Mari Pangestu: The Champion of Free Trade - The President Post

B6
July 12, 2010
The President Post
www.thepresidentpost.com
Executive Highlights
Moody’s Investors
Service has raised its
outlook on Indonesia’s
BA2 credit rating to
positive from stable.
The positive outlook means the
agency will likely raise the rating,
which is two notches below
investment grade, within 12-18
months. Moody’s last upgraded
Indonesia’s credit rating in September
2009. In its statement,
the ratings agency said the move
reflected Indonesia’s capacity for
sustained growth, its effective fiscal
and monetary policies and
prospects for further improvements
in the government’s financial
and debt position. Aninda
Mitra, Moody’s vice president for
Indonesia, said recent instabilities
in the European debt markets
have had no serious implications
on Indonesia’s improving credit
fundamentals. He noted that
the recent appointment of former
banker Agus Martowardojo as finance
minister and the nomination
of Darmin Nasution as Bank
Indonesia governor were supportive
of policy continuity and institutional
credibility. Mitra also
remarked that the central bank’s
recent measures to reduce volatility
in capital flows were “ratings
neutral” as it did not fundamentally
restrict the servicing of debt
obligations.
Bank Indonesia
(BI) has introduced
measures to reduce
speculative money
flow and encourage
investors to keep
funds in longer-term
rupiah denominated
instruments.
Most analysts agree the steps taken
by the central bank are aimed
at short-term, speculative capital
and are unlikely to discourage
foreign investors. The measures
include a one month holding period
for those investing in its Bank
Indonesia bills (SBI). BI also widened
the spread between its overnight
repo rate and its benchmark
rate to +100 basis points
(bp), and the spread between the
overnight deposit rate and the
benchmark rate to -100 bp, all of
which boosts the cost of borrowing
from the central bank while
reducing returns from investing
in SBIs. BI will also introduce
nine-month and 12-month SBIs
in the second half of the year to
complement the bank’s shorterterm
debt paper. Acting BI governor
Darmin Nasution emphasized
that the new measures were
not “capital controls”, but were
aimed at helping the central bank
improve the effectiveness of its
monetary policy and strengthen
the country’s resilience to global
financial shocks.
plan to raise electricity
rates by an average
10% effective 1 July.
It is the country’s first tariff increase
for electricity since 2004
and, despite the sensitivity of
the issue, the public outcry over
the hike has been modest. In
his statement, President Yudhoyono
said the hike was necessary
to safeguard the economy
while protecting the poor. Tariffs
for households with capacity
of 1,300-5,500 volt ampere (VA)
will be raised by 18%. Electricity
tariffs for users with capacity of
between 450 and 900 VA, which
are mostly low-income households
and accounts for almost
half of the number of users, will
remain unchanged. Tariffs for
businesses and industrial operations
with capacity of up to 2,200
VA will be increased by 6%; between
2,200 VA and 200 kiloVA
by 9%; and above 200 kiloVA by
15%. The government has allocated
Rp55.1 trillion for electricity
subsidies in its revised 2010
state budget, up from its original
forecast of Rp37.8 trillion. Bank
Indonesia, meanwhile, said it did
not expect the increase in electricity
rates to have a significant impact
on inflation, and is retaining
its 2010 inflation projection
of 5.1-5.2%.
The government has
given the green light
to develop the longdelayed
US$1.4 Billion
Donggi-Senoro LNG
project in Central
Sulawesi.
This comes after the energy ministry
formally approved the allocation
of up to 75% of the LNG
produced from the planned facility
for exports. Last year, then
Vice President Yusuf Kalla insisted
the bulk of the project’s output
go to the domestic market,
prompting Mitsubishi – the majority
shareholder in Donggi-Senoro
- to threaten to withdraw
from the project and prevent the
Japan Bank for International Cooperation
(JBIC) from extending
low-cost funding to develop the
facility. State-owned oil and gas
firm Pertamina and local energy
company Medco Energi Internasional
holds 29% and 20% stakes
respectively in the project. The
LNG facility, which will have a
capacity of two million tons per
year, is now scheduled to start operations
in 2014. Japan’s Kyushu
Electric Power Co. and South Korea’s
Korea Gas Corp. are among
the likely buyers of the exported
LNG. The Donggi-Senoro facility
will get its gas from the Senoro
and Matindok fields jointly operated
by Medco and Pertamina.
its compared to Rp1.6 trillion in
losses in the year earlier period.
The firm also posted a 14% increase
in revenue to Rp35.5 trillion
in the first quarter.
Australia’s Churchill
mining has acquired
direct ownership of its
Ridlatama Tambang
coal concession in East
Kalimantan.
The company said the decision
to convert its indirect contractual
arrangements in the mine to direct
equity interest comes following
passage of the 2009 mining
law and the recent issuance of the
legislation’s implementing regulations
allowing foreign companies
to taka direct equity ownership
in locally incorporated
companies holding mining concessions.
Churchill managing
director Paul Mazak said the restructuring
to a simple ownership
%
8.0
IDX
3,300
3,100
2,900
2,700
2,500
2,300
2,100
1,900
1,700
1,500
Jun
09
2,027
919
EXCHANGE RATE 2009 - 2010
16,450
14,389
15,800
15,150
14,500
13,850
13,200
12,550
US$ (LHS)
100 YEN (LHS)
EURO (RHS)
11,900
11,250 10,659
10,600
9,950
10,225
9,300
8,650
8,000
Jun J A Sep O N D J-10 F Mar A
09
2009 2010
STOCK MARKET INDEX
IDX - Jakarta
S&P - USA
1,053
2,416
J A Sep O N D J-10 F Mar A
2009 2010
INTEREST RATES
structure was a significant milestone
for the company and would
allow it to accelerate development
of Ridlatama Tambang and become
a major coal producer in
the region. The concession has
an estimated JORC resource of
2.73 billion tons. Churchill said
it also converted to a 75% direct
ownership in Ridlatama Trade
Powerindo, which holds a mining
license to a 5,386 ha area adjacent
to Ridlatama Tambang.
The U.S. export-import
bank gave preliminary
approval for a US$1
billion lending facility
to 11 Indonesian banks.
The 11 banks are the Lembaga
Pembiayaan Ekspor Indonesia
(Indonesia Exim Bank), Bank
Mandiri, Bank Negara Indonesia
(BNI), Bank Rakyat Indonesia
(BRI), Bank Central Asia
(BCA), Bank Danamon, Panin
Selected Instant Indicators
15,000
14,500
14,000
13,500
13,000
12,500
12,000
11,500
11,000
10,500
9,927 10,000
9,500
9000
9,015
8,500
8,000
M 21 -
Jun
M
1,113
USA
S&P 500
1,300
21 -
Jun
2,942
1,200
1,100
1,000
900
Bank, Bank CIMB-Niaga, Bank
OCBC Indonesia, Bank International
Indonesia and Bank UOB
Buana. U.S. Exim Bank president
Fred P. Hochberg said the
agreement would enable Indonesian
firms to access low interest
rate financing through local
banks. He added that the facility
offered short, medium and long
repayment terms and would be
eligible for both public sector and
private sector borrowers. Hochberg
further remarked that Indonesia
would offer huge opportunities
for U.S. exporters as the
country’s diverse economy continues
to grow. In fiscal 2009
and 2010, the U.S. Exim Bank
authorized nearly US$1 billion in
financing to support the export
of 30 Boeing 737-8000ER aircraft
to Indonesian low-cost carrier
Lion Air.
Standard Chartered
Bank subsidiary, Bank
Permata, has acquired
General Electric
Finance Indonesia, the
local unit of General
Electric Capital.
Financial details were not disclosed.
Bank Permata president
director David Fletcher said the
acquisition would support the
bank’s focus on expanding its
consumer and commercial segments,
and reflected the commitment
of the bank’s two major
shareholders, Astra International
and Standard Chartered Bank,
to accelerate Permata’s growth
and establish the bank as a premier
financial services firm in
Indonesia. GE Finance Indonesia
has 10 branches across the
country, administering a range of
credit cards servicing more than
a million subscribers. The firm
also provides automotive financing
in ventures with Astra Sedaya
Finance and Federal International
Finance. GE Finance Indonesia
posted net profits of Rp93.8
billion in 2009, up 84% from a
year earlier.
Bank Mandiri secured
a US$100 million
loan from France’s
Development Agency
Agence Francaise de
Developpement (AFD).
The funding will have a 7-10 year
term and will be used to finance
projects in the energy sector focusing
on geothermal and renewable
energy, energy efficiency
and the domestic use of gas to replace
fossil fuels. AFD country
director Joel Daligault said it was
the agency’s first direct loan to a
state-owned enterprise in Indonesia,
and reflected AFD’s broader
cooperation with the Indonesian
government on climate change
and efforts to reduce the country’s
carbon emissions by up to
40% by 2020. Thomas Arifin,
Mandiri’s director of treasury, financial
institutions & special asset
management, said the loan
would strengthen the bank’s dollar
base and meet customer needs
as demand for more strict environmental
standards on energy
projects grow. He added that
the deal reflected AFD’s strong
track record on climate change
issues and promoting sustainable
growth in emerging markets.
The Australia and
New Zealand Banking
Group (ANZ) has
finalized its US$100
million acquisition
of the Royal Bank of
Scotland’s (RBS) retail,
commercial and private
banking businesses in
Indonesia.
Alex Thursby, ANZ’s chief executive
of Asia Pacific, Europe and
America, said the bank has completed
the rebranding of 18 RBS
branches and 29 ATMs in Indonesia
and moved customers and
staff to ANZ with minimal disruption.
He added that ANZ
was now focused on working on
it relationship with former RBS
customers and instilling confidence
in ANZ. The acquisition
has significantly expanded the
scale of ANZ’s operations in Indonesia,
which now includes 28
branches in 11 cities serving more
than 900,000 customers. Thursby
remarked that ANZ was now
in a very strong position to deliver
relationship-focused banking
for its high-end retail clients. He
noted that the bank has recently
introduced ANZ Signature Priority
Banking which offers affluent
customers a dedicated relationship
manager and full wealth
management services.
Hong Kong-based
commodities trader
Noble Group has
acquired a 51% stake
in local palm oil
producer Henrison Inti
Persada.
Financial details were not disclosed,
though some analysts estimate
the deal to be worth more
than US$80 million given the
value of Henrison’s plantation assets.
Noble’s executive chairman,
Richard Elman, asserted that the
deal would complement its global
agricultural and energy business.
It would allow the group, which
is a major supplier of agricultural
commodities to China, to expand
its edible oil supply chain and
help ensure a continuous flow of
crude palm oil. Noble is slated to
develop around 32,500 hectares
of land in Sorong, West Papua for
palm oil production as part of its
investment in Henrison. The latest
acquisition marks Noble’s first
venture in Indonesia’s palm oil
sector, though the group already
owns several coal and cocoa assets
in the country. Noble’s local
partner in Henrison is Kayu Lapis
Indonesia Group, the largest
forestry operator in the region.
High-end retailer
Mitra Adiperkasa
announced a Rp300
billion expansion plan
for its international
franchises
to meet surging demand from
high-income consumers. Fetty
Kwartati, Mitra’s general manager
for investor relations, said
the firm would be opening 20
new Starbucks Coffee outlets
in Jakarta, Surabaya, Denpasar,
Bandung, Medan, Yogyakarta,
Semarang and Balikpapan over
the course of this year. The company
also plans to open 10 new
Burger King restaurants, 10 new
Domino’s Pizza shops and a new
SOGO department store in Jakarta
in the second half of the
year. Mitra currently operates
74 Starbucks Coffee outlets, 11
Burger King eateries, five Domino’s
Pizza shops, and 10 SOGO
department stores across Indonesia.
Fetty said the firm was targeting
a 20% annual increase in
sales this year to Rp4.9 trillion on
the back of the country’s growing
urban, middle and upper-class
consumers.
Business Highlights are
contributed to The President Post
by CASTLEASIA/PT Jasa Cita
from information supplied to
members of their CEO Forum,
the Indonesia Country Program.
They are reprinted here with
permission. For more information
about CASTLEASIA programs,
please contact Juliette or Wijayanti
at 62 21 572 7321 or email
castle@castleasia.com subject CEO
Forum
The rupiah hit the key
level of Rp9,000 to the
U.S. Dollar following
Moody’s rating outlook
revision and China’s
decision to allow more
flexibility in the yuan.
Currency traders expect Bank Indonesia
to intervene at this support
level to reduce rapid fluctuations
and prevent further
appreciation that could harm the
country’s export competitiveness.
However, given the strength of
Indonesia’s economic fundamentals
relative to its peers, analysts
expect the rupiah to see further
strengthening over the mediumterm.
The rupiah has already risen
15% against the U.S. dollar
over the past 12 months, the largest
gainer in Asia.
Parliament has approved
a government
State power utility PLN
has given indicative
yields of 9.15-10.81%
For Rp3 trillion in
bonds it plans to float
next month.
Proceeds from the issue will
be used to fund the firm’s program
to modernize and expand
its transmission and distribution
network. PLN will issue two series
of conventional bonds worth
Rp2.5 trillion, a series A with a
five year tenor and an indicative
yield of 9.15-9.9%, and a series
B with a 12 year maturity
and an indicative yield of 10.08-
10.81%. The firm will also issue
Rp500 billion in syaria bonds in
two series with tenors of five and
12 years respectively. Danareska
Sekuritas, Mandiri Sekuritas and
Trimegah Securities have been
appointed to underwrite the bond
issue. Local ratings agency Pefindo
has assigned an AA+ rating
with a stable outlook for PLN’s
bonds. The Indonesian stock
exchange (BEI) is scheduled to
list the debt paper with the local
bourse on 9 July. As of Q1, PLN
posted Rp2.9 trillion in net prof-
7.5
7.0
6.5
6.0
5.5
Jun
09
US$ Mn
3,500
3,000
2,500
2,000
1,500
1,000
500
6.3
0
6.5
56.6
1,568
INTERNATIONAL RESERVES
AND TRADE BALANCE
Trade Balance
Net FX Reserves
57.4
837
64.5
1,960
Deposit Rate
Interbank Call Rate
SBI
J A Sep O N D J-10 F Mar A
2009 2010
3,048
1,669
A-09 May J Jul A S O N D J-10 F Mar
2009 2010
M
78.6
518
Apr
6.5
US$ Bn
88
84
80
76
72
68
64
60
56
52
48
44
40
6.1
21 -
Jun