AGO: No Soeharto, we trade in with his brother-in-law!

The earthquake that kills 4,000 people in Yogyakarta may have improved president Susilo Bambang Yudhoyono's popularity after weeks of criticism over his administration's decision to stop the investigation on former president Soeharto for poor mental health reasons. The Smiling General has been released from the hospital this afternoon. He is healthier. But the damage has been done. Attorney General's Office (AGO) seems reluctant to revive the investigation. But they have the kind of exchange offer, Soeharto's brother in law. What?

Yesterday, some newspapers quoted Attorney General Abdul Rahman Saleh saying his office has decided to prosecute a member of Soeharto family. While he didn't disclose the name of the possible corruption suspect, Saleh said the guy is a former director general for custom and excise at the ministry of finance.
I found only one name fit the criteria. He is Suhardjo, a younger brother of the late Siti Hartinah---Soeharto's wife. He was the director general of custom until the last years of Soeharto regime.
Two years ago, November 6, to be exact, Suara Karya newspaper reported that Suhardjo had been named a suspect with corruption charges. But since then, I read no more follow-up articles about that.
In fact, back in December 1998, AGO had summoned Suhardjo for his role in the controversial national Timor car project handled by PT Timor Putera Nasional (owned by Tommy Soeharto). But Suhardjo argued that he simply implemented the orders from his boss (the current Transparency International chairman Mar'ie Muhammad was the finance minister when Soeharto awarded various previledges to Tommy's Timor). Even Mar'ie simply answered to prosecutors that he implemented the boss's (Soeharto) orders.
No information available on what case Suhardjo is being prosecuted. But since the timing of the announcement was made just when the majority of people demanding a continuation of Soeharto prosecution, one might say that AGO is trading in Soeharto's case with his brother-in-law. Poor strategy! The announcement failed to get enough public attention, fortunately!

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Hasnul in Singapore vs Malaysia

Hasnul Suhaimi has tendered his resignation as CEO at second largest telecommunication company PT Indosat Tbk this morning amid poor performance in first quarter 2006 and the rumor of his sub-standard authority in the company. Everybody speculates of his move to be the new CEO at PT Excelcomindo Tbk, the third largest cellular company, which is left vacant today after the shareholders meeting approved Manuel de Faria's resignation. Is it something to do with latent competition between Malaysia & Singapore at play?

Singapore is obviously the largest international telecommunication player in Indonesia through ST Telemedia's majority shareholding in Indosat, SingTel's 35% shares in Telkomsel (the largest cellular provider), and SingTel's 45% shares in PT Bukaka SingTel Indonesia (the largest fixed line provider in eastern part of Indonesia under a cooperation contract with PT Telkom Tbk).
Meanwhile, Malaysia has two major telecommunication investments through Telekom Malaysia's controlling ownership in Excelcomindo and Maxis Communication's investment at Natrindo (JV with Lippo Group).
Singapore's are clearly bigger than Malaysia's, but the competition is intensified recently. Today, for example, Excelcomindo announced its plan to invest US$500 million this year to broaden coverage and expand customer base. If approved, Hasnul will be Excelcomindo's CEO in three months time.
"I don't think Hasnul decides to move to Excelcomindo because of his knowledge about ST Telemedia's plans at Indosat. Indeed he has a good relationship with Malaysia's politicians and Telekom Malaysia wanted him," said a source close to Hasnul.
How good is he?
"He could complained about the limited authority given by ST Telemedia, but Indosat's performance has been decreased in the last few months," said an executive at Indosat.
Hasnul is tightlipped about his resignation. But Minister for SOEs Sugiharto praised Hasnul's decision to resign at the time of poor result recorded in Q1 2006. Whatever! One thing is clear, Sugiharto is bussy to groom someone to fill Hasnul's position at Indosat. Another friend?

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Cemex rejects Sugiharto again, go ahead with Rajawali

Cemex Asia Holding send a letter to Minister of SOEs Sugiharto today and reiterated its objections on the latter's appeal for more time to exercise the rights of first refusal in Cemex's divestment of 25.5% shares in PT Semen Gresik Tbk.

People close to the saga said Cemex make it clear to Sugiharto that it would go ahead with the plan to sell 24.9% shares of Semen Gresik to Rajawali Corporation at USD337 million. "For Cemex, the game is over," he said.
A cabinet meeting last week actually asked Sugiharto to accept Cemex's offer to drop the arbitrary suit as part of the deal with Rajawali. "Government could deal with Rajawali later on, let say to accommodate some interests in Semen Gresik, including from West Sumatra groups," a high-level officer attending the cabinet meeting said.
But Sugiharto insisted to take all the opportunities he has in hands to try to deal directly with Cemex. He sent the second letter to Cemex on Friday just after Cemex's rejection on the first letter. The answer is the same. Time's up!

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Mandiri is under pressure still

Reading Bank Mandiri's financial statement published this morning, some might say the largest bank have cruised the difficult times and may expect higher net profit this year. The bank recorded net profit of Rp510 billion in the first quarter 2006. That's the reason. For the whole financial year 2005, the state-owned bank booked net profit of Rp660 billion, dropped 85% from 2004. But that's just too early. Why?


In fact, Mandiri's Q1 2006 is worse than Q1 2005 in terms of net profit (Rp519 billion). And if we take a look at the bank's core operation, the net interest margin at Rp2.06 trillion is actually lower than Q1 2005 at Rp2.21 trillion. The bank managed to boost other operations income, but failed to reduce operation costs.
The bank's employment expenses is already the highest among Indonesian banks with average cost of Rp150 million per employee, 50% higher than Bank Central Asia (BCA), the most profitable bank, at Rp102 million per employee.
The gross non-performing loan ratio is obviously higher in Q1 2006 at 27.66% against 18.88%, while net NPL ratio increased from 10.9% to 15.84%. It means, a significant progress in trimming NPL is paramount.
What's happened in the last few months? No progress made after the failure deal with Sampoerna Family to settle Kiani Kertas's US$200 million bad debts. The negotiation to improve loan arrangement with Raja Garuda Mas is not started yet. No immediate solution on Great River International. Suba Indah is also in trouble. Argo Pantes have just survived the bankruptcy lawsuit, but long way to go on Mandiri's loans. The question is whether the management of Mandiri has been tough enough to deal with big guys like Kiani, Raja Garuda, Great River and Argo Pantes?

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Eramet reaffirms Weda Bay project

Weda Bay, Halmahera in Molluca Islands will be Indonesia's next Soroako (giant nickel production facility run by International Nickel/Inco). France-based Eramet president Jacques Bacardats is in Jakarta this week to reaffirm the company's future plan for Weda Bay mineral project that may cost US$1.5 billion.

Early this month Eramet acquired controlling stakes of Weda Bay Minerals Ltd, an exploration and development company that
controls the Halmahera Nickel Cobalt Project at Weda Bay, Halmahera in Eastern
Indonesia. Halmahera is one of the largest undeveloped nickel projects
globally. State-owned mining company PT Aneka Tambang Tbk hold 10% shares in the project.
Simon Sembiring, director general for mining at the Energy and Mineral Resources Ministry told the press after the meeting between Energy Minister Purnomo Yusgiantoro and Bacardats that Eramet plans to produce nickel consentrates in Weda Bay. "But they might also produce nickel there, depend on the feasibility study," he said.
The plant in Weda Bay could produce up to 60,000 tones per year of nickel.
Eramet is an integrated mining and metallurgy group that produces non-
ferrous metals and their chemical derivatives, high-performance special
steels, nickel alloys and superalloys and high-performance parts for industry.
So far, Inco is the largest nickel producer in Indonesia through its Soroako, Sulawesi Island operation. Inco's installed capacity is around 70,000 tones of nickel consentrates per year and is working on US$250 million expansion project to boost the capacity by 30% to 90,000 tones/year.

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Krakatau Steel profit drop 42%

State-owned steel producer PT Krakatau Steel booked net profit of Rp236 billion in 2005, dropped 42% from Rp414 billion in 2004 on lower margin.

According to its financial report published today, Krakatau reported total revenue of Rp11.63 trillion (US$1.18 billion) in 2005, increased 23.8% from 2004. But its cost of goods sold increased higher by 30%, resulting in lower gross profit. Combined with increasing operating costs, Krakatau booked operating profit of only Rp638 billion, significantly reduced from Rp922 billion in 2004.
Krakatau, the largest steel manufacturer in Indonesia, also hurt by huge increase in interest expenses.
The company has total assets of Rp10.689 trillion (US$1.1 billion) as of December 2005.

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Seismographs investment/donation please!

The running texts of Indonesia's TV stations has apparently been focusing on the number of casualties and the amount of money donated by dignitaries like...Kalla Family Rp2 billion, Prayogo Pangestu Rp500 million, Boy Thohir Rp100 million, Indra Bakrie Rp500 million, etc...or the announcement from big companies in what they claimed corporate social responsibilities like...Company A to rebuild the school, company B to rehabilitate the mosques and hospitals...donates tents or boxes of instant noodles, tea, mineral water...etc...But I'm awating texts like...smart guy donates a seismograph or scholarships for students in the earth science...

I decided to run the text after reading Kompas.com report quoting Surono, an officer at Yogyakarta's branch of Badan Meteorologi dan Geofisika (BMG)---Indonesia's USGS.
Surono disclosed that Indonesia has no seismograph installed to measure the earth's movement in southern belt of the quake line of Java Island. Surono believes USGS even has that and that explains why USGS and BMG have different figures about the earthquake in Yogyakarta that kills more than 3,800 people and more than 10,000 people injured. Reconstruction costs were predicted at least US$110 million. Worse, as reported by Tempointeraktif.com, the quake also hit the main building of monitoring devices for Merapi Volcano and that's scared people there as no information available on the possible deadly eruptions from the active volcano.
Back to to the seismograph issue. USGS reported the epicentrum of the quake at 17 km beneath the surface, while BMG said it's 33 km below the surface.
Last year, both China and Japan committed to donate dozens of new seismographs to Indonesia aftermath the tsunami that killed more than 120 thousand people in Aceh. The National Earthquake Center has also planned to install more than 100 new seismographs in 10 locations. But somehow the country missed the southern part of Java Island?
I believe the cost of such seismograph is nothing compared to Minister Sugiharto's plan to spend US$337 million to buyback 25.5% shares of cement manufacturer PT Semen Gresik Tbk from Cemex SA and even a peanut compared to the cost to build East Kalimantan Governor's residence of US$7 million (to match Hollywood stars heh...).
Seismograph investment is one thing. But the country is apparently lack of expertise in the sector. So, scholarships dedicated to this field of expertise would be a great way to help prepare a better prevention management in the future.
City planning should be improved as well, especially on public housing technology in quake sensitive areas in the country. (Remember that the crash of the buildings or roofs were the main cause of misseries in Yogyakarta quake)
At the high-level public policy sphere, president Susilo Bambang Yudhoyono who runs the administration from Yogyakarta for three days, should take a new approach toward BMG. We can't aford to keep treating BMG as a periphery agency. We need to empower BMG to be our USGS and play a more important role for the economy and the people.
I remember few years ago when I visited a cigarette factory in Central Java. The owner said he was relying very much on weather reports from Australia to provide more accurate information to tobacco farmers. "The farmers need accurate weather reports to schedule planting or harvesting. We spend a lot of money to buy those reports from Australia, but we just can't stand to see them suffer from bad harvest season," the cigarette businessman said.
That's how important the information about the mother nature for the economy. I wonder how much money industries like construction, offshore oil and gas, mining, airlines, or sea transportation have to pay in US dollars for so many years just because of our ignorance on such an important institution.

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Sugiharto send new letter to Cemex

After a cabinet meeting last week and Cemex's rejection to the earlier letter sent on behalf of the government, MSOE Sugiharto sent a new letter on Friday asking Cemex's understanding on the demand to exercise the right of refusal over 25.5% shares divestment in PT Semen Gresik Tbk.

People close to the issue said over the weekend that Sugiharto reiterated government's intention to buyback 25.5% shares through a third party assigned consortium.
"But just like the previous one, Cemex most likely would turn down Sugiharto's proposal," he said.
Earlier in the week, a cabinet meeting was split on the buyback issue as both chief economic minister Boediono and finance minister Sri Mulyani Indrawati backed off the plan and only Sugiharto insisted to do so. After the meeting, Sugiharto was reportedly met VP Jusuf Kalla to convince the leader on the plan.
"It's clear that Sugiharto is not going to let this over soon," he said.

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Eterindo sales jump 284%

Listed chemical company and the first major producer of biodisel, PT Eterindo Wahanatama Tbk reported 284% growth in sales revenue in 2005 at Rp407.44 billion.

According to its behind the schedule publication of 2005 financial report, Eterindo recorded lower operating profit at a mere Rp722 million. But the company managed to book net loss of Rp2 billion, dropped significantly from Rp38 billion in 2004.
Eterindo started to supply biodiesel to state-owned oil and gas company Pertamina few weeks ago. The company produces 60 tones/day of biodiesel and is working on expansion to bring the capacity to 200,000 tones per year.

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Argo Pantes still in red

Integrated textile producer PT Argo Pantes Tbk reported net loss of Rp214.14 billion in 2005 to make its accumulated loss of Rp1.45 trillion as of Dec 2005 on poor margin.

According to its audited financial report published today, Argo Pantes booked lower sales at Rp932.53 billion in 2005 against Rp982.37 billion in 2004. The company managed to reduce gross and operating loss to Rp87.24 billion.
In February 2006, Indo Pus BV, a Netherland-based company, and Deutshce Bank filed a bankruptcy suit on Argo Pantes for its default payment of US$12 million. Argo has outstanding debt of US$198.68 million to 18 creditors of which Bank Mandiri is the largest with US$92 million.
Argo have proposed the settlement through debt to equity conversion of which creditors would control 21% shares. But no agreement yet on the proposal submitted two weeks ago.

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The Split Nation: Porn-Investment Bills

Parliament members are bussy to discuss two important bills on pornography and investment. Do these bills negates each other?

The supporters of Porn Bill says it has nothing to do with investment appetite on Indonesia. "Other countries already have such porn law and investment keeps coming," they said. But those who oppose the bill argues the porn law would scare investors, especially foreign direct investments, away. "Do we really need specific law on pornography while we have the penal code with tons of articles about pornography?"
The nation is clearly split on the porn bill. As the supporters have rallied in major cities to push the House of Representatives to immediately deliberate the porn law, opponents under the leadership of former president Abdurrahman Wahid threatened to organize massive protests in big cities.
So far, no horizontal physical confrontation between the groups. But who knows?
The split could be seen in the investment bill as well. Do we really need the new investment law while we can't make use out of the existing laws on domestic and foreign investments? The spirit of the investment law is to give equal level of playing field for domestic and foreign investors at the time of increasing anti-foreign investment sentiment pumped up by some nationalist figures.

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Soeharto: Hold your obits, I'm alive!

Friends of mine were bussy in the last few weeks to prepare obituary on former president Soeharto in case God the Almighty close the chapter. But they're dead wrong! In fact, Soeharto's health condition has been improved in the last few days and most likely would get out of the hospital next week or so.

As Soeharto's health improved, a friend from respected media expressed his anger. "How come he's alive still. I had prepared the obit nights and days, and the old man came out saying...hold your obit, I'm alive" he said.
"Well, Soeharto get better medical treatment than our first president Soekarno. Should he get the same treatment, he'd died seven years ago," I said.
"And probably, he'll really could go to Los Angeles to visit her grand daughter or get better medical treatment in Mayo Clinic," the friend complained.
"Anyway, what would be the title of the obit?"
"I put like this: Soeharto, RIP...Rest In Power...finally."
"Wow...that's cool!"

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Jusuf Anwar to be Ambassador to Japan

People: Former finance minister Jusuf Anwar would likely be appointed as new ambassador to Japan.

Antara News Agency quoted Anwar in Tokyo today that he will follow the fit and proper test to be the ambassador in Indonesian parliament scheduled May 30.
Anwar was the first finance minister in president Susilo Bambang Yudhoyono's cabinet before the reshuffle in early December 2005. He spent most of his career as civil servant in the ministry of finance. The news about the new job for Anwar has been around since the reshuffle last year.
Born in Tasikmalaya, West Java, January 2nd, 1941, Anwar has easy going personality. He love to share jokes. Anwar completed his masters degree in economics in 1978 at Vanderbilt University, United States. He later served as the Capital Market Supervisory Agency chief in 1998. Two years later, Jusuf was assigned as an executive director of the Manila-based Asian Development Bank (ADB). Earlier in the 1990s, Jusuf was appointed director of budget and foreign funds and secretary-general at the Ministry of Finance. In addition to his expertise in financial matters, he is also a legal expert and was active in the Ministry of Justice.

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The fall of rupiah & bad timing of statements

Rupiah lost its value against greenback by almost 8% in just one week, from 8,700 to 9,400, partly due to bad timing of statements delivered by high-level government officers.

Initially rupiah dropped on bad sentiment over stock market and increasing oil price. Early this week the newly appointed director general for tax Darmin Nasution told parliament members that it would be difficult to collect tax at the amount set in the 2006 budget. This statement then raised concern of fiscal sustainability as tax is the single major source of state income.
The following day, thousands miles away from the parliament building, president Susilo Bambang Yudhoyono addressed a crowd in Lombok Island, West Nusa Tenggara that Indonesia would accelerate debt payment of US$7.8 billion to International Monetary Fund (IMF) so in two years, ahead of its maturity in 2010.
Politically, the president might gain something out of the statement. But then those who understand how the economy works started to raise another questions: How big is our reserves to support the payment and what might be the impact to supply-demand of the dollar? How much penalty Indonesia should pay due to the acceleration of payment? Economist Iman Sugema argued it will save US$800 million if Indonesia pay IMF loans early. But rupiah dropped even further.
Indonesia's foreign exchange reserves stood at US$43 billion as of April 2006. If Sugema was right with the total saving of US$800 million for an early payment,then it would be good for people, at least we could build more schools and hospitals. But I think the timing of the statement wasn't right.

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Agro Hope in major plantation expansion

PT Agro Indomas, a joint venture of Malaysia's Agro Hope Sdn Bhd, had secured the license to expand its palm oil plantation in Central and East Kalimantan with Rp648 billion.

While no details available on how big the area for the new plantations will be, local media in East Kalimantan reported Agro Indomas is working on 17,500 hectare of plantation in Paser Utara regency. No information about the Central Kalimantan project.
Agro Indomas, according to the license from Investment Coordinating Board, will produce 134,187 tones of crude palm oil and 27,000 tones of palm kernel oil.
In the mean time, PT Tasik Raja, a company based in Medan, North Sumatra is also planning to expand its processing units to increase CPO capacity by 69,875 tones and PKO by 16,250 tones per year.

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Berlian to divest two chemical tankers

Seaborne transportation giant PT Berlian Laju Tanker Tbk plans to sell two units of chemical tanker currently under construction at a shipyard in Japan to First Ship Lease (FSL) Ltd, a Bermuda incorporated and Singapore based commercial finance company, at US$90 million.

According to its information to shareholders today, Berlian Laju--listed in Jakarta Stock Exchange (JSX) with total assets of Rp7.9 trillion (US$850 million) as of Dec 2005, will lease back these vessels capable to carry 22,050 m3 each.
Berlian argues that the transaction provide diversification of financing methods and is profitable because the sale price is higher than the new building contract price.
Berlian reported operating revenue of Rp2.6 trillion in 2005, doubled from Rp1.35 trillion in the previous year with net profit of Rp645.18 billion, almost trippled the previous year of Rp243 billion.
PT Tunggaladhi Baskara is the largest shareholder in Berlian with 45.36% and public investors at 54.52%.The divestment is pending shareholder's approval.

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Kalla, The Shinkansen

Vice President Jusuf Kalla started his official visit to Japan today, just few weeks after visiting China. One of his agenda will be to renegotiate the on-and-off Jakarta MRT system with Japan Bank for International Cooperation (JBIC).

Kalla is the like of Shinkansen, Japan's bullet train. He's fast, in action and talk. He's everywhere, easy to entertain journalist's question however controversial the topic. Just days before he left Jakarta for Beijing, Kalla made clear to everybody that it would be costly to let the Japanese funding the MRT project even though JBIC offered zero interest loans. He supported the establishment of a consortium of state-owned companies to work with China's companies instead.
Yesterday, just before the aircraft off the ground to Japan, state minister for national development planning Paskah Suzetta admitted one of the agenda during the visit will be a meeting between Kalla and JBIC governor on MRT funding.
For ordinary citizens and commuters, it's not a problem if Japan or China will finance the MRT as long as the ticket would be fair and could be in operation ASAP considering the crazy traffic jam in the city. Jakarta needs the kind of Shinkansen. Kalla should match his Shinkansen-speed-statements and actions, I think.
Other projects to be discussed are, among others, the Asahan hydropower plant project and infrastructure for Tanjung Priok seaport. Kalla will also meet executives of car manufacturers, Mitsubishi and Toyota. Kalla's family business hold the agency of both cars for East Indonesia region, but I do believe he will talk about family business there. He would try to lure them into the country, produce more cars in Indonesia for export market. I believe both Mitsubishi and Toyota are prepared to drive in more investments. But they need Shinkansen-speed of bureaucracy to settle the pending problems.

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Cemex: Time's up: Problems prevails

Cemex Asia Holdings confirmed today through its letter to SOE Minister Sugiharto that the time for Indonesia government to exercise its first right of refusal (FRR) had been expired and the cement giant is free to sell the 25.5% shares of PT Semen Gresik Tbk to anybody.

In the letter cc-ed to President Susilo Bambang Yudhoyono and Vice President Jusuf Kalla, Cemex also stated that Indonesia government can't assign third parties or affiliates to exercise the FRR and buy the shares.
Sugiharto immediately responded the letter saying government is asking lawyer to review Cemex's letter. "This is a legal issue. I will ask government's lawyer to review," Sugiharto is quoted by Tempointeraktif.com.
Meanwhile Detik.com quoted Sugiharto saying there are three issues to be considered. First, government's sole right to buyback the shares divested since 1998. Second, the time frame of 60 days demanded is based on New York Law. Third, Cemex should drop the arbitrary suit.
Cemex letter might seal Rajawali Corporation's US$337 million (some says the discount is too big) deal to acquire 24.9% shares. But the problem is not over yet, at least for Rajawali or to whom Cemex want to sell the shares. The company might be under annoying situation for the rest of its ownership if it couldn't make peace, a costly one, with the situation. The discounted price explains. On the other side, a new legal action from Sugiharto would prevent Cemex from dropping the arbitrary move.
As for Sugiharto, this saga is an important test for his position. He's just like a student who ask for more time to answer the questions for neglecting his homeworks most of the time. President Susilo, as a lecturer (he is a real lecturer but I'm not sure about his subject), might say to Sugiharto: Time's up, get out of the room! Anyway, October, the cabinet's annual exam is just few months away.

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Japan automotive investments keep coming

Japan could be considered the most consistent investor in Indonesia so far, at least with the incoming new automotive component investment commitments.


Data from Investment Coordinating Board shown the following new investments from Japanese companies in the automotive sector:
1) TSC Manufacturing: A joint venture between PT Takagi Sari Multi Utama, Sumitomo Shoji Chemicals Co Ltd, and Takagi Seiko Corporation to build a US$6.6 million automotive plastic component (800,000 pcs/year) in Delta Silicon Industrial Park, Bekasi, West Java.
2) Mikuni Indonesia: A JV between Mikuni (Thailand) Co Ltd and Mikuni Corporation to invest US$4 million in a secondary air valve and carburator plant in EJIP Industrial Estate, West Java.
3) Sankei Indonesia: A JV between Mr Hiroshi Tokoro and Sankei Co Ltd to build a US$6 million plant to produce plastic painted autoparts (1.2 million pcs/year) in KIIC Industrial Estate, Karawang, West Java.
4) Indonesia Nippon Steel Pipe: A JV between Siam Nippon Steel Pipe Co Ltd (Thailand) and Toshiba Industry Co. Ltd (Japan) to produce automotive component in Indotasei Industrial Estate, Karawang, West Java with US$18.75 million investment.

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Property crash is right next door!

It's like early 1990s when newspapers were filled with pictures of ceremonies to launch new property projects or topping off, grand launching, and then crash! That's my impression when reading newspapers in the last few months. I'm afraid the history is in the remaking.

I read two main business newspapers in Indonesia in two consecutive days. And I got long lists of new property projects already. Just recently, Investment coordinating board approved the plan of a Hong Kong investor to build some new malls and appartments in Jakarta with cost up to US$265 million.
Singapore's Keppel Land, meanwhile, is working with Modernland Realty to develop a US$300 million township in East Jakarta. Modernland just released its 2005 financial report with profit of Rp24 billion (US$2.5 million) from net loss of US$5 million in 2004.
The just recovered property company Pudjiadi Prestige, would start the construction of Rp300 billion condo in Bandung, West Java next month.
The ailing property company Pakuwon Djati is processing global bonds worth US$120 million to finance various projects.
Dharmala Intiland is joining PT Global Ekabuana to develop property complex in Jakarta with US$300-US$350 million investment.
Early last week, Gentamulia announced its The East project to cost Rp500 billion and Agung Podomoro with Garden City (Rp500 billion).
Do we really need these properties? Why nobody want to invest in manufacturing?
If we ask these developers, their answers would be similar, and they claimed high subscriptions even before the project started. Just like the old days prior to the 1998 crash.

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Cemex rejects government's proposal

Cemex Asia Holdings has decided to reject Indonesia government's proposal for an extension period of 60 days to exercise its first right of refusal or to acquire the cement giant's 25.5% shares in PT Semen Gresik Tbk.

"Cemex rejected the 60 days extension. So, Indonesia government should exercise its right to acquire Cemex shares in the time frame available, 30 days since Cemex sent the notification letter. Somehow, Indonesia government should learn something out of this saga," said people familiar with the issue.
Bisnis Indonesia reported on Saturday that SOE Minister Sugiharto had sent a letter to Cemex demanding an extension of 60 days to exercise the acquisition. Sugiharto claimed a consortium of state-owned enterprises would act on behalf of government to acquire the shares, just two weeks after Cemex signed a conditional sales and purchase agreement with Rajawali Corporation, a company led by tycoon Peter Sondakh. Rajawali agreed to pay US$337 million for Cemex's 24.9% shares of Semen Gresik.

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Garuda & The Ticket to Nowhere

Transportation Minister Hatta Radjasa disclosed government's plan to ask a debt haircut to the creditors of the-loss-making-flag-carrier Garuda Indonesia. The amount of the haircut would be substantial enough to make sure creditors will not approve that. And even if the creditors would be generous enough, such haircut is just a ticket to nowhere. Why?

To be honest, debt haircut is one of the best solutions to keep Garuda flying. The problem is how much haircut would be given. Minister Radjasa said Garuda's sustainable debt is US$270 million. That would translate to a demand of debt haircut up to US$520 million of its outstanding US$794.6 million. European Credit Agency (ECA) is the biggest creditor at US$501.6 million, followed by floating rate note (FRN) holders of US$130.6 million, a mandatory convertible bond (MCB) of US$136.8 million, and some banks.
In March, SOE Minister Sugiharto told parliament members that government need to inject US$250 million (from the state budget) to refinance Garuda's debt and establish a special purpose vehicle to buyback the debts. So it looks like Soeharto administration's bailout of aircraft manufacturer (IPTN) in 1990s. Billions of US dollar invested in IPTN (renamed Dirgantara Indonesia) only to end up as dishes manufacturer and the state still had to takeover its bad debt at IBRA few years ago.
I'm sure MOF Sri Mulyani, a fiscal conservative, would not give the money to Sugiharto. Even Prime Minister Abdullah Ahmad Badawi rejected to bailout Malaysia's flag carrier Malaysia Airlines.
Sugiharto then opened the new option, divestment of up to 49% shares of Garuda. Several big names in the airline business were tipped as parties that had expressed interest to be government's new partner in Garuda. But resistance quickly emerged, as always, in the name of nationalism. Parliament member Drajad Wibowo (a former economist)rejected the divestment to foreign parties, but it's ok through IPO or to local investors. Hatta, meanwhile, asked his colleague in cabinet to give priority to debt restructuring than the divestment.
Nationalism have prolonged the endgame of many flag carriers, including those in Europe. Europe's airlines long were considered extensions of foreign ministries, responsible for flying the flag, not running a business. During the first half of the 1990s, European governments handed out $9 billion to prop up money-losing carriers from Air France to Greece's Olympic Airways. Even private companies have not escaped political complications. BA's attempt to buy KLM Royal Dutch Airlines collapsed partly because of fear that if the Dutch airline came under British ownership, it would lose international treaty rights to fly to places outside of Europe such as Japan and the U.S. And European Union rules prohibited Swiss-air, based outside of the EU, from taking over Belgium's landing rights within the EU if it bought a controlling stake in Sabena. So Swissair settled on a 49.5% stake.
In that sense, nothing particularly wrong on nationalism over Garuda. But VP Jusuf Kalla actually had more liberal views on flag carriers. In December last year, Kalla was quoted by Tempointeraktif.com saying Garuda is no longer the flag carrier and that he welcome investors to buy the airline.
At the time all these leaders bussy to talk about how to save Garuda, for whatever reasons, Garuda defaulted MCB payment to a bank syndication led by Bank Mandiri as Garuda keep mounting losses. The airline booked net loss of Rp672 billion last year, reduced from net loss of Rp811 billion in 2004. Stiff competition pushed down Garuda's occupancy rate to 67% in 2005 with half million less passengers than the previous year. Garuda's market share has dropped from 70% (prior to the liberalization of airline industry) to the recent 30% (some says 25%). Garuda apparently had failed to cope with the changing environment.
I agree with Lin Che Wei (Danareksa's president director) who wrote in Kompas newspaper few months ago that Garuda need to seriously overhaul its operation, streamlining, downsizing etc.
I believe that people support the basic idea of keep the company alive because thousands of jobs are at stake. But people have different views on how to help the company improve. I prefer the company raise equity, either through capital market or private placement (I have no problem with domestic or foreign investors) than using state funds to inject new loans-to-equity type of bailout simply because it's a kind of return ticket to nowhere! Garuda will return to the same place, parliament and government for help, at the expense of ordinary people who deserved more the state funds for better education or healthcare infrastructures.

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Market crash, hot money & our choices

I'm worried of my fellow journalist's too-much attention on writing articles about the movement of stock market index. More often we see the headlines like this...New record high for stock market index...while so little attention on how much people have been kicked out of job market.
We, the media, keep telling wrong direction to people about the economy...we're too bussy discusing world oil price, the fall of Dow Jones, the rise of The Fed rates...so when the Jakarta Composite Index lost more than 10% in only one week, we're bussy to ask comments from the ministers about what's going on...and then we get the same old answers like this...it's just a temporary shock, it's just the impact of Dow Jones etc...The sad thing is that we know exactly what's wrong with the economy, and what should we do, but we do the opposite instead. And the media missed the question: Do the government make the right decisions?

I'm not saying that stock market index is not important. There are 336 companies listed at Jakarta Stock Exchange (JSX)with market capitalization of more than US$100 billion, but there are only slightly above 1 million people work in these companies. I just can't understand that with daily trading of less than US$200 million of shares, we should miss the big picture of investment. We have to remember that average floating stocks of listed companies is below 20%. It's true that capital market crash would make listed companies difficult to raise funding for investment.
But even if the index jump by 100% per year, we can't expect the 336 companies and another hundreds of companies issuing bonds to create enough jobs and boost export to a level that strong enough to keep the economy healthy and grow faster.
In fact, last year when Jakarta Composite Index (JCI) grew 17%, second best in Asia behind Japan's Nikkei, the new jobs created by listed companies grew by less than 1%. More than half of listed companies cut number of employees for the sake of efficienty and sexier stock price.
We desperately needs new direct investments, domestic or foreign (FDI). In fact, government (president, VP, and ministers) had conducted countless roadshows and state visits to potential investors overseas to lure them in. We got so many promises. China promised and in fact signed MoUs to invest US$7 billion, another US$6 billion from Middle East, billions from Japan, South Korea, London major even promised UK's new investment of US$1 billion, Iran with US$3.5 billion, and just recently I posted the possibility of US auto giant to invest US$1.4 billion.
But so far, these investment commitments are just too good to be true. If we look at Central Bank's statistics of net foreign flow of capital, the numbers are well below that. In four quarters last year, only Q2 recorded unusual big amount of net FDI at US$2.17 billion. I'm not sure what was the reason as the other quarters were completely different. Q1 with net of US$393 million, Q3 net US$56 million, and Q4 of net outflow of US$366 million. Still, thanks to the Q2, the whole year was ended with a total of more than US$2 billio, doubled the year earlier. But still, it's not enough to create enough jobs.
We also know why the gap between commitments and realities is so wide. Rampant red tape and corruption, hefty bureaucrazy, poor infrastructure, legal uncertainty, and long-list of problems. We, and especially our scholars, experts, and well-educated ministers, know exactly what to do. But we don't make decisions. Worse, we, most of the time, take the opposites or careless on opportunities right in front of us such as the underspent budget and the reluctance of SOEs to implement their investment budget for being afraid of legal prosecution.
Government wanted to buyback Indosat shares from Temasek (at crazy high price), looking for loans to buyback Semen Gresik shares, or buy additional shares in Freeport Indonesia. I'm not saying such buybacks have no financial grounds because these companies are making profit and government would get bigger dividend with more shares in hand, right? May be I'm wrong, but I have two concerns:
First, we will give out US$2.6 billion (experts: capital outflow). Let say we get back 49% shares of Indosat at US$1.2 billion. The company may give out dividend of US$100 million a year, government will get additional US$49 million per year. It takes decades to payback the buyback investment. In the case of Freeport, I believe the issue at stake is not the amount of shares per se, but more importantly is a better revenue sharing scheme, stronger supervision and audit measures (really mean this) and fairer share of benefits for Papuans.
Second, buybacks will not create new jobs or increase capital expenditures. With more shares in hands, in the event of commodity price crash, investment would be a hell of pain. Even in good times like this time around, more shares in hands have nothing to do with more investment to come.
I wonder if our experts (with paychecks from SOEs, sometimes way too much) really did the math when they give suggestions to decision makers. But I do worry these experts are too busy counting their own steps to a higher position.
Government, in my view, should pay more attention on pushing investment commitments into reality and spending the budget properly to create more jobs and earn more foreign exchange from export activities for the economy to grow healthier.
Even if you hate so much the foreigners like Cemex, Temasek or Freeport, the least you should do is to have your fellow citizens to invest here, if that's what the natinalism sentiment is all about. But if local business people are also uncomfortable, can the state, including the SOEs provide enough jobs and create demand that push higher the economic growth?

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Gov't want to buy, Cemex rejects

Indonesia government had decided to exercise its rights to acquire Cemex SA's 25.53% shares in state-owned cement maker PT Semen Gresik Tbk through a consortium of SOEs, but Cemex is most likely reject the offer.


SOE Minister Sugiharto told the press after a meeting with coordinating minister for the economy Dr Boediono that government had sent the letter of intent to Cemex.
"But it's up to Cemex to decide," he said.
Bisnis Indonesia reported that Sugiharto asked Cemex to give two months time to exercise the right.
"The problem, legally according CSPA between government and Cemex in 1998, government can't transfer the right to buy. The legal opinion is that government has no legal basis to assign rights and to seek extension," source at the ministry said.
So, it's a matter of interpretation of the CSPA. Sugiharto (and Vice President Jusuf Kalla) argued that government could buy the shares outside the budget mechanism deploying SOEs.
SOEs like Jamsostek, Taspen, and Danareksa---all fund management companies would act on behalf of the government to buy after government decided to use its first right of refusal. This is not a surprise. Jamsostek led by Iwan Pontjowinoto (Sugiharto's colleague at Sharia Economy Society) claimed financing support for government to rescue the ailing flagship carrier Garuda Indonesia just days after Sugiharto openly said about the option to divest up to 49% shares of Garuda.
Minister of Finance Sri Mulyani Indrawati had turned down Sugiharto's proposal on Cemex arguing no state budget allocated but she said that she could understand if Sugiharto take another options.
But even if these SOEs would be allowed to buy, it's not easy to raise equity or to rely on their own funding. Bisnis Indonesia reported that Sugiharto have approached international lenders such as Macquarie Bank, UOB (Singapore), West LB (Germany), and Presidio Advisors (in partnership with PT Andalas Tuah Sakato, a company owned by West Sumatra administration). These companies claimed US$400 million funding in hands.
Cemex, reportedly, rejects the offer and only want to sell the shares to Indonesian company Rajawali Corporation owned by Peter Sondakh at US$337 million. Cemex and Rajawali had signed the conditional sales and purchase agreement (CSPA)to bring an end to long legal dispute with government.
So, the card is in Cemex's hands now. If the company reject Sugiharto's proposal and go ahead with the deal with Rajawali, I think Rajawali would feel the heat. But definitely it's also depend on how Rajawali deal with the government officers like Kalla and Sugiharto at the national level and local leaders in West Sumatra, East Java, and South Sulawesi---the locations of Semen Gresik's operations.

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US Auto giant to invest US$1.4bn in Indonesia

An automotive manufacturer from United States is in talks with Indonesia government to invest an integrated car production facilities in the country with investment up to USD1.4bn, the largest automotive investment committment so far.


Detik.com quoted Muhammad Lutfi, head of Investment Coordinating Agency, saying the US company would produce cars in the range of 1,000 cc to 2,000 cc cyllinders with installed capacity up to 200,000 units per year.
Lutfi didn't disclose the name of the company but admitting Indonesia and Thailand are now competing to bring in the investment. Thailand is considered a better place for investment for automotive giants mainly due to its more relax luxury cars tax system.
But Indonesia is a big market with strong demand. Last year, the car sales reached its record high of 530,000 units.
Indonesia is not a place of choice for US auto manufacturers as none of Ford or General Motors made significant investment here. Japanese car manufacturers are the dominant players in the market with Toyota, Suzuki, Honda, and Mitsubishi as the leading brands.

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Indonesia to get more Freeport shares

Energy Minister Purnomo Yusgiantoro said it's almost likely that Indonesia will get another 15% shares of the mining giant Freeport Indonesia.

While it's not clear yet whether the 15% shares would be for free or at a price. But Investor Daily reported on Saturday that the short term target is to get 9.36% shares once offered to government but then 'captured' buy local conglomerates. The government apparently has to buy those shares, not for free.
Currently Indonesia government owns 9.36% shares in Freeport. The company once divested 10% shares to Indonesian groups (initially Bakrie Group, then transfered to Bob Hasan during Soeharto years) but Freeport bought back the shares due to Hasan's default on payments to loans from Freeport.
State-owned mining company PT Aneka Tambang Tbk once proposed to acquire Freeport's 9.36% share through share swap with government shares in the company. But government turned down the offer and Aneka Tambang pulled out accordingly.
Freeport spokesperson Siddharta Moersjid said the 9.36% shares currently hold by PT Indocopper Investama may has the value of US$1 billion.
Director general of mining Felix Sembiring indicated that the buyer of 9.36% would not necessarily government of Indonesia, but could be Indonesian private-owned companies. Rumors said that Bumi Resources, a company linked to Bakrie Family, might enter the transaction after it divested two coal mining giants for US$3.2 billion.
Whoever, the move to get more shares could be considered a compromy amid pressures from nationalist groups to close down Freeport's operation. No Morales Way here!

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Fujita expand Indonesia facility

PT Fujita Indonesia had secured investment license to build a new automotive component plant in Karawang, West Java.


PT Fujita Indonesia had secured investment license to build a new automotive component plant in Karawang, West Java.
The plant, capable to produce 1.2 million pcs of crank shaft, would be built with US$5.17 million investment and create around 50 new jobs.
PT Fujita Indonesia is a joint venture between Fujita Tekosho Co Ltd, Fuji Kanagata Seisakusho, and Daiwa Tanko Co Ltd.

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Siam Nippon & Toshiba establish JV in Indonesia

Thailand's Siam Nippon Steel Pipe Co Ltd and Japan's Toshiba Industry Co Ltd establish a new joint venture to produce automotive components in West Java, Indonesia.


Thailand's Siam Nippon Steel Pipe Co Ltd and Japan's Toshiba Industry Co Ltd establish a new joint venture to produce automotive components in West Java, Indonesia.
The JV, named PT Indonesia Nippon Steel Pipe, will invest US$18.75 million in the new plant which will produce rolled tube (42,000 pcs), cold draw tube (18,000 pcs), and cutting tube (18 million pcs) per year.
The plant would create 140 new jobs, mainly for locals. The plant will be located at Indotasei Industrial Estate, Karawang, West Java province.

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Kobexindo to build cement plant in Kutai

PT Kobexindo Limestone and Wynford Finance Limited---a BVI company---will build a 2.5 million t/y cement plant in the rich East Kutai, East Kalimantan province.
Both companies set up a joint venture called PT Kobexindo Cement with planned investment of US$128.5 million.
Kobexindo Limestone is a company under the Kobexindo Group, one of the big player in heavy equipments supplier for coal mining and plantation companies with annual sales of around US$50 million.
Kobexindo Limestone is also registered as a coal mining company with 16,000 hectare of concession area in East Kutai. The company's president is Mr VS Humas Soputro.

No information available on Wynford for the time being.

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The Cabinet with Celeb Complex, Part Two

If you happen to read newspapers in the last few days, you may end up with the very same question: Who is the trully representative of government view on one particular issue? Will cabinet members keep using media merely as popularity booster for their own interests and leave the society at large without clear guideline on what the government will do?

With mounts of homeworks to boost economic growth, ministers allocates so much time to talk in various seminars, workshops, media visits, TV or radio talkshows and give so little time to analyze and make key decisions.
Public debates & discourses are important in a healthy democracy, but when it's just too much, no decisions would be made. Officers can't everytime ask people what they think of an issue or look at the popularity rating and then make decision on it. A lengthy decision making process would consume the government's energy.
"This administration has just no basic management skill i.e. making decisions. You can't score big points if you can only make two decisions in a year," an investment banker told me yesterday.
Look at how ministers talk-too-much-talk---on Cemex SA's deal with Rajawali Group regarding the 25.5% shares in PT Semen Gresik Tbk. Government officers as the representative of the state as the majority shareholder of the company tend to stand above the capital market law with their conflicting statements that put public investors at the sidelines and yet the market authority did nothing to punish government for that. (Guess it's an inferior complex at the stock market authorities)

At odds:
1) Cemex-Rajawali Group
2) MSOE Sugiharto-Presidio/MSOE Sugiharto-Consortium of SOEs/local administration etc

Let's do a little rhetoric analysis on
1) Vice President Jusuf Kalla: The buyer should be a local company or consortium of local companies (even though with foreign investor's funding?). Gave authority to Sugiharto to arrange the details.
2) Sugiharto, minister for the state-owned enterprises (MSOE): The buyer should be a local company plus local administrations/proxy or a consortium of SOEs and local administrations. Ask approval from finance minister Sri Mulyani.
3) Sri Mulyani, finance minister: No way that the state would finance the shares buyback, it's also difficult to deploy non-state funding if SOEs would be involved in the buyback.
4) Paskah Suzetta, national development planning minister

Plus member of parliaments:
1) Didik J. Rachbini, PAN legislator:
2) PKS
3) PPP
4) PKB
5) Democrat Party: Vera Febyanthy

To be continued...

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Boral to build cement plant in Indonesia

Australia's construction materials giant Boral Ltd is not interested in acquiring the controversial 25.5% shares of Cemex SA in PT Semen Gresik Tbk. The company prefers to build a greenfield cement plant in the country.

Boral through Boral Building Materials Pty Ltd (Australia) and Boral International Pte Ltd (Australia) had established PT Boral Indonesia and secured investment approval from Indonesia government recently to build a 1.2 million tones per year cement plant in Lebak, Banten province. The new investment would cost Boral US$183 million and will create 484 new jobs.

Boral has been in the market through a joint venture company called PT Jaya Readymix, the largest supplier of pre-mixed concrete in Indonesia. It also manufactures quarry products and produces kerb and guttering for the Jakarta market. PT Jaya Readymix is a branch of Australian multinational Boral's Cement Division. Boral is a focused International Building and Construction materials supplier.

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Bumi Resources gets below US$1.8 billion

PT Bumi Resources Tbk will likely only get net proceeds of US$1.8 billion the most out of US$3.2 billion divestment of two coal mining subsidiaries PT Kaltim Prima Coal (KPC) and PT Arutmin Indonesia due to heavy debts and payables.

An investment banker close to the deal said out of the US$3.2 billion deal, US$800 million would be to pay Bumi's debt and US$600 million to pay contractors and suppliers of KPC and Arutmin.

PT Borneo Lumbung Energi has been struggled to get US$3.2 billion funding for the acquisition of Bumi's assets in which CSFB would raise US$2.2 billion loans and Borneo's equity of US$1 billion. So far, Nirwan Bakrie is reportedly had subscribed US$200 million equity for the transaction, while other parties have not committed yet.

"The question is how much equity Renaissance/Borneo could raise to pay Bumi. If they fail, most likely will only get promissory notes," the banker said.

Several names, such as Marubeni and Leighton Contractors, were expected to participate in the acquisition. But Marubeni is reportedly don't want to put equity. Leighton was participated in the US$404 million financing of the acquisition by PT Bumi Resources of PT Kaltim Prima Coal few years ago.

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Pindo Deli book profit US$77.87 million

PT Pindo Deli Pulp & Paper Mills, a subsidiary of Asia Pulp & Paper, booked net profit of USD77.87 million last year on higher sales.
The paper products manufacturer recorded total sales of US$920 million in 2005 against US$882 million in 2004.

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Bukopin offers 32% shares to public

PT Bank Bukopin Tbk, a bank controlled by Indonesian government and Logistic Agency's Workers Cooperative, launch an IPO of 32% shares today.

PT ABN Amro Securities, PT Bahana Sekuritas, and PT Indo Premier Securities are the underwriters of the IPO.
The bank would use the proceeds to boost loans to SMEs, expand its outlets, and improve human resources quality.
As of Dec 2005, Bukopin has total assets of Rp24.69 trillion (almost US$2.8 billion). The company booked net profit of Rp257 billion last year, increased from Rp210 billion in 2004.

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Internet polls: Go ahead with Soeharto's trial

Majority of Internet users disagree with the plan to drop the charges against former president Soeharto and want the prosecutors go ahead with the trial. Out of four online publication, only Detik.com polling that shows majority of users agree to drop the charges.
Here's the result as of 21.00 Sunday, May 14, 2006.
1) Detik.com polling: 52% out of 1782 agree to drop charges on Soeharto, and 46% disagree.
2) Tempointeraktif.com: 90% of 1474 participants disagree and want to continue the prosecution.
3) Media Indonesia.com: 44.6% disagree and want to continue the prosecution, against 22% who want to drop the charges.
4) Republika.co.id: 70% disagree and want to move on with the legal process against Soeharto.

5) Rakyat Merdeka.co.id: 72.5% disagree.

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The trials we missed, The winners takes all

It's just inches away for former president Soeharto to be a free man. The cabinet has prepared the presidential decree for a full rehabilitation for him and the first president Soekarno as the sweetener. In fact, as reported by Tempointeraktif.com, Attorney General's Office had lifted the overseas travel ban on Soeharto. So, he could get first-class medical treatment overseas very soon. I do agree with Koran Tempo's editorial today that insists a trial for Soeharto and after that the president may issue an abolition or amnesty.
But I do realize that's a daylight dreaming especially with the current political structure, a result of Soeharto's clever moves. Most people still in the believe that Soeharto always pretend to be a sick person whenever prosecutors try to have him stands trial. But even if he's mentally healthy, as I believe that's the case, the power structure has been weak enough to make it happen. And this also applies to those banking criminals. Why?
Soeharto's aides were so clever to endorse the political liberalization aftermath the boss downfall. The reformists blindly campaigned for a full liberalization without ever calculating the impacts on their movements, especially on Soeharto and his cronies. Without limitation on number of political parties entitled to contest the 1999 election, the nation was stunned with almost 45 political parties registered to contest.
The New Order regime smartly invested in establishing political parties, not to resume the power, but mainly to prevent one single party win the election with clear majority votes. The strategy worked pretty well. PDI-P came out as the winner but only with 33% seats in the parliament. Golkar was the second with 20%-something, while others well below 20%. That was the first victory for Soeharto followed by the second when Megawati lost the presidential election to Abdurrahman Wahid. Golkar clearly was behind Wahid's win. Wahid appointed Marzuki Darusman, a Golkar executive, as the Attorney General. The then Golkar chairman Akbar Tanjung won the election of the House Speaker.
On the surface, the new administration led by Wahid and Megawati was seen as a strong coalition of nationalists. Wahid did start the prosecution on Soeharto and named him a suspect with corruption charges. Soeharto didn't show up in the first hearing in August 3, 2000 and missed two consecutive hearings in August 31 and September 14, 2000. Two weeks later, judges rejected the trial and released Soeharto from city arrest status.
Wahid once sent Susilo Bambang Yudhoyono (that time as mining and energy minister) to negotiate the return of Soeharto family's wealth (Time magazine once reported the amount) to the state. Soeharto's oldest daughter Siti Hardijanti Rukmana (Mbak Tutut) admitted the meeting with Yudhoyono that time.
But then the coalition broke up with shameful impeachment of Wahid supported immensely by Golkar, PPP, other parties, and most importantly the silent support from Indonesian military.
Megawati replaced Wahid and Hamzah Haz (former minister under BJ Habibie administration, then chairman of PPP) was the elected VP. We had new coalition of PDI-P, Golkar and PPP; plus the military. In such a coalition, Megawati administration was hopeless when it comes to Soeharto's trial. Megawati found a new friend, Akbar Tanjung and his Golkar Party without which she wouldn't survive till the 2004 election. Her administration revived the investigation in June 2002, but Soeharto's medical team managed to stop the trial when they announced Soeharto's permanent brain disorder.
In the 2004 election runoff, politicians 'managed' to impose stricter requirements for political parties which entitled to contest. Megawati lost the election despite formal support from Golkar which came out as the winner of legislative election. Military, despite its out-of-politic claim, was in fact behind Megawati's main contender, Susilo Bambang Yudhoyono, a retired army general. Megawati tried to boost her popularity with a promise to bring Soeharto to court, but people just didn't buy. Critics on Yudhoyono's partner, Jusuf Kalla (key Golkar figure and businessman), were also ignored. SBY-JK won anonimously the election. Few months in office, Yudhoyono explicitly told public that he would prefer to forget the past and move on with the new chapter. And last year he paid a visit to Soeharto when the former boss was rushed to a hospital. VP Jusuf Kalla and other political figures did the same. They echoed the call to put an end to Soeharto's trial. This week, almost all of the national leaderships join the chorus and this time Soeharto would likely score the biggest victory. Freedom! Rehabilitation! Abolition! Whatever.
Soeharto's crony capitalists have scored their own victories at the time of reform euphoria in the 1998-1999 period. This is the period when Soeharto's loving 'pupil' BJ Habibie lead the transition administration. Habibie's administration signed the famous Master of Settlement and Acquisition Agreement (MSAA) with bank owners who committed banking crimes i.e. the violation of legal lending limit (LLL).
Under the MSAA, Habibie's administration agreed not to bring the bankers to court for their respective crimes as long as they payback the amount of bailout loans. These bankers agreed with condition that they don't have to pay in cash. Government said OK, cash and nearcash or other assets that could be sold.
Salim, the owner of Bank Central Asia (BCA), then paid few trillions of rupiah in cash and shares in 107 companies to pay around 60 trillion debts. Sjamsul Nursalim (Gajah Tunggal) agreed to pay one trillion rupiah in cash and Rp27 trillion in assets. Soeharto's golf buddy Mohammad 'Bob' Hasan and Soeharto's cousin Sudwikatmono also signed the similar MSAAs. Government have sold out almost all of these pledged assets at heavy discounts, some bought by the debtors themselves through special purpose vehicle companies established overseas.
Other bank owners signed different forms of MSAA such as MRNIA or APU, which were basically the same i.e. exchange the freedom with payments of debts. Some says these crony capitalists invested a lot in some political parties to get these agreements, something extremely difficult to proof. And these agreements were the saviour for the banking criminals, bullets proof!
These are the trials that we missed so much. And these supposedly crime suspects are the winners that takes all, including our dream for justice. The least Yudhoyono could do, may be, is telling public his negotiations with Soeharto family during Wahid's administration to return the wealths to the state.
PS: A banker from Switzerland sent greetings to Soeharto. He asked me whether it's true that Soeharto is free to go overseas. Unfortunately he didn't tell me why he raised that particular issue!

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Bukit Asam to boost coal output to 62 million tones

As government speeds up the development of coal-fired power plants, the state-owned coal mining company PT Tambang Batubara Bukit Asam is launching an ambitious plan to boost its output from around 10 million tones/year to 62 million tones/year in the next five years.
AC Purba, director of Bukit Asam, told shareholders yesterday that the company is working on two major coal-fire power plant projects near its mining pit in South Sumatra with combined capacity of 2,600 MW. These power plants would consume at least 11 million tones/year once they start the commercial operation.
No details available on how the company would finance the massive expansion drive.

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The End of Soeharto's Trial

In contrast to former president Soeharto's successful stomach surgery and reports about his mental consciousness (or that he is not mentally ill), influential leaders are pushing Attorney General's Office to drop the charges and completely put an end to the trial.
Vice President Jusuf Kalla, Constitutional Court Chief Jimmly Assidiqqie, The National Resilience Institution Governor Muladi, and Minister for Religious Affairs Maftuh Basyuni are among those who want the country simply forget Soeharto's trial.
Attorney General Abdulrahman Saleh responded quickly saying the prosecution is stopped temporarily and give the chance to Soeharto for a medical treatment overseas if necessary.
Is it the end of a dream for having Soeharto stands trial? I'm afraid it is. This administration wouldn't risk Soeharto Politics to ruin its chance for second term in 2009. For sure a decision to completely drop the charges now would reduce further the already-low government's popularity. But with three years away from election, it shouldn't be a problem. As for me, it's a sad end of an era.
Lesson learnt? If you want to be a dictator, be the truly one, not in between (mediocre), and you'll be untouchable. What do you think?

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Soeharto's last words

Former president Soeharto was healthy enough to deliver messages to president Susilo Bambang Yudhoyono through the Cabinet Secretary Sudi Silalahi.
What message? "He hopes this administration would do better," said Sudi after paid a visit to the former 'boss' at Pertamina hospital, Detik.com reported.
Sudi spoke with Soeharto for almost 30 minutes. No further details of the conversation. But 30 minutes talk confirmed that Soeharto is not mentally sick or had lost his memory on things to stand a trial. Early last week Soeharto was seen fresh when he hosted former Malaysian prime minister Mahathir Muhammad at his residence. Mahathir testified Soeharto's good health despite difficulties in exchange words.
"But as a human being, I feel sorry for his physical condition," Sudi said. It was president SBY who asked Sudi to check out the medical services given to Soeharto.
Was the message the last one? I have no idea. No clear sign, at least from the media reports, that Soeharto is dying. But the doctors claimed the former authoritarian ruler's stomach was deteriorating for bleeding.
That's why Sudi declined to comment on a possibility to reopen the investigation on Soeharto. Politicians reacted differently, as usual. Golkar Party legislator Theo Sambuaga asked Attorney General's Office to drop the case and let Soeharto 'rest in peace'.
Former Assembly Speaker Amin Rais said he would never believe this administration could prosecute Soeharto. Amien said AGO's plan to resume Soeharto prosecution is a big joke and only want to give good impression to public. Amien might be right this time. While SBY never explicitly asked AGO to drop or move on with the charges, SBY clearly stated last year that he wanted to forget the past and only prosecute recent corruption cases.
His predecessors, Abdurrahman Wahid managed to prosecute Soeharto's golf buddy Mohammad 'Bob' Hasan and beloved son Tommy, while step-brother Probosutedjo was just convicted in a corruption case few months ago. But Soeharto got precious gift last year when the Supreme Court cut the prison terms for Tommy by five years.
The two previous administrations, wherein Amien was the Assembly Speaker with a lot of power in his hands to supervise government, also failed to make Soeharto stand trial for poor health reasons. Everybody love to play Soeharto Prosecution Card when they want to boost popularity. Remember how Megawati Soekarnoputri play the game during the runoff of the 2004 election? Or when political pressures mounts on Wahid? Just like this time around when so much pressure on this administration and their popularity dropped to well below 40%.
Some had proposed for so long a fair trial for Soeharto. Say that court's verdict would be guilty. Just stay behind the bars for one or two days, the president could grant an amnesty for humanitarian reason (85-year old). Just want to uphold the law as SBY said all the time during his campaign.
Anyway...
I just wonder how thankful SBY, one of few generals who pushed internal reforms in the military, with Soeharto's 'friendly' words at the time he lost many friends in the last few months. For sure Soeharto didn't say like Julius Caesar's, Et Tu Brute?

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Morales Effect in Indonesia

Bolivia President Evo Morales stunned world's oil, gas, and mining establishments with his May Day decree. Under the decree, foreign companies in oil, gas, and mining must accept much tougher contract terms within six months or leave the country. Morales' nationalization does not entail a complete state takeover, as has occured in other countries. So far none of the big players, Petrobras, Repsol YPF, BG Group, or Total SA has pulled out. But as soon as they find the terms unprofitable, they will leave the country.

Morales Effect hit the neighboring countries, especially Brazil and Argentine, which rely their gas supply from Bolivia. As reported by The Wall Street Journal today, Morales decree drives metal prices even higher as he stated clearly that oil and gas nationalization is just the beginning and to be followed by other sectors including forestry.

Tanzania immediately follows Morales step with the announcement of the country's Chambers of Miners that government had set up a task force to review foreign mining contracts because the current terms benefit foreigners at the expense of locals.

The Latin American anti-establishment storm would even stronger if the nationalist presidential hopeful Ollanta Humala win the second-round runoff vote later this month. The controversial Venezuela president Hugo Chavez has threatened to nationalize mining industry as well.
Like his ideological soul mate and friend, President Hugo Chavez of Venezuela, Mr Morales is keen to diversify Bolivia's relations away from a dependence on the US. Historically, Bolivia's weak economy - the poorest in South America - has made it very vulnerable to US influence.
China, the energy hungry nation, is considered to play a role in developing Bolivia's oil and gas sector, as it is already doing in Venezuela.

How about Indonesia?

Actually the nationalist movement had mounted pressure to review the gold mining contract of PT Freeport Indonesia, the largest gold mining in the world, since late last year. President Susilo Bambang Yudhoyono had asked minister Purnomo Yusgiantoro to review the contract. The nationalist is also targetting ExxonMobil's contract with Pertamina regarding the development of Cepu oil and gas project.

Some legislators then proposed to use the rights to investigate government over its decision to give ExxonMobil the operation right in Cepu Block. But when it comes to formal politics, only one party (PDI-P) which endorsed it. Legislator from PKS and PAN failed to convince its party leadership to support the move. Recently media also reported the breakup in PDI-P over the issue. So the movement in parliament has been weakened in the last few months.

But outside the parliament building, former Assembly Speaker Amien Rais keep the fight. He gathered support from senior politicians such as Try Sutrisno (former VP) and retired general Wiranto. This group failed to get spare time of president SBY to deliver their 'messages' and planned a major rally on May 20 instead.

But yesterday Amien trumpetted Morales Effect saying, "Our leader (President SBY) should act like Morales."

I'm sure he has good intention, to get better deal with big corporations like Freeport McMoRan and ExxonMobil which book unbelievable profit in the last few years. I support every efforts to renegotiate better terms for the people. What we need now is how to outsmart them.

It is true that Freeport, Exxon, or Caltex booked huge profit from their Indonesian operation. But we have to remember that local groups such as those who own PT Bumi Resources Tbk also recorded US$3.2 billion out of its divestment of coal mining companies. Look at how much money Bumi made last year? Rp1.2 trillion profit. That's also the case with Adaro Indonesia, Energi Mega Persada, or Medco Energi---all owned by local business groups.

We can't simply copy paste Morales decree because we have to analyze its full impact to the society. One's misery could be other's fortune. Kicking out the Spanish or UK companies, would open the door for China. The same could happen here. Kicking out US companies would be followed with huge fortune for some Indonesian business groups, but not necessarily means Indonesian people. We managed to kick out Rio Tinto and BP from Kaltim Prima Coal, but then we have Bumi Resources control it and got US$3.2 billion out of it. So, what we need is an overall arrangement of the level of playing field, not partial ones.

Great philosopher Jeremy Bentham said the best public policy is that which produces greatest happiness. We can't change a public policy that would bring miseries. It is our job, including the leaders of opposition movement, to find out the best policy. We're not in a rush anyway!

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Police detained Widiono, finally!

Police finally detained Eddie Widiono, president director of state-owned electricity company PT Perusahaan Listrik Negara (PLN) for an alledged corruption on a power plant project. Police detained Widiono on Wednesday night after series of investigations.
Read my previous posts for background:
1) Widiono named a suspect
2) Electricity shock on Widiono
Government was trying to keep Widiono at the helm of PLN. But as he starts a new life today, I'm sure government can't keep his job anymore.

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Reinventing Crony Capitalism

Dear readers,

I received thousands of letters that expressed interests in the Reinventing Crony Capitalism, the research I've done in the last five years or so. I really appreciate that. I can't reply all of your emails personally.
While I'm so happy to share the research with each of you, unfortunately due to some technical and legal problems that I didn't realize when I wrote in this blog, including copy rights of some materials and aspects of the research, I hereby beg your apology for a major delay since I have to do some rearrangements. But I will publish the excerpts of the research in the near future.
For your kind understanding and patience, thank you so much.
Best Regards,
Yosef Ardi

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Major labor rally again, what to do?

I was stuck in a very bad traffic arrangement this morning. I was told on Monday about the series of workers rallies this week to protest government's plan to revise the labor law. But I thought it was over on Monday when tens of thousands of workers take to streets and have been promised by legislators that they will not amend the law.

So, I was surprised with another major rally this morning with even more crowd on their way to the parliament building. Why?

It seems that workers are upset with Vice President Jusuf Kalla's statement that government would move on with the amendment for the sake of attracting more investment. These workers are not dumb enough to read newspapers and they know exactly that labor problems only ranked seventh in various surveys about the 10 most pressing issues confronted by investors.

Top list issues are:

- Inefficient government bureaucracy: How many months the business people have to spend to get all the paperworks done? They could get that faster but at an unbelieavable price tag. Imagine how difficult to get the materials in or out from Indonesian ports? What cost?

- Lack of infrastructures: Government prefer to inject money into inefficienct Garuda Indonesia airlines or hundreds of loss-making state-owned enterprises than to build infrastructure. Even the state-owned social security company which collects the money from workers prefer to invest in Garuda Indonesia than to, among others, empower the workers capability. We prefer crony capitalists to build infrastructure no matter how long will it take.

- Local and national corruption: We're entering the huge shifting in corruption from the centralized system of corruption during Soeharto years to a decentralized one which means even bigger amounts squeezed at all levels of government system. We believe that tax and custom offices are the most corrupt, but none of officers have been named suspect. How come? We believe that corruption is there but without corruptors? Is it a ghost nation something?

Praise the workers for their peaceful rallies so far! But for how long?

Poor respond from the government may lead to a bigger rally than ever, scheduled for Friday. That would be a combination of Monday and Wednesday rallies. Well, you'd better stay at home, except that your office is close enough!

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Bagir Manan: Il Capo della Supreme Court

Bagir Manan started his second term as the Supreme Court's chief justice Tuesday after a landslide election victory that drew a chilly response from legal watchdogs, The Jakarta Post wrote its headline today.

Meanwhile Kompas simply put cynical tittle...Supreme Judges still believe in Bagir...as 44 out of 48 supreme judges voted for Bagir to lead the network of what popularly known as court mafias. That's why I prefer the above title.
Some says Bagir's reelection is a proof of leadership crisis in Indonesian judiciary system and that Bagir is the best among the worst, while others, including minister for justice and human rights affairs Hamid Awaluddin, praised the election and says Bagir has the technical capability to fisx the corrupt system. Bagir himself admitted he's not the best.
During his first term, as The Post wrote it, Bagir presided over the controversial acquittal of former House of Representative speaker Akbar Tanjung in a graft case, cut the prison term of former president Soeharto's son Tommy Soeharto by five years without an explanation, and has also been accused of taking bribes from Soeharto's step-brother Probosutedjo.
The mission uncomplished. Bagir would serve two more years, enough time to accomplish the 'mission', to make sure none of the mafia members would live behind the bars.

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Berlian Laju on US$600 million actions

Listed giant shipping company PT Berlian Laju Tanker Tbk announced its plan to acquire shares in shipping companies and fleet development to cost more than US$600 million.
Berlian plans to purchase shares in shipping companies based in Europe with enterprise value up to Euro 200 million and add vessels through purchase or participation on vessels through newbuilds, second-hand vessels or fleet of vessels with total planned investment up to US$400 million.
The Europe acquisition would mainly on the shipping companies with transportation of liquid cargoes.

The financing for both major transactions would come from the company's internal funds and loans.

Berlian booked net income of Rp645.18 billion last year, jumped from Rp243.2 billion in the previous year. The company has total assets of Rp7.9 trillion as of December 2005, of which Rp5.899 trillion was non-current. Public shareholders control 54.52% of the company shares.

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