang which is part of the Jababeka area was the right location for the training center because around 1,350 companies owned by investors from 27 countries were also located there.

"So, graduates from the ICT Training Center can directly find jobs in the Jababeka area," the minister said.

With the presence of the ICT Training Center, Jababeka could become the hub of a `smart` area, the minister added.

Related Story:

Gates offers free software to Indonesian students

RI to provide $1 million in relief aid to Myanmar

Jakarta (ANTARA News) - Indonesia has decided to provide relief aid worth US$1 million to Myanmar to help victims of Cyclone Nargis that left around 15,000 people dead or missing and caused serious damage to the country, a presidential spokesman said.

The tragedy reminded President Susilo Bambang Yudhoyono of the deadly tsunami in Aceh on December 26, 2004, Dino Patty Djalal said at the presidential oOffice here on Tuesday.

"That`s why the president decided to provide US$1 million in aid to Myanmar," he said.

The relief aid which included medicines and food would soon be flown to Myanmar using two Indonesian military (TNI) Hercules planes, he said.

On Tuesday morning, President Yudhoyono contacted an official at the Myanmarese Embassy in Jakarta, Kyi Maung Oo, to ask what the Myanmarese government and people needed, Dino said.

Dino quoted Maung Oo as saying that he still had difficulty contacting government officials in Yangon as communication networks were damaged.

In the phone talks, Maung Oo expressed gratitude to President Yudhoyono for the relief aid, Dino said.

He said the president had ordered the coordinating minister for people`s welfare to coordinate with the TNI chief in dispatching the relief aid.

He said so far there had been no report of Indonesian citizens being among the victims of the natural disaster in Myanmar.

Related Story:

RI sends aid to Myanmar, sealed with SBY letter

Images of Aceh Earthquake 9.2 /Tsunami Disaster December 2004