Monday, October 31, 2005

PKS to withdraw cabinet support & SBY's Golkar Maneuver

As reported by Kompas newspaper today, Prosperous and Justice Party (PKS) is preparing to withdraw its support from the cabinet of president Susilo Bambang Yudhoyono as pressure from its grass roots intensified recently.
Secretary general Annis Matta said the party had told its cadres in the cabinet to prepare their bags packed and get out of the cabinet. The party review its coalition in the government as grass roots and constituents criticized heavily recent fuel price hike.
Whenever you read such story, better be careful. Last year, Prosperous and Justice Party (PKS) also made such statement demanding president Susilo Bambang Yudhoyono (SBY) to drop cabinet candidates with strong connection with International Monetary Fund (IMF).
But when SBY picked at least two names, Yusuf Anwar (former director at Asian Development Bank) and Sri Mulyani (former director at IMF) as minister of finance and national planning respectively, PKS maintain its support and secured three cabinet posts for its cadres.
I bet this time the party is bargaining on something bigger. We could still back you up, but give us more important portfolios!
PKS initially got three not-too important portfolios like young and sport, housing, and agriculture. Recently some says PKS managed to have State-Owned Enterprises (SOE) Sugiharto as their cadre. Sugiharto was initially endorsed by Development United Party (PPP), but recently the party withdrew its support for Sugiharto.
So most likely PKS wanted to say something like this to SBY. Well, you may reshuffle the cabinet, but you have to keep our cadre Sugiharto in his current post. But, let's just see in the coming days.
SBY's Maneuver on Golkar
Over the weekend, president SBY invited senior politician and former chairman of Golkar Party Akbar Tanjung to his private residence. At the meeting, as disclosed by Akbar, SBY conveyed his message that Akbar should keep his eyes open towards Golkar even though he has no formal position in the party.
SBY clearly wanted to send signal to his deputy, Vice President Jusuf Kalla, who is also Golkar chairman. Competition between the two leaders intensified recently, including for a cabinet reshuffle plan. Akbar followers control majority seats of Golkar Party in the house of representatives. Last week, Kalla's supporters disclosed a plan to replace Golkar's representatives who are Akbar's followers. At the same time, SBY is expected to replace Kalla's allies in cabinet. Chief economic minister Aburizal Bakrie is the primary target.
Koran Tempo quoted unnamed Golkar executive saying the meeting between SBY and Akbar is important for SBY to build equilibrium with Kalla. But Akbar is also capitalizing the meeting as clearly shown by his attendance at the Vice President palace yesterday afternoon for an informal gathering.
The paper quoted Ahmad Mubarok, deputy chairman of Democrat Party (main supporter for SBY), saying the meeting has something to do with cabinet reshuffle. "The political calculation is like that. The new cabinet should unite Golkar Party, Democrat, and PKS. We could add National Mandate Party (PAN) or National Awakening Party (PKB)," he said.

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Thursday, October 27, 2005

New Cabinet Lineup, So What Gitu Lho?

Cabinet reshuffle, so what gitu lho? (This is Indonesian English of So What?). That was the reaction of some readers when I asked them about the issue. Would that make any difference at all? was also a common question. Yet, they wanted to know, who would be in and out of the cabinet.
As president Susilo Bambang Yudhoyono is reviewing performance of his ministers, some names are tipped to fill the new cabinet lineup to be announced early next month after Lebaran (Ied Fitr) holiday.
Chief Economic Minister: Rizal Ramli or Boediono or Dorodjatun Kuntjorodjakti or Sjahrir
Finance Minister: Boediono or Sri Mulyani (currently minister of national development planning)
Trade Affairs: Aburizal Bakrie (currently chief economic minister)
Industry: Mari Pangestu (currently minister for trade affairs)
Energy: Hatta Radjasa (currently minister for transportation affairs)
Transportation: Burhanuddin Napitupulu (Golkar Party executive)
State-Owned Enterprises: Sugiharto (PKS maintain its support) or Sofyan Djalil (currently minister for communication and information)
Defense: ............(Juwono Soedarsono, the incumbent, submitted resignation letter for health problems)

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Wednesday, October 26, 2005

Soeharto's Favorite: Who Wants to Be A Millionaire

This is not a joke. Former president Soeharto's favorite TV show is Who Wants to Be A Millionaire hosted by Tantowi Yahya every Saturday night in RCTI, the TV station owned by his son Bambang Trihatmodjo through PT Bimantara Citra Tbk
As reported by few hours ago, it was his grandaughter Gendis Siti Hatmanti (23), daughter of Bambang, who disclosed Soeharto's relaxing habit. Gendis said she often accompanied Soeharto to watch the show. Asked whether she ever discussed with grandfather about people's misseries and difficulties following the step increase in fuel price, Gendis said no political discussion. "We're just watching TV," she said.
As wrote by, the fact about Soeharto's daily activities would raise the question on court's reluctance to move on with Soeharto's trial on the basis of his frailing health. Early this month, Soeharto paid a homage to his wife's grave in Solo, Central Java.
In opposite with Soeharto who enjoy the quiz not for the money (a billionaire already), our incumbent president Susilo Bambang Yudhoyono's favorite is watching TV drama series titled Kiamat Sudah Dekat meaning The End of The World is Near.

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Tuesday, October 25, 2005

Bakrie company bags US$84 million contract

State-owned gas transmission and distribution company PT Perusahaan Gas Negara (PGN) Tbk awarded a US$84 million contract to PT South East Asia Pipe Industries (Seapi), a subsidiary of PT Bakrie & Brothers Tbk, to supply pipes for the Labuhan Maringgai-Muara Bekasi undersea gas pipeline project.
Seapi will work with Indian company Welspun Gujarat Stahl Rohren Ltd to supply 32 inch diameter pipes for 160 km. Contractor for the project is in the bidding process.
It is interesting because only few months ago, Indonesian Pipe Producers Association (Gapipa) accused Indian pipe producers had dumped their products in Indonesian market to get the PGN project. Seapi President and deputy chairman of Gapipa Abas F Soeriawidjaja in early July accused three Indian pipe producers involved in a conspiracy to dump their products at 30% cheaper than local products. I don't know how we interpret Seapi's cooperation with Welspun this time.
Late last month, PGN awarded smaller contract worth US$15 million and Rp29 billion (US$3 million) to PT KHI Pipe Industries, a subsidiary of state-owned PT Krakatau Steel, to supply pipes for Muara Bekasi-Rawamanyu segment.
Few years ago, Seapi also won the contract to supply 65% of pipes for the Grissik-Singapore gas pipeline project. That time Seapi worked with Pohan Steel Company (Posco), South Korea.
Previously Welspun also bags US$92 million and Rp195 billion (US$20 million) contract from PGN to supply Grissik-Pagardewa linepipes of 199.5 km with 36 inch diameter. Welspun won the contract with other Indonesian partner PT Abadi Kuasa Karya.
Japanese JFE Engineering Corporation had been appointed as contractor for engineering, procurement, and construction of Pagardewa-Labuhan Maringgai of 270 km with 32 inch diameter. The contract price for the South Sumatra West Java (SSWJ) Phase I pipeline, approved by the Japan Bank for International Cooperation (JBIC), is US$161 million.
Meanwhile contractor for pipeline design, construction, and quality test for SSWJ Phase II Pagardewa-Labuhan Maringgai is Punj Loyd Ltd with contract value of US$17.5 million and Rp308.4 billion (US$30 million). PLL will also install fiber optic network along the pipeline.
The SSWJ Phase I pipeline is developed to meet gas demand for industries in Western part of Java island by transporting gas from Pertamina's Pagardewa gas field in Sumatra. The transmission pipeline, funded mostly by soft-loan from JBIC, has the capacity of 460 MMSCFD which can be extended to 600 MMSCFD. The project is expected to complete in March 2007.
PGN is concurrently develop SSWJ Phase II transmission from Grissik in Sumatra to Rawamaju in West Java to transport gas from ConocoPhillips Coridor Block in Grissik. The capacity of SSWJ Phase II is 520 MMSCFD which can be extended to 600 MMSCFD. The completion of this project is scheduled by the end of October 2006.
Tomen Corp and Nippon Steel also awarded the SSWJ Phase I for 105 km pipeline from Labuhan Maringgai to Cilegon, Java.

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Monday, October 24, 2005

Indonesia cut Hutchison’s 3G

Indonesia government had asked PT Cyber Access Communications, a subsidiary of Hong Kong based Hutchison Communications Limited, to return 5 Mega Hertz out of its 15 MHz 3G license.
Basuki Yusuf Iskandar, director general for telecommunication at the ministry of information and communication, said he expects Cyber Access to return the 5 MHz this week saying the 15 MHz license is just too big for the company and would only put the company in trouble as it should pay bigger bandwith usage cost.
Cyber Access is one of two operator awarded 3G license last year with PT Natrindo Telepon Seluler (NTS).
Cyber Access has two licenses. One on 2G with 10 MHz and one on 3G with 15 MHz. This company was controlled by Charoen Pokphand Group Indonesia. In March 2005, Hutchison Telecom entered into an agreement to acquire 60% stake in Cyber Acess with cash consideration of US$120 million. CP Group Indonesia owns the remaining 40% shares. Both companies claimed to invest US$300 million to develop 3G services in Indonesia scheduled for commercial operation early next year.
Last year, government warned Cyber Access that it could lose its 3G mobille license if it failes to deploy the infrastructure immediately.
The company is required to develop 939 base stations by 2005, 1,557 base stations by 2006 and 2,018 base stations by 2007. But CAC shows no signs that it would fulfil the 939 base station obligation in 2005.
Last month legislator Ade Daud Nasution from Reform Crescent Party asked Communication and Information Minister Sofyan Djalil to review the 3G license awarded to Cyber Access and Natrindo Telepon Seluler (subsidiary of Lippo Group).
Ade Nasution said high-level lobbies were behind the license for Cyber and Natrindo. Nasution mentioned Taufik Kiemas (husband of former president Megawati Soekarnoputri) and Prayogo Pangestu (owner of Barito Group) were behind Cyber, while Akbar Tanjung (former house speaker) and Theo Sambuaga (commissioner at Lippo and member of House Commission I) were behind Natrindo.
Malaysia’s Maxis Communication had acquired 51% of Natrindo for US$100 million and agreed to lend US$150 million for four years. People criticized both Cyber Access and Natrindo for selling their shares before they managed to deliver 3G services saying they’re acting only as license brokers.
In May, government said it would withdraw all 3G licenses and reopen the bidding but failed to do so afraid of possible legal battle in international courts.
So, now government is asking Hutchison to give back the 5 MHz. Just like when Mobile-8 Telecom (a subsidiary of Bimantara) was asked to give back the bandwith.

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Sunday, October 23, 2005

Ministers are busy with Window Dressing

Annus Horribilis! Yes. What a horrible first-year in office for president Susilo Bambang Yudhoyono and VP Jusuf Kalla. Tsunami had killed 120,000 people and devastated Aceh and Nias in Northern tip of Sumatra Island. Avian flu outbreak has claimed human lives. Skyrocketing international oil price pushed government to scrap the 30-yeard old subsidy and hike domestic fuel price twice. Bank interest rates increased, inflation back to double-digit, and rupiah had depreciated significantly. Economic growth target missed. And then tourist heaven island of Bali had been rocked by terrorist bomb for second time with new style in suicide bombing.

Those are facts that been blamed for poor economic performance. People aware of these miseries but people demanding a cabinet reshuffle because they saw poor policy respond from ministers. Their public statements were also horrible. While their boss keep talk in a campaign-style speeches and the deputy always confronting public’s opinion, which sparked further the controversy, the ministers talked to people as if nothing happened.

One-year mark has been passed on October 20, 2005. We’re waiting president SBY deliver his promise to reshuffle his cabinet. It is interesting to mention here some ministers’ last move to polish their image before submitting their one-year report. This is what I call a Window Dressing.

VP Jusuf Kalla defended economic team saying they are better than previous cabinet of Megawati Soekarnoputri, while former MPR speaker Amien Rais said the team is worse than Megawati’s.

Chief Economic Minister Aburizal Bakrie said the economy is improved with higher growth than last year saying his team had worked hard during trouble times. His staff sent photographs of his appearance as speaker in a conference in Philippines before President Arroyo and had been published by some newspapers. After being summoned by SBY at his house in Cikeas, Bakrie told the press that there are 1.5 new jobs created for the whole year, almost double from last year’s 900,000, while people believes that more and more people out of job market.
Bakrie said investment has grown by 300% this year, but Bank Indonesia data shown only US$1 billion of net capital inflow, slightly higher than last year.

Finance Minister Jusuf Anwar published a memoir on his first-year claiming all targets met. In the morning of October 20, he managed to have president SBY to officially give the 10th million-tax number to a man at State Palace. This is a huge leap from 3.5 million numbers since Indonesian independence.

SOE Minister Sugiharto claimed next year's dividend from state-owned enterprises to be doubled and there is no need for privatization to fill the budget deficit. The ministry's privatization target this year is Rp3.5 trillion (US$350 million) and Sugiharto got zero so far.

Education Affairs Minister Bambang Sudibyo published one full page advetorial in Kompas today (probably for more than Rp100 million or USD10,000) about his accomplishment in one year in office at the time when so many school buildings destroyed for various reasons and a lot of students can't afford to enroll to higher education.

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Wednesday, October 19, 2005

Kalla confirm his bid for presidency 2009

It’s never too early for Vice President Jusuf Kalla. He always talk to public first no matter controversial the issue at stake. Today he informally announced his bid for 2009 Presidential Election.
In the last few days, for undisclosed reason (but I guess to defend the government’s one year achievement and problems in office), Kalla give 30 minutes interview to several national media, including my newspaper. But no statement had attracted my attention the most than the one he made to Antara news agency as quoted by newswire like AFP and online publication
“As Golkar Party cadre, I have the right to be elected. But I will ask permit from president,” Kalla said without further explanation what if president Susilo Bambang Yudhoyono don’t give such permit.
His early announcement surely would drum up competition betweeen Kalla and SBY that already heated up on cabinet reshuffle. Kalla is the chairman of Golkar Party, the largest political forces in The House of Representatives (DPR).
Kalla, 64, believe he could compete in the 2009 Presidential Election but promised to work hard as vice president till the race. He dismissed speculation about his poor relationship with SBY. The planned cabinet reshuffle would be a confirmation of their bond. Some doubts SBY will replace Coordinating Minister for Economic Affairs Aburizal Bakrie because of Kalla’s strong support for Bakrie.
Surprisingly, Antara chairman Asro Kamal Rokan denied the report saying Kalla didn't express his intention to contest in 2009 election.

To be continued

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Privatization rebuff

The state-owned enterprises ministry is pouring cold water into privatization issue and prefers to have SOEs doubling their dividend to the state next year.

Mohammad Said Didu, secretary to the ministry said next year’s dividend target is Rp23.5 trillion, more than 100% of this year’s target at Rp11 trillion.

Didu went further saying there is no need for privatization this year as the state budget is not under heavy pressure anymore and dividend could substitute the income target from privatization. “I don’t see which SOE to be privatized,” he said.

Previous administration set the privatization target for this fiscal year at Rp3.5 trillion. But this administration is just about to start privatization through the selling of 9% shares of state-owned gas distribution company PT Perusahaan Gas Negara (PGN) Tbk. SOE Ministry is in the process to select placement agent for those shares.

Both minister of finance Yusuf Anwar and coordinating minister for economic affairs Aburizal Bakrie had reminded SOE minister Sugiharto to fulfill his ministry’s privatization target. But Sugiharto is unenthusiastic about privatization saying he prefers to raise dividend payment from SOEs.

Anwar disagree with Sugiharto saying dividend payment and privatization income are two different issues. “Dividend amount payable is very much depends on profitability of a SOE. Privatization is a result of divesting stakes, in all or parts,” he said.

Early last month, President Susilo Bambang Yudhoyono issued a new regulation (PP No.33/2005) on privatization. One of its articles (article 9) deliberated that SOE in the fields of natural resources can’t be privatized. But government failed to come up with clear definition of natural resources-based SOE. Some interpret this for companies like PGN, Pertamina (oil and gas), PT Aneka Tambang Tbk (mining), PT Tambang Batubara Bukit Asam Tbk (mining) and all plantation SOEs.

In contrast to the privatization of SOE issue, SBY’s administration is open to private participation in public service sectors including electricity, water supply, telecommunication, toll roads, ports, and others.

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Friday, October 14, 2005

Latest round-up on Indonesia's cabinet reshuffle

Dear Bloggers,
Below is a round-up of situation confronted by Indonesian political parties regarding cabinet reshuffle.

Golkar Party: Some party executives said the party’s internal meeting next week will discuss its position on government. If the party decides to be a ruling party, it would ask more cabinet seats than the current two ministers (Chief Economic Minister Aburizal Bakrie and Manpower Minister Fahmi Idris). Six cabinet posts is expected.

But today, the party’s chairman Jusuf Kalla who also the vice president denied such intention. Kalla has rejected a cabinet reshuffle and is expected to strongly oppose any plan to kick Aburizal out of cabinet.

To reduce tension with Kalla and Golkar as the largest party in house of representatives (DPR), president Susilo Bambang Yudhoyono might keep Aburizal in cabinet with different portfolio, but in return Golkar will get more seats including the money-spinning State-Owned Enterprise Ministry. This is the most difficult part should SBY go ahead with the reshuffle.

Partai Persatuan Pembangunan: The party executives wanted to pull out its cadres (Minister for Small Medium Enterprise and Cooperatives Suryadharma Ali and Minister for SOE Sugiharto) saying both failed to give significant contribution to the party. It would be easier for SBY to address PPP.

Partai Kebangkitan Bangsa (PKB): While both sides of the aisle, Alwi Shihab and Muhaimin Iskandar (backed by former president Abdurrahman Wahid), claimed as the support from party members, Muhaimin camp clearly asked SBY to sack Alwi (Coordinating Minister for Welfare Affairs) and Saefullah Yusuf (Minister for Underdeveloped Areas). It is not clear whether Muhaimin camp want to fill these posts and be the supporting political party for SBY. This one is also tricky for SBY as accommodating Muhaimin camp would only strengthen their political muscle while the president is upset with the party’s opposition on fuel price hike policy.

Partai Amanat Nasional (PAN): The party, struggling with ongoing split following the chairmanship conflict, has sent mixed signal on cabinet reshuffle. While some PAN legislators wanted a cabinet reshuffle, the party’s chairman Sutrisno Bachir (a businessman and close ally of Aburizal) repeatedly saying PAN is against a cabinet reshuffle. This one would be easier for SBY but potentially widen political division in PAN as party members are critical of Aburizal’s economic team. PAN has two members in the cabinet. They are Hatta Rajasa (minister for transportation) and Bambang Sudibyo (minister for education).

Partai Keadilan Sejahtera (PKS): In its cabinet review published early this month, PKS supports a cabinet reshuffle with special mention on the under perform economic team. PKS has three members in cabinet. They are Anton Supriantono (agriculture minister), Adhyaksa Dault (sport), and Muhammad Yusuf Ashari (Housing).

Partai Demokrat: This is the main supporter for SBY right from his candidacy and now led by Hadi Utomo, SBY’s brother-in-law. The party also recommended a cabinet reshuffle, especially the economic team. The party is conducting polling on the issue and the interim result is almost 90 percent respondents support the reshuffle. In a meeting with SBY, the party reaffirmed of the president's plan to reshuffle the cabinet.

Partai Bulan Bintang: The party has two members in cabinet, minister for state secretary Yusril Ihza Mahendra and forestry minister MS Ka’ban (party chairman). No public statement, but Yusril is under pressure regarding corruption charges on his office and currently under investigation.

Other Parties: PDI-P, the second-largest party in DPR, has confirmed its opposition stance and would stay away from the issue. Small parties like Partai Damai Sejahtera (PDS), Partai Bintang Reformasi, and others would not be significant in the issue.

Other Voices: Minister for Environment Affairs Rachmat Witoelar, a confidante to SBY, said economic hardship can't be solved with replacing ministers. PAN Chairman Sutrisno Bachir admitted that in his meeting with SBY, the president promised to give one more chance (one year) to cabinet members with average performance.

Other ministers proposed to be replaced by most parties and experts?
Minister of Finance Yusuf Anwar, Energy Minister Purnomo Yusgiantoro, Foreign Affairs Minister Hassan Wirajuda, Justice and Human Rights Minister Hamid Awaluddin, and Coordinating Minister for Political and Security Affairs Widodo AS.


A Big Question Mark of whether SBY ever has the gut to reshuffle the cabinet in a big way!

Maximum output: Mini-reshuffle with the same character, another rainbow cabinet, and consisted of too many political appointees!

Schedule: November will be the earliest.

Anyway, do we have to take this issue seriously? I need a fresh air and stories that could cheer you up!

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Bakrie family to regain control over BTPN?

Bisnis Indonesia reported today that investment bank PT Renaissance Capital is searching for funding to acquire 71.6% shares of PT Bank Tabungan Pensiunan Nasional (BTPN), a bank previously controlled by Bakrie Family (who controls PT Bakrie & Brothers Tbk) with key figure Aburizal Bakrie (chief economic minister).
The acquisition value is predicted to reach US$90.3 million or 1.75 times of the bank's book value as of May 2001 at US$72.1 million.
As reported earlier by IFR Asia, Bakrie Family might be the real investor behind Renaissance. But Bakrie Family and Renaissance gave no confirmation on the rumor. BTPN was controlled by Bakrie Family before Indonesia Bank Restructuring Agency (IBRA) restructured the bank after the collapse of banking sector in 1998-1999.
PT Perusahaan Pengelola Aset (PPA), the company established to manage remaining assets under IBRA, hold 28.39% shares in BTPN, while Bakrie Capital owns 10%, Rifan Financindo 22.61%, and Mr Fuad Mansur 20%. It is not clear though whose shares Renaissance is planning to acquire. Besides, Rifan is known for its close relationship with Bakrie Group.
Credit Suisse First Boston (CSFB) is reportedly been appointed by investor to raise the funds to acquire BTPN. PPA initially approved a plan to raise BTPN's capital through initial public offering (IPO) but then back it off because the company is afraid of share dillution.
Early this week, media reported that Malaysian and Singaporean investors are vying for a majority stake in BTPN. Malaysian investors are state-investment company Khazanah Nasional Bhd and ICB Financial Group, while the Singaporean investor is Overseas-Chinese Banking Corp. But both Khazanah and ICB denied the report yesterday.
Khazanah is just completed the acquisition of 52% shares in PT Bank Lippo Tbk, while ICB is preparing a rights issue to increase capital at its subsidiary PT Bank Bumiputera Tbk.
If Bakrie really is behind Renaissance, it would be a silent comeback for the family after losing control over PT Bank Nusa Nasional (one of banks that merged into Bank Danamon). It is not clear whether Bank Indonesia would allow the family to regain control over the bank considering their track record.
Renaissance is a company established by three former partners at accounting firm Delloite Tohmatsu. They are Samin Tan, Suryadinata, and Dessi Natalegawa. The company is also financial advisor for PT Kiani Kertas, a company controlled by retired general Prabowo Subianto.

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Malaysia’s year of acquisitions!

I should say this year is Malaysia’s year in Indonesia’s investment, just like 2003 and 2004 for Singapore. A lot of acquisitions with totally different reaction from Indonesian.
Singapore investors were facing intense opposition and criticism, sometimes out of proportion nationalism sentiment during major acquisitions by Temasek on Indosat, Bank Danamon, and Bank International Indonesia (BII). That’s not the case with Malaysia’s acquisitions, at least in the last 12 months.
Last week, Santubong Investments BV, a wholly-owned subsidiary of Khazanah Nasional Berhad, completed its proposed acquisition of a 52.05% equity stake in PT Bank Lippo Tbk from Swissasia Global for approximately US$330 million.
Santubong is also planning to make a tender offer for the remaining shares in Lippo Bank it does not own. Lippo Bank is one of the largest private banks in Indonesia initially controlled by Riyadi Family who owns Lippo Group.
Khazanah is the third Malaysian investor to acquire Indonesian banks after the 1997 financial crisis. Commerce Berhad was the first major investor when it acquired Bank Niaga (2003) followed by ICB Group which controlled Bank Bumiputera since last year. ICB is in the process to raise the capital of its Indonesian subsidiary through rights issue sometimes next month.
Khazanah’s name also tipped in the possible acquisition of 71% shares of smaller size PT Bank Tabungan Pensiunan Nasional (BTPN) worth US$90 million. Yesterday, Khazanah denied the report, but people close to PT Perusahaan Pengelola Aset (PPA) said Khazanah is one of investors that expressed interest to acquire PPA’s 28% shares in BTPN.
Late September, Khazanah, the investment holding arm of Malaysian government, subscribed to a 16.8% stake in PT Excelcomindo Pratama for a total cash consideration of approximately US$234 million.
Excelcomindo is the third largest cellular telecommunication provider. Telkom Malaysia, where Khazanah has 40.64% shares, acquired 27% shares of Excelcomindo early this year leaving the founder PT Telekomindo Primabhakti (subsidiary of Rajawali Group led by Peter Sondakh) with the remaining 47.92% and Asia Infrastructure Fund (AIF) with 10%.
With the latest move, Malaysian control 41.8% shares of Excelcomindo, almost the same size with Temasek’s control over Indosat (formerly a state-owned telecommunication company and the second largest in the market).
Khazanah also has indirect investment in Indonesian telecommunication and multimedia market through Astro All Asia Networks where it has 21.52% shares. Early this year, Astro established a joint venture with Lippo Group to develop pay TV business. The new joint venture will invest US$1 billion in Indonesia in the next few years.
Early January, Malaysian telecommunication giant Maxis Communication had acquired a 51% shares of another Lippo subsidiary PT Natrindo Telepon Seluer for US$100 million and announced its plan to turn around the loss-making cellular operator by as early as 2010.
Right before entering the new year, Malaysian YTL Corporation Berhad fired the investment market with its surprise acquisition of 35% stakes in PT Jawa Power for US$139 million. PT Jawa Power is an independent power plant producing 1,200 MW of electricity. Siemens and Powergen are other major shareholders. I bet, a lot more Malaysian investment to come.

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Wednesday, October 12, 2005

6 Years sentence for Adiwarsita

Jakarta Court sentenced businessman and politician Adiwarsita Adinegoro for six years in jail for corruption that cost the state around Rp100 billion (US$10 million).
Today’s verdict is shorter than prosecutor’s demand of eight years behind the bars.
Adiwarsita was the chairman of Indonesian Forestry Business Association (APHI). He is a member of house of representatives (DPR) from Golkar Party, the largest party in Indonesia.


How should we interpret Probosutedjo’s confession?

Why the hell economist Sri Edi Swasono accompanying convicted businessman Probosutedjo when the later was summoned by Corruption Eradication Commission (KPK)?

My first thought was because Mr Swasono is the husband of Meutia Hatta, minister for woman affairs. What for? Put pressures on investigators and give impression to public that Probosutedjo is clean?

I didn’t know that it was Mr Swasono whom Probosutedjo disclosed the bribery attempt for the first time and then reported the case to KPK.

“It was me who reported the case first to KPK. I saw the situation at Supreme Court has gone out of normal,” said Probosutedjo, former president Soeharto’s step brother, in a press conference after the Q & A with KPK investigators.

He was questioned for almost five hours yesterday by KPK investigators as witness in the US$500,000 bribery attempt committed by his lawyer Harini Wiyoso (a former chief prosecutor at Yogyakarta High Attorney) and five Supreme Court staffs. All of them had been detained except Probosutedjo, who is at the center of the case.

Feeling uncomfortable with so many offers to set him free with money compensation right from the lower court hearings up to an appeal process, Probosutedjo admitted he contacted Mr Swasono who then reported the case in July.

“The initiative to bribe Supreme Court judges wasn’t mine. It was Mrs Harini who offered the settlement and asked for 600,000 US dollars that would be divided as follows, 100,000 US dollars to be share down for everybody and US$500,000 for the Supreme Court chief justice Bagir Manan,” Probosutedjo said.

The owner of Mercu Buana Group admitted he was initially disagree with Harini’s proposal as he felt the he committed nothing wrong in the case that claimed a loss of US$10 million to the state.

“Besides I already disbursed a lot of money in the lower court and appeal process which was amounted US$1 million. Actually I have no money anymore. But if I should stay behind the bars, I will find out loans to collect the money demanded,” Probosutedjo admitted.

The money was collected and given to Harini in two tranches, the first in August for US$100,000 and the second early this month at US$500,000.

What more can you say?

Probosutedjo admitted that he had reported the bribery attempt in July but he gave the money to bribe in August and October. If he really didn’t want to bribe from the first place, why then he gave the money in two terms? If he was aware that Harini is not his lawyer for the case to be decided by Supreme Court, why he gave the money instead?

Should KPK just apologize this man because of his confession that he was the one who took initiative to report the bribery attempt? Should we assume that KPK and Probosutedjo had stroke a deal to fence in his own lawyer and Supreme Court staffs not in the first delivery in August but in the second delivery in October?

Listen to confession from Supreme Court staff and suspect Sudi Ahmad. Ahmad admitted he was showing an example of the verdict to Probosutedjo to convince the convicted to disburse the remaining US$500,000. And the verdict was a free for Probosutedjo. Lower court sentenced him four years in jail but appeal court cut that to two years.

If I were KPK, I should detain this man for a conscious and intentional try to bribe Supreme Court judges. He have the money simply because he believed that it could set him free. He gave the money with clear intention that he wanted the Supreme Court set him free.

KPK should also start to investigate those judges and everybody who took the US$1 million from Probosutedjo during the trial at lower and appeal courts.



Monday, October 10, 2005

Oil deficit troublesome

I was expecting Jakarta’a traffic would be more relax once the government raise fuel price significantly. But it turn out to be an empty dream. The first week of price hike (almost doubled the gasoline price) no sign that people might drive down. That’s not make sense to me.
“This is the first week of the month when people still have money in their pocket. Just wait for another week,” said a friend.
But when the traffic jam is there while we had entered the second week of October, I look for another answer. A taxi driver gave better answer. He said on average people are driving 40 km two-way home-office which could consume 6 liter of gasoline at the most or Rp27,000 per day. Put an escalation of 50% for commuting and traffic, the cost would only goes to Rp40,000 per day.
Given the poor public infrastructure, no incentive for commuters to stop driving. Even though government would increase gasoline price again next year by another 30 percent, consumption will persist.
So, I am thinking of a step increase in parking tariff in cities might reduce people’s driving appetite. Let say for the first hour should be Rp10,000 instead of Rp2,000 and Rp3,000 per hour onwards. The money collected should be enough for the city administration to start seriously build the mass rapid transport system.
I am deeply worried about the country’s future in energy supply and its macroeconomy impact. Indonesian love big cars simply because they could pick up all family members in a car and traveling together over the weekend. But they use the same cars for commuting on working days as well with one or two passengers. That’s why traffic jams are so bad in cities like Jakarta. And the traffic jam cost the country oil deficit which is getting bigger, cause bigger cars need more energy.
Look at the latest statistics from Central Bureau of Statistics. In the January-August 2005, Indonesia’s crude oil surplus reduced significantly to US$137 million from US$244 million in the same period last year.
Take a look at trade balance in refined oil (gasoline, diesel oil etc). Indonesia’s deficit more than doubled from US$2.14 billion (Jan-Aug 2004) to US$5,22 billion in Jan-Aug 2005. Thanks to Indonesia's net export of gas at US$5.8 billion, the country's oil and gas trade balance still in surplus of US$731 million in that period. But the surplus heavily dropped from US$2.9 billion in the same period last year. No doubt that by the end of the year, Indonesia would book deficit in overall oil and gas trading.
The reason is clear, Indonesia imported US$6,43 billion of refined oil (fuels) in 8 months this year while it’s export only at US$1.2 billion.
And if we review the automotive market this year, there is no way that fuel consumption would drop. New cars sold in Indonesian market this year have reached 400,000 and could reach 600,000 by the end of the year. Last year, Indonesia ranked first in the world as the fastest growing market with 37% growth. At least 4 million new motorcycles hit the road last year and another 4.6 million to 5 million this year.
It is clear that automotive market is not affected by increasing fuel price in the last few years. Government should capitalize on that with higher tax, right?
Imagine if tax for new cars increased by Rp10 million per car, government could raise Rp5 trillion and Rp1 million per motorcycle could raise another Rp5 trillion. On top of that, government could implement fuel tax as well.
In the supply side, Indonesia desperately needs fresh investment to boost oil output. In May, output hit its lowest level of 927,800 barrel per day, far below OPEC’s quota of 1.425 million bpd.
Investors, mainly foreign investors, blamed Indonesian for not generous enough to give incentives for oil and gas activities, lack of legal certainty, heavy bureaucracy, confusing interpretation of autonomy rules, and social problems.
But a respected blogger gave me the following reasons why Indonesian should not rely too much on foreign oil and gas investment:
- Training and career planning for Indonesian working for foreign oil and gas company are limited to enabler positions. For the core expertise, Indonesian is limited to be an assistant, not key player.
- Indonesian has no access to proprietary technology.
- Indonesian executive promotions are camuflage and ceremonial. Indonesian executives at foreign oil and gas companies are mere puppets.
- Indonesia is regarded as cash cow (US$2 billion per year) to finance their expansion. Reinvestment in Indonesia is limited.
- Asking too many fiscal and tax incentives
- Don’t think they would support government’s intention to boost output. This is a nightmere. They are playing the cornering strategy to ask more incentives from government. Wanna proof? Santos in Jeruk, Exxon in Cepu, Chevron in Central Sumatra, and Unocal in Kalimantan.
So I think of Indonesian oil and gas companies. I only know some names. Pertamina, Medco, Energi Mega Persada, and Bumi Siak Pusako. I don't know whether we could count on these companies to reduce the oil deficit. Pertamina, with all its resources, should have play a leading role. But here we are. Pertamina is a sick man. What do you think?

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Friday, October 07, 2005

Bagir Manan and The Supreme Bribery

The great philosopher Plato gives very important place to the idea of justice. He used the Greek word Dikaisyine for justice, which comes very near to the work 'morality' or 'righteousness', it properly includes within it the whole duty of man.

Chief Justice in this concept then should be a man with the work of morality. Bribery, meanwhile, is absolutely an immoral conduct. What about Indonesian Chief Justice Bagir Manan who would just turn 64 yesterday?

Yesterday, Harini R. Wiyoso, lawyer for the convicted businessman Probosutedjo, former president Soeharto’s half brother, admitted she gave US$500,000 to Supreme Court staffs that should be given later to Supreme Court Chairman and Chief Justice Bagir Manan.

“My client said that the money was for Mr Bagir,” said Firman Wijaya, Harini’s lawyer after the hearing at Corruption Eradication Commission.

Bagir is one of three judges reviewing Probosutedjo’s corruption case. Court had convicted Probosutedjo in April 2003 and sentenced him four years in prison. But in an appeal, higher court cut the sentence to two years. Probosutedjo also rejected the verdict and asking for judicial review by the Supreme Court.

Bagir denied strongly and said he has nothing to do with the bribery attempt. Harini and five Supreme Court staffs had been detained and named suspects in the case. It was the detained staffs who disclosed the bribery attempt early this week. (Read previous article on this)

In July, Supreme Court decided to reduce the prison sentence of the youngest son of Soeharto from 15 years to 10 years for multiple crimes, including ordering the murder of Supreme Court justice Syaifiuddin Kartasasmita.

Legal experts have criticized the decision saying there was no legal reason for the court to reduce sentence of Hutomo (Tommy) Mandala Putra. It was Bagir Manan who led the panel of five judges hearing Tommy’s request and defend the decision saying judges believed one of four charges against Tommy should not carry a penalty.

Judicial Commission chairman Busyro Muqoddas is worrying the bribery investigation would stop with the court staffs. “That’s why we will summon all judges in Probosutedjo case including Bagir,” he said.

The Probosutedjo bribery attempt case is hardly an exception to what Indonesian journalists call it court mafia. A World Bank and National Planning Board joint report, published in 1999, notes that a justice-seeker must pay a prohibitive bribe even when a complaint is filed. After a verdict is reached and the judge's sentence is passed, the warring parties must fork over more money for a written copy of the sentence.

In 2002, a law professor at the University of Indonesia published his findings on the hurdle of bribery, which waylays the justice-seeking process from the police station to the judge's office, and everywhere in between. He quoted what people commonly say when reporting a personal loss: "Reporting the loss of our chicken, we end up losing our goat." Such corruption is not merely a series of isolated incidents. Nowadays, there is imbedded in the judiciary a spider web of power capable of extortion without wielding a single weapon.

In 2002, Indonesia Corruption Watch, an especially active NGO, published a book detailing their investigation into the workings of this mafia. It is clear from their findings that even the highest court of law, the Supreme Court, is party to the "justice" trade.

Off-course we should reserve Bagir’s right of presumption of innocence. But we should audit his wealth as what we did three years ago. According to an audit report by Supreme Audit Agency in April 2003, Bagir has personal wealth of Rp678 million (US$68,000) that consisted of 1,490 square meter of lands in Bandung and Sumedang (both in West Java province), a house worth Rp246 million, four cars and prescious stones Rp361 million, and bank deposit of Rp71 million.

But in a report published by disclosed his wealth as follows: Seven land spots in West Java and Lampung province with total 2,090 square meter, three cars, and Rp85 million of bank deposits at BNI and HSBC.

With take home pay of Rp20 million (US$2,000) per month it must be easy to count his wealth after four years in office. So far, no latest audit published for Bagir’s wealth. (Anybody have data on Bagir’s wealth?)

Born in Lampung, Sumatra in October 6, 1941, Bagir graduated from Law School of Padjajaran University in Bandung, master of comparative law from Southern Methodist University Law School, Dallas, Texas (1981), and PhD from Padjajaran University (1990).

Without any court experience, Bagir was appointed Chief Justice in 2001. It was Golkar Party, political machine of Soeharto during his 32-year authoritarian rule, which gave support for Bagir's nomination.

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Monday, October 03, 2005

Noke Kiroyan named Newmont subsidiary CEO

Newmont, the world biggest gold producer, has new CEO for its Indonesian operations. Last week, the US-based mining firm had appointed Noke Kiroyan, a former president director of Rio Tinto Indonesia, as president director of PT Newmont Pacific Nusantara (NPN).

NPN, a wholly-owned Newmont subsidiary that is providing services for all Newmont’s interests in Indonesia. It provides government relations, taxation and other services to secure Newmont’s US$2.5 billion investment in the country.

The 59-year-old was born in Manado, North Sulawesi where Newmont operates the gold mining company PT Newmont Minahasa Raya (NMR). The Newmont subsidiary and its executive have gone on trial there, charged with dumping toxic waste and polluting a bay (Buyat Bay) near its mine.

Prosecutors said Newmont mine tailings 'reduce the quality of seawater at Buyat Bay and water in Buyat River' and that police laboratory tests found excessive levels of mercury and arsenic in the bay.

The pollution had 'caused itchiness among Buyat villagers and caused Buyat hamlet to be unlivable, forcing residents to relocate'. Newmont has denied the charges, saying it disposed of toxins safely and that levels of mercury and arsenic found around the mine were well within acceptable levels. But studies have produced conflicting results. Newmont faces a $173 million civil case over the alleged pollution.

The gold mine near Buyat Bay, 2,200 kilometers northeast of Jakarta, opened in 1996 and closed in August 2004 due to depleted reserves. Newmont's operations in Indonesia accounted for 6 per cent of its global sales in 2004. The company also operates Asia's second-largest copper mine, Batu Hijau, on eastern Sumbawa island, which produced 718 million pounds of copper and 719,000 ounces of gold last year. It has a mine life of 20 years.

In an announcement last Friday, Newmont said Noke is a capable of managing companies in dealing with workers right, divestment, environmental and management transition disputes. So, it is clear that Noke is expected to turnaround Newmont’s image and wining the court battle.

Apart of the trial on NMR, Newmont’s operation in Sumbawa through PT Newmont Nusa Tenggara (NNT) also worrisome due to increasing workers group pressure. Newmont might be impressed with the way Noke handle the massive workers protest at PT Kaltim Prima Koal, the largest coal mining company in Indonesia, in 2003, even though he was at odd with labor movement groups. Noke was criticized with his style of curbing labor protest. But he has his own views on labor issue in the country.

“What is an issue is Government regulation, which, among others things, includes a requirement that people dismissed for whatever reason needs to be given compensation. This thinking is not right, he says, explaining that, under existing law, a worker has to be compensated even if he or she is convicted of a crime or dismissed because of negligence. We think this law is detrimental to business,” he said in an interview last year.

For sure, his native North Sulawesi was not the only reason for Newmont to appoint Noke. He has more than three decades’ experience as an international business executive. After a distinguished career with Siemens in Indonesia, he managed Salim Group oleochemical companies in Germany, Australia and the US before becoming President Director of Rio Tinto Indonesia in 1997.

In 2001 he was assigned as President Director of Kaltim Prima Coal (KPC), and following its sale in October 2003 rejoined Rio Tinto Indonesia as non-executive Chairman. KPC was jointly-owned by Rio Tinto and Beyond Petroleum. KPC was sold to PT Bumi Resources Tbk., a listed company controlled by Bakrie Group owned by Aburizal Bakrie who is Indonesia’s chief economic minister.

Graduating with a degree in journalism in the early 1970s from Padjajaran University, Bandung, West Java, Noke climbed the corporate ladder, eventually to become the CEO of numerous multinational firms. Prior to the appointment at Newmont, Noke holds the position of non-executive chairman of Rio Tinto in Indonesia, president commissioner of PT Kelian Equatorial Mining, independent commissioner at PT Asuransi Cigna and the president of the Indonesia-Australia Business Council (IABC).

Noke also earned a Bachelor of Arts degree in Liberal Studies from the College of Arts & Sciences at Syracuse University, New York and a Postgraduate Diploma in Business Administration from the Edinburgh Business School, Heriot-Watt University in Scotland. He speaks English and German fluently and has a good working knowledge of Dutch.

With such rich experiences and close relationship with government officials, it is interesting to see whether Noke could help Newmont out of its troubles.

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