The beautiful Islet of Angels: Relax

Wanna spend some time in a submarine paradise? Then charter a small catamaran and sail to the Pulau Bidadari (about 3 hours from where? but surely not the one at the Thousand Islands near Jakarta). The clearest and closest snorkeling is found off the white sand beaches here.

Good opportunity to swim and even for a dive! The reef of the coast has a big diversity of inhabitants, among them big tropical fishes. There is nothing else on this beautiful island, so bring water, titbits and refreshments and, sending you a great greeting from this paradise!

That's how RoyJava described the islet that become a hot political debate in recent days. Wish I knew that. Shame on me. Bidadari Island, located off the western coast of Flores in East Nusa Tenggara province, was purchased by a British citizen named Lewan Dosky at least three years ago, newspapers reported late last week.
(I was born in Manggarai Regency at the western tip of Flores Island. I left the island in 1986 without knowing how beautiful the neighbouring islets are.)

Lewan bought the 15-hectare islet from Haji Machmud, a Labuan Bajo resident, at Rp439 million (around US$43,000). But national media seems to be fooled. According to Detik.com, the names are as follows: Ernest Lewandoski and Kathleen Mitcinson. Ernest is the director of PT Reefseekers Kathernet Lestari. The company lease the 45 hectare islet (not 15 hectare) until 2035. So, it was not a buy-sell scheme like all the fuss in the media.
The island has become a key tourist attraction due to the availability of sea parks, which are rich in ornamental fish. Last year, two thousands visitors came to Bidadari.

But that's not the case with politicians and leaders in Jakarta. Jingo Nationalism. National security, etc. I don't want to jump on the wagon of debate. I simply want to share a light moment to enjoy mother nature's beautiful scenery, like the one I display above.
If you have enough time, travel agencies in Bali normally offers the Komodo Tour package with Bidadari Beach for snorkeling, swimming, sun bathing, and relaxation as part of the itinerary.
The famous sightseeing on Komodo dragon in Komodo Island is a must for those who love wild animals. Sometimes you could see the wild horses, buffalo, deer, and wild pig. But keep your eyes open as sometimes the young Komodo dragons are on the trees.
Last but not least, we, Indonesian, should thank Ernest and Kathleen who found the beautiful tourist attraction in one of thousands of ignored islands in the country. I heard, sadly, that one businessman desperately want to takeover the leasing rights from the English couple and he is the major force behind all of these nonsense fuss. Money talks!

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Cement market to grow 10%, Indocement's profit jumped 537%

Indonesia's cement consumption is expected to grow 10% this year to 33 million tones from about 30 million tones last year, said Dwi Sutjipto, president director of PT Semen Gresik Tbk.
PT Semen Gresik Tbk, majority shares owned by government, is the largest supplier wit 45% market share, the company said. Semen Gresik shares are traded at Jakarta Stock Exchange. Mexican Cemex SA is the second largest shareholder with 25% stakes.
The company and its subsidiaries (PT Semen Padang and PT Semen Tonasa) have combined production capacity of 17 million tones per year. The national cement production capacity is about 45 million tones. The company is embarking on feasibility study to build new plant with design capacity of 2.5 million tones per year and investment up to Rp3.5 trillion (around Us$400 million).
Meanwhile, the second largest producer PT Indocement Tunggal Prakrasa Tbk, reported net profit of Rp739.68 billion (approximately US$80 million) last for the financial year 2005 ended in December, a 537% jump from Rp116 billion in 2004. The company published the income statement today in some newspapers.
Indocement with combined production capacity of 16.5 million tones per year booked net sales of Rp5.59 trillion in 2005, an increase of 21% from Rp4.61 trillion, thanks to robust growth in the property and construction sector.
The 537% net profit growth was mainly because in the previous year Indocement booked loss of Rp498 billion in foreign exchange translation. The more realistic figure is operating profit of Rp1.21 trillion last year compare to Rp836 billion in 2004 which means around 50% growth in profit margin.
HeidelbergCement holds 65.14% shares in Indocement, followed by Salim's PT Mekar Perkasa at 13.03%, and public investors at 21.83%.
The third largest producer PT Holcim Indonesia Tbk (formerly PT Semen Cibinong Tbk) announced last month that it's operating profit was expected to grow by 40% for 2005.
Holcim is capable to produce 7.9 million tones per year and vying for 17% market share this year. Holcim became majority shareholder in 2001, controlling 77.33% of the paid up capital.

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Holding for SOE mining companies

Government seems to be serious on establishing a holding company for the state-owned mining enterprises. Three publicly listed-companies, PT Aneka Tambang (Antam) Tbk, PT Timah Tbk, and PT Tambang Batubara Bukit Asam Tbk, will be under the new holding.
Bisnis.com reported today that the ministry of state-owned enterprises had written to Bapepam (Indonesia's Securities Exchange Commission) on the plan late last month.
The ministry reported earlier to the House of Representative (DPR) that these state-owned mining companies had met with legal, financial, and tax consultants to discuss the plan. The conclusion was the need to establish a holding company.
To implement the plan, the ministry had appointed independent consultants to work out on legal, financial, and capital market aspects. The name of the new holding is tentatively PT Indonesia Resources Company.
Late last year, five groups (Citigroup, BNI Securities-Trans Capita, Rothschild-SMC Silalahi Management Consulting, Danareksa-Boston Consulting-BNP Paribas, and Bahana Securities-Indo Consul) submitted their bids.

As quoted by Detik.com today, minister for state-owned enterprises Sugiharto said Citicorp, JP Morgan, Sumadipraja & Tale, and MS Tax had been appointed as consultants.

But an executive at JP Morgan denied the report. "We gave the idea of holding, but we're not interested to work on it," he said.
The ministry argues that a holding would boost economic of scale, improve synergy and accelerate the growth. The group would be able to takeover some shares to be divested by big companies like Freeport Indonesia and PT Bumi Resources Tbk.
Antam is strong in prescious metals, Timah in tin production, while Bukit Asam is a coal producer. Initial plan was to merge these companies but dropped for undisclosed reasons.
Antam, Timah, and Bukit Asam booked combined sales of Rp7 trillion (US$750 million) in 9 months 2005 with total profit at Rp1.18 trillion (around US$120 million).
Surprisingly, chairman of Bapepam Darmin Nasution said he didn't know the letter.

Director general of mining at the energy department Simon Sembiring raised the question about the plan saying such holding would only apply if the shareholders are all the same. "How could you establish a holding company if shareholders of the three companies are different," he said.

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Cepu Debacle and the legacy for 2009

As the negotiation clock ticked down to injury time, no immediate signal that ExxonMobil Corporation and Indonesia's Pertamina has reached an agreement over who should operate the giant Cepu oil and gas field. Vice President Jusuf Kalla set the dealine last week for both companies to resolve the dispute by this week at the last and if they failed to do so, government will takeover the appointment. Kalla assigned two ministers, energy and state-owned enterprises, to make decision immediately afterwards.

But it seems that without the president's decision no such deal would materialize. The president is in a South East Asia tour to three countries starting today with Brunei, and then Cambodia and Myanmar. Coordinating minister for the economy Dr Boediono is also on board.

In the absence of president Susilo Bambang Yudhoyono and Dr Boediono, it's almost certain that no decision would be made in the next few days on Cepu settlement. The president is scheduled to return home on March 2nd.

Rumors: The President is not comfortable with the fact that Golkar guys have been actively involved in Cepu project. Golkar executive Surya Paloh had secured a deal with Bojonegoro Regency to participate in the administration's share (4.5% in the 10% participating interest for local administrations). Other Golkar figures are believed to had already got the deal with Blora Regency (2.5% split) even though the regent is a PDI-P cadre. With up to 170,000 barrel per day at peak production, Cepu Block could generate trillions of rupiah to local administrations shortly after commercial operation started.

On top of that, VP Kalla is the chairman of Golkar. His statements 10 days ago indicates that Kalla hands on the settlement more than anybody in the cabinet. The president simply don't want to be perceived in public just like the Aceh Peace Deal.

The president is bussy calculating the impact to local politics in Bojonegoro in particular and East Java as a whole towards the 2009 election. He want to make sure that people in Bojonegoro, Blora, Central Java and East Java acknowledge his leadership in resolving the four-year dispute and a settlement could prosper people in these regions. He needs a legacy for 2009.

It is true that Blora and Bojonegoro are small regencies in terms of population. Blora with less than 1 million, while Bojonegoro slightly above 1.2 million people. But a Cepu settlement, with the hope that by 2008 it could start commercial production would also means the success for Central Java and East Java, two of the most populous provinces in Indonesia. SBY lost Central Java to Megawati Soekarnoputri in the 2004 election, and he is surely work hard to win the province in 2009.

Let's do the math. First on schedule. The sooner the decision to operate the block would be better. Let say the construction and preparation would take 36 months, if the project starts next month, the first drop of oil could be in early 2009, months ahead of the election. But local administrations would not get the windfall until the end of the year. Whoever operate the block, it takes few months or even years to reach peak production. But at least, the US$2.5 billion investment had been injected into the local economy by then and thousands of jobs created with the multiplier effects.

Imagine if the project was started last year, right after Exxon and Pertamina signed the Production Sharing Contract with BP Migas in October. The first drop of oil could be before the end of 2008, give room to local administrations to start enjoying the windfall (both through 10% participating interest or the budget arrangement at 15% of the total government's revenue stream) by early 2009, months before the election.

With daily production of 170,000 barrel of oil at US$60 per barrel, total revenue from Cepu would be US$10.2 million per day and it translates to US$3.72 billion per year. Mathematically, government will get US$3.16 billion, Pertamina at US$251 million, Exxon US$251 million, and local administrations US$56 million.

Under the autonomy and oil and gas laws, local administrations should get 15% of government's revenue. Let's say that the government's net revenue after cost recovery would be US$2.5 billion a year. That means, local administrations will get US$375 million to be divided to Bojonegoro and Blora as producing regencies (depending on where the location of the wells drilled in a particular year) at US$162 million, and the rest to other areas in East Java and Central Java.

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Indonesia textile: Vying for 20% export growth

Indonesian Textile Association (API) is vying for a record export of US$8.35 billion this year, a 20% growth from last year's US$7 billion.
API Chairman Benny Sutrisno told Tempointeraktif.com today that the association was optimistic to book US$9 billion export this year.
That's indeed a very good sign. But even a US$8.35 billion would be difficult to be met considering huge challenges the industry is facing. Amid stiff competition from lower-cost countries like Vietnam, Sri Lanka, or Cambodia, the country's textile industry operates old machines that needs billion of US dollars investment to level the competition. At least 300 companies need to replace old machines with total investment up to US$400 million. The problem is local banks have been blacklisted the industry from their loan exposures.
The industry is also vunerable with increasing energy prices and labour costs. The industry claimed an electricity tariff hike would cut significantly product competitiveness as it could translate to 25% increase in operation costs.
Indonesia ranked 11th in the world's textile export with market share of 3.15% from the total market of US$194.7 billion in 2004. The country, meanwhile, ranked 9th in the garment export with market share of 4.45% from the total world market of US$258 billion.

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Injury-time in Indonesia: A lucrative business

Few years ago, members of the Nation Awakening Party (PKB) East Java chapter gathered in a hotel in Surabaya the night before the East Java governor election to ensure all PKB members in the East Java local legislature (DPRD) vote for Abdul Kahfi with the incumbent Imam Utomo as the contender.
"As most of DPRD members from PKB are ulemmas (Moslem clerics), the organizer of the event asked all of them to have Sumpah Pocong (swear to God and would be punished in hell) if they vote other candidate in the election," said a friend journalist who attended the event.
Former presdient and key patron of PKB Abdurrahman Wahid led the ceremony.
Kahfi was also formally endorsed by Golkar Party. Utomo, meanwhile, got PDI-P as the main sponsor with the smaller parties rally behind him. PKB had 33 seats at DPRD, slightly above PDI-P (31 seats). With Golkar's 11 seats, plus another 6 votes from other parties, Wahid and Kahfi side believed they could could 50 votes to make it draw.
Surprisingly Kahfi got only 34 votes in the election, consisted of 31 votes from PKB and 3 from Golkar, meaning two PKB members breached Sumpah Pocong. Utomo won the election unanimously with 63 votes. "That's because of some members finally put a price for their votes, and the closer the time to election, the higher the price. And minutes to injury-time, rumors said the price for one vote reached US$250,000," the journalist said.
That's how I start to think about the business of injury-time in Indonesian politics. Especially when I heard this week the CEO of a state-owned enterprise gave US$300,000 to a publication company only to 'protect' him from a possible indictment in a corruption case as other directors have been detained.
How about the mid-week move by five members of Regional Representative Council (DPD), five members of the House of Representatives (DPR), economists and students grouped in what they called Coalition to Save Cepu? Well, the group condemn government's signal to award ExxonMobil Corporation's subsidiary the right to operate the giant oil and gas field in Cepu, East Java. They urge government to give it to Pertamina instead. This weekend is the deadline for Exxon and Pertamina to settle the operatorship issue, an injury time.
The newly established group led by Marwan Batubara, a former staff at telecommunication company PT Indosat Tbk. Marwan is a DPD member representing Jakarta residents. Why all of a sudden Marwan speak out loud on Cepu issue while he should raise the issue of worsening traffic jam in Jakarta or other issues concerning Jakartans? Was it something to do with his close relationship with Widya Purnama, Pertamina's president director and Marwan's boss at Indosat?
Drajad Wibowo, DPR member from National Mandate Party (PAN) also join the group and rally behind Pertamina's directors. He would have better use his constitutional rights to summon government officers on the issue than join such group, I think.
And Fadhil Hasan, director of INDEF, a think tank established by some economists including Wibowo and Didik J. Rachbini (currently member of DPR). Did INDEF conduct a research on Cepu or simply took the secondary data from Pertamina? Why they simply believe? Had they try to get data from Exxon as well, a standard procedure for a group claimed itself a think-tank? Why now, not then? Where were all these guys during the four-year of public debacle over the Cepu issue and only shown up at injury time?
"Indonesia is in the transition period still and there are rooms for money politics still. But talking about money politics, it's everywhere, even in countries like US. Pressures groups are mushroomed, and it's a huge business. Some doing the business hit and run, others for a longer term and survive, but overtime they would levelling off in terms of the price tag," a friend consoling me.
I remember in the last few years some companies were established to organize public protest or demonstrations for certain issues. These companies could organize wide range of protests from those who just sit and raise the protest banners or the noisy ones. Some put the price tag at Rp50,000 per head count. Don't laugh. These guys could even offer package of media coverage. TV shoots were normally expensive, could reach millions of rupiah for two minutes display. Photo shoots could be Rp500,000 or less.
I didn't see much these days though. I'm not sure whether it's because of declining demand or oversupply. But media seems to have learnt something, knows what's genuine, and fewer journalists willing to cover such activities. And that could be the end of their businesses as the customers didn't get what they want anymore. Market mechanism works perfectly.
And that could be the case for those who run the injury time businesses with comments published in the media.
Anyway, just like in the football game, sometimes the coaches makes important decision, say replace one or two players with fresh ones from the bench, at injury time with the hope to score a winning goal. It's precious.

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Iran to invest US$2 billion in Indonesia refinery project

After years of promises and talks, energy minister Purnomo Yusgiantoro reaffirmed yesterday Iran's plan to seriously build the US$1.5 billion to US$2 billion refinery in East Java.
Purnomo said president Susilo Bambang Yudhoyono had ordered him to go to Iran to discuss the plan. Both countries actually had signed a head agreement on the plan. Purnomo and Iranian Oil minister Bijan Namdar Zanganeh signed the agrement in March last year
But Iran seems to have backed off the plan when state-owned company Pertamina signed an agreement with China's Sinopec to build a refinery in Tuban, East Java. Recently, Pertamina started to doubt Sinopec's seriousness.
Last year, Iranian Oil Minister Bijan Namdar Zanganeh said that establishment of a refinery with design capacity of 300,000 barrel per day in Indonesia would provide further security for Iran's market supply.
Under last year's agreement, Indonesia would receive 300,000 barrel per day heavy crude from Iran and Tehran would have 30% share in the refinery project. The project could cost US$3 billion.
"Iran is ready to invest US$1.5 billion to US$2 billion in the project," Purnomo said yesterday as quoted by Temporinteraktif.com.
National Iranian Oil Company and Pertamina will undertake the project in which Naftiran Intertrade Company will hold 30% stake.

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Pertamina directors sacked, Ari Soemarno the new CEO

Finally, it's a bitter end for Widya Purnama. Last night, government fired the president director of state-owned company PT Pertamina in a shareholder meeting. Pertamina's marketing director Ari Hernanto Soemarno had been appointed as the new CEO for the giant oil and gas company.

"It's true. Last night, government replaced Widya with Ari Soemarno," said one executive at Pertamina this morning.

But one director replied my question through short message system saying, "That's the rumor I heard," he said.
I wrote last week about Ari Soemarno as the front-runner to replace Widya.
The replacement took place amid growing criticism on Widya's stubborn stance to have Pertamina as the operator of the giant Cepu oil field and put ExxonMobil at a delicate situation. Widya was at odds with government officers and board of commissioners on the issue. But others warned hidden agenda behind Widya's 'nationalistic' campaign especially the company's relationship with PetroChina.

TO BE CONTINUED...

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Investment Corner

Starting of today, I'll list down briefly new important foreign direct investment (FDI) projects in Indonesia.

1) Malaysia's Lion in Kalimantan palm oil: Total investment US$45 million. The plant, to be located in Malinau, East Kalimantan province, would produce 45,000 tones per year of crude palm oil and 10,000 tones of palm kernel oil (PKO). Lion establish a joint venture company named PT Lion Intimung Malimau through its subsidiary LFIB Plantations Sdn Bhd. PD Intimung, a company owned by Malinau Regency Administration, act as partner in the joint venture.

2) South Korea's Poong Won Chehwa Co Ltd: To build a shoe factory in Serang, Banten province with investment up to US$30 million. The plant would absorb 8,000 workers to produce 5 million pairs of shoes for export market. The company had established a joint venture company named PT Poong Won Indonesia with Parkland Co Ltd, South Korea, as investment partner.

3)

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Continental expand Indonesia facilities at US$147 million

PT Continental Solvindo, a subsidiary of Singapore-based Continental Chemical Corporation Pte Ltd will invest US$147 million to expand its manufacturing plants in Indonesia.

The company had secured the license from Investment Coordinating Board late last year. Continental's new facilities would produce 140,000 tones per year of phthalic anhydride, 30,000 tones of dioctyl phthalate, 12,000 tones of synthetic latex, 12,000 tones of alkyd resin, and 12,000 tones of polyester resin per year.

Continental Solvindo operates two

Continental Chemical Corporation Pte Ltd, headquartered in Singapore, is one of Asia’s leading manufacturers of intermediate petrochemicals and specialty resins. The Continental Chemical group produces through its own production facilities and through tolling operations, a variety of plasticizers and other intermediate chemicals together with specialty chemicals such as industrial solvents and resins for the coating, casting, adhesive and textile industries. The Continental Chemical group was formed in 1997 as a partnership between Asian and American investors who are also on their own, major participants in the chemical business worldwide. The Continental Chemical group first started its operations by acquiring two production facilities, one in Thailand and the other in Indonesia. Today, the group has production/tolling facilities with a total capacity exceeding 450,000 metric ton per annum. The group’s products are sold across USA, Europe, Middle-East, Africa, Australia, Thailand, Greater China, South Asia and the rest of Asia Pacific.

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Freeport Politics

As ExxonMobil's Indonesia unit is just inches away from a deal with Pertamina to immediately operate the giant Cepu oil and gas field in Java, PT Freeport Indonesia---a subsidiary of Freeport McMoRan (FCX)---is closing both its plants and offices in the country.

Both ExxonMobil and Freeport are politically sensitive companies with long-history of allegation of their indictments in various abuse of military power. ExxonMobil in Aceh, the north-western part of Indonesia and Freeport in Papua, the most eastern part of the archipelagic nation.
The difference lies in the settlement of conflicts in both companies' area of operations. Indonesia government had signed a peace deal with Free Aceh Movement in Aceh last August, while Papua might have to face a longer period of conflicts and no immediate sign of a long-lasting peace.
In the last few months, both Exxon and Freeport, have to deal with political upheavals. I wrote the political journey of Cepu dispute already. Now I'm focusing on Freeport.
Let's take a look at recent developments in Papua as a whole and Freeport in specific.
On Wednesday, Freeport stopped operations at its Papua mine after hundreds (some reported 500) of illegal miners, demanding to meet company representatives after a clash with security personel Tuesday, blocked a road to the site.
About 500 miners set up barricades and demanded permission to sift through waste pumped from Grasberg mine, the largest copper and gold mine in the world, which is owned by Freeport.
Early this morning, up to 20 Papuan angry students attacked the Plaza 89, the building housing Freeport's offices in Jakarta. They broke windows and damaged facilities in the lobby of the building in the pre-dawn attack, said National Police chief Gen. Sutanto, adding that 13 people have since been arrested over the violence.
The Grasberg mine has produced 16.1 billion pounds of copper and 23.3 million ounces of gold net since it began production in 1988. The mine's estimated reserves of more than 40 billion pounds of copper and 46 million ounces of gold give it "decades" of future production, the Freeport-McMoRan 2004 annual report said.
While Freeport said it's just premature to calculate the losses due to the mining shutdown, Indonesia government quickly came up with numbers.
Director General for Mining at the Energy Ministry, Simon Sembiring, said Indonesia's potential losses were estimated at Rp27 billion (US$3 million) per day, calculated from last year's revenue from Freeport at US$1 billion.
Actually copper concentrate shipments from Papua province are continuing despite a suspension of production at the Grasberg mine, a spokesman for Freeport said on Thursday as quoted by Reuters.
"The disruptions happened in the mining area and the processing factory," spokesman Siddharta Moersjid said, not in the area from which concentrate shipments are made.
Why Freeport bothers those small-time illegal miners?
Energy Minister Purnomo Yusgiantoro said on Wednesday that there were illegal miners in almost all mining areas in the country and they usually collected mining products that had been discarded by the mining companies operating in the areas.
Late last month, minister for environmental affairs Rachmat Witoelar said that damage to the environment caused by Freeport's operation has reached a serious level.
In its operation, PT Freeport produces tailings of poisonous and dangerous subtances which reach the Arafura sea. Its tailings have execeeded the total suspended solid as allowed by the Indonesian law.
Early this month Purnomo said the government would set up a inter-ministry team to study mining activities of PT Freeport Indonesia in Papua. On February 10, Vice President Jusuf Kalla said Freeport should increase the revenue it shares with the government from its Papua mines amid lucrative prices of copper and gold.
Some politicians jumps on the wagon calling Freeport's arogance was behind the recent violence in Papua.
They seems to echoing former chairman of the People`s Consultative Assembly (MPR) Amien Rais that called on the government to close PT Freeport`s mining activities in the country`s easternmost province of Papua as it has committed three big crimes, namely plundering natural resources, destroying the ecology, and evading taxes during its operation in Indonesia.
Cabinet members met on Thursday, among others, to discuss the situation confronted by Freeport. National Police chief, Military Commander, Coordinating Minister for The Economy, Coordinating Minister for Politic and Security Affairs, and Internal Affairs Minister attended the meeting.
Thousands miles away from Jakarta, local leaders including the Trikora military commander and Papua Police Chief trying to calm down the situation.
But all of these are short-term measures.
No words, so far, from president Susilo Bambang Yudhoyono. Back in 1999-2000 when he was energy minister under Abdurrahman Wahid administration, SBY once made Freeport had to cut ore output following an accident at Freeport's Lake Wanagon waste dump which killed four workers and raised concerns about possible environmental damage.
He was also supportive of the idea to divest more Freeport Indonesia shares to Indonesian companies and review the II working contract.
But on February 28, 2000, Henry Kissinger, a commissioner of Freeport, met then president Abdurrahman Wahid (photo above, courtesy of Kompas) in Jakarta asking Indonesia government to honor the contract.
Oops...early last year, president SBY met Kissinger in Singapore (I was in the city-state) and ask the latter to help reduce negative views on Indonesia in the US.
President made the request when he met Kissinger on the sidelines of his two-day state visit to Singapore. SBY considered Kissinger to be "still in a position to influence US leaders" to help the US government and people to look at Indonesia in its totality and not in parts
While Kissinger no longer serve as member of the board at Freeport, his firm Kissinger McLarty Associates is reportedly acts as Freeport's consultant and lobbyist.
The firm was formed in 1999 by the merger of two organizations headed by former Secretary of State Henry Kissinger and Mr. McLarty, who served as President William Jefferson Clinton's chief of staff ... In addition, Mr. McLarty and some business associates that include Mr. Kimball are involved in a separate partnership that advises large corporate clients and a handful of private equity firms.
But like many mining operations around the world, Freeport's Grasberg operation has been both a benefit and a source of controversy. Similar to the political history of Papua itself, Freeport's more than 32 years resource-extraction always attracts political maneuvers, at local, national, and global levels.

That's why it is important to understand the political history of Papua first.

On december 27, 1949, following a prolonged struggle, the Netherlands ceded independence to its former territories, except West New Guinea (then named Irian Jaya and now called Papua). The agreement specifies that "the question of the political status of New Guinea be determined through negotiations" between Netherlands and Indonesia within a year of the transfer of sovereignty.

For more than a decade after the agrement, Papua's legal status remained in limbo until the United States (during Kennedy Administration) placed heavy pressure on the Netherland and brokered an agreement transfering administrative authority for West New Guinea from the Dutch to the United Nations (UN) in what popularly known as New York Agreement.

Abigail Abrash from Harvard Law Shool Human Rights Program) in Papua: Another East Timor? called the US central role in brokering New York Agreement as the start of Washington's complicity with Indonesia's domination of Papua. That complicity, Abrash wrote, continues through an effective disregard for Indonesia's massive human rights violations and by direct support for US corporate ventures in Papua that degrade the environment and undermine Papuans' livelihoods.

On the other side, Papuans widely view Freeport as a foothold of Indonesian (Jakarta) control over their lands.

TO BE CONTINUED....

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Sudigate, Syafruddin's arrest & Pontjo Sutowo

Jakarta Prosecutors Office might have expected headlines when they arrested former IBRA chief Syafruddin Arsyad Temenggung yesterday. In terms of popularity, Syafruddin, once considered as one of the most powerful men in Indonesian economy and a close ally to Taufik Kiemas (husband of former president Megawati Soekarnoputri), might equals ECW Neloe, former Bank Mandiri CEO, who was acquitted early this week.

Surprisingly, most major newspapers run the controversy surrounding cabinet secretary Sudi Silalahi as their headlines instead. They put Syafruddin's case in front page though. But surely media's attentions were very much diverted to the increasingly interesting Sudigate.

While the case was initially considered another empty strike on Sudi just like the previous criticism for letting the State Palace doors open to the fugitives and bad debtors or rumor about the Jaguar car given by media baron Harry Tanoesoedibjo, this time Sudi himself that escalates the controversy when he reported cabinet secretary staffs of forging letters on the embassy building project to the police.

Forging letters! On top of that, it was the police who came to the State Palace to dig information from Sudi, not the other way around like used to be in a country that upholds equality before the law. That's why Kompas chose to put that as headline than Syafruddin. Other newspapers also run their headlines on Sudi's flip-flop statements. Sudi blamed on media, but he should have known media love the flip-flops.
This afternoon, Sudi entertained hundreds of questions and criticism from House Commission II members. And that make the case even more interesting. Sudi claimed there were nine irregularities in the letters published by media and firm on his stance that someone had forged the letters.
But Sudi diverted the arsenals to his friend and boss, president Susilo Bambang Yudhoyono, when he admitted that he wrote the letters after the president gave the direction (petunjuk) to do so.
"The letters I wrote has only one copy carbon to the president, so the company can't bring the letters to anywhere and considered as a recommendation," he said as quoted by Tempointeraktif.com.
Petunjuk is a very popular word during Soeharto's 32 year in power. Officers that time could easily defend themselves or convince people with the phrase menurut petunjuk bapak presiden or according to Mr President's directive...
That's why Sudi's letters are considered the reborn of Soeharto's style in this administration, a very bad image.
But the question of political ploy on Sudi deserved an answer. Why now?
To my surprise, today Vice President Jusuf Kalla conducted a meeting with Pontjo Sutowo (a suspect in Hilton corruption case) at the VP's palace. Pontjo was named suspect way before Syafruddin Temenggung (detained last night), but the owner of Hilton hotel still enjoys the courtesy call with the VP. Why prosecutors let Pontjo walks freely while quickly detain Syafruddin? Where's the equality before the law which was SBY-JK's campaign theme?
Hope media would raise the issue with the same portion of attention...Would they?

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Seoul Embassy: Renovation vs Relocation

Media Indonesia publish a very interesting article today about the controversy surrounding cabinet secretary Sudi Silalahi's letter recommending PT Sun Hoo Engineering to renovate Indonesian Embassy building in Seoul, South Korea.

The article titled Lokasi Gedung itu jadi incaran Chaebol (literally means The Building Location is targetted by Chaebol) explains why the letter was so important. It's not simply about renovating the building, but relocate that to other place with a possible huge economic gain.

The newspaper reported the embassy compound is located in a prestigious Yoido-Dong district, southern side of Seoul city, next to the Trump Enterprises building. Indonesia government bought the 8,000 square meters land at Rp3 million per square meter, but now the market price could be Rp70 million per square meter, which means around Rp560 billion for the whole compound. Rumors in Seoul that chaebol vying for the complex adjacent to Han River which split the city.

The embassy is located in prime real estate area in Seoul's Yeouido-dong central business district. Due to its strategic location, the government has been offered land swap deals said to be worth up to US$200 million, The Jakarta Post wrote.

We could find headquarter of big companies like Samsung, Hyundai, or Keppel Land in the Yeouido-dong central business district.

But who is behind Sun Hoo Engineering, a company that is not found through searching engines such as Yahoo! or Google? Was the company proposing a renovation or relocation of Indonesian embassy? Why Sudi should send the recommendation letter to foreign affairs minister twice if the project never existed? Who wants to swap the land at US$200 million?

Indonesian media reports speculated that Sun Hoo is a fictious company. According to Sudi's attachment letter the company's address was at Mega Kebon Jeruk Kavling 18-19, West Jakarta. But the address turns out to be the home of Mr Kim Sung Woo, a South Korea citizen.

Media Indonesia tried to investigate the companies mentioned in Sudi's letters. The newspaper managed to meet Essendi Johan, director at PT Amarum Multi Pratama and Haryono Silalahi (president director). Haryono who share the same last name with Sudi denied that he has no family relationship with Sudi. Another name linked to PT Sun Hoo is Kim Sung Woo who denied that he owns the company. But he admits that he knew Essendi since three years ago. "But we have no construction business," he said as quoted by Media Indonesia.

Where to go?

Well, police said today that Sudi feels that he never wrote the letters. Sudi through his staff even reported cabinet secretary staffs that alegedly counterfeiting the letters or his signature to the police. Police Chief General Sutanto said the police is investigating the counterfeit allegation.

Surprise, surprise!

Sutanto said that the letters to foreign affairs minister have been changed from its original version. Sudi told police that he never send those letters.

What a mess! Vice President Jusuf Kalla tried to defend Sudi before saying the letters were just information, not a decision or recommendation to appoint PT Sun Hoo Engineering.

Worse, Sudi admits on Friday that he sent the letters formally to the minister of foreign affairs. Which one is true?

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PGN to develop coal bed methane

State-owned gas distribution company PT Perusahaan Gas Negara (PGN) will develop coal bed methane amid reports that Indonesia's natural gas reserves declined significantly in the next few years.

Tempointeraktif.com quoted PGN director Adil Abas saying Indonesia's coal bed methane (CBM) reserves are huge with 182 trillion cubic feet (TCF) in East Kalimantan and 183 TCF in South Sumatra.

Coalbed Methane (CBM) is now a major source of gas production in the United States and is gaining importance in Australia, China, Indonesia and Europe. CBM reserves in the United States are estimated at some 450 Tscf. In Australia, CBM resources exceed 300 Tscf, while China has a resource potential greater than the United States and Australia combined. Recent advances in well design and production technology offer scope to significantly increase the proportion of gas contained in coal that can be commercialised. However, a different mindset to that applied to conventional gas development is necessary for both producers and customers if the full potential of this vast resource is to be realised.

Natural gas may be produced from wells in deep coal seams by pumping out water to reduce formation pressure. In the early 1990s in the USA there were about 6,000 coalbed methane (CBM) wells producing over a billion cubic feet per day, and CBM reserves represent a significant proportion of total onshore gas. The technology is now being disseminated worldwide.

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Tuban Petrochemical to ease Indonesia's oil import pressure

Late last week, Saturday to be exact, condensates from Senipah field started to flow into the giant petrochemical complex operated by Tuban Petrochemical Industries. And in just two-weeks away the complex would start the commercial production of not just petrochemicals but most importantly fuels.

While the complex's main products are paraxylene (500,000 tones per year), toluene (100,000 tones), and ortho-xylenes (120,000 tones), it has design capacity to produce 1.1 million tones of kerosene, 335,000 tones of reformate, and 189,000 tones of diesel fuel per year as well.

On top of that, Tuban Petrochemical would produce around one million tones of light naphta per year, an important raw material for upstream petrochemical industries.

"That would ease little bit the pressure on Indonesia's fuels import," said Amir Sambodo, commissioner at Tuban Petrochemical.

State-owned oil and gas company PT Pertamina owns 15% shares in the complex and is preparing to build a refinery next door in a cooperation with China's Sinopec. But Pertamina expressed it's upset for the uncertainty at the Sinopec side and would invite other investors to materialize the project.

Rumors said government might ask ExxonMobil to build the refinery in exchange of its support for the US company to operate the giant Cepu oil and gas block. The crude oil produced from Cepu (could reach 200,000 barrel per day at peak production) would be the raw material for the Tuban refinery.

Despite the startup of Tuban Petrochemical, the shutdown of Balongan refinery in West Java pose a threat in short term. Fortunately in the last few months fuels demand decreased significantly due to price hike imposed on October 2005.

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Purnomo turns down Pertamina's proposal, Exxon's victory

ExxonMobil will likely win the year-long battle over state-owned oil and gas company PT Pertamina for the right to operate the giant Cepu oil field.

Energy minister Purnomo Yusgiantoro has turned down Pertamina's proposal to apply rotating system in the operation of Cepu Block, Indonesia's largest oil discovery in decades.

"I've been working in the oil business for almost 20 years and it's impossible to drill rotatingly every five years," he said as quoted by Detik.com today.

While Purnomo didn't directly mention ExxonMobil, he reiterated government's stance that the most prepared company, especially from financial resources perspective, should operate the block.

At the current exchange rate of Rp9,200 per US$, total investment needed for the block is expected at Rp20 trillion to Rp25 trillion. "How we could raise the funding?"

The former OPEC president admits that the cost to operate Cepu block would be expensive. This is another indirect support for Exxon as many times Pertamina warned government of Exxon's high cost that would translate to higher cost that should be recovered by government.

"Exxon promised the costs won't be expensive as we have the benchmark already," Purnomo said.

Technology transfer was considered an important factor as well. If both companies failed to reach agreement on operatorship issue this week, Purnomo said government will takeover the settlement.

"We had asked them, Pertamina said it's ready, Exxon too...but whatever the government will decide, sweet or sour, Exxon and Pertamina should accept. We can't afford to let this situation goes on as too much loses at stake."

Pertamina and ExxonMobil have been locked in a battle over who is entitled to be the operator of the block in which they equally own by 45% and is considered crucial to boost the country's declining oil output in the last eight years. The block could produce up to 200,000 barrel per day during peak production, about 20% increase from the Indonesia's current at slightly below 1 million barrel per day.

The Jakarta Post wrote on Monday Vice President Jusuf Kalla's visit to Cepu on Saturday may indicate a preference for ExxonMobil on operatorship issue.

Kalla was accompanied by coordinating minister for the economy Boediono, finance minister Sri Mulyani Indrawati, state-owned enterprises minister Sugiharto, energy minister Purnomo Yusgiantoro, industry minister Fahmi Idris, chairman of national development planning agency (Bappenas) Paskah Suzetta, Vice President Director of Pertamina Mustiko Saleh, and President of ExxonMobil Oil Indonesia Peter J. Coleman.

Pertamina president director Widya Purnama, surprisingly, wasn't there. Widya repeatedly saying that he would resign if Exxon win the operatorship.

"The Cepu operator should have cutting-edge technology, strong financial resources, and efficient operation. Since the issue of operatorship is not that significant, I hope you can reach a deal sooner than later," Kalla told executives of Pertamina and ExxonMobil.

Pertamina comes up short on these requirements, with less advanced oil exploration technology and lower financial resources than ExxonMobil, who began operations in the late 19th century, The Jakarta Post wrote.

When Pertamina raised the issue of higher costs in an Exxon-run exploration, the US giant quickly rebuff saying it's proposed cost at US$4.5 million per well is similar to Mudi well drilled by PetroChina in East Java.

Expert staff at the coordinating minister for the economy Muhammad Ikhsan responded fiercely saying, "if Pertamina's cost is lower, it should have surpassed Petronas already."

Quoted by Detik.com few minutes ago, Ikhsan said Pertamina simply can't operate Cepu as it has no money. "They still owe the government Rp17 trillion (almost US$1.9 billion), how they would finance the project," he asked.

Worse, Ikhsan said, Pertamina yet to have financial report that would make it difficult to raise funds in international market. Exxon, according to Ikhsan, has the capability to operate the block.

Well, if he deliver his promises to resign, an Exxon operatorship would finally bring an end to Widya's one and half year at the helm of Pertamina, right Pak Widya?

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Court acquits Mandiri directors

South Jakarta District Court acquits former Bank Mandiri directors (ECW Neloe, I Wayan Pugeg, and Soleh Tasripin) from corruption charges.

Judges said in their verdict today that no evidence that could proof that the suspects have put the state at loss with their policies to disburse Rp150 billion loans to PT CGN.

"The defendants ... were not proven legally and convincingly to have carried out graft. The court acquits the defendants from all charges given by the prosecutors and orders their release," chief judge Gatot Suharnoto told the South Jakarta court as quoted by The Jakarta Post.com.
Lawyers for the three have said the defendants did nothing wrong and previously insisted the case be dismissed. The men have appeared together in each trial session.
It was unclear if prosecutors would appeal. Their sentencing demand had been high by Indonesian standards, where courts often hand down jail terms of less than 10 years for graft despite Yudhoyono's pledges to get tough.

Attorney General Abdul Rahman Saleh expressed his upset over the verdict. He said AGO would appeal and expects higher court and Supreme Court would punish the suspects more severely.

Judicial Commission which is in conflict with Supreme Court stunned with the verdict and will investigate the judges. But some observers warned that the verdict might reflect the weaknesses of prosecutors.

ECW “Eddie” Neloe (photo with the tie, courtesy of Media Indonesia), Mandiri’s former president and chief executive, and the two other executives were detained in May amid a wide-ranging investigation by prosecutors into up to $1.2bn in loans extended by Mandiri.
Mr Neloe once Indonesia’s most powerful banker and as a result his trial is expected to be a high-profile test of the ability of President Susilo Bambang Yudhoyono to wage a promised war against Indonesia’s endemic corruption. He had close relationship with former president Megawati Soekarnoputri and Abdurrahman Wahid.

Prior to the verdict, Wahid vowed to judges to make fair judgements on the former Mandiri directors.

Bank Mandiri was formed in 1999 out of four state banks that collapsed as a result of the Asian financial crisis. It is Indonesia’s largest bank by assets and was the subject of a heavily oversubscribed initial public offering in 2003 that was at the time hailed as a sign of renewed confidence in the country’s banking sector.

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Exxon is inches away from Cepu deal

ExxonMobil Corporation is just inches away from striking a deal in one of the biggest oil discoveries in Indonesia's history. The four-year battle to develop the giant oil and gas reserves in Cepu Block partly sealed over the weekend when Vice President Jusuf Kalla visited the site in Bojonegoro Regency with some ministers.

As both Pertamina and ExxonMobil insists to be the operator of the US$2 billion investment, Kalla said that government takes into account three issues: Technology, financial capability, and efficiency in operation. ExxonMobil, the largest oil producer in the world, would easily beat Pertamina in these fronts despite concerns on its higher costs compare to its neighbor in Sukawati field operated by PetroChina and Pertamina.

The most likely outcome will be that both companies establish a joint operating committee, a kind of joint operating body but exactly like the one implemented in Sukawati by Pertamina and PetroChina, in which Pertamina will be the CEO and Exxon as the COO. The JOC will supervise the operation to be conducted by Mobil Cepu Limited, a subsidiary of ExxonMobil, that has been there since 1999 when it acquire the fields from Humpuss Patra Gas, a company owned by Humpuss Group.

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Bimantara takeover, how serious?

UBS is seeking to help finance the takeover of two Indonesian companies, PT Bimantara Citra Tbk, the conglomerate which owns four major television channels in Indonesia, and toll-road operator PT Citra Marga Nusaphala (CMNP) Tbk, according to individuals in Indonesia familiar with the transaction.

Global Crown Capital, a special purpose vehicle, owned by the Salim family, Peter Gontha (former shareholder and executive at Bimantara), and Indra Rukumana (former President Suharto’s son-in-law) is seeking to acquire controlling stakes in Bimantara and CMNP. In order to obtain the funding, the three parties have pledged shares they have in Bimantara and CMNP to UBS in order to obtain a loan of up to US$350m, said individuals in Indonesia.

Few details were available about the goings on, but Bimantara last week issued a denial stating that the conglomerate had not been approached by GCC to acquire the assets. Salim also denied the plan to acquire Bimantara and CMNP.

But Bimantara wrote to Jakarta Stock Exchange (JSX) authority on Friday that recently it recieved a proposal from one of its shareholders (Almington Assets Limited) which represents 5% shares of the company that it want to pledge the held shares to UBS AG Singapore Branch.

JSX suspended the trading of both Bimantara and CMNP shares on Friday. No information so far on when JSX will lift the suspension.

Individuals in Jakarta said there were definite signs that the consortium had already obtained funding from UBS in their attempt to take over the assets. Investor Daily on claimed on Friday that it got a document showing the financial support from UBS Bank to GCG to acquire Bimantara and CMNP. In exchange GCC will pledge to UBS some marketable securities, cash, and shares of Bimantara and CMNP. Under the loan proposal to UBS, GCC needs funding of US$250 million to US$350 million.

According to the document, before it acquires Bimantara and CMNP, GCC would takeover shares of PT Televisi Pendidikan Indonesia (TPI, a TV station under Bimantara) and CMNP Manila (toll road operator in Manila).Under the loan proposal to UBS, GCC needs funding of US$250 million to US$350 million.

Meanwhile, IFR Asia reported an official who acts as custodian of shares traded on the Jakarta Stock Exchange said UBS has recently requested that a large shareholding of Bimantara shares be blocked under the Swiss bank’s name.

“If that’s so, then that’s a sign that the GCC conglomerate has already pledged shares to UBS,” said one banker in Indonesia.

Investor Daily reported today that Almington Assets had pledged its 11% shares through GCC to UBS AG with the address at Temasek Boulevard 18-00 Suntec Tower Five, Singapore. GCC also planned to acquire 14% shares of CMNP owned by Heffernan International Limited, Delta Equity Assets Ltd, and Commonshare Investment Ltd, all are special purpose vehicle companies registered in British Virgin Island.

Another banker said to AFR Asia: “UBS private banking has been shopping the local market to finance the rupiah-denominated portion of the deal. One of the parties approached was Sinar Mas Securities, so we know something big is going on.”

The battle for the Bimantara assets will be a lively one, said investment bankers in Indonesia, given that Bhakti Investama, another Indonesia company, now holds a stake of around 40% in Bimantara and 10% indirectly.

“It therefore will be very difficult for GCC to gain a controlling stake in Bimantara,” said an investment banker to AFR Asia.

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Military's voting rights

General Election is three years away, but the competition has been started right after the ballot counted almost two years ago. The recent issue at stake is the military's voting right. Should they vote like other citizens or not?
The outgoing military commander General Endriartono Sutarto insists that the military is more than ready to exercise the right while others believe it would be better to do that in 2014 election.
PDI-P, the second largest party in the House of Representative (DPR) quickly accused the plan to have the military's voting right exercised in 2009 as part of president Susilo Bambang Yudhoyono campaign for a second term in office.
The People's Consultative Assembly (MPR) Decree No. VIII/2000 stipulated that members of the military and the police have no voting right and no right to contest in the election. The MPR also agreed that the military and the police would maintain their seats in the DPR until 2004 and in the MPR until 2009.
In 2002, minister of home affairs under Megawati Soekarnoputri administration, Hari Sabarno, a three-star army general (retired), proposed a bill that grants voting rights to members of the military and the police.
But in his speech last week, President SBY said government remained opposed to military personnel voting in elections because it wanted to ensure their neutrality and improved professionalism.
President ordered military administrators to keep out of politics but work to improve their personnel's qualifications and welfare arguing a fundamental tenet of the achievement of democracy was the exclusion of the military from practical political activities, thus preventing se of military power for political gains.
What's the difference anyway?
Even without voting rights, the military maintains its superiority over civilians, right? Look at how many ministers are retired generals? How many governors and majors are military figures? Look at our legislative at the national and regional levels. We could list down thousands of retired military top-brass in the country's political parties.

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Sugiharto Gang accused of squeezing investors

Last week I had a coffee with a respected investment banker. We discussed several issues including the recent anti-graft campaign.

"Anyway, what's your view about the guy, the expert staff of state-owned enterprises ministry," he asked.
"Well, I have no specific information about this guy except those written in the blog," I said.

"I met him several times. My impression, in most occassions, the first hour of our conversation was normally good, but normally entering the second hour, he started to ask me a favor...mainly about projects that he could also participate in or take benefit out of it," he said.
Frankly, I had no chance to cross-check what the investment banker said about the officer mentioned.
But today, when I read the story at Detik.com that two expert staffs of SOE ministry had tried to squeeze investor, I started to think that the investment banker was telling no lies. Detik.com went further with the follow-up story that even more interesting that MSOE Sugiharto is indicted in the squeezing-investor scandal.
Here's the story. Legal Aid Agency for SOE (LBH BUMN) announced that it will file a report to Corruption Eradication Commission (KPK) on two expert staffs of SOE Ministry, identified as HL and LM, for an effort to squeeze an investor called PT AKA Prima. This company was about to sign a cooperation agreement (KSO) with PT Kertas Kraft Aceh, a SOE.
According to Habiburrohman, director at LHB BUMN, the expert staffs asked PT AKA Prima to donate Rp10 billion (around US$1.1 million) to a certain political party. "If they don't do that, they threatened the KSO letter will not be signed by Minister of SOE Sugiharto," Habiburrohman said.
AKA turned down the demand and pulled out from the deal. AKA won the deal through a fishy bidding process, the agency also accused. HL and LM recommended AKA to use a brokerage firm PT Indo Premier Securities in the deal. AKA's fate even worse as Indo Premier rejected to return the money deposited by the investor.
"In no way that the minister knew nothing about the squeezing effort as he should sign the KSO letter at the end of the process," Arif P, chairman of founders council of LBH BUMN said.
No responds from the SOE ministry so far. Check out the names in previous articles in this blog, you might get the clue on who's who of the scandal.

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PKS approach Chinese ethnic to win Jakarta Governor Election

As the first direct election of Jakarta governor is just months away, Prosperous Justice Party (Partai Keadilan Sejahtera/PKS)---the winner of legislative election in 2004, has started to win the race with new approach.
PKS Chairman Tifatul Sembiring told the party's executives and cadres to broaden the political base with serious efforts to get supports from Chinese ethnic. This is a very interesting development considering the party's strong Islamic image.
"We can't build and develop Jakarta without Chinese community. We have to have the Chinese on our side. We gotta tell them that we're not a threat," he said yesterday.
Tifatul urge his party members to reach out to non-Islamic groups and networks if they want to win the election next year. Winning the Jakarta Governor election, Tifatul said, could reflect the party's chance in bigger political struggle which is to win the 2009 general election.
Indonesians of Chinese descent account for approximately 3%, or around six million, of the country’s 215 million people. But some estimates put it arround 10 million, including intermarriages.
Jakarta has a large Chinese community which has been there for centuries. It is estimated that about ten percent of the population is of Chinese descent.
While the number seems small, they have huge economic influence and has significant votes in Jakarta. Despite efforts by some Islamic parties, most of their votes were given to more secular parties.
Who are the candidates for governor from PKS?
Two names have been tipped. Actor-director Rano Karno (popular for his Betawi--native Jakartans TV series titled Si Doel) and Major General Syafrie Syamsuddin (currently secretary general of the ministry of defense, a former Jakarta Military Commander during the 1998 riot).
Popular figure Andi Alfian Malarangeng, the president's spokes person, is believed to contest the election with support from Partai Demokrat.

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Salim denies acquisition plan on Bimantara & CMNP

Salim Group strongly denied reports that it has intention to acquire two listed companies PT Bimantara Citra Tbk and PT Citra Marga Nusaphala (CMNP) Tbk.
In a letter to Jakarta Stock Exchange (JSX) authority today, Philip Phiong, executive of Salim Group, stated the group neither has the plan to do such acquisition.
Today Investor Daily stunned the market with its report that Salim Group will acquire Bimantara and CMNP through a company named Global Crown Capital with the financial support from UBS. The newspaper quoted Bimantara executive who confirmed the plan. JSX quickly suspended the trading of both Bimantara and CMNP shares in the early hours to prevent speculation and manipulation.
Bimantara wrote to JSX yesterday afternoon that it heard the information about certain parties which plan to acquire the company but it had not received formal documentation or reliable information.
But Bimantara notified JSX in the letter that recently it recieved a proposal from one of its shareholders (Almington Assets Limited) which represents 5% shares of the company that it want to pledge the held shares to UBS AG Singapore Branch.
Meanwhile CMNP simply said to JSX that it hadn't receive any formal proposal from certain parties which plan to acquire the company.

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Another political ploy on Sudi?

A letter from Cabinet Secretary Sudi Silalahi to Foreign Affairs Minister asking the latter to ‘consider’ PT Sun Hoo Engineering in the renovation of Indonesian Embassy Building in Seoul, South Korea quickly become a political debate.
This is the third time in two months that Sudi under the spotlight. Last month, lawyer-activist Eggy Sudjana spreaded the rumor that Sudi was among the president’s close aides who received luxury Jaguar car from media baron Harry Tanoesoedibyo. Eggy apologized later, but the damage has been done.
Last week, Sudi was under the gun for the courtesy call of four bad debtor-fugitives to the State Palace. Sudi denied that he arranged the visit. Police Chief Sutanto then came to be the bumper.
Some politicians, as quoted by Media Indonesia today, potrays Sudi’s letter as an abuse of power. Yudhi Chrisnandi (House Commission I from Golkar Party) said, “if the letter is really exist, that’s a serious power scandal.”
Other member from PDI-P, Suparlan said the selection of companies to renovate the building should be through an open bidding.
Sudi admits the letter. “But for God’s sake, I have nothing to do with the company. I got no gain from it at all.”
What’s the fuss?
Below is the free translation of Cabinet Secretary Sudi Silalahi’s letter dated February 21, 2005 to Foreign Affairs Minister cc President Susilo Bambang Yudhoyono and the management of PT Sun Hoo Engineering regarding the construction of Indonesian embassy building in Seoul, South Korea.
First, Ref. Management Letter of PT Coint Nusantara Gas No. 10/CNG/11/2004 dated December 6, 2004 regarding the project.
Second, the President in principle has no problem with the plan as dictated to Cabinet Secretary on December 13 in Yogyakarta, as long as to keep the old building and that the new building would only a supporting building pursuant to the best use and Seoul’s city planning.
Third, president gave guidance that the minister could respond and accepting a presentation from the management of PT Sun Hoo Engineering in the first chance, and then follow it up pursuant to the existing regulations (proposal attached).
Fourth, the presentation then should be reported to the President with recommendations needed.
Journalists stationed at the Vice President’s Office got the copy of the letter almost at the same time with the courtesy call of Indonesian Ambassador to South Korea Jacob Tobing (a long time Golkar politician but then jumped to PDI-P) few days ago.
Media failed, so far, to disclose the names behind two companies mentioned in the letter, PT Coint Nusantara Gas and PT Sun Hoo Engineering. Who own these companies? I tried to google them but got nothing.
Despite accusations that this is a political ploy against Sudi, the third strongest man in the cabinet after the president and vice president, the following questions are deserved answers.
First, why the management of PT Sun Hoo Engineering wrote the letter with construction proposal attached to Cabinet Secretary if the authority over embassies under the ministry of foreign affairs? Was it by design that Sun Hoo sent the letters to Cabinet Secretary and President instead of directly to minister of foreign affairs?
Second, why the President should lay his hands on something so trivial like renovating an embassy building far away in Seoul, South Korea and hands-off on so many things of great importance at home?
Look at the structure of the letter. The Cabinet Secretary, a retired lieutnant general, may deny over and over again that there was no pressure to pick PT Sun Hoo Engineering. But anybody, especially those work in the bureaucracy, who read the letter, could easily interpret that as a kind of favouritism, even though an open bidding would finally be conducted. And that could lead to a gross abuse of power.
Sudi, as quoted by Republika today, defended the letter though. According to Sudi, the letter was not intended as a direct appointment to build the embassy. “May be 10 companies will join the bidding. That’s why I’m asking, is it a corruption? Did I abuse my power? I think this is a kind of character assasination.”

Well, mind the Palace Gate, Sir!

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Lippo Karawaci appoints UBS for US$300 million bond sale

Property giant PT Lippo Karawaci Tbk has appointed UBS as selling agent for US dollar bond of around US$300 million, an investment banker told me last night.
The company's shareholders meeting on January 30, 2006 approved the issuance of debt instruments in the form of notes or other forms of US$200 million the most or any other value deemed fair by the board of directors.
Corporate guarantee is applied for the issuance of such debt instruments pursuant to the company's restructuring. Under the restructuring, Lippo Karawaci transfers several assets such as Graha Medika Hospital to PT Graha Indah Pratama, Siloam Gleneagles Karawaci to PT Sentra Dinamika Perkasa, Siloam Surabaya to PT Tata Prima Indah, and Imperial Aryaduta Hotels & Country Club to PT Karya Sentra Sejahtera.
Lippo Karawaci then transfers the shares in these companies by PT Sentra Dwimandiri and PT Prudential Development to a subsidiary established overseas and subsequently change the status of these companies into foreign investment companies (PMA). Lippo also transfers its indirect ownership over these companies to unaffiliated investors.
This is the second restructuring at Lippo Karawaci in less than two years. In July 2004, Lippo Karawaci completed the merger of eight property-related companies to form the largest listed property company in Indonesia by market capitalization. The eight participating companies in the merger were:
1. PT Lippo Karawaci Tbk2.
2. PT Lippo Land Development Tbk

3. PT Siloam Healthcare Tbk
4. PT Aryaduta Hotel Tbk
5. PT Metropolitan Tatanugraha
6. PT Ananggadipa Berkat Mulia
7. PT Sumber Waluyo
8. PT Kartika Abadi Sejahtera

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Energi Mega appoints E&Y as merger advisor

The listed oil and gas company PT Energi Mega Persada Tbk has appointed PT Ernst & Young Advisory Services as the independent advisor for a merger plan with PT Bumi Resources Tbk.

"The independent advisor has started to review the (merger) plan on February 7," wrote Yudi Soedargo and Thomas Leo Soulsby, Energi directors, to Jakarta Stock Exchange (JSX) yesterday.

Asked whether the merger could be done next year, Energi said it's depend on the advisor's review.

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Slowdown in Indonesian economy, anti-graft campaign, and the upcoming social unrest

Indonesian currency rupiah gained almost 7% in the last few months. But it can't help people to get jobs, neither to stop companies send more people out of the job market. And further slowdown in the economy combined with higher production cost will surely push industries to cut the easiest, the overhead, and that would lead to an even bigger unemployment and social upheavals.

Even the so-called healthy companies like PT Indofood Sukses Makmur Tbk have to cut thousands of workers. Last year alone the company sent home almost 4,500 workers as the consumer goods company trying to survive from the slowing demand.

Late last month, thousands of workers at PT Dieng Jaya (a mushroom producer) in Wonosobo, Java, went on strike demanding massive lay-offs because the company had failed to pay salary in 19 months.

Wood-based industry might be the worst as companies are increasingly difficult to get raw material. PT Surya Dumai announced late last month that as of February 1st, the company will close down the wood panel production facility and send home 1,000 workers. Wood-based industry in South Kalimantan planned to lay-off 11,800 workers by first half 2006 and could reach 19,000 by the end of the year.

In Aceh, last month shareholders of PT Asean Aceh Fertilizer had decided to liquidate the fertilizer company and that would means 1,400 workers will be unemployed. The state-owned enterprises ministry voted in favor of the liquidation of AAF and supported the crazy buyback programs of Indosat and JICT.

Look at textile industry. In Semarang, Central Java, 5,832 workers in the textile plants had been laid off last year. PT Dan Liris in Sukoharjo, Central Java fired 1,200 workers last year and another 434 workers early last month. Minister of Industry Fahmi Idris fired back at manufacturers for the recent rejection of electricity tariff amid threats of massive lay-offs.

This is just the start of a possible 2 million people kicked out of the job market for the whole year. And then we got the news about Indonesia's Economy Expands 4.9% in Fourth Quarter from Bloomberg.

Indonesia's economic growth slowed to 4.9 percent in the fourth quarter as higher borrowing costs curbed consumer spending.
The expansion in Southeast Asia's largest economy, the slowest in six quarters, followed a revised gain of 5.6 percent in the three months ending September from a year earlier and compared with the median forecast of a 4.2 percent rise in a Bloomberg survey of 13 economists.

``The slowing down of global exports combined with a local fuel price increase last month and the increase in interest rates,'' Choiril Maksum, director of the Central Statistics Bureau, told a briefing in Jakarta today. ``The decline of the rupiah in the third quarter,'' also contributed to slower growth.

Indonesia's central bank raised its key interest rate six times from August to December to a three-year high of 12.75 percent to stem inflation after the government more than doubled fuel prices, and to help the rupiah recover from a four-year low on Aug. 30. Higher borrowing costs have prompted consumers to delay buying products including motorcycles, cars and homes.

``The banking industry has been concentrating their efforts on lending more to consumers for the past year or two, so the rise in interest rates has affected consumer sentiment,'' Tomo Kinoshita, an economist at Nomura Securities Co. in Singapore, said before the announcement. That's been ``bad for purchases of automobiles and housing.''

Indonesia's private consumption rose 4.2 percent in the fourth quarter from a year earlier, less than the 4.4 percent increase of the previous three months. Manufacturing expanded 2.9 percent in the quarter to Dec. 31 after a gain of 5.6 percent in the third quarter.

Government spending surged 30 percent in the final three months of last year after a previous rise of 16.2 percent. Investment grew 1.8 percent in the period, the slowest pace in two years.

To help counter a decline in domestic consumption, Indonesia wants to attract about $10 billion of foreign direct investment this year, about 12 percent more than last year. President Susilo Bambang Yudhoyono said the government will need about $430 billion of overseas investment by 2009 to help the economy expand by an average 6.6 percent.

Well, that's our problem. The real foreign direct investment (FDI) recorded by Central Bank is far below the numbers announced by Investment Coordinating Board (BKPM). Forget about FDI. In the last few days we heard some Indonesian businessmen announced their plan to invest in China (Lippo Group and Sinar Mas) or the latest from Sampoerna who put a bid to buy a London Casino at 115 million poundsterling.

Indcoup said,

Sampoerna made his fortunate by exploiting millions of smokers in Indonesia and now he wants to buy a business overseas! Wouldn’t it be better for him to invest the money in Indonesia (around 2.4 trillion rupiah!) – where many people still live below the poverty line - and create jobs here rather than see such a huge amount of money flow out of the country? Isn’t this the least this dollar billionaire could do?

On top of all of these, local lenders, especially the state-owned banks, are reluctant to disburse loans afraid of prosecutions should the debtors default on payments. And even if they managed to give new loans, companies, especially the state-owned companies are reluctant to invest in new projects as they're afraid of corruption charges. The second article of Law on Anti-Corruption is clearly frightening.
A write-off may be a usual practice in the world of banking and under the Indonesian banking law it's allowed. But under the Article 2 of Anti-Corruption Law any banker could be sentenced to 20 years behind the bars for such write-off as it could be interpreted as easing the debtor's pain, giving the benefit to others (debtors).
The haircut is a normal practice in the banking industry if a debtor failed to service the debts for acceptable reasons. But that could be considered a crime too.
A bad debt of US$ 1 in the state-owned bank is currently translated into a loss to the state of US$1, so that's a corruption and a crime. This is clearly a false interpretation of what is the state money in a state-owned bank and how a bank works. From my point of view, the state money in a state-owned bank is the portion of equity of the bank. While others are depositors money the bank pass-on to debtors as loans. We can't charge bankers in the state-owned banks of corruption simply because the loans turned out to be bad loans. Surprisingly police and prosecutors sometimes buy such argument if you're lucky, politically strong, and couldn't boost the anti-corruption image.
An investment banker described the anti-corruption campaign as something really good but at a price, the slowdown of the economy, and that could means an invitation to another evil, unemployment and social unrest.

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Putera Sampoerna to buy London Casino

Below is an article from Gambling Magazine sent by a blogger to me this morning. The story also appeared in Forbes.com and other publications. In these publications, Putera Sampoerna is reportedly put a bid to acquire the London Casino's Les Ambassadeurs at 115 million poundsterling. Sampoerna had decided to back off from its bid to acquire pulpmaker PT Kiani Kertas at US$401 million.

The Times reported that Putera Sampoerna, believed to be a long-standing member of the club, is worth about £1.2 billion after selling his family’s clove kretek cigarette business to Altria, the US tobacco group formerly known as Philip Morris, for $5.2 billion (£3 billion) a year ago.

Indonesian Takes A Punt On Mayfair Casino

Gambling Magazine, Feb 10, 2006
An Indonesian tobacco tycoon has made a £115m approach to buy Les Ambassadeurs, the upmarket Mayfair casino owned by London Clubs International. Putera Sampoerna, who is billed as Indonesia's third richest man, is said to be worth more than £1 billion after selling his clove cigarette business to Philip Morris for $5.2 billion.

London Clubs, which is advised by NM Rothschild, confirmed yesterday that it had received an approach "which may or may not lead to the sale" of Les Ambassadeurs, its most lavish venue.
Its high rolling members are thought to include Philip Green, the Bhs owner. Bill Timmins, London Clubs chief executive, is thought to be receptive to a sale as part of his drive to reduce the volatility of the group's earnings. With punters happy to gamble more than £1m a night on roulette or blackjack, such volatility was aptly demonstrated at the half-year results in December.
After a run of bad luck and £4m of bad debts, Les Ambassadeurs racked up £2.1m losses, a big reversal from the £9.1m profits in the same period last year. Proceeds from the sale would be used to pay down the group's £124m net debts and fund the roll-out of provincial casinos. The group, which also owns the Rendezvous and Sportsman, plans to open in Leeds, Blackpool and London's Leicester Square.
London Clubs shares slipped ¾ to 147¼p, where the mooted sale price for Les Ambassadeurs represents just over a third of the group's market value. London Clubs declined to comment on who the approach was from.

A spokesman for London Clubs International confirmed to Forbes that it had received an approach for "Les A"--as the flagship club is affectionately known--but refused to speculate on a suitor or price for a the gilt-lined converted mansion, which overlooks Hyde Park. A couple of Les A's punters are Manchester United manager Alex Ferguson and apparel billionaire Philip Green.

Meanwhile Independent reported the Sampoerna bid fuelled speculation that the sale could pave the way for a merger between London Clubs, Britain's third-biggest casino operator, and its bigger rival Stanley Leisure. The Malaysian casino operator Genting has built a 29.9 per cent stake in London Clubs and owns 22 per cent of Stanley Leisure. However, any deal between the companies would probably come under the Competition Commission's scrutiny as the combined businesses would own nearly half of London's casinos.

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The brawl over PLN leadership

Despite his strong relation with president Susilo Bambang Yudhoyono and the army, some believes that Eddie Widiono Suwondho is counting his days as the chief executive officer (CEO) of PT Perusahaan Listrik Negara, the state-owned electricity company.

Rakyat Merdeka run a headline story today quoting some policians that Golkar Party is trying to promote its cadre as the new CEO for the ailing company. Candidates mentioned in the article are Golkar politician Agusman Effendi and the director general for electricity at the energy department Luluk Sumiarso. Other names are Ady Satria (former PLN CEO), Rahardjo Muharar (director at PLN), and Parno Isworo (PLN's finance director). Government is under pressure to replace PLN's board of director, especially Eddie Widiono.

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M&A: Three tooling service companies to merge

Three tooling service companies PT Gematrikarsa Sarana (GTS), PT Kennametal Hertel Indonesia (KHI), and PT Germantara Tooling Service Indonesia (GTSI) decided to merge into GTSI as a surviving company. According to their joint announcement today, workers at GTS and KHI will become GTSI staffs.

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President's SMS bill, personal website

Shoud president Susilo Bambang Yudhoyono replies all the incoming short messages (SMS) to the magic number 9949 (his birthday), his monthly cellular bill might have reached hundreds of million rupiah. I don't know how much is the cost to send a message to the number. But if the average tariff applies it could be Rp200 per message.

According to the president's special staff Sardan Marbun total incoming SMS reached 1.927 million since the service opened to public few months ago. It means that total cost the cellular customers paid almost Rp400 million. How much the cost at the president side for the Thank You auto reply?

In another related development, today Detik.com reported that the president finally has his personal website at www.presidensby.info. I couldn't access it so far. Total cost for the project was Rp84 million. Advertisers are welcomed?

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Lippo Karawaci profit increased 23%

Listed property giant under Lippo Group, PT Lippo Karawaci Tbk reported net profit of Rp358.94 billion last year (12 months) or a 23% growth from Rp292.9 billion in 2004.

According to its audited financial report published today the company booked 19.8% growth in total sales to Rp2 trillion last year against Rp1.67 trillion in 2004. The company then recorded gross profit Rp999.2 billion (around US$100 million) and operating profit of Rp536 billion.

Lippo Karawaci completed the restructuring in 2004 resulting in total assets of Rp6.23 trillion as of December 2005. The company is owned by Greatmind Investment Ltd (15.44%), Pacific Asia Holdings Ltd (13.95%), Capital Bloom Investment Ltd (7.76%), and public investors (62.85%).

Several former ministers sits as commissioners at Lippo Karawaci. They are Surjadi Sudirja (former minister of internal affairs under Abdurrahman Wahid administration), Tanri Abeng (former minister of state-owned enterprises under BJ Habibie admnistration), and Agum Gumelar (former minister of transportation under Megawati Soekarnoputri administration). Both Surjadi and Agum are senior military figures retired as lieutnant generals.

Bank loans in the company jumped from Rp492 billion to Rp1 trillion last year with Raiffeisen Zentralbank Oesterreich AG (Singapore) as the biggest creditor (US$50 million), followed by Bank Niaga (Rp181 billion) and the affiliated Bank Lippo (Rp112 billion).

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Indonesia wants to buyback container port from Hutchison

Bisnis Indonesia reported yesterday that state-owned port operator PT Pelindo II was exercising the buyback of 52% shares in PT Jakarta International Container Terminal (JICT) from Grosbeak Pte Ltd, a subsidiary of Hutchinson Port Holding (HPH) of Hongkong. Pelindo II owns 48% shares in JICT.

Grosbeak paid US$215 million for the government shares in a open tender in 1999 and provided US$ 28 million worth of software for it container terminals in Tanjung Priok. Grosbeak is given a concession to operate the terminals for 20 years.

Why Pelindo wants to buy back? Who'll finance that? Is it serious? How if Hutchison don't want to sell the shares?

According to Abdullah Syaifuddin, Pelindo II president director, the state-owned company rejected Grosbeak's proposal to extend the build, operate and transfer (BOT) contract amid declining terminal handling charge (THC). Transportation Minister Hatta Radjasa supported Pelindo. But Mr Syaifuddin didn't come with details of how Pelindo could buy the shares back.

So far, Syaifuddin's plan is just like state-owned enterprises ministry's plan to buyback Indosat shares from ST Telemedia, Temasek's subsidiary.

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East Kalimantan-Java gas pipeline: The Five Bidders

The Upstream Oil and Gas Regulatory Body (BPH Migas) announced five bidders for the giant 1.219 km gas pipeline project connecting East Kalimantan and Java Island yesterday. Two state-owned enterprises (PT Perusahaan Gas Negara Tbk and PT Barata Indonesia) and three private companies (PT Bakrie & Brothers Tbk, PT Bumi Karsa Lini Nusa, and PT Alpha Kharisma).

PT Perusahaan Gas Negara (PGN) Tbk would establish a consortium of companies including state-owned electricity company PT Perusahaan Listrik Negara (PLN), state-owned fertilizer company PT Pupuk Sriwijaya (Pusri), and two engineering companies PT Inti Karya Persada Teknik and PT Tripatra Engineers & Constructors.

Except PT Bakrie & Brothers who is clearly linked to Bakrie Family, no detail information on PT Bumi Karsa Lini Nusa and PT Alpha Kharisma. I got zero results from googling on these companies. Bumi Karsa without two words Lini Nusa is linked to VP Jusuf Kalla. But Bumi Karsa Lini Nusa is clearly a newly registered company and may be nothing to do with Bumi Karsa, but that could be a possibility.

Alpha Kharisma is also a new company, most likely.

On PGN's consortium, PT Inti Karya Persada Teknik (IKPT) was owned by Nusamba Group (Sigit Harjojudanto, Dakab Foundation, and Dharmais Foundation---all of them are related to former president Soeharto).

Late last year, Soeharto's golf buddy Mohammad 'Bob' Hasan filed a lawsuit against IKPT shareholders and asked them to return 45% of shares owned by PT Wijaya Karya, PT Parama Matra Widya, PT Jasa Ferrie Pratama, PT Grada Matra Tiara, and Workers Cooperative of IKPT.

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Pertamina might ignore Sinopec in Tuban refinery project

State-owned oil and gas company PT Pertamina seems can't wait too long to make decision on the US$1.1 billion refinery project in Tuban, East Java province. Six months after Widya Purnama, Pertamina's president director signed a memorandum of understanding (MoU) with Chen Tonghai, Sinopec's president in Beijing, Pertamina stated today that it might invite other investors to build the refinery. Sinopec was considered too slow to make its mind.

Pertamina director Suroso Atmomartojo said if China's Sinopec can't make decision, Pertamina would invite other investors to build the refinery which could produce 150,000 to 200,000 barrels per day.

Indonesia desperately needs new refinery to catch up the increasing domestic demand. Currently Pertamina operates several refineries with combined capacity of 1 million barrels per day. No additional capacity built in the last decade.

In the meantime, starting tomorrow Pertamina will shutdown Balongan Refinery for up to 20 days of maintenance. The refinery, located in Balongan, West Java is capable to produce 150,000 barrel per day.

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President's article in Herald Tribune on Danish cartoon

President Susilo Bambang Yudhoyono writes in International Herald Tribune an article titled Let's try to get beyond caricatures, published on Friday, February 10 as part of his effort to reduce the tension following the publication and reprinting of the cartoon of Prophet Muhammad, first published in Denmark in September 2005.

The President wrote,
The international community must work together to put out this fire. A good start would be to stop justifying the cartoons as "freedom of the press," which only hardens the Muslim community's response. Another vital step would be to discontinue their reproduction, which only prolongs the outrage.

He follows with appeals to the West and non-Muslim,

The West and Islam need not collide in a clash of civilizations. Many Islamic communities comfortably embrace some Western habits.

The international community must not come out of the cartoon crisis broken and divided. We need to build more bridges between religions, civilizations and cultures.

And appeals to Muslim,

Muslims around the world also have responsibilities. No one - certainly not Muslims - will be better off if the current crisis descends into open conflict and more bloodshed. The best way for Muslims to fight intolerance and ignorance toward Islam is by tirelessly reaching out to non-Muslims and projecting Islam as a peaceful religion. We also need to be forgiving to those who have sincerely apologized for offending Islam.

Well, reaching out and forgiving are two words that easy to say. Today, former Army Chief of Staff General (Ret) Tyasno Sudarto joined a protest organized by Hizbut Tahir in Jakarta. As reported by Tempointeraktif.com, Tyasno urged government to strongly condemn the cartoon publication.
Hizbut Tahir said a simple apology is not enough to end the crisis. The organization wants death penalty according to Sharia Law be implemented on the cartoonist and publishers.

Mr President, would be great if you could write in Indonesian media as well! I could help the translation if you want, for free!

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