Audit problems at Telkom

PT Telekomunikasi Indonesia Tbk, the largest company by market capitalization (USD12 billion), announced two weeks ago that it would not meet the deadline of 2005 financial report which is tomorrow.

Why?

Because it has audit problem due to the changes in the accounting standard imposed in the country which pushed the telecommunication giant to re-adjust its assets.
"While the adjustment would not influence the income statement for 2005, we can't afford to have serious auditing problem at the company, especially if Telkom follow stock market regulator's suggestion to revise the report later on," said one analyst.
Surprisingly no detail information available for public investors about what's going on exactly. But it seems the asset swap between Telkom and Indosat (the second largest telecommunication player) back in 2002 is at the center of the audit issue.
The year 2005 auditor and 2002 auditor are from different accounting firms. KPMG for 2005, PricewaterhouseCoopers for 2002. The problem, none of these auditors willing to restate the 2002 report.
This is not the first time Telkom experienced audit problem. Telkom was pushed to reaudit the 2002 financial year.
Anyway, nobody expects Telkom would be like Enron, right?

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Indonesia government to implement e-biding

In a move to minimize corruption, president Susilo Bambang Yudhoyono signed a decree to implement e-biding system so all government transactions are transparent enough to any citizen interested in the procurement of services and goods.

National Development Planning Minister Paskah Suzetta said government will establish a website dedicated to government agencies, independent commissions, state-owned enterprises, local administrations, and companies owned by local or regional administrations. Under the decree, these organizations should announce all plans to procure goods and services in the website.

Indonesia government is ranked as the most corruptive nation in the world partly because of poor transparency in its procurement of goods and services. But e-biding should be more than just announcements.

In fact, in the last few years, some government-related agencies and state-owned companies have started to implement e-procurement system. Take for example Pertamina. But if you enter the website www.pertamina.com, you'll only find tender announcement in Indonesia language. That's not fair indeed.

The Upstream Oil and Gas Regulatory Body (BP Migas) at www.bpmigas.com is better, even though not all the tender announcement available in both Indonesian and English.

E-bidding or E-procurement should be designed as a user-friendly system that just needs a controlled password from users and buyers to get into the system. The system should also has full electronic audit trail archive that allows one to able to view every bid that has been submitted, by whom and when upon completion of the bid. The inclusion of the bidding history paves the way for a bidding process that is fair and ethical.

I believe, full e-procurement is not yet possible because electronic documents are yet to be given legal status in the Indonesian courts. Thus all key documents must still be handled in the conventional manner. So to make the e-bidding, e-tendering or e-procurement as an important system in combating corruption needs serious drafting of e-commerce bill. But as the first step, the new website would improve transparency. Good move.

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Kick-off: Six power plant projects

State-owned electricity monopolist PT Perusahaan Listrik Negara (PLN) has started to invite expressions of interest for prequalification of six independent power plant projects in Indonesia with combined generating capacity of 2,270 MW.

Those projects are:

1) Northern Seaside, Central Java: 2 x 600 MW, coal fired steam PP (completion date 2011).

2) Pasuruan, East Java: 1 x 500 MW, combined cycle (2010)

3) Eastern Seaside, East Kalimantan: 2 x 60 MW, coal fired steam PP (2010)

4) Northern Seaside, North Sulawesi: 2 x 25 MW, coal fired steam PP (2010)

5) Eastern Seaside, North Sumatra: 2 x 100 MW, coal fired steam PP (2010)

6) Northern Seaside, Bali: 2 x 100 MW, coal fired steam PP (2010)

As the monopolist of electricity distribution, PLN intends to purchase electricity capacity and associated energy generated by the above mentioned plants. The 150 kV or 500 kV associated transmission lines and substations shall be built by the developer and transferred to PLN as a special facility.

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Indonesia Corporations 2005 results

Indonesia's beer and cigarette producers make good money in 2005, positive growth from 2004. Manufacturers had bad year. Food and consumer goods recorded reduction of profit, except the milk producers. Energy companies and related services companies, shipping, and plantations were doing well. But the banks, while still profitable, feel the heat of increasing interest rate last year. TV made good money, but not my favourite newspaper and magazine Tempo.

Below are 2005 financial result of some Indonesian companies listed at Jakarta Stock Exchange (against 2004 in the brackets):
- PT Indofood Sukses Makmur Tbk, food: Profit Rp124bn (negative)
- PT Unilever Indonesia Tbk, consumer goods: Rp1.44 trillion (-)
- PT Energi Mega Persada Tbk, oil and gas: Profit Rp195bn (positive)
- PT Tambang Batubara Bukit Asam Tbk, coal produer: Profit Rp467 billion (positive growth)
- PT Bank Panin Tbk, bank: Profit Rp505 billion (negative)
- PT Bank Permata Tbk, bank: Profit Rp295bn (negative)

- PT Bank Negara Indonesia Tbk, bank: Profit Rp1.4 trillion (negative)

- PT Bank Artha Graha Tbk, bank: Profit Rp22bn (-)
- PT Sari Husada Tbk, milk producer: Profit Rp289 billion (positive growth)
- PT Humpuss Intermoda, shipping: Profit Rp 143 billion (negative growth)
- PT Malindo Feedmill Tbk, feed mill: Profit Rp47 billion (positive)
- PT Bakrie Sumatra Plantation Tbk, plantation: Profit Rp115 billion (positive)
- PT Bakrie & Brothers Tbk, holding company: Profit Rp292bn (positive)
- PT Asahimas Flat Glass Tbk, glass producer: Profit Rp212 billion (positive)
- PT Bhakti Capital Indonesia Tbk, brokerage firm: Profit Rp22 billion (positive)
- PT Indofarma Tbk, pharmaceutical: Profit Rp9bn (positive)
- PT Andhi Chandra Tbk, automotive: Profit Rp16bn (negative)
- PT Charoen Pokphand Indonesia Tbk, agriculture: Profit Rp41bn (positive)
- PT Pelayaran Tempura Mas Tbk, shipping: Profit Rp126bn (positive)
- PT Jembo Cable Company Tbk, cable manufacturer: Loss Rp2bn (negative)
- PT Sepatu Bata Tbk, shoes manufacturer: Profit Rp25bn (negative)
- PT Gudang Garam Tbk, cigarette: Profit Rp1.89 trillion (positive)
- PT Bentoel International Tbk, cigarette: Profit Rp108 billion (positive)
- PT Lion Metal Works Tbk, metal: Profit Rp19bn (negative)
- PT Surya Citra Media Tbk, media: Profit Rp65bn (positive)

- PT Tempo Inti Media Tbk, media: Loss Rp8bn (negative)
- PT Pan Brothers Tbk, textile: Profit Rp10bn (positive)
- PT Selamat Sempurna Tbk, component: Profit Rp60bn (positive)
- PT Siantar Top Tbk, food: Profit Rp10bn (negative)
- PT Toba Pulp Lestari Tbk, pulp: Loss Rp24bn (positive)
- PT Bank ANK Tbk, bank: Profit Rp11bn (positive)
- PT Voksel Electric Tbk, cable manufacturer: Profit Rp27bn (positive)
- PT Metrodata Electronics Tbk, electronic: Profit Rp16bn (positive)
- PT Bank Swadesi Tbk, bank: Profit Rp11bn (positive)
- PT Tigaraksa Satria Tbk, distribution: Profit Rp19.5bn (positive)
- PT Panin Sekuritas Tbk, brokerage firm: Profit Rp31bn (positive)
- PT Petrosea Tbk, oil & gas: Profit Rp83bn (+)
- PT Sucaco Tbk, cable manufacturer: Profit Rp56bn (+)
- PT Ultrajaya Milk Industry Tbk, milk: Profit Rp4bn (+)
- PT Pembangunan Perumahan Tbk, construction: Profit Rp66bn (+)
- PT Citra Marga Nusaphala Persada Tbk, toll road operator: Profit Rp81bn (-)
- PT Multi Bintang Indonesia Tbk, beer producer: Profit Rp87bn (-)
- PT Delta Djakarta Tbk, beer producer: Profit Rp56bn (+)
- PT Duta Pertiwi Nusantara Tbk, chemical: Profit Rp4bn (-)
- PT Ekadharma Tape Industries Tbk, plastic: Profit Rp5bn (+)
- PT Cipendawa Agroindustri Tbk, animal husbandry: Profit Rp0.9bn (-)
- PT Wahana Phonix Mandiri Tbk, textile: Profit Rp2bn (+)
- PT Siwani Trimitra Tbk: Loss Rp7bn (+)
- PT Pudjiadi and Sons Tbk, property: Profit Rp2bn (-)
- PT Asiaplast Industries Tbk, plastic: Loss Rp4bn (+)
- PT Kresna Graha Sekurindo Tbk, brokerage firm: Profit Rp6bn (-)
- PT Gema Grahasarana Tbk, interior & manufacturing: Profit Rp4bn (+)
- PT Intraco Penta Tbk, heavy equipments: Profit Rp18bn (+)

- PT Duta Anggada Realty Tbk, property: Profit Rp197bn (+)

- PT Fatrapolindo Nusa Industri Tbk, plastic: Profit Rp57bn (+)

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Dong Yang expands Indonesia facility

PT Dong Yang Electronics Indonesia, a subsidiary of South Korea's Dong Yang Electronics Co Ltd, would expand its plant in West Java, Indonesia with additional investment of US$10.98 million. The new facility will produce 1.8 million sets of PCB assembly absorbing 60 employees.

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Gudang Garam down to #2

PT Gudang Garam Tbk is no longer the largest cigarette producer in Indonesia. The company's 2005 sales only reached Rp24.29 trillion or US$2.47 billion, slightly below PT HM Sampoerna Tbk at Rp24.66 trillion or US$2.5 billion.
Gudang Garam also only booked net profit of Rp1.89 trillion last year or US$211 million, a 5.59 percent growth from Rp1.79 trillion in 2004, but well below Sampoerna at Rp2.383 trillion or US$242 million last year.
But Gudang Garam's total asset as of December 2005 was Rp22.128 trillion or US$2.25 billion, almost twice of Sampoerna's Rp11.93 trillion or US$1.21 billion.
Why?
Partly because of the acquisition of Sampoerna by Philip Morris last year. Sampoerna's subsidiary PT Panamas also sells Marlboro following the acquisition.
Wonowidjojo family who controls cigarette producer PT Gudang Garam Tbk has been routinely appeared in Forbes rich list for many years. In this year's list, Rachman Halim Wonowidjojo, is listed as the richest man in Indonesia with US$2.5 billion of net worth. That might not exactly true especially if Forbes use Gudang Garam as the foundation of the analysis. Why?
Gudang Garam was established in 1958 by ethnic-Chinese businessman Surya Wonowidjojo alias Tjoa Ing Hwie or Tjoa Jien Hwie.
Surya's children are Rachman Halim (Tjoa To Hing), Juni Setiowati (Tjoa Jiet Hwa), Sumarto (Tjoa To Seng), Wurniati (Tjoa Kiet Lian), Susilo (Tjoa To Bing), Sigit Sumargo, Sujati, and Tjoa Sun Tie.
Surya died in 1985 and was replaced by his eldest son, Rachman Halim.
Related companies:
1) PT Trias Sentosa Tbk
2) PT Bank Halim
3) PT Karyadibya Mahardika (KM)
4) PT Hari Mahardika Usaha

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PGN profit jump 82 percent

State-owned gas distribution and transportation company PT Perusahaan Gas Negara (PGN) Tbk booked net profit of Rp862 billion or US$87 million last year, jump 82 percent from Rp474 billion in 2004.
According to its financial result published today PGN recorded Rp5.43 trillion revenue or US$552 million in 2005, increased almost 22 percent from Rp4.46 trillion in 2004.
The company booked gross profit of Rp2.78 trillion and operating profit of Rp1.55 trillion with total assets as of December 2005 at Rp12.57 trillion or US$1.28 billion.

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Indosat profit slightly down

The second largest telecommunication provider PT Indosat Tbk recorded slightly reduced profit at Rp1.62 trillion last year against Rp1.63 trillion in 2004. In US dollar term, Indosat's net profit actually slowed down 5 .7 percent to US$165 million from US$175 million.
Indosat's revenue increased 11 percent from Rp10.43 trillion to Rp11.589 trillion, mainly due to significant increase in cellular segment of 17.7 percent amid the competition and consumer cut their communication expenses.
While the company's operating expenses grew by 9.7 percent last year, Indosat's operating income improved by 14 percent in rupiah. The company's financing cost increased significantly last year by 20 percent.
So with lower profit, is it a sign that Indonesian cellular market has been off the peak? Where Indosat would go with the new players increasingly aggresive to bite the market?

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Holcim to build new US$300 million plant

PT Holcim Indonesia Tbk, a subsidiary of Holcim, is embarking on a new cement plant project in Tuban, East Java that may cost US$300 million of investment, Detik.com reported.
Holcim, currently the third largest cement producer in Indonesia, is looking for internal and external funding for the project.
Feasibility study on the project is expected to complete by July. The new plant will have installed capacity of 3 million tones per year.
Indonesia currently has combined capacity of 45 million tones per year with utilization rate of 90 percent or 42 million tones output. Domestic demand last year was 30 million tones and is expected to grow 10 percent this year.
PT Semen Gresik Tbk, the largest producer, is also preparing to construct a 2.5 million tones per year plant sometimes next year. Gresik's subsidiary PT Semen Tonasa will also build a 2.5 million tones per year plant in South Sulawesi.
Egyptian Orascom, meanwhile, plans to build a 2.5 million tones cement plant in Indonesia this year.
But without significant improvement in the implementation of infrastructure projects, I'm afraid these expansion programs would only worsen the industry's future.

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The brawl over Adaro

Beckkett Pte published half-page announcement in some Indonesian newspapers on Monday. Beckkett warned all parties not to approve or endorse any actions related to the disputed shares of PT Adaro Indonesia, the largest coal mining company in the country.
Why?
Because, Beckett lawyer Todung Mulya Lubis said, his client want to get back the Adaro Indonesia shares sold by Deutsche Bank to PT Dianlia in 2001. Why? Because the company believes the price wasn't right, too low. Dianlia acquired 40% shares of Adaro at US$44 million from Deutsche Bank after Beckkett defaulted on US$110 million loan pledged with Adaro shares. Beckkett seeks a claim for damage at the amount roughly US$400 million. Imagine that number, Beckkett could buy all the newspapers in the country with every day announcement one full page.
Was the deal really too low?
Combination of China's increasing demand for energy and the Iraq war contributed to step increase in oil price and other energy sources. Without one of these two significant factors, the oil price would still increase but not at the pace like what's happened in the last three years. The Iraq war was a big surprise for the energy market, while China factor was well calculated.

As the oil price moves into crazy high, alternative source of energy also increased significantly. Natural gas has been closely linked to oil. While the price of coal is sometimes linked to the oil price, the actual situation proves that this belief is less true than claimed. But I have to say the war has changed the situation.
According to Energy Ministry's statistic, Indonesia's coal production increased significantly from 53.8 million tones in 1997 to 132 million tones in 2004. During this period, export also grew from 40 million tones to 92 million tones.
Adaro's output and export also moved in the same direction. The company's output was only 9 million tones in 1997, but had surpassed 24 million tones in 2004. It's export doubled from 7.98 million tones to 15.1 million tones in the period.
During this period, a lot of changes in Indonesia's coal mining business. PT Bumi Resources acquired 80 percent shares of PT Arutmin Indonesia from BHP Billiton in October 2001 at US$148.5 million. In 2003, Bumi also acquired another 20 percent shares of Arutmin at US$35 million.
Acquisition of 80 percent shares of Arutmin with 9.5 million output in 2001 could be seen a better deal than the Adaro's 40 percent share with time difference of just few months later. But Adaro deal could be considered better than the Arutmin 20 percent acquisition in mid-2003.
In the same year, Dianlia bought New Hope's 41 percent stake in Adaro for US$378 million. In June 2005, a consortium of international banks and strategic investors bought Adaro from Dianlia for about US$950 million. The new foreign investors include the Government of Singapore Investment Corp., the Kerry Group, and the private-equity arms of Goldman Sachs Group Inc and Citigroup Inc. How about the price of US$10.5 million for 34 percent shares in Indominco (sold by Indocement in 2002) with coal output of 5.3 million tones?
Imagine the recent acquisition price of KPC and Arutmin at US$3.2 billion with combined coal production of the same size with Adaro's 2004 output. We may say the Adaro deal last year was way to cheap, right? Or we could say the KPC-Arutmin deal is way too expensive. But that could be considered fair if we compare the coal price in 2001 at US$17 per ton against the highest of US$54 per ton as of September 2005, even though dropped to below US$40 per ton in November 2005.
Coal price is one thing. How about intangible values such as macro-economy stability, security, or even the step increase in stock market index. Take Jakarta's Composite Index which grew from 475 in February 2002 (when Dianlia acquired Adaro shares) to 1.311 yesterday's closing?
Who will make the right decision on this valuation dispute? The court?
FYI, few weeks ago, in Singapore High Court session, a noted Indonesian economist, who wrote a column at Kompas daily testified as an expert, reportedly, upon Beckkett's request. Some Indonesian reporters were also there on the case in Singapore, with expenses paid by at least one public relations group linked to the plaintiff.
The fact that Indonesian Supreme Court rulling neither endorsed nor rejected the lower court rullings might reflect the complexity of the case. And that might open an out-of-court settlement. But as there is no sign that parties involved in the dispute would take the route, we should wait the Singapore Court verdict first. This is gonna be a long legal battle.

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Why Bumi Resources need debts?

Just days after it signed the divestment of PT Kaltim Prima Coal and PT Arutmin Indonesia at US$3.2 billion, PT Bumi Resources Tbk signed new loan of US$200 million with Credit Suisse First Boston (CSFB). CSFB also arranged funding for PT Borneo Lumbung Energi which acquired KPC and Arutmin from Bumi.
It's unclear of how much of the US$3.2 billion that supported by loans arranged by CSFB. But sources said Borneo provided US$100 million, Marubeni Corp at US$900 million, and the rest from CSFB arranged loans.
What's weird is the latest US$200 million loan to Bumi to be paid in July 2006 when Bumi would merge with PT Energi Mega Persada (EMP).
I really don't get it. Bumi is expected to get US$2.7 billion from KPC and Arutmin divestment as US$500 million of proceeds will be used to pay Bumi's debts. Surprisingly Bumi said the it would use the US$200 million loanto strengthen its working capital.
Anybody can explain what's going on exactly?

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The burden of informal payments at Indonesian ports

Without a comprehensive research, it's just too easy to conclude that informal payments at Indonesian ports are huge enough to make the country the costliest in the world when it comes to shipping in or out goods.

I've experienced that last year when I shipped in personal effects (mainly used books and household stuffs) from Berkeley, USA. I found the shipping cost from San Francisco to Tanjung Priok (Jakarta's main port) was US$475 while the cost to get the stuffs out of the port was US$550.

Transportation minister Hatta Radjasa admitted the cost at Indonesian ports are the highest in the world. But what's the government to reduce the cost is even more important.

May be government should start with this simple adjustment of documentation fee. For March 2006, documentation fee per bill of lading (B/L) in Indonesian ports is US$40, way above Cambodia (US$15), China (US$15), Singapore (US$30), or Philippine (US$30).

Even though government claimed the terminal handling charge (THC) had been cut to US$75 per 20 feet container since November last year, some shipping companies still quotes US$150 for April 2006 arrival. Shipping agents also quotes US$230 per 40 feet container in Jakarta, way above US$190 in China.

Why? Because we never serious in tackling the informal payments. This is not the burden for exporters but the economy as a whole.

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SMART book Rp304 billion profit

PT SMART Tbk, food and agribusiness unit of Sinar Mas Group, booked net profit of Rp304 billion last year against net loss of Rp107 billion in 2004.
According to its published financial report today, SMART recorded sales of Rp4.656 trillion (US$474 million) last year, almost 10% growth from Rp4.274 trillion in 2004. SMART booked gross profit of Rp722.32 billion against Rp616 billion in 2002.
PT Smart Tbk is a subsidiary of Golden Agri-Resources Limited (GAR), one of the largest Singapore's listed oil palm plantations company in the world. This relationship benefits PT SMART with economic of scale in research and development, sourcing of raw material, and access to a wide domestic and international marketing network. GAR is the subsidiary of Asia Food & Properties Ltd controlled by Sinar Mas Group.

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Sampoerna booked net profit US$242 million

Cigarette producer PT HM Sampoerna Tbk, a subsidiary of Philip Morris, booked net profit of US$242 million in 2005 or Rp2.383 trillion, increased significantly from Rp1.99 trillion in 2004.

According to its financial report published today, Sampoerna recorded Rp24.66 trillion sales last year or US$2.5 billion, jumped from Rp17.64 trillion in 2004.
As costs of goods sold also jumped from Rp11.84 trillion to Rp17.44 trillion, Sampoerna booked gross profit of Rp7.22 trillion last year against Rp5.8 trillion in 2004.
Operating expenses also grew from Rp2.6 trillion to Rp3.28 trillion, resulting in operating profit of Rp3.94 trillion in 2005 against Rp3.18 trillion in 2004.

Sampoerna has total assets of Rp11.93 trillion (US$1.21 billion) as of December 2005.

Amazing. The smokers gave so much for this company. The state got the most, I bet. The US$2.5 billion sales is net sales, most likely after the excise tax of 33 percent. The state got at least US$1.2 billion from tobacco excise, plus the corporate income tax of Rp1.28 trillion, plus dividend tax later on.

What about non-smokers?

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Motorcycle sales to drop 25%

Indonesian motorcycle sales would likely to drop 25% in the first quarter 2006 due to reduced consumer spending, Antara reported.
Johannes Hermawan, director of PT Astra Honda Motor, the largest motorcycle producer in the country, predicts the Q1 sales would only reach 862 thousands unit against 1.151 million units in Q1 2004.
The Indonesian Motorcycle Manufacturers Association (AISI) announced early this year that motorcycle sales in 2005 rose 31.2 percent to 5.1 million units from 3.89 million units in 2004. Industry analysts say the dramatic increase in sales is a result of improving consumer sentiment during the fast half of 2005 and a shift to more fuel-efficient forms of transportation following early October fuel price increases.
AISI, however, predicts that higher interest rates, inflation, and reduced consumer spending will result in 2006 motorcycle sales of fewer than 3 million units.
Hermawan said Astra was targeting 52% market share. In the first quarter Astra's market share would be 50% the most. Weak demand is predicted to continue until the end of first half.

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A fairer share of Freeport

Last week Freeport McMoRan Copper & Gold Inc (FCX), the parent company of PT Freeport Indonesia, announced that chairman James R. Moffett received a bonus of US$19.4 million last year on top of his US$2.5 million salary. All in all, Moffett made US$21.9 million last year.
Moffett also has 1.5 million stock options with an exercise price of US$37.04 million or US$55.56 million.
Meanwhile President and CEO Richard C. Adkerson got restricted stocks of US$18 million last year. Total compensation for Adkerson last year was US$23.7 million. It's fair for Moffett, Adkerson, and Freeport executives, media reports said, because Freeport-McMoRan's net income for the full year 2005 rose to $934.6 million.
But is it fair for Papuans?
Look at the company's total revenue os US$4.179 billion last year. Most of it was the contribution of Papua operation. With copper sales of 1.456 billion pounds at average price of US$1.85 per pound, Papua gave US$2.69 billion. Gold sales of 2.79 million ounces at US$456 per ounce from Papua gave US$1.27 billion. Plus silver sales of US$30 million. Altogether, Papua contributed to US$3.99 billion.
The company argued that it's total payment to Indonesia government was Rp11 trillion last year or around US$1.2 billion. Is it fair enough? That's the question of protesters against Freeport in the last few weeks, despite the fact that somebody might provoke or take the benefit out of their movement.
"I don't think it's an indication of a rise in antiforeign investment or something like that," Dr Boediono, coordinating minister for the economy told Dow Jones over the weekend as quoted by The Jakarta Post on Saturday.
"It's an expression among the public for a fairer share of (investment) benefits (and) it's legitimate demand that we, the government and the business community can work together to address," he said.
Boediono dismissed fears the protests represented anti-US sentiment or xenophobic sentiment, anti-foreign investment, anti-American, or anti-American investment.
Hope Boediono's right. And I believe Papuans have the chance to get a fairer share out of Freeport's fortune. Renegotiation and rearrangement are always the better than bloody protests. Hope that Moffett and Adkerson aware of the situation. Otherwise they would have difficulties to exercise their sky-high stock options.
On government side, it should be made clear the implementation of Article 34 of the Law No. 21/2001 regarding Special Autonomy for Papua. The article stiputales, among others, that Papua receives 80 percent of the revenue from mining operation.
Central government should announce its total income from Freeport so people knows exactly how much they should get. On the other hand, Papua administration should also disclose to public how they use the money from Central Government amid reports of rampant corruption at the regional administration level.
Freeport is not the only source of wealth that need to be audited comprehensively. Based on the Article 34 of the Law No.21/2001, Papua gets tax sharing as follows:
- Land and building tax: 90%
- Acquisitionn of rights over land and building: 80%
- Individual Tax: 20%
Papua also gets natural resources revenue sharing as follows:
- Forestry: 80%
- Fishery: 80%
- Mining in general: 80%
- Oil: 80%
- Gas: 70%

A comprehensive audit on all the Central Government income from Papua from all business activities in forestry, fishery, mining, oil, and gas would give us an idea how to improve the region's economy and Papuans prosperity.

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Indonesia-Australia diplomatic conflict

Diplomatic relations between Indonesia and Australia entered a new low with Indonesia's decision to recall its ambassador to the neighbouring south. The decision was made in response to Australia's decision to give temporary protection visa to 42 asylum seekers from Papua province.
The Indonesian government is shocked, disappointed by and regrets the Australian government`s move in granting temporary visas to 42 Indonesian citizens who had been seeking asylum in Australia, a senior minister said.

"By doing so, Australia is blatantly ignoring the feelings and sensitivities of the Indonesian people," Coordinating Minister for Political, Legal and Security Affairs Widodo AS said after attending a limitd cabinet meeting here Friday, Antara reported.

The Indonesian House of Representatives (DPR) called on the government to recall immediately its ambassador to Australia following Canberra`s move to grant asylum for 42 Indonesian citizens from Papua.
House Speaker Agung Laksono revealed the DPR`s appeal at the closing of the House`s Third Term of Sessions at the DPR building here on Friday.
Foreign Affairs Minister Hasan Wirajuda said president Susilo Bambang Yudhoyono endorsed the decision. The country is waiting Canberra's respond.
ABC reported that Labor's Kevin Rudd says Indonesia's decision to recall its ambassador is regrettable and he has urged diplomatic restraint.
The Papuans are to be relocated to Melbourne from a detention camp on Christmas Island, while the case of one remaining applicant is to be investigated further.
The asylum seekers are pro-independence activists and their families who spent five days at sea in a dugout canoe to reach Australia saying they had been tortured and feared for their lives if they were sent back home.
Meanwhile, Foreign Affairs Minister Alexander Downer says a decision to grant visas to a group of people from Papua does not undermine Australia's position that the province must remain part of Indonesia.
Australia and Indonesia have had other differences. The Australian government and groups within the country have sometimes criticised Indonesia's performance on human rights, while Indonesia has at times seen Australia as self-righteous and a knee-jerk ally of the United States.
Relations hit a low in 1999 when Australia led a U.N. force into East Timor to stem violence after the territory voted to break away from Indonesia.
But ties had warmed in recent years, especially as the two cooperated on anti-terrorism efforts following an October 2002 bombing attack in Bali that killed 202 people, many of them Australians.

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The president's belly-button allergic

President Susilo Bambang Yudhoyono surprised people with his joke today. He said he doesn't like to see someone's belly-button. He hates to see woman with exposed belly-button, in public off course.

"Probably I'm an old-fashioned man. I don't like seeing the belly-button. It's annoying. Once I rejected a singer with such an exposed belly-button at the State Palace," president said with his shy smile, Detik.com reported.

Why the president discussed about belly-button? Well, he was addressing an assembly of Gerakan Mahasiswa Nasional Indonesia (Indonesia National Students Movement, GMNI) at Sahid Hotel, Jakarta today.

He was discussing the controversy over Anti-Pornography and Porn Actions Bill. While he didn't clearly expressed his stance on the controversy, the country has the right to decide what's fall into pornography or porn actions. But, is the belly-button allergic a sign that the president support the Anti-Pornography Law?

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Bumi needs new name like No Resources Co.

In a quiet move that only limited shareholders (most likely controlling ones) aware of, PT Bumi Resources Tbk offloaded two of its key assets PT Kaltim Prima Coal and PT Arutmin Indonesia to PT Borneo Lumbung Energi for US$3.2 billion.

Those who got the early information or involved in the transaction had taken huge gain out of the transaction. Look at the BUMI's share price prior to the transaction (graph from Bumiresources.com). What actually is the benefit of this transaction for public shareholders? Why Bumi decided to sell KPC and Arutmin to Borneo and not other investors? Who are the beneficiary owners of this transaction? What's left? Who got the money and how much? Did they ever tell or ask approval of public investors about the material transaction? Did they tell Bapepam (Indonesia's SEC)?

All of us knew after the fact that Bumi had appointed two securities firms, PT Danatama Makmur and PT JP Morgan Securities Indonesia, as advisors for the transaction. We also knew after the deal had been done if that's in line with the company's business strategy to become Indonesia's best performing energy and natural resources company.

Surprisingly market authorities not just did nothing to investigate what's going on but welcome the transaction even before they do their homework. "So many questions are left unanswered, but authorities seems to put a blind eye. The transacation has clearly screwed up minority investors," said one analyst.

Without KPC and Arutmin, Bumi Resources is a shell company without assets. That's why I suggest the company to consider a new name like PT No Resources Tbk. A friend suggest the name of PT Shell Resources Tbk, but I said the real energy giant Shell will surely take legal action on that.

Ok, let's go back to the transaction. Bumi Resources got US$3.2 billion. What to do?

- Pay debts to PT Energi Mega Persada Tbk for US$500 million. And then merger in July with Energi Mega. Imagine how Energi Mega's public investors or minority investors. They'll be screwed up again.

- Pay out the bonds early at US$600 million.

- Embarks on US$3 billion coal-to-liquid project with SASOL among others. But SASOL denied it straight. So forget about it for a while. The CTL project is a far away dream.

- Investing in new businesses such as bio-mass, upgraded brown coal, briquettes, bio-diesel, and power plants. But all of these are long-term plans.

What the readers said about the deal?

An old friend wrote this two days ago:

It would seem to be a handy tool to allow the Bakries's to leverage the company up to the hilt. If you cannot have a standard bank to suck up investors money to recycle in your business, buy yourself in to a "so called" investment bank. I can only conjecture that this is a sham transaction merely to leverage the coal assets to the hilt whilst prices are high.

I would guess that Marubeni have agreed to a certain offtake agreement for X years to support the loan and at the end of the day it is Bakrie still with controlling shareholding.With the ongoing unrest amongst foreign resource companies the Bumi policy of getting foreign assets at bargain prices at moments of unrest could be unfolding again. I can only guess the coal to liquids is a very obvious red herring.

And this...

I thing coal to liquid is rediculous plan of Bumi Resources. If They want to leap its tentacles to coal to liquid, sol why did they sell two 'diamons'????Are they sick?

Another friend...

It seems like a financial engineering done by Bumi Resources. Along with huge profit from the sale, Bakrie Family who owns Bumi Resources has dreamed to enlarge the company as well as Australian BHP Billiton and Xstrata.I am sure that Borneo or Samin Tan is just a middle man who is willing to sell KPC and Arutmin to Bumi and chip in the assets into Energi Mega Persada.Bumi will offer a share swap for Energi Mega's shareholders to support the giant making of integrated energy company, PT Bumi Energi.

Or this one from a real 'old' friend:

Samin Tan's comments this week that "we will not sell Bumi again for the time being" shows that Renaissance has not only bought the two Bumi mines through Borneo Lumbung Energi but is also calling the shots in Bumi, ergo, is VERY close to the Bakries, a persistent rumour that Bakrie spokesmen have consistently denied to local media several times.

This is highly significant. WHY? Because it puts the Bakrie's right back in the middle of all the action through Renaissance and its success with the PPA.

Assuming that Beckkett loses the Singapore action, and Edwin hooked up with Tan, Renaissance and the Bakries would still have 20% of Indonesia's biggest coal producer with the Adaro mine, 40% of which was bought in Deutsche's firesale of the assets! Renaissance is well in with the PPA which holds all the unsold IBRA assets pledged to the government by indebted tycoons.

Renaissance can broker funds into deals that many lenders would not touch and allow Bakrie free rein with his supreme lobbying ability in the corridors of power and with the Group's ability to leverage big deals with litle capital. Also with Renaissance up front, but not obviously linked, the Bakrie Group need not fear any of the stigma attached to them for being, at one time, one of Indonesia's biggest indebted conglomerates.

These are smart, smart guys (Tan and the Bakries) hence my suggested reemergence of the Indonesian version of the Asia tigers (albeit formerly applied to Asian tiger economies of old). Acting together they have the Midas Touch. Finally, note the resurrection of the pribumis, not the Chinese. Indonesian resources owned and operated by pribumi Indonesians? Amen, I'll drink to that.!

As for me,

I need to meet Bumi Resources management, advisors, analysts, buyers, and securities exchange authorities to get the answer of all my stupid questions. Appreciated all the comments, and would love to have all of you answer some of the questions.

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Aneka Tambang

Mining company PT Aneka Tambang (Antam) Tbk recorded net profit of Rp841.93 billion last year, slightly increased from Rp810.24 billion in 2004. But in US dollar terms, Antam's profit actually slightly reduced by 1.85% from US$87.22 million to US$85.6 million last year as the rupiah depreciated against US dollar by around 6% last year.

Antam, 65% of its shares owned by government, booked net sales of Rp3.287 trillion (US$334 million), 15% growth from Rp2.858 trillion in 2004. Meanwhile its cost of goods sold increased from Rp1.497 trillion to Rp1.827 trillion, resulting in gross profit of Rp1.46 trillion last year (Rp1.36 trillion in 2004).

As the company's operating expenses grew significantly from Rp262 billion to Rp324 billion, Antam booked operating profit of Rp1.135 trillion (US$115 million) last year (US$118 million in 2004).

Antam has total assets of Rp6.4 trillion (US$651 million) as of December 31, 2005. The company is projecting US$400 million revenue this year with the resume of FeNi III plant that would boost ferro nickel output and a possible higher price in the world market.

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Astra's profit decreased 5 percent

The largest automaker and distributor PT Astra International Tbk booked total sales of Rp61.17 trillion (almost US$6.22 billion) in 2005, increased 36 percent from Rp44.92 trillion (US$4.83 billion) in 2004. Sounds good. But look at the sales in US dollars, the actual growth was just 28.77 percent as the rupiah depreciated around 6 percent against US dollars last year.
As costs of goods sold jumped 37 percent, Astra booked 33 percent increase in gross profit at Rp13.72 trillion. Operating expenses also increased by 37 percent due to huge increase in general and administration costs. As a result Astra booked Rp6.41 trillion (US$652 million) of operating profit, a growth of 28.9 percent from 2004.
With significant growth in the contribution of associated and jointly controlled entities at Rp2.16 trillion, Astra's performance actually more 'real' than the previous year with almost Rp575 billion of gain in foreign exchangetranslation.

All in all, Astra then booked net profit of Rp5.457 trillion (US$551 million), 0.96 percent higher than Rp5.40 trillion (US$581 million) even though in US dollar the company's profit actually lower by 5.16 percent.

With the huge drop in automotive sales in the first three months of 2006, Astra is facing a difficult year.

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YKK Zipper expands Indonesia facilities

PT YKK Zipper Indonesia---a subsidiary of YKK Corporation, Japan, the largest zipper producer in the world, is expanding its facility in Cibitung, West Java, Indonesia with US$43.27 million investment.

The new plant will produce 700 million meter of tape, 3.500 t/y of monofilament, 30 million meter/year of hook and loop fastener, 320 million meter of zipper, and 500 million pcs of slider per year. The new plant would absorb 1,301 workers.

PT. YKK Zipper Indonesia is one of the subsidiary at YKK Corporation. Japan, established in January 1972 and started operating effectively in January 1974 with total employees of 1,912 persons.

PT. YKK Zipper Indonesia runs in the production of Zipper with its components , and also producing Quicklon (Hook & Loop Fastener), Elastic tape, Metal Notions, Buckle, Yarn, Machine parts & Moulding with two factories in Bogor & Cibitung, Bekasi.

PT Adityawarman is YKK's partner in the company with 75% output for export market.

YKK's other subsidiaries in Indonesia are PT YKK Zipco Indonesia (3 factories in Cibitung, Bekasi, with 652 employees) and PT YKK Fasco Indonesia (Hook and Loop Fastener manufacturer).

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Military to pull out of Freeport mine

Koran Tempo reported today that Indonesian military will withdraw its troops from Freeport's mining operation in Papua.Quoting National Police Chief General Sutanto, the newspaper reported that police mobile brigade (Brimob) would replace the military (TNI) gradually in protecting the mining operation.

Military Headquarter admitted the withdrawal should have started early this month. There are 500 to 600 military personels protecting the mine.

Hopefully this time the military deliver its promises. Three years ago, military also said it wants to withdraw troops guarding the country's bigges mining.

The withdrawal of military guards from 'vital projects' has been a major demand of human rights defenders in both West Papua and Aceh. In Aceh military officers guard the natural gas installations of the giant US oil corporation, ExxonMobil. Their presence has been linked to a series of gross human rights abuses which form the basis of a court case in the US, filed by the International Labor Rights Fund.

In West Papua, communities and NGOs concerned about the developments at Freeport and at BP's huge Tangguh gas and gas processing project planned for Bintuni Bay, will be watching closely to see whether Endriartono really means what he says.
Military withdrawal would not mean that the notorious police mobile brigade (Brimob) would also give up their lucrative security deals to guard company facilities. In fact, as reported by Koran Tempo today, their presence would be even more significant in the mining operations.

Military protection on Freeport became major topic late last year when The New York Times published its investigation over payments made by Freeport Indonesia to senior military officers.

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Leighton to expand US$68 million in Indonesia

PT Leighton Contractors Indonesia, a subsidiary of Leighton Holdings Limited, would expand its general contracting for mining projects in Minahasa, North Sulawesi and Kutai, East Kalimantan with additional investment of US$68 million. The expansion project would create 220 new jobs with annual revenue target of US$50 million.

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Bumi Resources & EMP merger in late July

It's a chaotic situation at PT Bumi Resources Tbk, a company with almost no significant asset after it divested two major assets, PT Kaltim Prima Coal and PT Arutmin Indonesia, two of the largests coal producer in the country.
After series of plans announced, including the US$3 billion coal-to-liquid project with South Africa's SASOL or development of some oil fields, Bumi Resources announced today the plan to merge with oil and gas producer PT Energi Mega Persada (EMP). Both Bumi and EMP are closely associated with Bakrie Family. The merger will be conducted through share swap mechanism.
The merger is scheduled for late July this year, despite negative covenant at EMP in which capital market authorities forbid the company of conducting any corporate action in one year since its rights issue in September 2005.
Surprisingly Bumi claimed that capital market authorities had endorsed the plan. I really don't understand, what is the definition of a corporate action, and whether the merger is not such kind, and why the share swap mechanism would make any difference to authorities?
It's remain unclear also on what Bumi will do with the US$3.2 billion proceed from the divestment of KPC and Arutmin. I believe the US$3bn CTL project is still far away and it's impossible to spend all the money there.
Bumi had announced it's US$3 million acquisition of PT Pendopo Energi, a coal mining concession owned by Barito Group. But many more to come, I guess. Fasten your seatbelt!

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Jakarta subway, another 30 years of discussion

It's just ten days away for Indonesia government to decide, whether to accept Japan's offer to finance the long-awaited mass rapid transportation system (MRT) to be built in super-crowded Jakarta. March 31 is the deadline as Japan will start the new fiscal year.
Japan Bank for International Cooperation (JIBC) has repeatedly offer low-interest rate loans, this time 0.4% over 40 years of payment and 10 years of grace period. I would say the offer is lot better than the recently issued US$1 billion global bonds which bears 7.75% interest per annum.
Jakarta Governor Sutiyoso seems want to close his 10-year tenure (next year) with something spectaculer to remember. So he wrote president Susilo Bambang Yudhoyono recently asking government's decision on the MRT project. (This one is probably more important than Sutiyoso's proposal to create a Megapolitan Administration)
He doubted the plan of some state-owned enterprises to takeover the project. "Even we can't build good schools building," he said with cynism.
That's not the first statement of Sutiyoso. I remember back in 2001, Sutiyoso once claimed the construction of MRT project to be started that year at the cost of US$1.75 billion and would absorb 60,000 workers. He should make this happen now.
Three years ago, JBIC agreed to provide US$767.66 million funding for the MRT system at higher interest rate of 0.95%. So, if Sutiyoso was right with the latest offer of 0.4%, this one could significantly cut almost half the interest payments over 30 years time.
I wonder if government could make decision this time. But to my surprise, government rejected Japan's offer on disagreement over terms of the loans (tied loans) and Indonesia's demand to have 75% local content in the project.
Fourteen years ago, when I was a reporter for technology beat, then minister for research and technology BJ Habibie (former president) was the one who heavily supported the country's long-awaited mass rapid transport system. I wrote many articles about the subway system many times only to be upset over and over. Even some of them with exact timetable that the MRT would be in operation by 2000.
I agree 100% with the MRT system, probably due to personal experience with Underground in London, UK or Bay Area Rapid Transport (BART) in Bay Area, San Francisco, USA. That's why I never fed up imagining Jakarta would have such system some day.
But, my goodness, 30 years have passed, we're keep talking about it. That's why Jakartans love to call MRT as a Masih Rapat Terus (Still Under Discussion) project.
Imagine that, the idea was first floated in the 1970s and later during the administration of governor Surjadi Soedirdja, was last postponed after the financial crisis in 1997.
Transportation experts have repeatedly said that the MRT was one of the most effective solutions to tackling chronic traffic congestion in the capital, although they also said it would be extremely expensive.
Other observers say the city's messy underground sewer, power and telecommunications networks, its unstable soil structure and its recurrent flooding problems could turn any underground project into an engineering nightmare. The engineering fears are real given that Jakarta is basically a flood plain but Bangkok has been able to do it.
Imagine the congestion in the capital when the construction starts. But I think people would not mind at all, say for three years, as long as they know exactly MRT could make their life better off.
So what's the problem then?
Well, back in 1994, Habibie signed a memorandum of understanding with two Japanese companies, Sumitomo and Itochu, to build the MRT.
In 1995, when Surjadi was the governor, he signed the MoU with Japan European Group which consisted of PT Citra Lamtorogung (controlled by Siti Hardiyanti Rukmana, former president Soeharto's eldest daughter), PT Bakrie Investindo (controlled by Aburizal Bakrie, currently the coordinating minister for people's welfare),Itochu, and Ferrostaal (Germany).
Other investors worth mentioned are Ciputra Group, Lippo Group, Bukaka Group (partly owned by VP Jusuf Kalla's family) and Suthamtabie (a company owned by the family of Habibie).
I guess, as long as government can't settle the issue of who would be the investors in this project, we should wait few more decades, or even it will never come.
This time, government turned down Japan's offer for funding on local content issue, in which Indonesia government demanded 75% of the value of the project should be provided by local companies. It means that we have to wait 30 more years to really have MRT in place.
Others said intensive lobby from automotive producers may also block the MRT project. But if they book lower car sales in Jakarta, like in the last three months, blame the traffic!

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Bumi & Sasol on coal-to-liquid

This is the second announcement in less than six months of ambitious development of coal-to-liquid (CTL) technology in Indonesia. Pertamina was the first with Accelon as the partner in a planned US$6 billion CTL project to be located in East Kalimantan.

Today, PT Bumi Resources Tbk, which just offloaded two major coal producers PT Kaltim Prima Coal and PT Arutmin Indonesia at US$3.2 billion, formally announced its plan to build a 80,000 barrel per day CTL plant in South Sumatra. Bumi admitted it's in discussion with South Africa's Sasol as technology partner.

SASOL, the world's largest producer of CTL-based synthetic diesel, is building a 34,000 bpd CTL plant in Qatar and conducting feasibility study to build 2 x 80,000 bpd CTL plant in China. These China projects would cost US$6 billion. In September, SASOL visited Montana, USA to study the possibility of building a US$5 billion CTL plant in the country.

Sasol has produced almost 1,5 billion barrels of synthetic fuel from about 800 million tonnes of coal since the first sample of synthetic oil from coal was produced fifty years ago at its Sasolburg plant near Johannesburg in South Africa on 23 August 1955.

Regarded as a world technology leader in the production of coal-to-liquids (CTL), Sasol operates the world's only commercial scale synthetic plant at Secunda, where it produces 150 000 barrels of liquid fuel per day. Sasol currently supplies about 28% of South Africa’s fuel needs from coal, saving the country more than R29 billion (US5,1 billion) a year in foreign exchange.

While Bumi's plan sounds feasible, the question remains, whether they're brave enough to take the risk. One energy executive said if the oil price keeps above US$35 per barrel, such CTL technology would be feasible. But look at China.

China also signed an agreement with Sasol to build two coal-to-liquid fuel plants in China. These plants, costing $3 billion each, would jointly produce 60 million tons of liquid fuel (440 million barrels) a year. Since China imported 100 million tons of oil in 2004, these plants would give China substantial control over its domestic energy situation, though its demand is growing fast. That would put pressures on oil price.

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Gudang Garam down to No.2

PT Gudang Garam Tbk is no longer the largest cigarette producer in Indonesia. The company's 2005 sales only reached Rp24.29 trillion or US$2.47 billion, slightly below PT HM Sampoerna Tbk at Rp24.66 trillion or US$2.5 billion.

Gudang Garam also only booked net profit of Rp1.89 trillion last year or US$211 million, a 5.59 percent growth from Rp1.79 trillion in 2004, but well below Sampoerna at Rp2.383 trillion or US$242 million last year.

But Gudang Garam's total asset as of December 2005 was Rp22.128 trillion or US$2.25 billion, almost twice of Sampoerna's Rp11.93 trillion or US$1.21 billion.

Why?

Partly because of the acquisition of Sampoerna by Philip Morris last year. Sampoerna's subsidiary PT Panamas also sells Marlboro following the acquisition.

Wonowidjojo family who controls cigarette producer PT Gudang Garam Tbk has been routinely appeared in Forbes rich list for many years. In this year's list, Rachman Halim Wonowidjojo, is listed as the richest man in Indonesia with US$2.5 billion of net worth. That might not exactly true especially if Forbes use Gudang Garam as the foundation of the analysis. Why?

Gudang Garam was established in 1958 by ethnic-Chinese businessman Surya Wonowidjojo alias Tjoa Ing Hwie or Tjoa Jien Hwie.

Surya's children are Rachman Halim (Tjoa To Hing), Juni Setiowati (Tjoa Jiet Hwa), Sumarto (Tjoa To Seng), Wurniati (Tjoa Kiet Lian), Susilo (Tjoa To Bing), Sigit Sumargo, Sujati, and Tjoa Sun Tie.

Surya died in 1985 and was replaced by his eldest son, Rachman Halim.

Related companies:

1) PT Trias Sentosa Tbk

2) PT Bank Halim

3) PT Karyadibya Mahardika (KM)

4) PT Hari Mahardika Usaha

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Pupuk Kaltim book Rp383bn profit

State-owned fertilizer company PT Pupuk Kaltim booked net profit of Rp383 billion last year, twice more than its 2004 profit at Rp152.88 billion.
According to its financial report published today, the company booked total sales of Rp5.52 trillion (almost US$600 million) last year, jumped from Rp3.82 trillion in 2004.
Pupuk Kaltim recorded operating profit of Rp842.19 billion last year, increased significantly from Rp533 billion in 2004. Interest payments of Rp239 billion, meanwhile, cut significantly the company's profit.

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Branta Mulia profit jump

Tire yarn and cord fabric manufacturer PT Branta Mulia Tbk reported net profit of Rp119.49 billion last year, jump from only Rp42.24 billion in 2004 on improved margin.
According to its financial report published today, Branta booked total sales of Rp1.76 trillion (almost US$200 million) last year, significantly increased from Rp1.47 trillion in 2004. Meanwhile its cost of goods sold increased from Rp1.167 trillion to Rp1.376 trillion, resulting in Rp388.76 billion gross profit last year. As no significant changes in operating expenses, the company booked operating profit of Rp232 billion last year, jump from Rp147 billion in 2004.
US-based DuPont Chemical once the largest shareholder in the company, but sold out all its shares of 19% to some Indonesian businessmen last year. Branta is the largest tire yarn producer in Indonesia with operation in Thailand as well.

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The benefactors of 1.8 million hectare plantation project

Tamsil Linrung, who headed a team of House Commission IV which visited East Kalimantan, has stated the support of the parliamentary commission for the opening of large oil palm plantations in border areas amid environmentalist critics that the plan is merely to cut down trees in these areas, Antara reported.

Speaking to reporters here last weekend, Tamsil, a legislator from Prosperous Justice Party (PKS) said oil palm cultivation in borderlands has great significance for coping with problems, especially the manpower problem, in border areas. He made the remarks commenting on the government's plan to open 1.8 million ha of oil palm plantations in East Kalimantan, especially in critical forests close to the border with the East Malaysian region.

But environmentalists have long been suspicious over the plan. Data from Sawit Watch, a NGO with focus on palm plantation, shown in West Kalimantan, government had given licenses to open 1.5 million hectares of palm oil plantation, but only 382,000 hectares that are really being cultivated. In East Kalimantan, only 303,000 hectares that already been cultivated for palm oil out of 2 million hectares of licenses. In Central Kalimantan, the cultivated lands for palm oil have reached 438,000 hectares, far below the 1.8 million hectares allocated.

Sawit Watch has every reason to be suspicious. They're just afraid those who hold the licenses would only cut down trees, get the harvests, and leaving the lands in even worse condition.

Who would invest in the Indonesia-Malaysia border anyway?

Well, Felda Holdings, the largest CPO producer in the world from Malaysia, is apparently keen to get around 500,000 hectares of land in Kalimantan to expand its palm oil business.

China Development Bank pledged US$8 billion funding for the palm oil plantation that covers about half the size of The Netherlands.

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Newmont suspends exploration in Sumbawa

PT Newmont Nusa Tenggara, a subsidiary of Newmont Corporation, decided to temporarily stop its activities in Sumbawa island of West Nusa Tenggara province as 400 protesters burned down the company's exploration camp.

Kasaan Mulyono, spokesperson at Newmont Nusa Tenggara (NNT), told Detik.com this morning that the exploration activities were stopped for security concern.
The Jakarta Post quoted Nunik Maulana, another spokesperson of NNT, saying some 50 people came to the area with gasoline and threatened to burn down the camp. No one was injured in the attack as the company were able to evacuate around 135 exploration workers earlier on Saturday after serious threats.
NNT is an Indonesian joint venture company owned 80% by Nusa Tenggara Partnership and 20% by PT Pukuafu Indah (Indonesia). Nusa Tenggara Partnership is owned 56.25% by Newmont Indonesia Limited and 43.75% by Nusa Tenggara Mining Corporation. It was formed in 1986 to explore and eventually exploit under contract to the Government of Republic of Indonesia a Contract of Work area located on Eastern NTB.
By December 2003, Batu Hijau's ore reserves were 1 billion tons containing 0.525% copper and 0.37 gram per ton gold. At the current production rate, Batu Hijau's mine life will continue until 2025.
While copper production decreased 22% in the fourth quarter at Batu Hijau due to declining grade and lower mill production, gold sales increased slightly to nearly 181,000 ounces at an average cost of $161 because of an 15% increase in ore grade.
For the year 2005, Batu Hijau reported 720,000 ounces of gold production at an cost of $152/ounce, up from 2004 production of 715,000 ounces at an average cost of $128/ounce. The 2006 guidance for Batu Hijau is 565 million pounds of copper at an average cost of 45-cents per pound, and 575,000 ounces of gold at an average cost of $145/ounce.
Newmont booked revenue of US$4.4 billion last year.

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Anadarco to invest US$50 million in six oil wells in Indonesia

A United States-based oil and gas company, Anadarco, will undertake explorations in six oil wells in Northeast Madura III Block with an investment of US$50 million, an official said here Friday, Antara reported.

The explorations in the Northeast Madura III Block, which is situated north of Madura island or 88 km from Sumenep district, will be the first for the American oil firm, BP Migas chief spokesman Amir Hamzah said after a discussion with East Java governor Imam Utomo on the proposed oil exploration.

Anadarco has invested totally US$25 trillion around the world, Amir said adding that the US oil and gas firm has mostly made investment in Algeria.

It is hoped that Anadarco will start producing oil in 2009-2010 if it success in exploring the oil wells, he said adding that the American oil and gas firm will share the oil fields with publicly-listed Medco Energy International if Anadarco successfully explores the oil wells.

Amir, however, did not mention the amount of the oil deposit in the Northeast Madura III Block but said the oil reserve was enormous.

The discovering of the six new oil wells in the Northeast Madura Block was made after a production sharing contractor namely Australia`s Santos Limited found an oil field in Jeruk waters in East Java Basin.

Anadarco signed a work contract with the Executive Body of Oil and Gas Upstream Activity (BP Migas) to explore oil in Indonesia late 2004.

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Anti-Exxon protest to repeat Abepura?

Anti-Freeport protest in Abepura, Papua had cost four lives (three police and air force officers) last week. Today thousands of people from Solo, Central Java marched to Bojonegoro, East Java to protest ExxonMobil's control over the giant Cepu oil gas field.
The planned Anti-Exxon protest might repeat the Abepura bloody clash as Bojonegoro youngsters are planning to block the hundreds of protesters from moving into the oil block.
As reported by Detik.com, Bojonegoro youngsters plans to cut down trees to block the roads into the area. Police seems aware of the possible clash so they blocked the protesters in Boyolali instead. Police asked protesters to cancel their plan to enter Bojonegoro regency. Bojonegoro police deploys 1,000 personels to block the protesters at the border of Bojonegoro and Blora regencies.
It's an interesting situation as Bojonegoro defend Exxon's operatorship of Cepu block, while those protesters are mainly from Solo area in Central Java.
They argued that they're fighting for the sake of nationalism, Detik.com reported. While Bojonegoro residents rejects such claim saying they're tired of poverty. "Please don't make this a political issue. We're just want to have a better life," said Parnani, a Bojonegoro resident.
While Bojonegoro residents are moving on with their activities, some fears of clash between protesters and local youngsters. That's why an English course and computer center established by Garis Tepi (NGO) and ExxonMobil in Kalitidu sub-regency, Bojonegoro, decided to close down their operation for a while.

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Two-star general named suspect in a major corruption scandal

This might be the first major corruption trial for Indonesian army general in the country's history. A two-star army general apparently has been named a suspect in a corruption scandal at the amount of US$11 million, Detik.com reported.

The online publication quoted major general Ruchyan, the military police commander, saying the two-star general with initial SM had admitted that he had received illegal payments out of the total US$11 million embezzled from the soldiers housing mandatory deposits. Colonel Ngadimin had previously been named suspect in the scandal.
It was the Financial Transaction Analysis & Reporting Center (PPATK) which disclosed the suspicious transaction amount to Rp100 billion (around US$11 million). PPATK also found another suspicious transaction amount to Rp129 billion involving Colonel Ngadimin and the officer at Bank Mandiri Kemang Branch, Jakarta.
Ruchyan said Corruption Eradication Commission (KPK) will handle the investigation of the Rp100 billion corruption scandal, while Attorney General will take care the Rp129 billion scandal.
Indonesian military is one of the most corrupt institutions in the country and for many years managed to escape investigation and trials. The trial of these scandals would be a tough test for Susilo Bambang Yudhoyono's administration, especially considering the president's military background.

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Behind the US$3.2bn acquisition of KPC & Arutmin

PT Borneo Lumbung Energi finally won the US$3.2 billion deal to acquire two major coal producers PT Kaltim Prima Coal (KPC) at 95% sgares and 100% shares of PT Arutmin Indonesia from PT Bumi Resources Tbk. While the US$3.2 billion acquisition already become the largest acquisition in the country's stock market history, the deal is most likely just the beginning of something big.

Who are the beneficiary owners of the deal?

PT Borneo Lumbung Energi is owned by two shareholders of PT Renaissance Capital Asia, Mr Samin Tan and Mr Suryadinata with 75% and 25% shares respectively. With such scheme, the new owner have nothing to worry about the requirement to have minimum 51% shares of both KPC and Arutmin by Indonesian.

But for sure, Samin Tan and Suryadinata have no such amount of money. They got full support from four enterprises. They are PT Renaissance Capital Asia, Marubeni Corporation, Thiess Contractor, and DBZ. It's not clear of how much equity and debts in the deal. But sources said US$1 billion of equity and US$2.2 billion of debt arranged by Credit Suisse First Boston (CSFB).

Marubeni has reportedly deposited US$150 million, while Bakrie Family at US$700 million.

What's next?

PT Bumi Resources will acquire oil and gas producer PT Energi Mega Persada Tbk, and develop coal to liquid technology with South Africa's SASOL. The merger would likely to materialize next year.

New investments: Oil, gas, coal to liquid, biodiesel, biomass, and electricity.

What the Borneo Energi will do next?

That would be the vehicle to acquire PT Indocopper Investama which controls 9.4% shares of PT Freeport Indonesia. Bakrie Family once controlled the company before Soeharto's golf buddy Mohammad 'Bob' Hassan acquired Bakrie shares with Freeport's full financial support. Hasan failed to service the debts to Freeport which led to the US company's control of 100% of Indocopper. The value of Freeport's 9.4% shares is predicted at US$1 billion.

PS: Special thanks to a friend who is kind enough to provide most of the information in this article.

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Bakrie Family behind Renaissance on KPC & Arutmin deal

A consortium led by Renaissance Capital had signed the sales and purchase agreement (SPA) with PT Bumi Resources Tbk to acquire Bumi's shares in two major coal producers, PT Kaltim Prima Coal and PT Arutmin Indonesia at US$3.2 billion.

Geroad P. Yusuf, Corporate Secretary at Bumi Resources disclosed this morning that PT Borneo Lumbung Energi had signed the SPA yesterday. PT Borneo Lumbung Energi, an affiliation company of PT Renaissance Capital, acquired 95% shares of KPC, 100% of Arutmin, and 100% PT Indocoal Resources Ltd.

Yusuf didn't disclose members of Renaissance Capital consortium. But some says Bakrie Family and Marubeni Corporation are among others.

Sources said Bakrie Family and other members of the consortium put US$750 million in the consortium with the remaining US$2.5bn from debt instruments provided by some banks with Credit Suisse First Boston (CSFB) as the arranger.

Earlier this morning, Marubeni Corp had deposited US$150 million to Bumi's escrow account for the transaction.

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Anglo American competes to acquire KPC & Arutmin

UK-based giant mining and natural resources company, Anglo American, is said to compete with Marubeni Corp in the acquisition of PT Bumi Resources shares in PT Kaltim Prima Coal (KPC) and PT Arutmin Indonesia.
"I think for KPC and Arutmin, the party everyone's focused on now is Anglo American. But how about the 51% local ownership requirement," an investment banker said last night.
Anglo American is a global leader in mining and natural resources. The company was formed in May 1999 through the combination of Anglo American Corporation of South Africa (AACSA) and Minorco. It has its primary listing on the London Stock Exchange and is majority owned by UK institutions.
Anglo American has interests in 16 base metal operations in seven countries, particularly in Brazil, Chile, Ireland, Peru, South Africa, and Venezuela.
In Indonesia, Anglo American's exploration milestones includes discovery of the Purnama gold deposit at Martabe (1998), discovery of Aisasjur gold deposit in 1997, and its formation this year of a strategic alliance with Austindo Resources (controlled by George Tahija) to explore in Papua.
But why KPC & Arutmin?
Well, Anglo American's coal interests are held through wholly owned Anglo Coal, one of the worlds largest private sector coal producers and exporters with total assets of US$2.5 billion. Anglo Coal is an international coal producer with mining operations in South Africa, Colombia, Venezuela and Australia. It produces thermal, PCI (pulverised coal injection) and metallurgical and coking coals for international customers in the Med-Atlantic and Indo-Pacific markets as well as local customers in South Africa and Australia.
Back to the question on 51% local ownership requirement, whoever would buy the shares, I would say the maximum amount that is 'safe' would be 49% in both KPC and Arutmin. But who want to spend US$2.5 billion without majority control? This is the question I still have to find the right answer.
KPC was owned by BP & Rio Tinto, while Arutmin was owned by BHP (Australia). All of these foreign investors, by law, should divest up to 51% shares in a certain period to local investors. That was the justification for the Bumi Resources acquisition on KPC and Arutmin. But now the case is in the reverse version. I'm not sure if government would allow that.

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Freeport protest, four dead

Four security personels, one from the military and three policemen, died in a clash with Papua protesters in Cendrawasih University, Abepura today.

Antara reported earlier that three Indonesian policemen died, 11 others and at least three civilians were badly injured in a clash between security troops and Papua protesters here on Thursday.
A spokesman of the Abepura general hospital told ANTARA News that one of the killed policemen had died of serious wounds caused by stones and other objects the protesters had thrown at the security personnel
The protesters were demanding the closure of US gold and copper mining company PT Freeport Indonesia operating in Timika, Papua.
But president Susilo Bambang Yudhoyono reiterated government's position to maintain the mining operation saying the closure would do more harm to the country.

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Amien Rais, Too Late the Hero

Former Assembly Speaker Amien Rais is the most active politician in the last few months, at least from public appearance.
Media love his 'harsh statements', such as...Freeport committed three major crimes...Don't be afraid of America, just close down Freeport operation...or illogical things such as...Freeport could resume operation as long as it could bring back the mountains...
I am 100% believe that Freeport committed wrongdoings, but I'm 100% sure our leaders (military and civilian) had contributed something in those problems. At the end of the tunnel, I believe also that someone would take benefits or losses out of this debacle.
Amien then jumped on the wagon of opposition towards government on Cepu settlement, in which both ExxonMobil and Pertamina agreed to have ExxonMobil as the operator of the block. He expressed his anger and uncrontrolled emotion with brand new accusation...I'm sorry to say that this administration has been involved in major corruption scandal...or...I don't know who the hell whispered them (government) to make this decision...
To make the case, Amien need friends. So he met former vice president Try Sutrisno Thursday night. DPD member Marwan Batubara, legislator Alvin Lie and Drajad Wibowo, and ICMI Chairwoman Marwah Daud Ibrahim were by his side. Amien said he can't sleep well since ExxonMobil won the operatorship.
But Amien was not lucky. Try's friends, former presidents Abdurrahman Wahid and Megawati Soekarnoputri, and former House Speaker Akbar Tanjung were not there. Wahid, Try, Megawati, Wiranto, and Akbar get together quite often in the last few months, but Amien was not member of the group. So, they must thought like this...why Amien need us now while he never show up whenever we sit down and criticize government on various issues in the past? Or, OK, so he need us when he has agenda?
I have to say, Amien is too late the hero in Cepu debacle. He was the Assembly Speaker when Pertamina approved the acquisition of Humpuss remaining shares in Cepu block back in June 2001. That was the critical moment of truth for the Exxon to get 100% control over Cepu block. Where was Amien then?
Another critical moment is when government-sanctioned negotiations team signed the memorandum of understanding with ExxonMobil in June 2005. Based on the MoU, government then awarded the cooperation contract (KKS) in September 2005 in which government agreed upon 85% revenue split from Cepu, and 15% for contractors. Government also agreed that the contractor shareholding at 45% for Pertamina, 45% for ExxonMobil, and 10% for local administrations.
Did you ever read Amien's opposition to this agreement? Operatorship agreement, signed yesterday, actually the derivative of the KKS, technical issue that less significant than the KKS. Amien justify his accusations based on the JOA.
Well, Amien apparently is too late to learn the facts and just too fast to judge, accuse, and talk. Amien should do his homework, to learn more to be a wise man. Otherwise, he is just a horse for those who are smart enough to ride on him.

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Bumi Resources confirmed the divestment of KPC & Arutmin

Ari Hudaya, CEO of PT Bumi Resources Tbk, confirmed my earlier reports that the company is in the process to divest all its shares in two major coal producers PT Kaltim Prima Coal and PT Arutmin Indonesia.

Detik.com reported that after the divestment Bumi would launch the merger with oil and gas producer PT Energi Mega Persada Tbk.
Besides, Bumi will develop coal to liquid technology with South Africa's SASOL, the largest producer of diesel oil from CTL technology. Both companies are planning to develop CTL in South Sumatra.
But Hudaya neither confirmed nor denied Marubeni as the potential buyer for KPC and Arutmin. Sources said the deal could be somewhere around US$2.25 billion.

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Marubeni acquires KPC-Arutmin US$2.25 billion

As I reported earlier, Marubeni Corporation is apparently acquiring two coal producers PT Kaltim Prima Coal and PT Arutmin Indonesia from PT Bumi Resources Tbk with price tag of US$2.25 billion, people close to the deal said.

Credit Suisse First Boston (CSFB) is advising Marubeni Corporation, Japan, for the deal, while JP Morgan for PT Bumi Resources Tbk.

Bumi would use the proceeds from KPC and Arutmin to buy Freeport Indonesia shares.
"They need money to buy Freeport shares. The buyer, Japanese trading company, seems to offer huge amount of money that the company can't resist. The amount may well above US$2.25 billion," said another banker.
Marubeni Corporation is one of the largest coal traders in the world. "Marubeni use its internal funds to finance the transaction."
PT Bumi Resources Tbk, which controls PT Kaltim Prima Coal and PT Arutmin Indonesia, was reportedly planned to acquire shares of Freeport Indonesia. Meanwhile, Marubeni owns shares in coal mining operations in Australia and Canada.

Koran Tempo reported today market rumor that Bumi Resources would sell some shares in KPC to acquire electricity company PT Indonesia Power.

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Govt rejects Hutchison & Maxis objection

Government rejects Hutchison and Maxis Communication objections to pay up-front fee and frequency usage costs of Rp480 billion for each company.

Hutchison and Maxis got the 3G license few years ago before government implement the new regulation on the service. Companies which won the 3G licenses recently have to pay up-front fee and frequency usage rights cost.

Government insists that the new policy is applied to Hutchison and Maxis as well, but these companies reject to do so.

The rejection might lead to law suits by Hutchison and Maxis. But government said it's ready to confront the possible law suits.

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Major coal transaction is underway in Indonesia

A major coal transaction is underway in Indonesia. One company that controls two major coal producers in the country is about to leave the business for another transaction, buy Freeport shares.

"For sure there will be a transaction, but I don't know the buyer," said one investment banker in a SMS today.

The company has close relationship with the group which keen to acquire copper and gold mining giant PT Freeport Indonesia.

"They need money to buy Freeport shares. The buyer, Japanese trading company, seems to offer huge amount of money that the company can't resist. The amount may well above US$2 billion," said another banker.

Credit Suisse First Boston is reportedly handle the transaction on the buyer side, while JP Morgan is advising the seller.

Other sources said Marubeni Corporation, one of the largest coal traders in the world, is the company involved in the transaction.

PT Bumi Resources Tbk, which controls PT Kaltim Prima Coal and PT Arutmin Indonesia, was reportedly plan to acquire shares of Freeport Indonesia. Meanwhile, Marubeni owns shares in coal mining operations in Australia and Canada.

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Honeywell expands Indonesia facilities

PT Honeywell Indonesia, a subsidiary of Honeywell International, is expanding its facilities in Batam Island, Indonesia with new investment of US$3.8 million.

The new facility will produce indicators and Navom (12,636 pcs) with new jobs to be created for 159 people.

Honeywell International is a $26 billion diversified technology and manufacturing leader, serving customers worldwide with aerospace products and services; control technologies for buildings, homes and industry; automotive products; turbochargers; and specialty materials.

Based in Morris Township, N.J., Honeywell’s shares are traded on the New York, London, Chicago and Pacific Stock Exchanges. It is one of the 30 stocks that make up the Dow Jones Industrial Average and is also a component of the Standard & Poor's 500 Index.

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Musashi launch major expansion in Indonesia

PT Musashi Auto Parts Indonesia (MAP-IN), a subsidiary of Musashi Seimitsu Co. Ltd, Japan, is conducting a major expansion project in Indonesia with additional investment of US$85 million.

According to the data from Investment Coordinating Board (BKPM), MAP-IN's new facilities includes main shaft for two-wheelers (1.5 million units), camshaft for two-wheelers (1.8 million sets), two-wheelers transmission gears (2.4 million pcs), and spindle kick stater (2.78 million sets) and will create 123 new jobs.

Musashi is one of the largest auto parts producer in the world with combined net sales of 107.24 billion yen in 2005. MAP-IN was established in March 1996 producing transmission gears, shafts, and chamshafts.

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Mulyakarya to build cement plant in Langkat, North Sumatra

PT Mulyakarya Jayaco, a local company, had secured approval from Investment Coordinating Board (BKPM) to build a 1.5 million tones per yer cement plant in Langkat, North Sumatra province. The project's cost would be Rp2.23 trillion (US$245 million).

It is not clear who owns Mulyakarya. But the company is listed as a member of plywood producers association.

France-based cement giant LaFarge once planned to build a 1.4 million t/y cement plant in Langkat back in 1997.

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Exxon & Pertamina finally sign Cepu deal

US giant ExxonMobil Corporation and state-owned oil and gas company PT Pertamina finally signed the joint operation agreement (JOA) to develop the oil-and-gas-rich Cepu block with investment costs of US$2.5 billion on Wednesday (March 15) amid criticism and opposition towards Exxon.

Under the JOA, both companies---which has 45% shares respectively in the block---agreed to establish Cepu Operation Organization which consists of a joint operating committee (JOC) that supervise the general manager/operator of the block. Exxon will be the operator of the block.

Pertamina will be the chairman of JOC with representatives from Pertamina, ExxonMobil, and a company to be established by local administrations with voting rights of 45%, 45%, and 10% respectively. The JOC will make important decisions such as plan of development and budget. All decisions needs pass mark of 60% voting rights. With that, no decision could be taken without approval of both Exxon and Pertamina.

The preparation and construction of the project, located in Central Java and East Java provinces, would take 31 months. The first oil drop will be sometimes in September 2008. Peak production is expected at 170,000 barrel per day.

Oil reserves are expected at 600 million barrels, some even put above 1 billion barrels. Meanwhile gas reserves are estimated at 1.7 trillion cubic feet.

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Bakrie Telecom is in red still

PT Bakrie Telecom Tbk, telecommunication subsidiary of PT Bakrie & Brothers Tbk, booked net loss of Rp144.32 billion (around US$16 million) for 2005 financial year.

While the losses significantly dropped from Rp297.97 billion (around US$29 million) in 2004, the company's operating loss increased significantly from Rp67.52 billion to Rp99.94 billion last year.

The company managed to boost its revenue from Rp275bn to Rp369bn, a 34% growth. But the company's operating expenses jumped significantly from Rp229bn to Rp343bn as the company was struggling to expand the market share. PT Bakrie Telecom Tbk is known in the market for its Esia brand.

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Petronas-Exxon-Pertamina: Lessons learned

While some Indonesians, especially political pundits, bussy to reject ExxonMobil as the operator of the giant Cepu oil field, Malaysia's Petronas quitely opens its first gas station in Cibubur, near Jakarta. Petronas is the second multinational to open gas station in Indonesia after Shell, the super major along with ExxonMobil and Beyond Petroleum (BP).

We, Indonesians, are always jealous with Petronas. Those who loves Formula One easily noticed Petronas in one of the only 11 teams competing in the racing. Their existence would significantly be boosted with their recently announced plan to be the largest player in retail market of fuels in Indonesia.

Petronas used to learn from Pertamina, Indonesia's state-owned company. The Malaysian even adopted the production sharing contract (PSC) system in oil and gas business. They modified that, off course. In less than two decades, Petronas emerged as one of the largest companies in the oil and gas business. It has ventured into various countries, become a global oil and gas player.

What's wrong with Pertamina? Why Petronas managed to surpass Pertamina in almost every aspects of the business? A simple comparison: Pertamina booked net profit of around US$1.3 billion last year, while Petronas 10 times Pertamina's. Pertamina's oil production was 140,000 barrel per day, while Petronas at 567,000 barrel per day.

Can we learn something from Petronas?

Partnership. No way that Petronas could become a world player without partnership with other global players such as Chevron, Mitsubishi, ExxonMobil or BP.

Under production-sharing contracts, ExxonMobil's 600 wells account for about half of Malaysia's oil production and two-thirds of Peninsular Malaysia's natural gas production. Petronas Carigali Sdn. Bhd., a subsidiary of Petronas, is a co-venturer in all but two of the 11 fields operated by ExxonMobil.

ExxonMobil Exploration and Production Malaysia Inc., (formerly known as Esso Production Malaysia Inc), is the largest oil producer in Malaysia and largest supplier of gas to Peninsular Malaysia, producing approximately 280 thousand barrels of oil and 1.4 billion cubic feet of gas per day.

Building on experience, Petronas has extended its reach by forming ventures with ExxonMobil and other multinationals to explore for oil and gas in Africa, the Middle East and Central Asia. The highlight is the Petronas and ExxonMobil membership in the $3.5 billion Chad Project (ExxonMobil interest, 40 percent; Petronas 35 percent; and Chevron, 25 percent).

Petronas is also a 15 percent interest holder in ExxonMobil's Block 24 offshore Angola and Block 214 offshore Nigeria.

Suprisingly, those who oppose ExxonMobil and insist to have Pertamina as the leader in Cepu project, tend to use Petronas as the role model of nationalism in developing the country's natural resources. I'm afraid these guys use the wrong model or they just don't want to read or just to make the case against government.

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Condi's visit in Indonesia: Day One, no metal detector please!

What a hectic day for US Secretary of State Condoleeza Rice. She arrived at Jakarta's Halim Perdana Kusuma airport (not the Soekarno Hatta International Airport, I guess because of security concerns, as few days ago the airport received bomb threats) around 1PM.

She went on straight to an Islamic boarding school (Madrasah Al-Makmuriyah) in Jakarta, where she announced the plan to produce Sesame Street Indonesian version with US funds of US$8.5 million. Oops, Mrs Rice didn't aware that the school also teach its students mathematics and science. Outside the school compound, some people waged a protest on US policies.

The prelude of a lunch at Foreign Affairs Ministry's Office tells an interesting story when the cameraman from MetroTV Eko Widodo admitted that one of US military officers guarding Mrs Rice reportedly threatened to shoot him when he tried to take the picture. It was Indonesian military officer who warned Widodo that if he keeps focusing the camera to the US officer, "the US military officer will shoot you."

After the meeting, Mrs Rice told the press that Indonesia and the United States have agreed to enhance military cooperation, among other things through the international military education and training (IMET) program.

The US State Secretary also said like cooperation in the economic, health and educational fields, military cooperation was one way to enhance the two countries` bilateral relations which had been in lexistence for a long time.

Rice hoped US cooperation with Indonesia in many fields could be further improved as Indonesia was playing a significant role in the world as a country where harmnious inter-religious, inter-ethnic and inter-racial life was well-maintained.

Condi also expressed hope that Indonesia`s role in representing moderate Islam could be further increased so as to make a valuable contribution to the settlement of conflicts in the world.

She then paid a courtesy call to president Susilo Bambang Yudhoyono. She arrived at the State Place at 3.45PM and didn't have to pass the metal detector routine like anybody entering the president's office. The president raised the concern on deadlock of peace process in Korean peninsula. Outside the palace, 600 protesters from an Islamic organization shouts anti-US slogans. "Sharon = Dead, Slobodan = Dead, Bush = In the process", the banners said. Or simply, "Go to hell Condoleeza Rice."

Mrs Rice then meet economic ministers led by coordinating minister for the economy Dr Boediono. The meeting didn't discuss specific issues such as Freeport or ExxonMobil, Dr Boediono told the press. They're only discussing macro issues. Indonesia, as Dr Boediono said, expects US government's help in luring in US companies' investment to the country.

The US assistance to Indonesia in the Fiscal Year 2006 include:
Education: $31.9 million, Health & Water: $33.3 million, Democracy: $36.3 million, Economic Growth: $21.9 million, Environment: $6.9 million, Tsunami reconstruction: $400 million, Avian Influenza: $11 million, and Peace in Aceh: $11 million.

But Health Minister said US is yet to disburse the promised funds to help the country cope with avian influenza that already killed 22 people.

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