BNI leads Lahat power financing

State-owned bank BNI has been appointed as leader of a syndication to finance coal-fired power plant project developed by PT Priamanaya Energi in Lahat, South Sumatra. 

BNI will arrange a US$230 million financing for the 2x125 MW power plant to be built at a Lahat mine mouth. The power plant is scheduled for commercial operation in 2012. According to director general for electricity, J. Purwono, the project is part of the second 10,000 MW power program.

PT Priamanaya Energi is a subsidiary of PT Priamanaya Djan International, a company controlled by businessman and politician Djan Faridz. Faridz is an elected member of Regional Representative Council (DPD) to be a representative of Jakarta people in DPD. Member of DPD is also a member of People's Consultative Assembly (MPR), the highest legislation body in Indonesia.

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Podomoro gets Rp1.1 trillion loan

PT Tiara Metropolitan Jaya, a subsidiary of property developer giant Agung Podomoro Group, secured Rp1.1 trillion syndication loan arranged by state-owned bank BNI. 

Members of the syndicated loan are BNI, Bank International Indonesia (BII), and CIMB Niaga. Tiara will use the loan to finance its Central Park project with total investment of Rp2.74 trillion or about US$270 million. BNI provides Rp500 billion, BII Rp300 billion, and CIMB Niaga Rp300 billion. 

The remaining Rp1.64 trillion is self-financed. The loan will due in five years, including one year of grace period. Central Park, located in West Jakarta, is consisted of malls and apartments. 

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Corporate actions update

PT Pakuwon Jati Tbk will inject USD80 million into PT Artisan Wahyu using proceeds of USD110 million issued by Pakuwon Jati Finance BV to finance Superblok Gandaria project.

Pakuwon raised USD110 million from international bond issued in November 2006 with maturity in 2011 and yield 12%/year. Gandaria project is consisted of shopping center (232,484 m2), office space (99,642 m2), four-star hotel (39,154 m2), and two condo towers with 72,765 m2. Construction to start this year and completion by fourth quarter 2009. No worries about oversupply?
Meanwhile, PT Medco Energi Internasional Tbk through its wholly owned subsidiary, Medco Far East Limited/PT Medco E&P Malaka, and its partners, Premier Oil Sumatra (North) BV, have signed a Share Sale and Purchase Agreement with ConocoPhillips to acquire Conoco's 50% working interests (through CPAL, 100% owned by Conoco) in Block A Production Sharing Contract located in Aceh province for USD72 million. Medco & Premier will equally own 50% of CPAL.
In April 2006, Medco and its partners, Premier, and Japex Block A Ltd, a subsidiary of Japan Pertroleum Exploration Co Ltd, have acquired 100% shares of Mobil Block A Limited from ExxonMobil Block A Investment Limited, which was also the holder of 50% working interest of Block A PSC. Such acquisition provided Medco, Premier, and Japex working interests of Block A PSC to the amount of 16.67%, 16.66%, and 16.67%, respectively.
Acquisition of CPAL raised Medco's ownership in Block A to 41.67%, similar to Premier's.
Meanwhile, PT Budi Acid Jaya Tbk will build a 5.7 MW biogas power plant with USD7 million investment in Lampung, Sumatra.
PT Bank Negara Indonesia (BNI) Tbk estimated 35% growth in profit after tax to Rp1.9 trillion for the year 2006 on 6% loan growth.

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Divestment of up to 40% shares at BNI, next year

Management of PT Bank Negara Indonesia (BNI) Tbk has proposed the divestment of up to 40% shares next year through rights issue and secondary offering. The proposal could generate up to Rp12.6 trillion. But the implementation is subject to parliament's approval. Initial comments from some legislators called the size (40%) is too high and 20% would be considerable size.

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Holding vs merger of state-owned banks

Responding the Central Bank's Single Presence Policy (SPP), government has launched an initiative to establish a holding company for state-owned banks (Mandiri, BNI, BRI, BTN & BEI). But some prefer merger of these banks. Which one is better?

Legislator Drajad Wibowo (former commisssioner at BNI) told Koran Tempo today that merger would be better to create a stronger bank. His view is completely different with his stance few months ago when he agreed on a BNI-BTN merger plan but rejected a Mandiri-BNI merger arguing the latter would create an overlap functions.
State-owned enterprises minister Sugiharto said earlier that government is reviewing the plan to respond Central Bank's policy. Establish a holding bank, either vertical or horizontal structure, is among the options available besides the merger. Kompas quoted Sugiharto last week saying out of so many options available, the holding company is the option left for further review. The review would be to decide whether to pick one bank as the operating holding or establish a new non-operating holding.
So far, there is no clear guideline from government about its policies on state-owned banks. VP Jusuf Kalla prefers a merger of Mandiri-BNI because of their similar functions, but keep BRI and BTN as independent banks with speficic tasks (BRI for SMEs, and BTN for housing). Guess why?
Previously some politicians argued against the merger saying that would be politically too sensitive. But Drajad told Tempo that a merger would be more sensible politically. Drajad's colleague, Dr Aviliani, who is also member of board of commissioners at BRI, prefers holding than merger. I'm not sure whether her view represents the BRI board or not. Drajad & Aviliani were economists at INDEF (think tank).
After the fuss over SBY's newly established team, it's interesting to watch the competition between the two camps (SBY & JK) over the holding vs merger issue.
Early this year, government scrapped a BNI-BTN merger plan on strong opposition from legislators and the management/workers of BTN. So, I just can't imagine the scale of political opposition on the merger of 5 state-owned banks.
Merger is also considered a violation of Govt Regulation No. 28/1999 about the merger, consolidation, and acquisition of banks which stated the bank emerged of the merger should not have assets more than 20% of the total national bank assets. The merger of 5 state banks would create a bank with 38% of national bank assets, Kompas reported.

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SCB-Mizuho-ABN Amro arrange U$150 million loan for BNI

State-owned bank PT Bank Negara Indonesia (BNI) Tbk has appointed Standard Chartered Bank, Mizuho, and ABN Amro as arrangers to raise US$150 million loan to refinance its debts and support expansion programs, Antara reported.

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BNI look for US$150 million funding

State-owned bank PT BNI Tbk is reportedly preparing US$150 million fund raising to refinance its debts. The bank, with total asset of Rp146 trillion as of June, is about to send out request for proposal (RFP) to prospective underwriters/arrangers.

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State banks in doubt, blame the traffic

An expat blog in Jakarta has the title...when in doubt, blame the traffic. I modify it when I read the article posted by Tempointeraktif.com on Sunday that bankers at state-owned banks are in doubt of whether they would be able to give write-offs or haircuts to clean up their balance sheets despite the recent Supreme Court decision.

Tempointeraktif.com quoted Bien Subiantoro, director of PT BNI Tbk, the bank with the second most bad loans in the country behind PT Bank Mandiri. Mr Subiantoro said, "I'm not too optimistic. Even though the Supreme Court cleared the way, I'm not sure yet whether the officers at state-owned banks would have the guts to give haircuts especially considering the current situation of our legal system."
He further said, "There is psychologycal constraints."
Besides, as Mr Subiantoro said, there are few details of regulations needed to implement the new policy.
Read my previous posts for backgrounds:
1) SOE's bad loans could be written off 100%

2)Mandiri-BNI bad loans settlement: Long way to go

3) Fresh maneuver on state banks bad loans

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SOE's bad loans could be written off 100%

Supreme Court had approved the separation of state assets and state-owned enterprises assets, government officers claimed. This would pave the way for SOE banks to write off up to 100% bad loans owed by SOEs, but only 5% write off for private companies.

Secretary to MSOE Muhammad Said Didu, as quoted by Tempointeraktif.com, said with the Supreme Court's decision, there would be no more excuses for SOE banks than to compete with private-owned banks.
"Let's say that SOEs bad loans could get write off up to 100%, but those of private companies up to 5% only," he said.
So, there will be different settlement for PT Garuda Indonesia (SOE) and PT Argo Pantes Tbk (listed-private company), both with bad loans at state-owned PT Bank Mandiri Tbk. Mandiri's bad loans reached Rp25.9 trillion (almost US$2.8 billion). Another state-owned bank PT BNI Tbk recorded Rp10.04 trillion (US$1.1 billion) bad loans.
What people need to watch is the implementation of this policy, especially to minimize moral hazard at state-owned banks.

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Mandiri-BNI bad loans settlement, long way to go

State-owned banks, especially PT Bank Mandiri Tbk and PT BNI Tbk, have to wait few more months to get a clearer picture of how to handle their huge bad loans. Why?

Minister for state-owned enterprise (MSOE) Sugiharto admitted yesterday that Supreme Court had returned the draft revision of regulation on non-performing loans (NPL) to the ministry for another review. He didn't disclose Supreme Court's respond. But Investor Daily quoted sources at Supreme Court saying it's up to the government to decide on what to do with the NPLs. So, back to square one.
Government, desperate to clean up the state bank's balance sheets from billions of bad loans, actually wanted to get legal clearance from Supreme Court on policies like haircut, write-offs, or bad loans offloading mechanism.
Sugiharto interprets the Supreme Court respond as a good one, just like what the government expect. The idea was to revise Govt Reg No. 14/2005 about Mechanism to Write-off State/Local administrations debts, especially erasing Article 19 and 20. Under the revised regulation, write-off or haircut should not conducted through Ministry of Finance but could be done by SOEs based on Limited Liability Law and SOE Law.
But the question, whether government or state-bank officials dare to make such decisions without have to worry the future prosecution/investigation under Anti-Corruption Law? Oops, most of them are ping-pong athletes!

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Indonesia banking consolidation

A decade ago, Indonesia had 240 banks. Financial crisis in 1998 had cut significantly the number to 131 banks at the moment. It was the crisis that forced the consolidation in the country’s banking industry. But with per capita income of below US$1,500, the number is way too big and it cost the country a huge inefficiency of banking operations.

Under Indonesia Banking Architecture (API) launched in 2004, entry to the market has been tightened with minimum capital of Rp3 trillion (US$335 million) to open a new bank. Besides, banks, including the banks established by regional administrations, should have minimum capital of Rp100 billion by 2010.

In June 2005, Bank Indonesia (the central bank) launched the banking consolidation policy to anticipate the implementation of Basel II Accord by 2008. Under the policy, banks should have minimum core capital of Rp100 billion (US$11 million) as of 2010 and a minimum of Rp80 billion by the end of 2007. Those who failed to meet the requirement will be punished with limited operation such as maximum amount of third party funds at 10 times of core capital and maximum loans of Rp500 million (US$550,000).

The central bank actually hoped for voluntary mergers before 2007. But there are only few voluntary mergers and acquisitions so far. Some small-medium banks have tried to raise capital through stock market, but the progress has been slow. The latest major merger was back in December 2004 when three banks (CIC, Danpac & Pikko) merged. Last year, two banks (Arta Graha & Inter Pacfic) merged and Sinar Mas reentered the banking business with the acquisition of small bank PT Bank Shinta. But overall, the consolidation has been too slow.

Currently total capital of 131 banks is Rp120.8 trillion or average of Rp916 billion. It seems bigger than the requirement of Rp100 billion. But the Top 20 banks contributed to most of the capital and leave others with big question mark. There are way too many banks that serve one or two customers only, sometimes related to the owners or related parties/families with core capital less than US$10 million.

According to financial report as of June 2006, the Top 20 banks has combined capital of Rp114 trillion which leaves another 111 banks with combined capital of only Rp6 trillion or average of Rp54 billion. Most foreign-owned banks in the country have core capital above Rp100 billion with Bank of America as the only exception, raising the question of its future in Indonesia.

Profitability is also a big issue in Indonesian banking industry. As of May 2006, total assets in Indonesian banking system is Rp1514 trillion (around US$165 billion) while total profit is Rp15 trillion, reflecting a return on asset (ROA) of 1%. But why these banks don’t want to merge?

Central Bank and bankers argues that banking consolidation needs tax incentives, the authority of government. But no such incentives provided.

Desperate on the bank’s owners to merge voluntarily and the slow progress in banking consolidation through capital requirement, Bank Indonesia then launch the single presence policy, which practically forbid a company or someone owns more than a bank. But the policy most likely would only consolidate big banks, not the small banks. For example, Temasek-related banks (Danamon, BII & DBS Indonesia), Khazanah (Bank Niaga & LippoBank), Panin Group (Panin & Victoria), Standard Chartered (Standard Chartered Indonesia & Bank Permata), or Rabobank (Rabobank Indonesia and two banks it acquired recently—Bank Haga and Hagakita, from Djarum Group which controls Bank Central Asia/BCA) and ANZ-ANZ Panin.

If the central bank fair enough to implement the policy, state-owned banks should be merged or consolidated as well. But in normal situation, it’s difficult to merge state-owned banks. Efforts to merge PT Bank Negara Indonesia (BNI) Tbk and PT Bank Tabungan Negara (BTN) collapsed last year on political maneuvers from the proponents and opponents.

Vice President Jusuf Kalla indirectly opposed the idea to merge state-owned banks arguing they have different functions in the economy. Strong resistance has always been at the state-owned banks themselves, especially workers and the management, something the government can’t just neglect.

This is great dilemma and political test for Indonesian government as neglecting the consolidation based on single presence policy would be discriminative and against the fair competition law.

Confronting such dilemma, Central Bank has softened its stance on single presence policy. Instead of forcing the owners to divest or merge the banks, they’re given option to establish a holding company to manage the banks.

Some banks have responded the move in different ways. Djarum Group, who owns the largest private bank PT Bank Central Asia (BCA) Tbk with Farallon Capital, for example, decided to sell two other banks (Haga & Hagakita) to Rabobank last month. But this had leave Rabobank with further question, whether it will merge its subsidiary with the two banks. Singapore’s OCBC has decided to merge OCBC with NISP.

Singapore’s Temasek is yet to decide the future of its banking ownership in Indonesia (Danamon, BII & DBS Indonesia). Malaysia’s Khazanah has repeatedly denies speculation about merger of its Indonesian banks (Niaga & Lippo). While market has speculated the possible offloading of Niaga and keeping LippoBank, Khazanah has option to merge Niaga & Lippo or establish a new holding. The same would apply to Stanchart or Rabobank.

How about the small local banks?

Some small-medium banks have entered the stock market to raise capital. There are some, which plans to float their shares in the coming months. But most of them are being the targets of acquisition by bigger groups. There are around 20 banks in this category. And we will see more mergers and acquisitions to come.

Further consolidation is subject to Central Bank’s firm decision to implement the architecture it drafted. Under the architecture, there will be three categories of banks operating in Indonesia. First is international bank, those with capital above Rp50 trillion (US$5.6 billion); second, national bank (capital from Rp10 trillion to Rp50 trillion); and focus bank (Rp100 billion to Rp10 trillion). None of the banks operated in Indonesia falls into the first category. A merger of state-owned banks could create one. And only three existing banks are eligible to get the national bank status with nation-wide operation.

Such categorization would consolidate further the banking industry and streamlining the operation of many banks which then boost average assets per customer in most banks and reduce significantly the banking operational costs. We will see more the merger of small-to-medium size banks to get the status as national banks.

Those who will be affected by single policy

Group Indonesian Banks

OCBC OCBC Indonesia
Bank NISP
UOB UOB Indonesia
Bank Buana
Khazanah Niaga
Lippo
Temasek Danamon
BII
DBS
Stanchart Stanchart Indonesia
Permata
Rabobank Rabobank Indonesia
Haga
Hagakita
Panin Panin Bank
ANZ Panin
State-owned banks Mandiri
BRI
BNI
BTN
BEI

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Ministers, The Most Photographed & Quoted

Indonesian ministers are among the most photographed personalities in the newspapers simply because they regularly appear in public events like seminars, workshops, groundbreaking ceremonies, inaugurations, companies' birthdays, hearings with parliament members etc.

I just don't understand what is the benefit for readers to see their faces every day? Don't we have more beautiful sights and sceneries to show how beautiful this country is? Don't we have more dreadful sights and hardships to share with than these same-old faces?
In the last few days, I saw the picture of SOE Minister Sugiharto in various newspapers several times. One newspaper even published two of his photographs. Finance Minister Sri Mulyani is also among the most photographed (not for good looking, I guess). Aburizal Bakrie, the coordinating minister for people's welfare and Energy Minister Purnomo Yusgiantoro are also in the list.
These ministers are also the most quoted officers. We have their statements every day just like the information on stock price movements or rupiah value against US dollar. It's constantly changed, mechanistic, nothing new, just statements, empty words, no meanings, no decisions made. Altogether, we see newspapers increasingly become ministries' newsletters.
Below these ministers, we also see regularly pictures or headshots of SOE CEOs like, among others, Agus Martowardojo (Bank Mandiri), Sigit Pramono (BNI), or Ari Sumarno (Pertamina), while performance of these SOEs are not as good as their photographs.

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People on The Move

Brokerage and investment firm PT BNI Securities Tbk, a subsidiary of state-owned bank PT BNI Tbk, appointed Hindarmojo Hinuri as the new president director replacing Sudirman following a capital market investigation over the company's mutual fund operation.

Hindarmoyo is the former president director of Surabaya Stock Exchange (SSX), director at Jakarta Stock Exchange, and PDFCI Securities. He is 53 years old. Isn't he too old for the job?
Meanwhile, Danny Jozal retired from his position as CEO of chemical company PT BASF Indonesia, a subsidiary of Germany's BASF AG. Malaysian Henry Tan replaced Jozal.

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People On the Move

Former president director of Jakarta Stock Exchange (JSX) Mas Ahmad Daniri has been appointed independent commissioner at PT Indah Kiat Pulp & Paper, a subsidiary of Asia Pulp & Paper Co Ltd.

Daniri is currently the chairman of Good Corporate Governance (GCG) Committee at Indonesian Chamber of Commerce and Industry (Kadin Indonesia).
Meanwhile, Adrian Rusmana, chief research of BNI Securities, is moving to PT Kresna Securities Tbk as research director.

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Telkom management reshuffle

Government as the largest shareholder will likely to reshuffle the management of PT Telkom Tbk, the largest company at Jakarta Stock Exchange by market capitalization, at the meeting scheduled June 30, Antara news agency reported today.

Muhammad Said Didu, secretary of the ministry of state-owned enterprises (MSOEs), said besides the replacement of BOD and BOC, number of directors would also be added three to make it 10.
The reshuffle has also something to do with the prosecution of two members of BOD in a VoIP scandal that led to corruption charges. But others simply on political reasons.
Antara quoted parliament member Syafrin Romas (National Awakening Party/PKB) saying he heard of the plan to oust Arwin Rasyid and Tanri Abeng, both president of BOD and BOC at Telkom. Arwin was appointed Telkom CEO in a shareholders meeting June 2005 along with other BOD members such as Garuda Sugardo (deputy president), Rinaldi Firmansyah (finance), Abdul Haris Matondang (infrastructure & network), Aris Yahya (corporate and wholesale), Guntur Siregar (consumer), and John Welly (human resources and development). Police detained Welly early this year on VoIP scandal. Siregar has been named a suspect in the case as well.
In the last few weeks, some groups have been bussy to launch maneuvers to reshuffle Telkom's management. Some political parties are reportedly not happy with the current officers and working hard to install their guys at the company including to push additional positions at directorship level.
Telkom's Workers Union had warned shareholders not to lift the risk management to director level as that would only add bureaucracy in the company. But political parties love the idea so they could share the directorships between them.
Seminars have been conducted in the last few weeks to pressure government to reshuffle Telkom management, including Arwin, an outsider at the company. (Arwin, a banker, was president director of Bank Danamon and vice president of BNI---the state owned bank).
Appointment of BOD and BOC at SOEs have always been subject to political pressures. During Soeharto years, it's he himself who appoint the BOD/BOC and the appointees only need to loyal to him. But 1998 reform has changed the political landscape in the country with nobody has clear power in hands and as a result they share the positions in SOEs as part of political calculations and games. And to maintain a position in the BOD/BOC, people have to have loyalty to some powerbrokers.
So, who will be the new CEO at Telkom? Some mentioned Garuda Sugardo and Abdul Haris Matondang. "People close to the State Place wanted Garuda to replace Arwin, while Arwin will be appointed Indosat CEO after Hasnul resigned this month," people close to the issue said. Garuda is reportedly close to president SBY's inner circle.
How about BOC?
The current Telkom BOC is consisted of Tanri Abeng (Chairman), Anggito Abimanyu (government economist), Gatot Trihargo, P. Sartono, and Arif Arryman (economist from Econit).
Tanri is a close friend to Vice President Jusuf Kalla and coordinating minister for people's welfare Aburizal Bakrie. Tanri has been named a suspect in a corruption case but managed to maintain his position at the company. No names tipped so far, but we'll know in the next few days.

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Middle East's growing investment apetite in Indonesia

Indonesia is the country with largest Moslem population in the world. But it's not easy to bring in funds from rich countries in Middle East. The development in the last few months, however, might reflects a growing apetite among the Middle East investors on Indonesia.
Emirates, for example, announced its plan to cooperate with Indonesian flag carrier Garuda Indonesia airline. State-owned oil and gas company Pertamina had agreed last week to work with Saudi Aramco in the Tuban refinery project in which the Saudi Arabia company would feed up to 400,000 bpd of crude. China's Sinopec is Pertamina's partner in the project. Pertamina agreed also to work with International Petroleum Investment Company (IPIC), a company owned by Saudi Arabia government.

An investor from Dubai, Abu Dhabi IslamiInternational Petroleum Investment Company (IPIC),c Bank, was also reportedly planning to acquire small-size banks in the country and convert it to a sharia bank.
Kuwait Finance House would do the same. The company would invest US$25 million to acquire small-size bank and convert it to a sharia bank too.
So far, Bank Muamalat, the first sharia bank in Indonesia, could be considered the biggest Middle East investment in Indonesia. The bank has total asset of Rp7.42 trillion as of December 2005, grew significantly from Rp5.2 trillion in December 2004. The bank booked net profit of Rp156 billion last year. Islamic Development Bank hold 28% shares in the bank, followed by Boubyan Bank Kuwait (21.28%), and Atwill Holdings Limited (15.32%).
Egyptian Orascom, the largest cement producer in Middle East, is preparing to build two cement plants in Central Java with investment up to Rp5.2 trillion (US$540 million).
Late last month, Jakarta Governor Sutiyoso flew to Dubai, Uni Arab Emirates, to meet executives of Dubai Bank Islamic for a proposed US$500 million monorail project funding.
Late last year, for the first time, executives of six major financial institutions visited Indonesia in one team. They were from Islamic Development Bank, Bank of Sharjah (Dubai), National Commercial Bank (Arab Saudi), Saudi Economic and Development Company, Blue Star Group, and Amlak Finance (Uni Emirat Arab).
IDB executive claimed that after WTC bombing in New York (9/11), Middle East investors pulled out 1.4 trillion US dollars from USA and Europe.
Sultan Kamal Bawazier, investor from Saudi Arabia, involved in the US$250 million financing of airstrip project in Kutai Kartanegara (Kukar), East Kalimantan. Kukar is one of the richest regencies in Indonesia, home to major oil, gas, and coal mining operations.
And just days before president Susilo Bambang Yudhoyono start a state visit to some Middle East countries, state-owned PT Bank Negara Indonesia (BNI) Tbk announced its plan to work with Kuwait investor to acquire Indonesian bank and conver it to a sharia bank.

State-owned enterprises minister Sugiharto meanwhile claimed that investment bankers from Middle East are ready to invest US$8 billion in sharia-based instruments such as bonds issued to finance infrastructure projects, including the ambitious 8,000 MW electricity capacity to be developed in the next few years.
President Susilo is scheduled to visit Saudi Arabia, Kuwait, Qatar and Uni Arab Emirates next week in a move to lure in more investors from Middle East countries. If history counts, it seems not easy to attract FDI from Middle East which is long-term investment in nature.
Vice President Jusuf Kalla has better idea. Last month, he asked tourism board in Bali to bring in more visitors from Middle East to the Island. Hm...bold idea. Early success is the decision of Partai Bintang Reformasi (Islamic party) to have its national convention in the beautiful island this week.

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Poor performance of sharia unit in Indonesian banks

In the last few years, almost all major banks in Indonesia established sharia units. It's rather a kind of euphoria if we take a serious look on their performance.

Sharia unit at Bank Danamon, the second largest private-owned bank in the country, for example, booked net loss of Rp31.98 billion last year against net profit of Rp615 million in 2004. Temasek Holdings is the majority stakeholder of Danamon.
At Bank Tabungan Negara, a state-owned bank, the unit posts net loss of Rp1.17 billion. The sharia unit of Bank Negara Indonesia (BNI), the second largest state-owned bank, managed to book net profit of Rp6.8 billion, but heavily dropped from Rp32.94 billion in 2004.
Bank Permata, controlled by Standard Chartered, also recorded net loss of Rp6 billion at its sharia unit.
Bank Niaga posts net loss of Rp1.23bn from sharia unit despite huge jump in revenue. BII, also controlled by Temasek Holdings, managed to cut the loss at sharia unit from Rp30bn to Rp14.7bn, but revenue slightly reduced.
But Bank Muamalat, a bank with full sharia principle in its operation, managed to book net profit of Rp156 billion, doubled from Rp74 billion in 2004. Islamic Development Bank (IDB) owns 28% shares of Muamalat, followed by Boubyan Bank Kuwait (21.28%), and Atwill Holdings Limited (15.32%).
BRI, the second largest state-owned bank, recorded impressive revenue growth in its sharia unit, but the net profit of Rp1.96bn is surely too small for the unit with total assets of Rp663.93bn, right?
Sharia banking in Indonesia was formally introduced in 1992 by the issuance of Act Number 7 on dual banking system. To support network expansion and to better encourage the development of Sharia banking in the country, Act No.7 was further amended through Act No.10/1998. An important change in this Ac is the opportunity for conventional banks to open Sharia unit and implement the dual banking system.
It seems that these conventional banks should wait few more years to reap the benefit of the Sharia principle as proved by Muamalat even though some banks might have established the unit simply for 'political protection' or marketing gimmick in the world's most populous Moslem country.
But that's not going to stop Abu Dhabi Islamic Bank (ADIB) to enter the sharia banking business in Indonesia. ADIB announced recently its plan to acquire Indonesian bank and transform it to a full sharia bank.

READ MORE!!!

Middle East's growing investment apetite in Indonesia

Indonesia is the country with largest Moslem population in the world. But it's not easy to bring in funds from rich countries in Middle East. The development in the last few months, however, might reflects a growing apetite among the Middle East investors on Indonesia.

Emirates, for example, announced its plan to cooperate with Indonesian flag carrier Garuda Indonesia airline. An investor from Dubai, Abu Dhabi Islamic Bank, was also reportedly planning to acquire small-size banks in the country and convert it to a sharia bank.
Kuwait Finance House would do the same. The company would invest US$25 million to acquire small-size bank and convert it to a sharia bank too.
So far, Bank Muamalat, the first sharia bank in Indonesia, could be considered the biggest Middle East investment in Indonesia. The bank has total asset of Rp7.42 trillion as of December 2005, grew significantly from Rp5.2 trillion in December 2004. The bank booked net profit of Rp156 billion last year. Islamic Development Bank hold 28% shares in the bank, followed by Boubyan Bank Kuwait (21.28%), and Atwill Holdings Limited (15.32%).
Egyptian Orascom, the largest cement producer in Middle East, is preparing to build two cement plants in Central Java with investment up to Rp5.2 trillion (US$540 million).

Late last month, Jakarta Governor Sutiyoso flew to Dubai, Uni Arab Emirates, to meet executives of Dubai Bank Islamic for a proposed US$500 million monorail project funding.

Late last year, for the first time, executives of six major financial institutions visited Indonesia in one team. They were from Islamic Development Bank, Bank of Sharjah (Dubai), National Commercial Bank (Arab Saudi), Saudi Economic and Development Company, Blue Star Group, and Amlak Finance (Uni Emirat Arab).

IDB executive claimed that after WTC bombing in New York (9/11), Middle East investors pulled out 1.4 trillion US dollars from USA and Europe.

Sultan Kamal Bawazier, investor from Saudi Arabia, involved in the US$250 million financing of airstrip project in Kutai Kartanegara (Kukar), East Kalimantan. Kukar is one of the richest regencies in Indonesia, home to major oil, gas, and coal mining operations.
And just days before president Susilo Bambang Yudhoyono start a state visit to some Middle East countries, state-owned PT Bank Negara Indonesia (BNI) Tbk announced its plan to work with Kuwait investor to acquire Indonesian bank and conver it to a sharia bank.
President Susilo is scheduled to visit Saudi Arabia, Kuwait, Qatar and Uni Arab Emirates next week in a move to lure in more investors from Middle East countries. If history counts, it seems not easy to attract FDI from Middle East which is long-term investment in nature.
Vice President Jusuf Kalla has better idea. Last month, he asked tourism board in Bali to bring in more visitors from Middle East to the Island. Hm...bold idea. Early success is the decision of Partai Bintang Reformasi (Islamic party) to have its national convention in the beautiful island this week.

READ MORE!!!

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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Holding for SOE mining companies

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

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

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

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

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