October in REVIEW: Adjusting to a New Cabinet

Manggi Habir ,  The Jakarta Post   |  Sat, 11/07/2009 1:02 PM  |  Business

The new Cabinet lineup was the focus of much of the news in October. There were some familiar old faces, new faces and a sprinkling of surprise appointments, among them the economic ministerial portfolio.

Finance Minister Sri Mulyani Indrawati and Trade Minister Mari Pangestu were among the old faces, while M.S. Hidayat as Industry Minister and Gita Wiryawan as head of the Investment Coordinating Board (BKPM), were among the new faces, and Hatta Radjasa as Coordinating Minister for the Economy and Darwin Saleh as Energy and Mineral Resources Minister were among the President's unexpected choices.

However, as economist Faisal Basri has commented, no significant policy changes were expected, although this time it is hoped policy implementation is faster and more effective.

Towards month end, the controversy surrounding the arrest of KPK leaders Bibit Rianto and Chandra Hamzah continued to build, and is expected to spill over into much of November. The police and the Attorney General's Office will be under considerable scrutiny.

Standard & Poor's Positive Outlook: In October, global rating agency Standard & Poor's changed Indonesia's sovereign outlook from stable to positive, paving the way for a potential upgrade to BB from its current BB- rating.

Standard & Poor's rating for Indonesia is the lowest among the top three global rating agencies, with Moody's just last month upgrading the country's rating to Ba2, which is one notch higher.

Corporate bonds rising: Companies are busy trying to take advantage of the current low interest rates by drawing up plans to issue bonds by year end.

The Capital Market Supervisory Agency (Bapepam) confirmed that by September this year, a total of 19 companies had issued bonds worth Rp 16.8 trillion and projected an additional Rp 6.4 trillion bond issuance by year end.

Upcoming bond issues include Bank Mandiri with Rp 3 trillion, and Indosat, the country's second-largest telecommunication company, with Rp 1 trillion in conventional bonds and Rp 500 billion in Islamic bonds.

October Headlines:
Oct. 2: Bumi profits fall

PT Bumi Resources, Indonesia's largest coal producer, has seen first-half profits drop 17 percent to US$251.9 million from a year ago. This is 58 percent of full-year projected earnings of $437.6 million.

The fall was largely due to tax payments amounting to $87.1 million and financial charges of $48.8 million. Bumi produced 27 million metric tons of coal in the first half of 2009, up 5.1 percent from a year ago.

The company sold 25.7 million tons at an average price of $66.9 per ton, compared with 25.4 million tons at $64.9 per ton a year ago.

Bumi recently raised $1.9 billion in loans from sovereign wealth fund China Investments Corp. The loan carries a 12 percent coupon rate with a cumulative 19 percent rate of return.

Oct. 3: Earthquake losses growing

Asuransi Maipark Indonesia has estimated financial losses from destroyed buildings due to the Sept. 30, 2009, earthquake in Padang, West Sumatra and Jambi to reach Rp 2 trillion. State electricity utility PT PLN noted that 220 transformers, 235 kilometers of medium-voltage cables and 445 kilometers of low-voltage cables, as well as buildings and vehicles, were destroyed or damaged.

The company's losses were estimated at Rp 170 billion. In comparison, the reconstruction costs of previous earthquakes for Aceh (2004) were $2.1 billion, Yogyakarta (2006) $560 million, Pangandaran (2006) $200 million and Tasik, West Java (2009) $156 million.

Oct. 3: Pertamina buying oil from Iran

Indonesian state oil company PT Pertamina has planned to buy crude oil from National Iranian Oil Refinery & Distribution Co., under a 30-year contract, to supply a refinery the two companies are planning to build in West Java.

The refinery carries a capacity of 150,000 barrels of oil per day.

Oct. 6: BI keeps 6.5% rate

Bank Indonesia has kept its key interest rate unchanged at 6.5 percent.

Analysts expect that this is the lowest BI will go, given potential inflationary pressures.

Oct. 7/14: Fitch places Berlian on review

Rating agency Fitch has placed its B credit rating for Indonesian tanker company PT Berlian Laju Tanker (BLT) on review for a possible downgrade, after the company's bid for Camillo Eitzen & Co. ASA (CECO) to become the world's largest operator of chemical tankers.

Fitch noted that the proposed acquisition, which would be financed by debt would further weaken BLT's already weak financial profile. Berlian offered to buy CECO in a deal valued at 1 billion kroner (US$175 million) to expand its operations beyond Asia. CECO has debt worth $1.47 billion.

BLT planned to issue mandatory exchangeable bonds worth $368 million to finance its acquisition of CECO. The first and second tranche would be worth $168 million and $200 million respectively.

Oct. 8: PLN invests $2.2b

State power company PT PLN has planned to invest $2.2billion to build a 700 kilometer power grid linking Sumatra to Java in 2011.

The grid, which includes a 40 kilometer underwater power cable passing through the Sunda Strait, will transmit power from Sumatra to Java that would remove the need to build big power plants in Java.

PLN plans to build six coal-fired plants (totaling 3,600 MW) in South Sumatra to produce and transmit power to West Java.

The project will be open for tender in mid-2010, begin construction in 2011 and be completed by 2016. Japan's JICA is expected to provide 80 percent of the financing and the remainder by PLN.

Oct. 15: Govt to cap coal exports

The government has planned to limit coal exports by up to 150 million tons a year to ensure sufficient domestic supply, especially for electricity generation.

National coal production this year is projected to reach 230 million tons, of which 162 million tons is exported with 68 million tons destined for the domestic market.

Oct. 17: Pertamina delays LPG price rise

Pertamina has delayed its plan to increase the domestic LPG price by Rp 100 per kilogram, or raise the price of a 12 kilogram LPG canister from Rp 69,000 to Rp 70,200, due to public pressure. The price rise will be postponed until next year.

Oct. 19: RI remains net oil importer

The government has estimated that fuel imports will exceed exports by 273,000 barrels per day, slightly above that of last year.

The country has been a net importer since 2003 due to falling oil production and rising oil consumption domestically. Since 2007, oil production dipped below one million bpd due to declining production from aging fields without sufficient new exploration and production in more remote areas.

Oct. 20: RHB Capital acquires Mestika

Malaysia's fourth-largest bank, RHB Capital Bhd., will acquire an 80 percent stake in Medan-based Bank Mestika Dharma for Rp 3.1 trillion ($332 million), subject to regulatory approvals.

Oct. 20: Vehicle sales still down

January-September 2009 car sales stood at 337,470 units, representing a 27 percent drop from a year ago.

Meanwhile, motorcycle sales stood at 4,139,711 units, reflecting a 14 percent drop from last year. Honda, Yamaha and Suzuki have the first-, second- and third-largest market share respectively.

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